MR DAVID PERRY QC

HCMP 2231 /2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2231 OF 2016

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J U D G M E N T

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Background

1. On 29 April 2014, CL Management Services Limited (“A1”), a company registered in Hong Kong, and Au Suet Ming, Clarea (“A2”), the sole shareholder and director of A1, were each convicted by a magistrate, Ms June Cheung, of three summonses; in the case of A1, of holding itself out to three different companies as carrying on a business in advising on corporate finance (being a regulated activity) without reasonable excuse, contrary to section 114(1)(b) and (8) of the Securities and Futures Ordinance, Cap 571 (“the SFO”); and in the case of A2, as an officer of A1, of aiding, abetting, counselling, procuring or inducing A1 to commit the offences or allowing such offences to be committed by A1 with her consent or connivance or as a result of her recklessness, contrary to section 390 of the SFO.  A1 was fined a total of $900,000, while A2 was fined a total of $600,000 and, in addition, sentenced to 6 months’ imprisonment suspended for 18 months.

2. On 2 June 2016, the appeals against conviction by A1 and A2 on each summons were dismissed by Madam Justice Poon (Poon J) in HCMA 382/2014.  By subsequent Notice of Motion, both A1 and A2 applied before Poon J for a certificate that three questions of law of great and general importance were involved in the decision, under section 32(2) of the Court of Final Appeal Ordinance, Cap 484.  On 16 June 2016, the judge refused the application.

3. Application for leave to appeal on essentially the same three questions of law, as well as on the basis that a substantial and grave injustice has been done to the applicants, is now to be made to the Appellate Committee of the Court of Final Appeal on 9 November 2016, under section 32(3) of the Court of Final Appeal Ordinance.

4. Following their convictions before the magistrate, and prior to the substantive appeal being heard by Poon J, application was made before McWalters JA on behalf of both applicants for Mr David Perry QC to be admitted as a barrister for the purposes of advising and appearing as counsel on behalf of the two applicants at their appeals, pursuant to section 27 of the Legal Practitioners Ordinance, Cap 159.  On 18 March 2016, McWalters JA refused the application: see Re Perry QC [2016] 2 HKLRD 647.

5. The application is now renewed before me, albeit that circumstances have changed since McWalters JA dealt with the matter, inasmuch as the applicants’ appeals have been dismissed by Poon J in the High Court and leave is now to be sought before the Court of Final Appeal.

6. The application, advanced before me by Mr Russell Coleman SC, with him Mr Graham Harris SC, Mr Bernard Mak and Mr Ernest CY Ng, was opposed by Mr Jeremy Bartlett SC, with him Mr Kaiser Leung, on behalf of the Hong Kong Bar Association, and by Mr Jonathan Kwan, on behalf of the Secretary for Justice.

7. On 3 October 2016, so that all parties would know where they stood in relation to the forthcoming hearing before the Appellate Committee of the Court of Final Appeal on 9 November, I refused the application and said I would hand down the reasons for my decision later.  These are my reasons.

The certified questions

8. The three points of law of great and general importance, which are sought to be certified, are as follows:

“THE FIRST POINT OF LAW

(A) (i) Whether under section 114(1)(b) of the Securities and Futures Ordinance (Cap 571) (the “SFO”) (read together with section 114(8) thereof) (the “Sections”) the phrase “holding himself out as carrying on a business in a regulated activity” connotes a representation intentionally made and which was intended to be relied upon OR (ii) whether the phrase includes claims, representations or professions irrespective of the effect intended by the representor and/or the likely effect on the purported representee(s);

(B) If (A)(i) is answered in the affirmative (or where (A)(ii) is answered in the negative), where the representation is made by an employee of a corporate defendant, whether, and if so how, the intention of the said employee can be attributed to the corporate defendant so as to affix criminal liability on the corporate defendant; and

(C) If (A)(i) is answered in the negative (or where (A)(ii) is answered in the affirmative), whether the offence created by the Sections admits the common law defence of “honest and reasonable belief” (that is, the “second alternative” or the “third alternative” in Kulemesin v HKSAR (2013) 16 HKCFAR 195 and Hin Lin Yee v HKSAR (2010) 13 HKCFAR 142) (and if so, what burden must the defendant discharge in proving the same) or whether the offence only admits a statutory defence expressly provided for in section 114(8) (that is, the “fourth alternative” in Kulemesin (above) and Hin Lin Yee (above)).

THE SECOND POINT OF LAW

Where under the Sections, a corporate defendant is alleged to have violated Section 114(1)(b) by a representation contained in a written instrument (the “Instrument”) purportedly made for and on behalf of such corporate defendant:-

(A) Insofar as the criminal liability of the corporate defendant under the Sections is concerned:

(i) Whether the prosecution is required to prove beyond reasonable doubt:-

(a) that the Instrument could be objectively understood by any member of the public (by reference to the same rules of construction of written instruments in civil law) to be representing that the corporate defendant is carrying on a business in a regulated activity; or

(b) that a reasonable reader in the position of the actual or purported representee would have understood the Instrument to be representing that the corporate defendant is carrying on a business in a regulated activity;

(ii) Where the directing mind and will of the corporate defendant did not know the exact terms of the Instrument, whether the principle of corporate attribution requires the prosecution to prove that the person responsible for the drafting of the Instrument was delegated by the directing mind and will of the corporate defendant to act as the corporate defendant when drafting the terms of the Instrument; and

(B) Whether under Section 390 of the SFO, the prosecution is required to prove beyond reasonable doubt that the officer knew or ought to have known or was reckless as to whether the Instrument contained the requisite representation which the prosecution is required to prove.

THE THIRD POINT OF LAW

Whether the word “advising” within the phrase “advising on corporate finance” in Part 2 of Schedule 5 of the SFO excludes “arrangement or introduction of other persons qualified under the Ordinance to give advice” where the arranger or introducer himself does not give any such advice.”

The applicable principles

9. There are a number of guiding principles firmly established in the “overseas admission” cases.  These authorities were traversed in some detail and the principles summarised by McWalters JA in the earlier decision in Re Perry QC, at para 24 of his judgment.  Neither Mr Bartlett nor Mr Kwan has sought to question those guiding principles.  Nor has Mr Coleman, save in two respects, neither of which ultimately affects the decision I have had to make.

10. First, in respect of para 24(vii) of McWalters JA’s distillation of the relevant principles, namely that

“where a hearing before the Court of Final Appeal is involved, the court will be more, rather than less, inclined than at any other level to admit overseas counsel. This is provided that the matter is one that is substantial and in which overseas counsel is able to contribute significantly by reason of his expertise”,

Mr Coleman prefers the emphasis that was given by Cheung CJHC in Re Dicker QC (unrep., HCMP 1923/2013, 17 September 2013) at para 9, that

“Where an application for admission is in relation to a hearing before the Court of Final Appeal, including an application for leave to appeal before the Appellate Committee of that court, that by itself “will be in most cases decisive” (Re Jones QC, HCMP 2446/2008, 17 December 2008, Ma CJHC, para 6), provided that the matter that is involved in the relevant hearing is a “substantial” one; and it is one “in which overseas counsel is able to contribute significantly by reason of his expertise”: Re Pannick QC [2004] 1 HKLRD 950, para 16(4).”

11. In view of my decision as to whether the matters sought to be advanced before the Court of Final Appeal arise on the facts of the case and whether they might impact substantially on the development of Hong Kong’s jurisprudence or not, it is not necessary for me to engage this suggested difference in emphasis.

12. Secondly, Mr Coleman sought to float the proposition that, where there can be no countervailing public interest in respect of the local Bar, particularly where local senior and junior counsel are also retained, a defendant’s constitutional right to counsel of his or her choosing must be the paramount starting point, from which a refusal to admit overseas counsel would be a disproportionate derogation of the defendant’s rights.  He went so far as to suggest that, in such circumstances, once it is demonstrated that a particular overseas counsel is a fit and proper person in terms of qualification, experience and good standing, there should be no further restriction imposed on his or her admission.

13. I use the word “float” because Mr Coleman was obliged to acknowledge that the judgment of Chan CJHC in one of the leading “overseas admission” cases, namely Re Flesch QC and another [1999] 1 HKLRD 506, at 514C-515B, is against him.  Whilst he was entitled to suggest that Re Flesch QC and Another should no longer be followed in this regard, I consider this aspect of Chan CJHC’s judgment to be a correct application of the principles designed to promote a fundamental aspect of the public interest, namely the maintenance and development of a strong and independent local Bar.  Moreover, the principles set out in Re Flesch QC and Another have been consistently endorsed and followed ever since: see Re Pointer QC (unrep., HCMP 455/2012, 3 April 2012); Re Crow QC (unrep., HCMP 462/2012, 29 May 2012; Re Dicker QC [2013] 2 HKLRD 245; Re McDonnell QC [2013] 2 HKLRD 773; and Re Parsons QC [2015] 4 HKLRD 781.

14. In the event, Mr Coleman prudently retreated from his initial position, which would clearly give wealthy litigants a significant advantage, but nevertheless contended that the right to counsel of one’s choosing was a very important factor in determining the public interest.

Discussion

15. Although I do not strictly need to be drawn into an analysis of the merits of the three points of law said to be of great and general importance, one of the over-arching difficulties which the applicants face in advancing their appeals before the Appellate Committee of the Court of Final Appeal, as indeed they faced before Poon J at the magistracy appeal in the High Court, is that the magistrate specifically found, at para 116 of her Statement of Findings, that had she been required to consider whether the section 114(1)(b) offences under the SFO required full mens rea, the evidence

“showed clearly that D2, being the redirecting mind of D1, knew full well the content of all the Professional Financial Consultancy Agreement signed with the three respective clients. She was clearly in control of D1 and she was the one who received the payments and then shared almost half of it with Michael in each and every case…. I am sure that what Michael did to the clients was all within D2’s authority and delegation. Further, she was also responsible for using her own connection and knowledge to introduce the professional teams for her clients’ listing applications. D2 must have knowledge that D1 did represent itself as carrying on a business in advising on corporate finance.” (Emphasis supplied)

16. Whilst it is true that the magistrate, and Poon J at the appeal, arrived at different conclusions as to the relevant mental state required under the alternatives discussed in Hin Lin Yee v HKSAR (2010) 13 HKCFAR 142 and Kulemesin v HKSAR (2013) 16 HKCFAR 195, Poon J noted, at para 25 of her judgment, that the magistrate had

“concluded that A2 was in the know throughout and A1 failed to avail itself of the defence of “reasonable excuse”, thus the “holding out” of A1 was committed by A2 on its behalf. From that, the magistrate also found that the “holding out” by A1 were done with A2’s knowledge and consent. I do not think the findings of the magistrate can be faulted.”

At para 33, Poon J concluded

“The basis of A1’s conviction was that A2 was all along in the know. A conviction of A1 under such basis would necessarily result in A2’s conviction under section 390.” (Emphasis supplied)

17. Yet, Part A(ii) of the second point of law for which certification is sought is predicated on the assumption that “the directing mind and will of the corporate defendant did not know the exact terms of the Instrument”.  However, as I have pointed out, the magistrate made a specific finding of fact at para 116 of her Statement of Findings, having heard A2’s evidence (which she rejected), that A2

“knew full well the content of all the Professional Financial Consultancy Agreement signed with the three respective clients.”

Later, at para 121, she reiterated that

“A2 did have knowledge of what A1, with the assistance of Michael, was doing all along and the content of the respective agreements.”

18. Similarly, the question posed by Part B of the second point of law is otiose, given the finding that A2 did know that the Instrument contained the requisite representation.  Questions of proof of knowledge and corporate attribution of knowledge simply do not arise on the facts of the case in the light of the magistrate’s specific findings.

19. Furthermore, in relation to Part A(i) of the second point of law sought to be certified, I cannot see how questions of objective understanding of the Instrument arise when the magistrate has specifically found what the representatives of the parties to the three agreements would have understood, and did understand, from the plain terms of each agreement.  Those terms were described by the magistrate as “clear and simple” in respect of the first company (para 84 of her Statement of Findings), and “unequivocal” in respect of the second and third companies (para 91 and 96 respectively of her Statement of Findings).  As she held in respect of the second company, at para 91:

“In any event, the clear representation on the written agreement should be considered as the most forceful and reliable evidence of what parties were agreeing and representing.”

20. With respect, notwithstanding the attractive way the argument has been presented, the second point of law of great and general importance simply does not arise on the facts of the case, given the particular findings of the magistrate.  Indeed, Poon J’s view, expressed at para 5 of her judgment, was that

“Question 2 was simply an attempt to challenge findings of fact under the guise of a so-called question of law.”

The fact that the second point is now to be repeated before the Appellate Committee of the Court of Final Appeal (the so-called “CFA factor”) does not clothe the point with an importance it does not bear or a meaning it cannot have.

21. The same may be said of the third point of law sought to be certified.  The question again proceeds on the assumption that A1 held itself out as merely arranging for the introduction of other persons to give advice on corporate finance, without A1 itself giving any such advice. However, the magistrate made specific findings of fact, based on the evidence that she heard, that A2, as the controlling mind of A1, had represented and held out to all three companies that A1 was in fact carrying on the business of advising on corporate finance: see respectively para’s 85, 91 and 96 of the magistrate’s Statement of Findings.  I do not see, therefore, how this question arises on the evidence and facts of the case; which was also the view of Poon J, at para 6 of her judgment.

22. I should make clear that I am not determining the merits of the appeal in respect of the second and third points of law.  Rather I am endeavouring to ensure that they derive from the decisions of either the magistrate or Poon J and amount to points of law on which any counsel, let alone overseas counsel, can properly advance argument and assist the Court of Final Appeal.  I regret to say that I do not see how these points of law conceivably arise on the facts of this case but, even if I am wrong about that, I do not accept that their resolution is likely to contribute substantially to local jurisprudence.

23. Different considerations arise in respect of the first question of law on which certification is sought.  Broken down, I agree with Mr Bartlett’s helpful analysis of the question posed that it essentially involves two issues: first, which of the five alternative mental requirements as set out in Hin Lin Yee v HKSAR (2010) 13 HKCFAR 142 and Kulemesin v HKSAR (2013) 16 HKCFAR 195 does an offence under section 114(1)(b) of the SFO engage; secondly, if the phrase “hold himself out as carrying on a business in a regulated activity” in section 114(1)(b) of the SFO connotes a representation intentionally made and which is intended to be relied upon, then, where the representation is made by an employee of a corporate defendant, can the intention of the employee be attributed to the corporate defendant so as to affix criminal liability to that corporate defendant?  The first issue may be described as the “alternatives” issue: the second, as the “attribution” issue.

24. Looked at in this way, the law in respect of the “alternatives” issue is well settled.  McWalters JA, in his judgment in Re Perry QC at para’s 30-32, held as follows:

“30. The specific legal issue in the appellants’ appeal is the construction of section 114(1)(b) of the SFO with a view to determining the mens rea element of the regulatory offence that section creates. But when the court is considering the aspect or facet of the public interest concerned with developing Hong Kong’s jurisprudence it does not usually focus narrowly on the specific legal issue that will be adjudicated upon by the court, that is the construction of section 114(1)(b) of the SFO, but rather on the broader legal principles relevant to that issue. Here, the broader legal principles relate to statutory construction, the mens rea of regulatory offences and the importance of mens rea in the criminal law and how to determine whether it has been displaced and if so what form of mens rea, if any, takes its place.

31. All of these broader legal issues have already been addressed by the Court of Final Appeal and for the purpose of resolving the construction of section 114(1)(b) of the SFO the court will be called upon to apply the existing legal principles as set out in the case law of the Court of Final Appeal. I agree with Mr Pao that the process of statutory construction is context and statute specific. Given that is so and given that the broad underlying legal principles are now settled, I do not believe that, at this stage of the judicial process, it can be said that this case is likely to lead to the development of new jurisprudence. In my view, it is premature to assume that this case will raise substantial issues of importance to the development of Hong Kong’s jurisprudence that will proceed to the Court of Final Appeal.

32.  I am not persuaded, therefore, that the issues in this case are likely to impact substantially on Hong Kong law.  The aspect or facet of the public interest concerned with the development of Hong Kong’s jurisprudence is not, at this stage, engaged.”

25. I agree.  And since this application seeks to draw comfort from the double usage by McWalters JA in the above passage of the phrase “at this stage” in the judicial process, namely prior to the magistracy appeal being heard, I do not accept that the issue somehow achieves greater complexity or intrinsic significance and meaning simply because the point is to be advanced before the Appellate Committee of the Court of Final Appeal rather than before Poon J.  It is true that the magistrate and Poon J differed on the alternative mental element required by the section.  However, as I have endeavoured to explain, that is rather beside the point given the plain findings of fact by the magistrate as to A2’s “assistance or consent or connivance” (para 121 of her Statement of Findings), that she “knew full well” the contents of the agreements signed with the three client companies and that she “must have (had) knowledge” that A1 held itself out as carrying on a business in advising on corporate finance (para 116 of her Statement of Findings).

26. For the sake of completeness, I should also say that I do not accept that the “alternatives” argument raises either a point of particular complexity or difficulty or that its resolution will add substantially to local jurisprudence in Hong Kong.  The resolution of this issue, assuming it is arguable, involves no more than the application of well-established principles, already forged by the Court of Final Appeal, to the construction of the section in question.

27. In respect of the “attribution” issue, I do not see, in the light of what I have said earlier about the magistrate’s findings as to knowledge, how this issue arises on the facts of the case.  As I have pointed out, the magistrate clearly stated that had the offences required proof of full mens rea on the part of A1, she would still have found the company guilty as charged.  She also made clear findings of knowledge on the part of A2 and held that A2’s agent Michael was not acting on a frolic of his own but at all material times acting within A2’s specific delegation and authority.  Accordingly, even if the Court of Final Appeal were to be persuaded that the first alternative under Hin Lin Yee and Kulemesin was appropriate to the construction of section 114(1)(b) of the SFO, the magistrate has already found that A2, as the controlling mind of D1, knew “full well” the content of the agreements and must have known that A1 was holding itself out as carrying on a business in advising on corporate finance.

28. Again, if I have taken too narrow or simplistic a view of the answer to the question posed, I do not regard the point as either complex or difficult, nor is it one whose resolution will add anything substantial to local jurisprudence.

29. I should add that I was not impressed with Mr Bartlett’s subsidiary argument that the particular candidate for admission is not possessed of relevant expertise and experience related to this particular area of regulatory law, either in Hong Kong or its equivalent in the United Kingdom.  There is no doubt that Mr Perry is of the highest standing and ability as a criminal specialist both in the United Kingdom and in Hong Kong, where he is of course well known, in any field of criminal law and is plainly capable of providing able assistance to any appellate court before whom he appears.

30. The present application founders because not only do the questions posed not arise from the decisions of the either the magistrate or Poon J, but also their resolution is unlikely to have any substantial impact on local jurisprudence in circumstances where the relevant principles are already firmly established.  Further, there is nothing in my view complex or difficult about this matter, either factually or legally, which cannot be fully and competently handled by the local Bar.

31. For these reasons, I refused the application.