CHEN WENCAN AND ANOTHER v. SECRETARY FOR JUSTICE AND ANOTHER

HCAL 366/2022

[2023] HKCFI 796

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 366 OF 2022

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D E C I S I O N

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A.  Introduction

1.  These proceedings arise out of two Restriction Notices (“RNs”) issued by the 2^nd Putative Respondent (“SFC”) against the Applicants on 9 February 2021. The RNs were issued under sections 204, 205 and 207(e) (“RN Regime”) of the Securities and Futures Ordinance Cap 571 (“SFO”), and had the effect of freezing the Applicants’ assets deposited in the accounts held with two securities firms.

2.  The proceedings were commenced by a Form 86 filed on 19 May 2022, which seeks to mount a constitutional challenge to the SFC’s use of the RNs in freezing the Applicants’ assets. The core of the argument advanced is that the RN Regime is (1) not ‘prescribed by law’, and (2) amounts to a disproportionate interference with the Applicants’ property rights.

3.  The Applicants have, however, recognised that the issues raised in these proceedings are “materially the same” as those raised and determined by me in previous proceedings. My prior determination was in the Judgment dated 26 September 2022 in the case of Tam Sze Leung v Secretary for Justice [2022] HKCFI 2330 (“Tam Sze Leung (RN)”).

4.  In that Judgment, I held that (1) the RN Regime does satisfy the ‘prescribed by law’ requirement, and that (2) the RN Regime does not amount to a disproportionate interference with property rights.

5.  In light of that Judgment, the Applicants accept that they may not be able to persuade this Court to depart from the decision made in that Judgment. But, they nevertheless maintain that the present application for leave to apply for judicial review should be allowed.

6.  The parties have agreed for this application to be dealt with on paper, and have filed written submissions in accordance with a timetable set. The Applicants are represented by Ms Samantha Lau of Counsel. The 1^st Putative Respondent (“SJ”) is represented by Ms Leona Cheung, Principal Government Counsel (Ag) with Mr Peter Dong of Counsel. The SFC is represented by Mr Benjamin Yu SC and Mr Norman Nip SC.

7.  Having considered those submissions, this is my Decision.

B.  Correct Starting Point

8.  It is useful first to consider the correct starting point, and in particular the stance being taken by the Applicants in these proceedings in light of my Judgment in Tam Sze Leung (RN).

9.  In her reply submissions, Ms Lau says that Ms Cheung’s argument – that the Applicants’ acceptance that Tam Sze Leung (RN) raised the same issues as the present case is itself sufficient to demonstrate that the current application has no reasonable arguability – is misplaced. Ms Lau clarifies that the Applicants’ correct stance is as follows. The Applicants recognise and acknowledge that the Court’s decision in Tam Sze Leung (RN) cannot be said to be plainly wrong, so accept the realistic possibility that the Court would not be persuaded to depart from the earlier decision. But the Applicants raise various matters of argument to seek to persuade the Court that there is indeed sufficient merit in the intended challenge in these proceedings such that leave to apply for judicial review should be granted. The Applicants do not rely on their intention to bring the matter to the Court of Appeal as a basis for arguing that they should be given leave to apply for judicial review.

10.  I shall approach the application on the basis of that starting point.

C.  The Applicants’ Submissions

11.  In her submissions (both the original submissions and those filed in reply), Ms Lau has sought to identify in outline a few points which she argues are not fully or satisfactorily answered in the Court’s Judgment in Tam Sze Leung (RN).

12.  As to the prescribed by law point, the submissions are that:

(1)  The balancing test laid down in §103 of the Judgment is inadequate to cure the risk of arbitrary use of the RN Regime caused by a lack of objective evidential threshold.

(2)  The widely-framed statutory functions of the SFC provided for in the SFO identify a statutory context insufficient to circumscribe the breadth of “public interest”.

(3)  Therefore, the case of Leung Kwok Hung (Covert Surveillance) is not clearly distinguishable from the present challenge.

(4)  The absence of prior scrutiny by an independent and impartial tribunal cannot reverse the harm done after RNs are issued.

(5)  The utility of the ex post facto review by the SFAT is undercut by various features, such that the power of the SFAT is more illusionary than real.

(6)  The procedural requirements summarised in §139 of the Judgment do not limit the scope of the SFC’s power under the RN Regime, and cannot cure the absence of a meaningful review.

(7)  It is also questionable that judicial review would be an effective safeguard in the context.

(8)  The deficiencies in the RN Regime do not sit comfortably with the heightened need for legal certainty when the power interferes with the right to property.

13.  As to the proportionality point, the submissions are that:

(1)  The Court failed to follow through in its analysis of the third step of the proportionality test on the prior acceptance of the various features of the RN Regime, such as the lack of temporal limit, which must be taken into account in the proportionality analysis.

(2)  Where the Court’s proportionality analysis hinges on the adequacy of the SFAT mechanism, the failure of the SFAT mechanism in providing adequate safeguards ought to lead to a finding that the RN Regime’s interference with property rights is disproportionate.

14.  I have considered each of those submissions.

D.  Consideration of those Submissions

15.  However, I agree with Ms Cheung and Mr Yu that those points do not lead to the grant of leave. In particular:

(1)  The Applicants’ complaint regarding the lack of an objective evidential threshold was considered in some detail and rejected by me in Tam Sze Leung (RN). I agree that the Applicants’ contention, as raised by Ms Lau, is an attempt to re-argue the point and invite the Court to come to a different conclusion. I see no reason to do so.

(2)  The Applicants’ complaint about the statutory functions of the SFC being in context insufficient to circumscribe the breadth of “public interest” is also an argument which was raised, but rejected by me, in Tam Sze Leung (RN). As there identified, and as Ms Cheung and Mr Yu also submit, the meaning of “public interest” is context driven, and there is no doubt that in light of the SFC’s statutory functions it encompasses the situation of market misconduct and other forms of conduct which will be in the public interest for the SFC to regulate (even if not specifically contemplated by the drafter of the SFO).

(3)  I also dealt in Tam Sze Leung (RN) with why I think the Leung Kwok Hung (Covert Surveillance) case is distinguishable from the challenge to the RN Regime. In that case – and vastly different from the circumstances relating to the RN Regime – the relevant power was general, open-ended, free from any legislative safeguards, and not subject to any judicial or other independent oversight. Further, the context gave insufficient contours to the meaning of “public interest”.

(4)  The Applicants’ complaint about the lack of prior scrutiny by an independent and impartial tribunal before a RN is issued was also one raised, and rejected by me, in Tam Sze Leung (RN).

(5)  The Applicants’ complaint about the utility of ex post facto review by the SFAT was similarly considered in some detail and rejected by me in Tam Sze Leung (RN). The criticism raised as to the absence of a duty of full and frank disclosure is, as Mr Yu submits, difficult to understand in the context of a full de novo inter partes merits hearing as is conducted by the SFAT. Further, it seems to me to make little difference as to who is said to bear the burden of showing that the RNs were wrongly issued, when the real question to be answered by the SFAT on the de novo hearing is whether the challenged RNs should be maintained. The alleged difficulty for any applicant to overturn an RN provides no assistance to the Applicants, where each case is dealt with on its own merits.

(6)  There is no merit in the Applicants’ complaint about the procedural requirements which were summarised in §139 of the Judgment in Tam Sze Leung (RN), and where I held that there were sufficient safeguards in place to prevent abuse of power.

(7)  Further, the argument on the ineffectiveness of judicial review is largely premised upon the complaint about the evidential threshold, which I have rejected. Further, there are numerous safeguards present in the RN Regime to prevent abuses. I also agree that the comments in my ruling as regards the No Consent Regime, made by me in Tam Sze Leung v Commissioner of Police [2021] HKCFI 3118, were made in the context of that regime and do not assist the Applicants in the intended challenge in these proceedings.

(8)  A complaint about the lack of temporal limit was similarly canvassed in Tam Sze Leung (RN), where I acknowledged the point but held that in context the restriction or limitation was no more than necessary to accomplish the legitimate aim.

16.  In summary, I am not persuaded that there are any significant differences or additional matters raised by way of Ms Lau’s submissions which point to any reason why a different view should be taken in these proceedings than was taken in Tam Sze Leung (RN).

17.  The points raised by Ms Lau, with respect, and as she for all practical purposes appears to recognise, do not raise arguable grounds of review with any realistic prospect of success.

E.  Result

18.  Therefore, the Applicants’ application is dismissed.

19.  I see no reason why cost should not follow the event. Therefore, the Applicants will pay the costs of the SJ and the SFC, to be taxed if not agreed. However, bearing in mind the relative simplicity of the points at issue in light of me previous decision, I do not grant a certificate for two Counsel.