CHAO PAK KI, RAYMUND AND ANOTHER v. THE HONG KONG SOCIETY OF ACCOUNTANTS

CACV 12/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 12 OF 2005

(ON APPEAL FROM HCAL 134 OF 2003)

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R E A S O N S  F O R  J U D G M E N T

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Hon Tang JA (giving the reasons for judgment of the Court):

1.  An Investigation Committee (“IC”) was appointed by the Hong Kong Society of Accountants in September 1999, as a result of a complaint by the Hong Kong Stock Exchange in respect of the audit of the financial statements for the year ended 31 March 1997 by the 2^nd applicant (the 1^st applicant was the engagement partner) of Climax International Co. Ltd.

2.  The IC having informed the Council of the Respondent (“the Council”) that there was a case to answer, the Council decided to constitute a Disciplinary Committee (“DC”) pursuant to section 33(3)(a) of the Professional Accountants Ordinance, Cap. 50 (“the PAO”), and referred the matter to it with the consequence that “the Disciplinary Committee concerned shall deal with it under section 34(1) and for that purpose the matter shall be deemed to be a complaint made to the Registrar by the investigation committee”: see section 42C(1) of the PAO.  We should add that these references to the PAO are references to the ordinance that was in existence at the relevant time.  That ordinance was amended in 2004 by the Professional Accountants (Amendment) Ordinance (Ordinance No. 23 of 2004) (“the PAAO”).  The PAAO features in the present appeal: see paragraphs 24-30 below.  For the time being, reference will be made to provisions of the PAO.

3.  Mr Patrick Wong was appointed as Chairman.  The Chairman in turn appointed 4 other persons to be members of the DC under section 33(3)(b).  These members included Mr Chan Sai-hoi and Mr Azedo.

4.  Section 33(3) of the PAO provided:

“(3)	(a)	Where pursuant to section 34 a complaint is referred to the Disciplinary Panel, the Council shall constitute a Disciplinary Committee to deal with the complaint and appoint a member of the Disciplinary Panel who is a professional accountant to be chairman of such committee.
	(b)	Subject to section 33B(4), a Disciplinary Committee constituted pursuant to paragraph (a) shall consist of the person appointed by the Council to be its chairman and 4 other persons who, subject to paragraph (c), shall each—
		(i)   be a member of the Disciplinary Panel; and
		(ii)  be appointed to membership of such Disciplinary Committee by its chairman.
	(c)	In constituting a Disciplinary Committee the Council may at the same time direct that one of the members of the committee shall be a person who is not a professional accountant, and in case the Council so directs, the chairman of the committee shall exercise his power of appointment under paragraph (b) in accordance with the direction.”

5.  By letter dated 23 May 2003, the DC informed the applicants that Mr Chan had an agreement to provide consultancy services to the Chairman’s firm but that “Mr Chan is in no doubt that the consultancy in question has no effect whatsoever on his objectivity in determining the issues in dispute and is willing to continue to serve as a member.  He is equally willing to stand down should any party object to his continuing”.

6.  By letter of 23 May 2003, the applicants objected to “Mr Chan sitting as a member of the Disciplinary Committee”.

7.  By letter dated 29 May 2003, the applicants were informed by the DC that as a result to their objection, Mr Chan had stepped down and Mr Leung Hok-him, appointed in his place.

8.  By letter dated 25 June 2003, the applicants took objection to the appointment of Mr Leung by the Chairman under section 33(3)(b). 

9.  Subsequently, a directions hearing was scheduled for 8 December 2003 at 9:30a.m.  By letter dated 21 October 2003, the applicants were informed that Mr Azedo would not be able to attend the hearing on 8 December 2003 and “Mr Azedo accordingly stepped down from the Committee on 16 October 2003 and on that date, the Chairman appointed Mr Graham Chan as a member of the Disciplinary Committee to take the place of Mr Azedo”.

10.  The applicants objected to the continuation of the DC and requested the Council to dissolve the DC under section 33B(3).

11.  Section 33B(2) and 33B(3) are relevant to this objection and they provided:

“(2)   If immediately before commencing to deal with a complaint, or if at any stage in the course of dealing with a complaint (being a stage at which the professional accountant against whom the complaint has been made is entitled to be present or represented) one of the members of the Disciplinary Committee is absent, such professional accountant or his representative may object to the complaint’s being dealt with in the absence of such member, and in case an objection is made pursuant to this subsection and is not withdrawn the Disciplinary Committee concerned shall neither commence to deal nor, where appropriate, further deal with the relevant complaint until either the objection is withdrawn or the member whose absence occasioned the objection is present.

(3)  Where—

(a)	(i)	a Disciplinary Committee, having given the professional accountant concerned or his representative an opportunity of being heard in the proceedings, is unable to decide whether an order under section 35, or what kind of such order, should be made; and
	(ii)	the committee’s inability so to decide is because one of its members is absent or is otherwise unable to participate in the committee’s deliberations regarding the decision; or
(b)	the Council is of opinion that because an objection made under subsection (2) which has not been withdrawn or because of the death, illness or other incapacity or the absence from Hong Kong of the person who is the chairman of a Disciplinary Committee, it is impracticable for the committee to continue to deal with the complaint with which it is concerned the Council shall by resolution dissolve the committee.”

12.  By letter dated 3 December 2003, the Council replied saying that “Further, the Council does not consider that there are grounds to dissolve the Disciplinary Committee.”

13.  That decision has led to an application for judicial review which was heard by Hartmann, J who dismissed it.  The applicants have appealed to us.

14.  On 18 October 2005, we dismissed the appeal.  These are our reasons.

15.  Before the judge, the applicants had also complained that “the appointment of two replacement members has acted to the material prejudice of the applicants in that they can no longer be assured of a fair and impartial hearing”.  That was rejected by the judge and there is no appeal from that decision.

16.  We turned to what remain of the applicants’ arguments. 

17.  At the forefront of the applicants’ argument is the point that the Chairman had no power to appoint replacement members under section 33(3).  That was so, it was argued, even if a member appointed should die or become incapacitated immediately following his appointment.  For the purpose of this argument it would not matter whether the Chairman had even completed the appointment process, so that if the first member appointed should die before any other member is appointed the Chairman would nevertheless be unable to replace him.  Put in such stark terms, it is not surprising that the argument was rejected by the judge.

18.  But the argument has to be put so high because if the applicants accept that there is power to appoint a replacement, it is obvious that the only logical stopping place is that identified by the judge at para. 35 of his judgment, where he said:

“35.   As I have said earlier, a disciplinary committee must be constituted in a manner that enables it to ensure a fair and impartial inquiry and the provisions of the Ordinance must be read in that light.  Accordingly, any power reposing in the chairman of a disciplinary tribunal to ‘hire and fire’ his members will patently be offensive to the underlying intention of the legislation.  But the power to replace member who has died or stood down does not of itself prevent a fair and impartial hearing.  As I had said, it may even ensure it.”

19.  We agree with the judge that the Chairman had power to replace dead or members who have stood down, so long as a fair and impartial inquiry could be attained.

20.  We also agree with the reasons given by the judge in rejecting the argument given in para. 22-24 of his judgment where he said:

“22.   In my judgment, it is correctly construed in the manner contended by Mr Adrian Huggins SC, counsel for the Society.  I trust I do him no injustice in paraphrasing his contentions as follows:

(i)    It is clear on a reading of Section 33(3)(a) and (b) that a disciplinary committee is constituted before any of its members (other than the chairman) are appointed.  The members are appointed after the committee itself has been constituted.

(ii)   A committee, once constituted, remains constituted even though not all of its members are yet appointed by the chairman.  It follows that, if one member of a committee steps down, the committee itself remains constituted and the chairman must have the power to appoint a replacement member to the committee so that it shall consist of sufficient members to discharge its statutory obligations.

(iii)  S.33(3) does not require the chairman to appoint all the other members simultaneously.  He may appoint one after the other.  If therefore, having appointed a first member, that member steps down, he may proceed to appoint a second member who takes the place of that first member.

(iv)  This process of appointment does not involve reconstitution of a committee.  The committee at all times remains constituted.  The process instead is simply one of ensuring that there are enough members appointed so that the committee can then deal with the complaints placed before it.

(v)   In summary, the constituted status of the committee is, to use Mr Huggins’ phrase “separate and separable from the life of its individual members (other than the chairman)”.

(vi)  That being the case, the replacement of one member with another does not result in the automatic dissolution of the committee itself.

23.    In my judgment, in looking to a true construction of the Ordinance, there is nothing that can be read to the effect that a power given to the chairman to make appointments precludes the power to make any necessary substitute appointments so that a committee, already constituted by the Council, may set about its work.  If it was otherwise, it would mean that, if a member stepped down for any reason, even if the committee had not yet set about its work, the committee would have to be dissolved and an entirely new committee formed.  I can construe nothing in the Ordinance to suggest that this was the legislative intent.

24.    Of course, if a committee, with its full complement of members, sets about its work and, when it is so involved, one of its members dies or stands down, then, subject to the provisions of s.33B(2), it may well be necessary for the committee to be dissolved and a new committee appointed.  But that requirement arises out of the need to ensure procedural and substantive fairness, an obligation on all public tribunals, it does not, on my reading of the Ordinance, arise out of any constraint contained in the statute itself.”

21.  The applicants also relied on section 33B(2).  We cannot regard the absence of a member who has died or resigned to come within section 33B(2).  Quite simply, they have ceased to be members.  It is quite clear that section 33B(2) is concerned with a serving member who would be expected to attend a hearing of the complaint “being a stage at which the professional accountant against whom the complaint is entitled to be present or represented” but has failed to attend or attend throughout the hearing of the complaint.  That being the case, we do not believe section 33B(3) which provides for dissolution following an objection made under section 33B(2) advances the applicants’ case at all.

22.  Mr Patterson, counsel for the applicants, also submitted that having regard to section 33B(4)(b), the Chairman could not have power to make further appointments.  Section 33B(4)(b) provided:

“(b)   Where a Disciplinary Committee is dissolved under subsection(3), a person who was a member of the dissolved committee and who participated in any way in its proceedings shall not be eligible for membership of the Disciplinary Committee constituted pursuant to the requirements of paragraph (a)(i).”

However this provision applied only in the event of a dissolution of the DC under section 33B(3).  We are not concerned with that situation.

23.  For the above reasons we dismissed the appeal.

24.  By summons dated 3 October 2005, the applicants sought leave to amend their notice of appeal by adding this additional ground:

“AND TAKE NOTICE THAT A FURTHER GROUND OF APPEAL is that the Climax Disciplinary Committee was dissolved by operation of law and by reason of the enactment and commencement on 8 September and 26 November 2004 of the Professional Accountants (Amendment) Ordinance (23 of 2004) and the amendments thereby occasioned to the Professional Accountants Ordinance Cap.50.”

25.  We have heard arguments on the proposed amendment.  We are of the view that we should not give leave.  Essentially, Mr Patterson’s point is based on the fact that PAO has been substantially amended by the PAAO.  He submitted that since there are no transitional provisions the DC has been dissolved.  Mr Huggins, SC who appeared for the respondent relied on section 23 of the Interpretation and General Clauses Ordinance, Cap. 1 (“the IGCO”) and submitted that since no contrary intention appears from the context of the PAAO that it should not apply (see here section 2 of the IGCO), section 23 is applicable.

26.  Section 23 of the Cap. 1 provides:

“Where an Ordinance repeals in whole or in part any other Ordinance, the repeal shall not – (b) affect the previous operation of any Ordinance so repealed or anything duly done or suffered under any Ordinance so repealed…(c) affect any …obligation or liability acquired, accrued or incurred under any Ordinance so repealed; …(e) affect any investigation, [or] legal proceeding…in respect of any such …obligation or liability…; and any such investigation [or] legal proceeding ..may be instituted [or] continued … as if the Ordinance had not been passed.”

27.  Now as a result of PAAO, the statutory body established under PAO has been renamed “Hong Kong Institute of Certified Public Accountants” and that the Council under section 10 of PAO has been renamed “Council of the Hong Kong Institute of Certified Public Accountants”.  In our view, despite the amendment the body established under PAO continues.  We do not believe it is arguable that the old body has been dissolved.  Nor do we think the absence of transitional provisions in the PAAO, much relied upon by Mr Patterson advanced the applicants’ case at all.  There were no transitional provisions because none was needed.

28.  Mr Patterson also submitted that because the commencement of PAAO has been staggered such that those amendments dealing with disciplinary matters did not come into force until 26 November 2004, although the rest of PAAO came into operation on 8 September 2004, one could infer the contrary intention to the application of section 23 of Cap. 1.  We do not agree.  We do not know the reason for the staggering of the dates of operation.  The most likely explanation is that these other amendments should await e.g. the establishment of the Council of the Hong Kong Institute of Certified Public Accountants under section 10, with its new composition, before e.g. the New Disciplinary Panel B under the new section 33(1)(b) could be appointed by the new council.  In any event, we cannot read into the staggering in the commencement of the different provisions the contrary intention for which Mr Patterson contended.

29.  Mr Patterson further submitted that the change in name as well as in the composition of the Council, meant that section 33B(3) could no longer work, because the old council would no longer be available to dissolve the DC should the occasion arise.  However, in our view, the reference to council in section 33B(3) is a reference to the Council established under section 10 from time to time.  The new Council under PAAO remains the Council of the same body which was established by PAO, despite the change of name and composition.

30.  For these reasons, we would refuse leave to amend the notice of appeal.