TSANG YIU KAI AND OTHERS v. INSIDER DEALING TRIBUNAL

HCMP 1322/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1322 OF 2007

ON AN INTENDED APPEAL PURSUANT TO SECTION 31 OF THE
SECURITIES (INSIDER DEALING) ORDINANCE, CAP. 395
FROM DETERMINATIONS AND ORDERS OF
AN INSIDER DEALING TRIBUNAL
IN RELATION TO
EASY CONCEPTS INTERNATIONAL HOLDINGS LIMITED

(subsequently renamed 21CN CyberNet Corporation Limited and
now known as CITIC 21 CN Company Limited)

and

EASYKNIT INTERNATIONAL HOLDINGS LIMITED

___________________________________

___________________________________

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REASONS FOR JUDGMENT

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Hon Tang VP (giving the reasons of judgment of the Court):

1.  The 1^st appellant (“Alan Tsang”) was the vice chairman of Easy Concepts International Holdings Limited (“Easy Concepts”) and Easyknit International Holdings Limited (“Easyknit”).

2.  The 2^nd and 3^rd appellants are Alan Tsang’s wife and sister respectively.

3.  The appellants were found by the Insider Dealing Tribunal chaired by McMahon J (“the Tribunal”) to be insider dealers contrary to Securities (Insider Dealing) Ordinance, Cap. 395 (“SIDO”) by its report dated 19 January 2006.

4.  A disqualification order was made against Alan Tsang for a period of 4 years.  A total sum of HK$6,426,817 being profits, penalty and inquiry expenses were ordered to be and have been paid by the appellants.

5.  The appellants did not appeal against the orders of the Tribunal.

6.  Mr Koon Wing-yee (“Koon”) who was the chairman of both companies, and another implicated person had also been found to be insider dealers by the Tribunal.  Their appeals were allowed by this court, differently constituted, on 30 May 2007, essentially on the ground that such inquries by the Insider Dealing Tribunal involved the determination of a criminal charge within the meaning of the Hong Kong Bill of Rights so that, inter alia:

“	(1)	evidence obtained under s. 33(4) of the SFCO, to which a claim for privilege against self-incrimination had been made, was inadmissible in insider dealing proceedings;
	(2)	the implicated persons could not be compelled to give evidence under s. 17 of the SIDO; and
	(3)	the appropriate standard of proof to be applied in the inquiry was beyond reasonable doubt.”  Koon Wing Yee v Insider Dealing Tribunal and Anor, unreported, CACV 358 of 2005 and CACV 360 of 2005, dated 30 May 2007.

7.  On 16 July 2007, the appellants applied ex parte for leave to appeal out of time against the orders.  As was the practice, the ex parte application was considered on paper.  On 16 July 2007, Rogers VP granted leave.  As was usually the case, no reason was given.

8.  On 17 July 2007, leave to appeal to the Court of Final Appeal was granted in Koon Wing Yee.  But for the present purpose, we proceed on the basis that it was correctly decided.

9.  By summons filed on 27 July 2007, the Financial Secretary applied to be joined as the 2^nd respondent to these proceedings and for an order that leave granted by Rogers VP be set aside.

10.  No objection has been taken in respect of the Financial Secretary’s application to be joined as the 2^nd respondent, nor to the application for an extension to time to apply to set aside leave.

11.  The sole question before us is whether leave to appeal out of time ought to be set aside.  At the conclusion of the hearing we set aside leave.

12.  The grant of leave to appeal out of time is the exercise of a discretion.  This court’s power to interfere with the exercise of discretion is limited and well known and need not be repeated.  The court would be very sparing in the exercise of the jurisdiction to set aside the grant of leave to appeal.  Ordinarily, it would not do so unless it is satisfied that the appeal will inevitably fail.  See the commentary in Hong Kong Civil Procedure 2008 at 59/14/16.

13.  However, here we are concerned with a situation where time is sought to be extended for appeal only on the ground that a subsequent judgment has held the previous understanding of the law to be incorrect.  Mr Jat Sew Tong, SC who appeared for the appellants accepted that the guiding authority for the present case is HKSAR v Hung Chan-wa and Anor [2006] 9 HKCFAR 614 (at para. 23).  There, in the judgment of the Chief Justice, which had the agreement of all the other members of the court, he said:

“	23.	Whatever be the level of court, in dealing with applications for extension of time to appeal against conviction on the ground that the previous view that the relevant provisions imposed legal or persuasive burdens has now been authoritatively held to be incorrect and that the relevant provisions only impose evidential burdens, the principle to apply is that this ground by itself would not justify an extension of time.
	24.	Such a principle is well-established by overseas jurisprudence.  In overseas jurisdictions, the courts in dealing with applications for extension of time for appeal against conviction have consistently applied the principle that time should not be extended for appeal only on the ground that an authoritative judgment subsequent to the conviction has held the previous understanding of the law to be incorrect.  See R v Ramsden [1972] Crim LR 547, R v Mitchell [1977] 1 WLR 753, R v Hawkins [1997] 1 Cr App R 234, R v Ballinger [2005] 2 Cr App R 433, R v Unger [1977] 2 NSWLR 990, R v Knight [1998] 1 NZLR 583 and R v Thomas [1990] 1 SCR 713.  In adopting this principle, the courts recognize the practical necessity for finality in the criminal process.
	25.	However, overseas jurisprudence does not exclude the possibility that there could be exceptional circumstances in a particular case which would justify the court in extending time for appeal against conviction on the ground that a subsequent judgment has held the previous understanding of the law to be incorrect.  Especially as the Court does not have before it an appeal raising a question relating to extension of time, it is not feasible for the Court on this occasion to attempt to define what constitute exceptional circumstances except to say that the circumstances must be so exceptional that the occasions when they would be held to exist would be very rare.”

14.  So we have to consider whether this is one of those very rare cases where leave to appeal should be granted.

15.  One circumstance relied on by Mr Jat was that the appellants were found to be insider dealers in the same inquiry as Koon Wing Yee.  However, we do not regard this as a sufficiently exceptional circumstance as would justify leave.  Given the general nature of the change in the law relied on, the fact that the appellants were involved in the same inquiry is not a sufficiently exceptional circumstance.  Apart from that coincidence, they are indistinguishable from a person who was found to be an inside dealer on the same date but by a different tribunal applying what turned out to be the wrong approach.

16.  Mr Jat has referred us to the reasons for decision of Cheung JA, given on 11 September 2007, in Lau Luen Hung Thomas (“Lau”) v Insider Dealing Tribunal and Anor, HCMP 1161/2007, unreported, 11 September 2007.  There the applicant also sought leave to appeal out of time, seeking to rely on Koon Wing Yee.  The applicant had been found to be an insider dealer, and had been disqualified from being a director of a listed company for 12 months, commencing from 22 December 2006.  He was required to disgorge profits in the sum of $15,301,676 as well as to pay a penalty of $15,000,000 and costs of $3,860,506.33.  Those sums had been paid.

17.  The learned judge said that what prompted Lau to decide to appeal was the decision in Koon Wing Yee.  There the delay was 157 days, the learned judge said:

“

12.

It is apparent that the applicant had taken a considered decision of not pursuing with the appeal prior to the issuance of his present application. …”

18.  The learned judge granted leave, he said that in doing so, he had taken into consideration, the length of the delay, the reason for the delay, the merits of the prospective appeal, and prejudice to the respondent.  Cheung JA noted that Rogers VP had granted leave to appeal in the present case.

19.  On delay, the learned judge said:

“	9.	A delay of about five months is a substantial delay.  While I accept that delays that had occurred prior to the decision of the Tribunal are not relevant factors to be taken into account in the exercise of my discretion, in terms of background information, there had been substantial delay in bringing forward the enquiry against the applicant. …
		……
	11.	From this brief chronology one can see that there was substantial delay in proceeding against the applicant between January 2000 and February 2005.  The delay of five months after the decision of the Tribunal should be viewed in this context.”

20.  With respect, we agree with the learned judge that delays that had occurred prior to the decision of the Tribunal are not relevant.  However, it is not clear whether the learned judge nevertheless thought that the delay of 5 months viewed in context should not be a bar to extension of time.  The delay was substantial, the fact that it was 5 months could not be an exceptional circumstance which would support an extension of time.

21.  Cheung JA then went on to consider the merits of the appeal.  Of course, if the judgment in Koon Wing Yee is not overturned on appeal, the applicant would have a meritorious appeal.  It is common sense that a subsequent change in the law would not have prompted an appeal unless the appeal is likely to succeed.  But as Le Pichon J (as she then was) said in Birkenhead Properties and Investments Ltd. v Leung Yiu and Ors [1998] 1 HKLRD 527 at 539:

“

83.

… But the merits point is nothing more than the mirror image of the change in the law point. …”

22.  Indeed, Cheung JA recognized:

“

18.

However, this factor alone is not the deciding factor because the change of law by a subsequent decision will not by itself justify an extension of time to appeal. …”

23.  Cheung JA then quoted from paras. 23 to 25 from the judgment of the Chief Justice in Hung Chan-wa.  He went on to say that in the case of Chiu Wing Nam v HKSAR [2006] 9 HKCFAR 850, the Appeals Committee:

“

19.

… granted an extension of time to an applicant whose legal position was the same as that of the applicant in Hung Chan Wa.  The application was four months and 10 days out of time.”

24.  In Chiu Wing Nam, leave to appeal out of time was granted to a defendant who had been convicted of the offence of trafficking in dangerous drugs who was serving a sentence of 12 years and 6 months.  But as the Chief Justice has explained:

“

11.

… [that] application for extension of time is not within the kind of applications contemplated in Hung and it is therefore inappropriate to apply the approach in Hung on extension of time. …”

That is because at the time when the application for leave to appeal out of time was filed:

“

11.

… the applicant was not seeking to rely on any judgment holding the previous view to be incorrect.  There was no judgment for the applicant to rely on.  At that time, the issue had not been determined, even at the Court of Appeal level.  Indeed, the applicant was himself raising the issue of determination.”

25.  Thus, Chiu Wing Nam is irrelevant in the present context.

26.  Cheung JA concluded:

“	20.	Whether the circumstance which would justify an extension is described as strong, special or exceptional, I am satisfied that this requirement has been satisfied in the present case.  When the change of law is so fundamental as a change in the standard of proof and the compellability of an implicated person to testify against himself, the applicant clearly should be given a chance to pursue his appeal and rely on this new development of law.  This is particularly so when the misconduct of the insider dealers of the case of Koon Wing Yee occurred at about the same time as that of the applicant and that the Insider Dealing enquiries of the two cases were also conducted at about the same time.
	21.	Mr. Bruce S. C., counsel for the 2nd respondent, submitted that the nature of the change of law is unimportant.  He relied on the case of R v Ballinger [2005] 2 Cr. App. R. 433 in which an applicant was convicted at a Court Martial and there was a change in law since the conviction whereby the Court Martial procedure was said to be unfair and in breach of the rights of a fair trial guaranteed by Article 6 of the European Convention on Human Rights.
	22.	The English Court of Appeal held that no substantial injustice or injury to the applicant had been shown which would justify an extension of time to be granted.  In that case the delay was about 15 months, in particular there was a further delay of three months after the law had been clarified.  In my view Ballinger, apart from being a decision which is not binding on me, clearly can be explained on its own facts by reference to the substantial delay.”

27.  With respect, the nature of the change of law is not an exceptional circumstance justifying an extension of time.  In Hung Chan-wa the change in the law was also fundamental.

28.  In Ballinger, a petty officer physical trainer in the Royal Navy was found guilty of indecent assault and was sentenced, inter alia, to a term of detention and dismissal from service on 2 April 2003.  In July 2004, he applied to the Court of Appeal for an extension of time to seek leave to appeal because of the decision of the Court of Appeal in R v Dundon [2004] EWCA Crim 621, The Times, April 28, 2004, following a decision of the European Court of Human Rights in Grieves v United Kingdom [2004] 39 EHRR 7 that:

“

… because the pivotal role of a Naval Judge Advocate was performed by a serving naval officer rather than a civilian, and the appointment was made by the Chief Naval Judge Advocate, another serving naval officer, the most significant guarantee of independence in other courts was missing; those features being such as to render trials unfair and in breach of Article 6 rights”.  See headnotes at 433.

29.  Article 6 of the European Convention on Human Rights required a trial by an independent and impartial tribunal.

30.  It is clear that there the change of the law was fundamental in its impact.  Even so, extension of time was refused.  Scott Baker LJ delivering the judgment of the English Court of Appeal at 439 said:

“

In our judgment an applicant seeking an extension of time for leave to appeal in circumstances such as those in the present case has to show more than that there has been a breach of Art. 6 and that in consequence his conviction is unsafe; he must also show that he has suffered a substantial injury or injustice.”

31.  With respect, we do not believe that the judgment of Cheung JA supports in anyway the submission that there are here exceptional circumstances so rare that the grant of leave to appeal can be supported.

32.  We are concerned with an exercise of discretion.  But it is not an unfettered discretion.  The exercise of discretion must be guided by the decision in Hung Chan-wa.

33.  The practical necessity for finality in criminal process underlines the importance of the principle stated in Hung Chan-wa.  The same principle applies to civil cases.

34.  Finality is particularly important because a judgment determining a legal question operates retrospectively as well as prospectively.

35.  The following passages from the judgment of Street CJ in R v Unger [1977] 2 NSWLR 990 explained why:

“

There is no difference in principle between a subsequent judicial decision which has the effect of exposing a prior misconception in relation to a principle of law which was wrongly regarded as well founded at the time of the trial, and a subsequent judicial decision exposing the invalidity of regulations that were wrongly treated as valid at the time of the trial. The trial having been concluded and the time for appeal having gone by, the general principle is that the matter is regarded as at an end. It is to be borne in mind that the effect of a conviction in a criminal court, no less than a verdict and judgment in a civil court, is to merge in that conviction or judgment, as the case may be, all of the material upon which it proceeded. Dixon J., as the Chief Justice then was, said in Victorian Stevedoring and General Contracting Co. Pty. Ltd. v. Dignan (17): ‘… if he has already been convicted, then because his liability has merged in the conviction, it no longer depends upon the law under which it arose, and it does not lapse with the revocation of the law. The conviction has become the source of his liability for his offence, and the conviction continues in force because its operation does not depend upon the law creating the offence, but upon the authority belonging to a judgment or sentence of a competent Court.’

This concept of merger is no blind, arbitrary proposition. It is founded deeply in the fabric of the philosophy of the common law. Although in pure theory the overruling or modification by judicial decision of previous conceptions of legal principle does no more than correct a departure from the timeless perfection of the law, the plain fact is that legal principle is constantly evolving and being moulded in the light of the changing and developing social context. Recognizing this, there has always been an unwillingness to permit the re-opening of past decisions. Indeed the process of appeal, either civil or criminal, is a comparatively recent and statutory concept - it finds no basis in the common law itself. This finality of decision in each individual case leaves the courts free to permit a judicious flexibility in the development of principle in later cases, free from inhibition lest such development may set at large disputes that have previously been resolved. The concept of merger in judgment, both in the civil and in the criminal field, to which Dixon C.J. referred, equally with the doctrine of res judicata, serves this requirement of flexibility for potential development of the law.”

36.  This is a case where there was no viable basis upon which leave to appeal out of time could have been given.  For that reason, we revoked leave to appeal.