NEW CHUAN KONG INVESTMENT CO LTD AND ANOTEHR v. SECURITIES AND FUTURES COMMISSION

FAMC No. 9 of 1999

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 9 OF 1999 (CRIMINAL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM HCMA No. 31 OF 1998)

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D E T E R M I N A T I O N

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Mr Justice Litton PJ:

1. This is the determination of the Appeal Committee.

2. We are asked to certify under s.32(2) of the Hong Kong Court of Final Appeal Ordinance, Cap. 484, three questions of law for the Court's consideration. In relation to one of them, concerning an order for costs, we are also asked to grant leave on the basis that substantial and grave injustice has been done, under the second limb of s.32(2).

Background

3. The background to this application is this. On 5 August 1997 the Securities and Futures Commission ("SFC") laid informations at the Eastern Magistracy against (1) New Chuan Kong Investment Co. Ltd. (formerly known as Jialing Finance Co. Ltd.) and (2) Mr Fok Hiu Tong, alleging as against the company breach of s.3(1)(a) of the Leveraged Foreign Exchange Trading Ordinance, Cap. 451 ("the Ordinance") and as against Mr Fok aiding and abetting the company in the commission of the offence. The company and Mr Fok will be referred to collectively as "the defendants". The offence was allegedly committed by the defendants during the period 1 August 1995 to 30 April 1996 and was first discovered by the SFC more than 12 months before the date when the informations were laid.

4. On 4 December 1997 Mr. J. Brennan heard the informations at the Eastern Magistracy and dismissed them without any evidence being adduced on the ground that the informations were laid outside the time limit imposed by s.67 of the Ordinance.

5. Section 67 reads:

"67. Limitation on commencement of proceedings

Notwithstanding section 26 of the Magistrates Ordinance (Cap. 227), any 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 3 years after the commission of the offence or within 12 months after the first discovery thereof by the prosecutor, whichever period expires first."

6. Section 26 of the Magistrates Ordinance, to which s.67 refers, provides:

"26. Limit of time for complaint or information

In any case of an offence, other than an indictable offence, where no time is limited by an enactment for making any complaint or laying any information in respect of such offence, such complaint shall be made or such information laid within 6 months from the time when the matter of such complaint or information respectively arose."

7. The SFC, being dissatisfied with the magistrate's determination, applied to him to state a case for the opinion of a judge. At the magistrate's request a draft case was forwarded for his consideration. The draft erroneously contained a statement to the effect that the SFC had "duly entered into a recognizance as required by the [Magistrates] Ordinance in that behalf". The provisions of the Magistrates Ordinance governing the giving of security by an appellant are in s.110 which states:

"110. Giving of security by appellant and fees for appeals under section 105

(1) The appellant shall, within 3 weeks from the making of an application under section 105, enter into a recognizance with or without sureties as any magistrate may have directed, and in such reasonable sum as having regard to the purpose of the recognizance and to his means, the magistrate may have thought necessary to fix, conditioned to prosecute his appeal with diligence to abide by and duly perform the order of the judge or Court of Appeal and to pay such costs as may be awarded by the judge or Court of Appeal or, with the magistrate's consent, he may, as respects the whole or any part of the sum so fixed, give such other security, by deposit of money with the magistrate's clerk, or otherwise, as the magistrate may deem sufficient.

(2) The appellant, if in custody, may, by order of a magistrate, be brought up for the purpose of entering into the recognizance.

(3) The appellant shall not be entitled to have the case delivered to him unless he completes the recognizance within the prescribed time, and if he makes default in so doing the appeal shall be deemed to be abandoned.

(4) The appellant shall at the same time, and before he shall be entitled to have the case delivered to him, pay to the magistrates' clerk or other proper officer, in respect of the said case and recognizance, the fees following -

1.	For the recognizance.	$5.00
2.	For drawing the case and copy thereof for appellant, if not exceeding 5 folios of 72 words each	5.00
3.	Or if the case exceeds 5 folios, for every additional folio	1.00

(5) This section shall not apply where the application is made by or under the direction of the Attorney General."

8. On 9 January 1998 the magistrate signed the case stated which contained the assertion that the SFC had entered into a recognizance. The case was then delivered to the SFC on the same day.

9. In fact the SFC had never entered into a recognizance and was never asked by the magistrate to do so. When this fact was discovered the defendants took out a motion in the High Court for a declaration that the appeal be deemed to have been abandoned by the operation of s.110(3) of the Magistrates Ordinance. This was heard by Mrs Justice V. Bokhary in May 1998 and by her judgment dated 27 May 1998 the motion was dismissed. This gives rise to the first question of law which we are asked to certify. It is formulated in this way:

"Is an appeal by case stated by a private prosecutor, (pursuant to s105 of the Magistrates Ordinance), deemed to be abandoned (pursuant to s110(3) of the Magistrates Ordinance), if the prosecutor does not within 3 weeks of the application to the Magistrate to state a case, enter into a recognizance (pursuant to s110(1) of the Magistrates Ordinance)?"

10. In dismissing the motion, the judge ordered costs to be paid by the unsuccessful defendants. Counsel then representing the defendants told the judge he could not resist a costs order. This gives rise to the second question of law which is formulated in this way:

"Does the High Court in an appeal by case stated (pursuant to s105 of the Magistrates Ordinance) have jurisdiction to award costs (pursuant to s120(1) of the Magistrates Ordinance), in favour of a Prosecutor-Appellant against a Defendant-Respondent upon dismissing a preliminary Motion by the Respondent for a Declaration that the appeal is deemed to be abandoned?"

11. The appeal by way of a stated case then proceeded. This was heard by Mrs Justice V. Bokhary on 25 January 1999 and by her judgment dated 4 March 1999 she allowed the SFC's appeal and remitted the informations back to the magistrate for trial. She ordered the costs of the two days' hearing to be paid by the defendants. This gives rise to the third question of law which is now formulated thus:

"Upon a proper construction of s67 Leveraged Foreign Exchange Trading Ordinance (Cap. 451) has a magistrate the jurisdiction to try an information alleging an offence contrary to s3(1)(a) and 3(2)(b) of that Ordinance laid more than 12 months after the first discovery of the facts of the commission of the offence?"

12. On the same day (4 March 1999) the judge refused to certify questions of law for the Court of Final Appeal's consideration, preferring to leave the matter to this Committee.

The 1st question

13. The limited scope of the 1st question should be noted. The only fact underpinning the question is the bare fact that "the prosecutor [did] not, within 3 weeks of the application to the magistrate to state a case, enter into a recognizance". The fact that the magistrate might have been misled by what appeared in the draft of the case does not enter into the equation. The answer to the 1st question turns on a pure question of law. Does section 110(1) impose on an appellant (other than the Secretary for Justice) a legal obligation to enter into a recognizance as stipulated in that section? If there is such an obligation then plainly the SFC is in default.

14. Mr McCoy SC counsel for the defendants submits that it does not matter that section 110(1) lays down no procedure for the appellant to apply to the magistrate to fix the sum for the recognizance: If there is a duty imposed on the appellant it is then up to him to take steps to ensure that s.110(1) is complied with. This gives primacy to the words "the appellant shall ... enter into a recognizance" in s.110(1). Mr McCoy has the support of Gregg J in Lam Kuen v. The Crown [1954] HKLR 216 for this clear-cut interpretation of s.110(1), Gregg J in turn having followed Gould J in this regard in an unreported criminal appeal referred to at p.218 of that report.

15. As we see it, this approach is plainly arguable. It would seem that the requirement for a recognizance in an appeal by way of case stated has a considerable legal history behind it. An examination of cases from overseas which seek to interpret similar legislation may throw further light upon the proper interpretation of s.110. It is not the function of this Committee to conduct such an examination. This will have to be left to the Court of Final Appeal. In the circumstances we certify the 1st question as a point of law of great and general importance and give leave.

The 2nd question

16. The answer to the second question turns upon a proper construction of s.120(1) of the Magistrates Ordinance which states:

" (1) On any appeal to which section 105 or 113 applies, the judge may make such orders as to costs, as he may think fit, and may -

(a) Where he allows the appeal, direct that there shall be included in any costs to be paid by the respondent to the appellant the costs properly incurred by the appellant in the proceedings before the magistrate, or such fixed sum as the judge may consider reasonable in respect of the costs so incurred by him;

(b) in any case, in which the appeal is from an order or determination in respect of or in connection with an offence, in lieu of directing a taxation of costs, fix the sum to be paid by way of costs by either party to the appeal,

and in fixing, for the purposes of this subsection, the amount of any costs to be paid to a party to an appeal shall have regard to his means."

17. The costs order was made on the defendants' motion to declare the appeal "deemed" abandoned under s.110(3) of the Magistrates Ordinance. The question is simply this: Can such a proceeding fit within the words "on an appeal to which section 105 ... applies" as they appear in s.120(1)?

18. The judge, in determining that she had jurisdiction to award costs against the unsuccessful defendants when she dismissed their motion, puts it in this way:

"It was an order as to costs on an appeal within the meaning of the wide words of s.120(1) of the Magistrates Ordinance ..... The order was made on this appeal, in a separate motion which, if well-founded, would have put an end to the appeal".

19. She accordingly concluded that s.120(1) was wide enough to encompass the costs incurred on the defendant's motion. In our judgment the judge's construction of the scope of s.120(1) is undoubtedly correct. Accordingly we decline leave on the 2nd question.

The 3rd question

20. Although 6 questions have been formulated in the case stated, there is in reality only one question which, if answered in the defendants' favour, means that the magistrate was right; the trial of the informations was time-barred; the judge had erred in reversing him and remitting the informations to him for trial. The question now formulated by Mr McCoy is simply this:

"Upon a proper construction of s.67 of the Leveraged Foreign Exchange Trading Ordinance, Cap. 451, has a magistrate the jurisdiction to try an information alleging an offence contrary to section 3(1)(a) and s.3(2)(b) of that Ordinance laid more than 12 months after the first discovery of the facts of the commission of the offence?"

21. Sophisticated arguments have been deployed on the issue. What Mr Ismail counsel for the SFC submits in effect is that the words "an offence" in s.67 do not include an indictable offence triable summarily - when, on the face of it, an offence means just that: an offence. Mr Ismail submits that the time limit in s.67 for laying an information only applies to a summary offence; as an offence contrary to s.3(1)(a) is undoubtedly an indictable offence albeit triable summarily - see s.3(2)(a) which authorizes imprisonment for 7 years upon conviction on indictment - he submits that the time limit in s.67 does not bite even though the information was laid after the expiration of the time limit. The same argument was put to the magistrate and was rejected.

22. In allowing the appeal the judge seems heavily influenced by the opening words "Notwithstanding section 26 of the Magistrates Ordinance" in s.67: The time limit of 6 months in s.26, it is common ground, relates only to summary offences. Arguably, this reliance upon s.26 for the proper construction of s.67 as a whole is misplaced. The matter is worthy of further detailed consideration by the Court of Final Appeal.

23. We accordingly certify the 3rd question as one of great and general importance and give leave.

Substantial and grave injustice

24. Mr McCoy submits that the way the judge dealt with the costs of the appeal, resulting in the defendants being ordered to pay in effect costs of 5 days in the Court of First Instance, was unfair and oppressive. He says that, arguably, the costs order made on 4 March 1999 (when the SFC's appeal succeeded) was (a) an order that no reasonable tribunal could have made (b) wrong in principle and (c) made without reasons being given, despite reasons having been sought. He accordingly seeks leave to appeal in relation to the costs order under the second limb of s.32(2) of the Hong Kong Court of Final Appeal Ordinance. It is to be noted (i) that as far as the costs of the hearing of the motion were concerned, counsel for the defendants, as mentioned earlier, had conceded he could not resist an order for costs: This accounted for 3 of the 5 days' costs; and (ii) rightly or wrong the defendants lost on the SFC's appeal before the judge.

25. Obviously if the defendants should ultimately succeed on either Question 1 (abandonment of the SFC's appeal by the operation of law) or Question 3 (the time-bar on the trial of the informations) the Court of Final Appeal could make consequential costs orders, not only in relation to the costs of the appeal to that Court but also in relation to the costs in the courts below. We accordingly decline to give leave under the second limb of s.32(2).