KOON WING YEE v. THE SECURITIES & FUTURES COMMISSION

FAMV No. 53 of 2008

N THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 53 OF 2008 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM

CACV NO. 369 OF 2007)

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

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Mr Justice Ribeiro PJ:

1.  On 28 December 2006, the applicant was served with a notice under section 183(1) of the Securities and Futures Ordinance[1] requiring him to attend for an interview with the SFC.  He launched the present judicial review proceedings to quash that notice, contending that it infringes his constitutionally protected privilege against self-incrimination.  He has so far answered no questions and his object is to avoid having to answer any questions put to him by the SFC.

2.  The SFC is given power to compel attendance and answers as part of its armoury to investigate suspected wrongdoing.  Non-compliance is a criminal offence[2] and the SFC may apply for a court order compelling answers under pain of sanctions for contempt.[3]  However, this power arises in the context of two important features of the Ordinance.  First, direct use of the answers against the interviewee in any criminal proceedings is prohibited if objection is taken on the basis of self-incrimination.[4]   And secondly, unlike the Insider Dealing Tribunal, the Market Misconduct Tribunal has no power to impose a fine or a penalty.  We shall come back to the relevance of these features.

3.  At first instance and in the Court of Appeal below, the application for judicial review was dismissed on the ground that it is premature.  Relying on HKSAR v Lee Ming Tee,[5] both courts held that the privilege against self-incrimination protected by Article 11(2)(g) of the Bill of Rights is not engaged since it is only a testimonial privilege, ie, a privilege against being compelled to testify against oneself or to confess guilt, and no criminal charges have yet been brought against the applicant. 

4.  Sir John Swaine SC, appearing for the applicant, argues that, applying Order 53, the applicant presently has a “sufficient interest” to bring the proceedings which therefore cannot be described as “premature”.  We did not require submissions from Sir John on O 53.  It is clear that the applicant has a sufficient interest and, if there is an imminent infringement of a fundamental right, the court will not stand by waiting for the axe to fall.  This application turns on the substance of the proposed appeal.

5.  The Court of Appeal’s “prematurity” conclusion is plainly correct in so far as it relates to the testimonial privilege under Article 11(2)(g).  However, in Lee Ming Tee,[6] it was noted that in the criminal context, a broader privilege against self-incrimination may be deduced as an integral part of the right to a fair trial protected by Article 10 of the Bill of Rights.  The existence of this broader privilege, which extends to answers compulsorily obtained before the start of criminal proceedings, was acknowledged in the judgment of Sir Anthony Mason NPJ in Koon Wing Yee v Insider Dealing Tribunal.[7]  The courts below erroneously failed to recognize this broader privilege.

6.  If the applicant were entitled in law to invoke this broader privilege, his application in relation to self-incrimination could not be said to be factually premature.  He is presently subject to a compulsory notice requiring him to answer the SFC’s questions.  As was pointed out in Lee Ming Tee:[8] “... the essence of the privilege is the withholding of answers.”  The applicant seeks precisely to do this and so to preserve his privilege (in so far as one exists).

7.  So the critical question is whether it is reasonably arguable that the applicant is entitled to invoke the broader privilege based on Article 10.  Since such privilege arises as an integral part of the right to a fair criminal trial, the applicant must show that answering the SFC’s questions would expose him to self-incrimination in criminal proceedings.  This is where the features of the SFO mentioned earlier become relevant.  Since section 187(2) renders answers to the SFC’s questions inadmissible for direct use in criminal proceedings in a court of law, the applicant faces no risk of self-incrimination in respect of any such court proceedings.  However, the answers are plainly intended to be available for use in MMT proceedings.  Accordingly, whether it is reasonably arguable that such use of his answers would infringe the applicant’s constitutional privilege against self-incrimination depends on whether it is reasonably arguable that MMT proceedings are criminal in nature.

8.  In Koon Wing Yee v Insider Dealing Tribunal, the Tribunal’s proceedings were held to be criminal “by reason of the power to impose a penalty under section 23(1)(c) of SIDO”. [9]   No parallel basis exists for classifying the MMT as criminal.  As Sir Anthony Mason NPJ pointed out:

“As an element in the new civil regime, the SFO set up the Market Misconduct Tribunal (‘the MMT’) to hear cases of suspected market misconduct.  The MMT was given power to impose civil sanctions, including surrender of any profit made or increased by market misconduct, but without power to impose a fine or penalty.  The decision to leave the MMT without power to impose a fine was influenced by legal advice received by the Government to the effect that the existence of such a power might lead to a breach of the BOR.”[10]

9.  Before us today, Sir John Swaine submits that it is reasonably arguable that the criminal nature of potential MMT proceedings in which compelled answers of his client may be used can be made out on the basis of two remedies provided for by the current Ordinance.  By section 257 the Tribunal is given power to require a wrongdoer to disgorge any profit gained or loss avoided for the benefit of the public purse.  And by section 281, the wrongdoer may be made liable in damages to persons who have incurred pecuniary loss as a result of the market misconduct. This, Sir John argues, amounts to a double penalty on the wrongdoer and so brings it into the criminal sphere.  We do not consider this point reasonably arguable since these are plainly separate and not inter-dependent remedies, each of a civil nature.  Properly characterised, they do not engage the criteria analysed by Sir Anthony Mason NPJ in Koon Wing Yee v Insider Dealing Tribunal.  We note that the decision of Hartmann and Lam JJ reached in Cheeroll Ltd v MMT HCAL 123/2007 (22 September 2008) was to similar effect.

10.  Sir John Swaine sought to argue alternatively that even if MMT proceedings are civil and not criminal, it was reasonably arguable that he was entitled to launch a constitutional challenge to the Tribunal on the basis that it is not impartial as required by Article 10 of the Bill of Rights since its procedure is inquisitorial without a clear separation between its investigative and adjudicative functions.  The arguability of the point on its merits may well be doubted, but that issue has not been reached.  No question regarding the constitutional soundness of the MMT as set up has arisen.  The only question is whether the applicant can refuse to answer the SFC’s questions.  No MMT proceedings are on foot.  This question, which was not considered below, is indeed at best premature.

11.  In our view, no reasonably arguable grounds for leave have been demonstrated and the application must accordingly be dismissed with costs.

[1]  (Cap 571).

[2]  Section 184.

[3]  Section 185.

[4]  Section 187(2).

[5]  (2001) 4 HKCFAR 133 at 171.

[6]  Ibid at 173-174.

[7]  [2008] 3 HKLRD 372 at 400-401.

[8]  At 157.

[9]  [2008] 3 HKLRD 372 at §66.

[10]  Ibid at §48.