SECURITIES AND FUTURES COMMISSION v. CHAN CHUN WAI

HCMA 675/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO 675 OF 2011

(ON APPEAL FROM ESS 5215-5217/2011)

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J U D G M E N T

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1.  The 1^st defendant (Billion Global Asset Management Limited) and 2^nd defendant (CHAN CHUN WAI) in this case were prosecuted under the Securities and Futures Ordinance, Cap 571. Both were convicted of the summonses which they faced. They both submitted appeals against conviction before the hearing today. On 7 November 2011, the 1^st defendant in this case had abandoned his appeal. We are only left with the appeal against conviction by the 2^nd defendant.

2.  At trial, the 2^nd defendant faced two summonses, it was alleged by the prosecution that he had aided and abetted the 1^st defendant, Billion Global Asset Management Limited (BGAM Limited), in holding itself out as carrying on the business of the regulated activity namely “Asset Management” and had issued an advertisement in that respect.

3.  There was no dispute to the prosecution’s evidence that the business advertised in (P16) related to Type 9 regulated activity, the 1^st defendant did not have a licence in relation to such activity and that the 2^nd defendant only had a licence for such activity but it was limited to his employment with Quam Securities Co Ltd (Quam). The only issue in this case was correctly identified by the learned Magistrate as whether the advertisement in the 1^st defendant’s website (P16) was issued by the 1^st defendant and or the 2^nd defendant and whether they had knowledge of it. 

4.  Both defendants had a clear record.  The prosecution called 2 witnesses.  Most of the evidence of the prosecution was admitted and that was produced as exhibit P23.  The undisputed evidence was that the 1^st defendant company was incorporated in December 2008.  The 2^nd defendant was the only shareholder and director of the 1^st defendant.  As I have said the 1^st defendant was not licensed to carry out any of the regulated activity.  The 2^nd defendant was licensed to carry out the asset management activity by the SFC was restricted to his employment with Quam.  The 2^nd defendant’s licence was revoked when his employment with Quam came to an end.  In January and February 2010, The 2^nd defendant registered 2 websites, with Website Solutions Ltd.  One of those websites was for the 1^st defendant and the other website was the 2^nd defendant’s personal website.  Upon the 2^nd defendant’s request, the 2^nd defendant’s website would be automatically transferred to the 1^st defendant’s website.  The 2^nd defendant paid for the initial fees for both websites and the 1^st defendant paid for the renewal fees of the 2 websites through the 2^nd defendant.

5.  According to the prosecution evidence, services provided by Website Solutions included domain registration, website hosting and site builder.  The 1^st defendant had provided a copy of its business registration certificate for registration of the domain name for the 1^st defendant’s website.  After registration and payment of fees, Website Solutions e‑mailed the site builder link, user name and password to the 2^nd defendant.  It was up to the 1^st and 2^nd defendant to design and publish the 1^st defendant’s website.  All along, the only contact person between the 1^st defendant and Website Solutions was the 2^nd defendant .

6.  In March 2010, the Securities and Futures Commission (SFC) received a complaint about the 1^st defendant’s website.  An investigation was launched on 16 May 2010.  PW1 found that the contents of the 1^st defendant’s website had changed.  A search warrant was executed at Quam on 17 May 2010, nothing material was found. There was no search of the 1^st or the 2^nd defendant’s premises.  The contents of the 1^st defendant’s website was subsequently deleted.

7.  The learned Magistrate found as a matter of fact that the 2^nd defendant was the sole shareholder and director of the 1^st defendant.  He had incorporated a company which contained the words “Asset Management”.  The 2^nd defendant registered a website for the 1^st defendant with a name which contained the words “Asset Management”.  There is no evidence to show that apart from the 2^nd defendant, the 1^st defendant had any staff.  It was also a fact found by the learned Magistrate that Website Solutions only sent the user name, password and site builder link to the 2^nd defendant.  The 2^nd defendant was the only contact between the 1^st defendant and Website Solutions.  So in the light of all those evidence, the learned Magistrate found that the only and irresistible inference is that the 1^st and 2^nd defendant had held themselves out as carrying on a business in a regulated activity; the 2^nd defendant issued P16 to help the 1^st defendant to hold out as carrying on a business in a regulated activity.  Therefore the learned Magistrate found that the Prosecution had proved beyond a reasonable doubt the 3 summonses and convicted both defendants accordingly.

8.  On the appeal against conviction on behalf of the 2^nd defendant, Mr Cheung, said that in charges 2 and 3, the learned Magistrate had erred in holding out that there was a case to answer on the two informations (charges 2 and 3) against the 2^nd defendant, and that there was no sufficient evidence to say that the 2^nd defendant did aid, abet, counsel, procure or induce the 1^st defendant to commit the offence (Charge 1) or that the offence (Charge 1) was committed with the consent or connivance of , or attributable to any recklessness of the 2^nd defendant.  There was no evidence, or no sufficient evidence to prove that the 2^nd defendant did issue the advertisement concerned.

9.  Basically, what Mr Cheung is complaining about is that there is no direct evidence pointing to the 2^nd defendant, having counselled the 1^st defendant to issue the advertisement and the 1^st defendant website was registered about a year before the advertisement, there is no evidence to show what had happened in the company between the 1^st defendant being set up and the advertisement being launched.  There is no direct evidence to indicate that the 2^nd defendant did it.  There is a reasonable doubt as  there is no direct evidence, that is why the learned Magistrate had found that the only and the irresistible inference from all the material facts proved that 2^nd defendant had help others to carry on a business in a regulated activity.  The 2^nd defendant issued P16 to help the 1^st defendant to hold out that he was carrying on the business as a regulated activity.

10.  There is no doubt at all that according to the prosecution evidence, the 2^nd defendant was the only person who had contact with Website Solutions on behalf of the 1^st defendant. The basic fact of the matter is that the evidence showed that 2^nd defendant was the only shareholder and director of the company.  Mr Cheung complained that there was no evidence to show that there weren’t any other people in the company.  There is no doubt that there is no evidence to show what happened in the company.  The only person who really knows about what goes on is really the only shareholder and director, ie the 2^nd defendant.  There was no evidence from the defence in anyway to weaken the evidence of the prosecution and the learned Magistrate was entitled to draw the irresistible inference from the evidence before her.  So I see no merit at all in the appeal, so the appeal is dismissed.