1、HONG KONG SPECIAL ADMINISTRATIVE REGIONHCAL 120/2005IN THE HIGH COURT OF THEHONG KONG SPECIAL ADMINISTRATIVE REGIONCOURT OF FIRST INSTANCECONSTITUTIONAL AND ADMINISTRATIVE LAW LISTNO. 120 OF 2005_IN THE MATTER of section 26A of the Securities (Insider Dealing) Ordinance (Cap. 395) andIN THE MATTER o
2、f an Inquiry by the Insider Dealing Tribunal into certain dealings in May 1997 in listed securities of HKCB Holding Co Ltd and Hong Kong China Ltd andIN THE MATTER of an application for judicial review byEDMUND KUNG CHIU NAM_BETWEEN EDMUND KUNG CHIU NAM Applicant and THE INSIDER DEALING TRIBUNAL Res
3、pondent and THE FINANCIAL SECRETARY Interested Party_Before: Hon Chu J and Hon Reyes J in CourtDates of Hearing: 29 March 2006Date of Judgment: 29 March 2006_J U D G M E N T_Hon Reyes J:-I. IntroductionIn March 2005 an Insider Dealing Tribunal held that Mr. Kung was not guilty of insider dealing. Mr
4、. Kung thereupon applied for some of his costs of defending himself before the Tribunal. The Tribunal refused his application. Mr. Kung now seeks judicial review of that refusal. In essence, he says that, in rejecting his application, the Tribunal was wrong in law and wrongly exercised its discretio
5、n.II. BackgroundIn May 1997 Mr. Carlton Poon engaged in insider dealing using Mr. Kungs discretionary account with Worldsec International Ltd. Mr. Kung knew nothing of this trading. Out of friendship, Mr. Kung had simply allowed Mr. Poon to conduct personal trading through the Worldsec account.1. Wh
6、en the SFC investigated Mr. Poons trades in May 1998, Mr.Kung lied to the SFC. At Mr. Poons prompting, Mr. Kung claimed that the relevant trades had been executed on his behalf. 2. In November 2000 Mr. Kung received a letter from the Financial Secretary naming him as a person implicated in insider d
7、ealing. Mr. Kung then consulted a lawyer for the first time.3. In March 2001, acting on legal advice which he had received, Mr. Kung volunteered a statement admitting that he lied and providing the correct information. He stated that, contrary to what he had told the SFC in 1998, he had not authoris
8、ed and had no knowledge of the securities which Mr. Poon had bought and sold using his account.4. Between 8 December 2003 and 11 October 2004 the Tribunal conducted an inquiry into the case against Mr. Poon, Mr. Kung and others. In its 1st Report, the Tribunal accepted Mr. Kungs March 2001 statement
9、. The Tribunal believed that, although Mr. Poon was guilty of insider dealing, Mr. Kung was not.5. The Tribunal said of Mr. Kung (at 1st Report, p.41):-“We have taken particular care in assessing Edmund Kungs evidence given that, notwithstanding the fact that at end of his two SFC interviews his obl
10、igation to tell the truth and to maintain secrecy were clearly spelled out to him, Edmund Kung deliberately chose to defy these obligations.In favour of his credibility is the fact that on 26 March 2001 at a relatively early stage, albeit after the announcement that there would be an inquiry and tha
11、t his securities dealings in May 1997 were to be part of the subject of the inquiry, he volunteered a statement admitting that he had lied to the SFC in his earlier interviews and claiming that he was now giving a true and full account of his actions. Mr. Fred Kinmonth, Edmund Kungs solicitor, infor
12、med us that a draft of this statement had been read out to Carlton Poon on 20 March. According to Mr. Kinmonth, Poon had not challenged the accuracy of the contents of the statement, but had replied to the effect that its contents were substantially correct.We were satisfied that Edmund Kung told th
13、e truth in his 26 March 2001 statement to the SFC and in evidence before us and that his claim that he had nothing to do with the trades in HKCBH and HKC securities in his Worldsec account over the material time is true.”6. The Tribunal then concluded (at 1st Report, pp.70):-“As we accept Edmund Kun
14、gs evidence in substance, the trades carried out in his account were not his and were carried out without any of the information needed to constitute insider dealing on his part.”7. Securities (Insider Dealing) Ordinance (Cap.395) (SIDO) s.26A regulates the award of costs in an insider dealing inqui
15、ry. The section provides:-“(1) Subject to subsection (5), at the conclusion of an inquiry or as soon as reasonably practicable thereafter, the Tribunal may award to:-(a) . (b) any person whose conduct is, in whole or in part, the subject of the inquiry, such sum as it thinks fit in respect of the co
16、sts reasonably incurred by him in relation to the inquiry.(2) Any costs awarded by the Tribunal under subsection (1) shall be charged on the general revenue.(3) The Tribunal may order that nay costs awarded under subsection (1) may be taxed on the basis of any one of the scales of costs set out in t
17、he Schedules to Order 62 of the Rules of the High Court (Cap.4 sub. leg.).(4) Subject to any rules made by the Chief Justice under section 36, Order 62 of the Rules of the Supreme Court (Cap.4 sub. leg.) shall apply to the award and taxation of any costs awarded by the Tribunal under this section. (
18、5) This section shall not apply to any person referred to in subsection (1) who is:- (a) a person who has been identified as an insider dealer in a determination under section 16(3); (b) an officer of a corporation who has been identified as such officer in a determination under section 16(4);(c) a
19、person who and in respect of whom it appears to the Tribunal has by his own acts or omissions caused or brought about (whether wholly or in part) the Tribunal to inquire into his conduct subsequent to the institution of the inquiry under section 16 or during the course of that inquiry; or(d) any oth
20、er person who and in respect of whom it appears to the Tribunal has by his own acts or omissions caused or brought about (whether wholly or in part) the institution of the inquiry under section 16.”8. Mr. Kung applied for his costs from 1 May 2001 (that is, a date 6 weeks after service of his volunt
21、ary statement). By its 2nd Report dated 9 August 2005 the Tribunal rejected Mr. Kungs application for costs.9. In so doing, the Tribunal accepted the argument of Mr. Barlow (Mr. Kungs counsel) that Mr. Kung was not a person who was barred from recovering his costs by SIDO s.26A(5). 10. In particular
22、, Mr. Barlow submitted (as recorded at 2nd Report p.11) that:-“It cannot be said that Edmund Kung did anything to cause the institution of this Inquiry because it cannot reasonably be suggested that it was Edmund Kungs false statements to the SFC investigators when they interviewed him on 13 May 199
23、8 that he had instructed Carlton Poon to purchase HKCBH and HKC warrants on his behalf in May 1997, that did anything to bring it into being. Even if Edmund Kung had told the truth in that interview, rather than harbour it in his breast until 26 March 2001 once he learnt that he was an implicated pe
24、rson, the Inquiry would still have been instituted because one of the objects of the Inquiry would have been the circumstances under which his Worldsec account was used to trade in those warrants in May 1997.”11. The Tribunal accepted the logic of this submission at 2nd Report p.265. But, in the exe
25、rcise of its discretion, the Tribunal felt that it was inappropriate to award Mr. Kung any costs.12. As a matter of general principle, the Tribunal held that it could follow the practice in criminal cases. Thus, costs might be:-“denied to an acquitted defendant such as Mr. Kung where his conduct has
26、 brought suspicion on himself and/or misled the investigating authorities into thinking that the case against himself is stronger than it is.”13. The Tribunal gave 2 specific reasons for its decision.14. First, Mr. Kung had lied to the SFC. The Tribunal thought that was “completely unacceptable”. Th
27、is was especially so where Mr. Kung:-“did nothing to rescind his lies until they drew him into the Inquiry and that he only did that after legal advice, when his own conscience as market professional should have told him where his duty lay.”15. The Tribunal felt that “to grant Edmund Kung his costs
28、. would only be rewarding deceit and mendacity”.16. Second, Mr. Kung had allowed Mr. Poon to use his Worldsec account without exercising any control over such use. That (the Tribunal believed) was “grossly negligent”. 17. Worse, such conduct might be characterised (the Tribunal said) as “condoning o
29、r hiding possible inappropriate or illegal transactions on Carlton Poons part”.III. DiscussionIn my view, the Tribunal was wrong to apply a principle of criminal law in determining whether to award Mr. Kung costs.18. The Chief Justice has not made any rules in respect of the award of costs in inside
30、r dealing cases. Consequently, by SIDO s.26A(4), the civil law principles in RHC Order 62 must govern any exercise of the Tribunals discretion to award costs to a defendant. Criminal law cost considerations do not enter the picture.19. The basic principle in the award of costs under s.26A(1) must be
31、 Order 62, Rule 3(2). That provides that costs should:-“follow the event, except where it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs”.20. Indeed, I do not understand Mr. Cooney (who appears for the Financial Sec
32、retary as an interested party) to be vigorously contending that criminal law principles apply to the award of costs. 21. Instead, Mr. Cooney himself strongly relies on guidelines provided by the civil case of Ritter v. Godfrey 1920 2 KB 47 (CA). There Atkin LJ suggested (at 60):-“In the case of a wholly successful defendant, in my opinion the judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the liti
