HONG KONG SPECIAL ADMINISTRATIVE REGION.docx
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HONG KONG SPECIAL ADMINISTRATIVE REGION.docx
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HONGKONGSPECIALADMINISTRATIVEREGION
HCAL120/2005
INTHEHIGHCOURTOFTHE
HONGKONGSPECIALADMINISTRATIVEREGION
COURTOFFIRSTINSTANCE
CONSTITUTIONALANDADMINISTRATIVELAWLIST
NO.120OF2005
____________
INTHEMATTERofsection26AoftheSecurities(InsiderDealing)Ordinance(Cap.395)and
INTHEMATTERofanInquirybytheInsiderDealingTribunalintocertaindealingsinMay1997inlistedsecuritiesofHKCBHoldingCoLtdandHongKongChinaLtdand
INTHEMATTERofanapplicationforjudicialreviewby
EDMUNDKUNGCHIUNAM
____________
BETWEEN
EDMUNDKUNGCHIUNAMApplicant
and
THEINSIDERDEALINGTRIBUNALRespondent
and
THEFINANCIALSECRETARYInterestedParty
____________
Before:
HonChuJandHonReyesJinCourt
DatesofHearing:
29March2006
DateofJudgment:
29March2006
________________
JUDGMENT
________________
HonReyesJ:
-
I.Introduction
InMarch2005anInsiderDealingTribunalheldthatMr.Kungwasnotguiltyofinsiderdealing.Mr.KungthereuponappliedforsomeofhiscostsofdefendinghimselfbeforetheTribunal.TheTribunalrefusedhisapplication.Mr.Kungnowseeksjudicialreviewofthatrefusal.Inessence,hesaysthat,inrejectinghisapplication,theTribunalwaswronginlawandwronglyexerciseditsdiscretion.
II.Background
InMay1997Mr.CarltonPoonengagedininsiderdealingusingMr.Kung’sdiscretionaryaccountwithWorldsecInternationalLtd.Mr.Kungknewnothingofthistrading.Outoffriendship,Mr.KunghadsimplyallowedMr.PoontoconductpersonaltradingthroughtheWorldsecaccount.
1.WhentheSFCinvestigatedMr.Poon’stradesinMay1998,Mr. KungliedtotheSFC.AtMr.Poon’sprompting,Mr.Kungclaimedthattherelevanttradeshadbeenexecutedonhisbehalf.
2.InNovember2000Mr.KungreceivedaletterfromtheFinancialSecretarynaminghimasapersonimplicatedininsiderdealing.Mr.Kungthenconsultedalawyerforthefirsttime.
3.InMarch2001,actingonlegaladvicewhichhehadreceived,Mr.Kungvolunteeredastatementadmittingthatheliedandprovidingthecorrectinformation.Hestatedthat,contrarytowhathehadtoldtheSFCin1998,hehadnotauthorisedandhadnoknowledgeofthesecuritieswhichMr.Poonhadboughtandsoldusinghisaccount.
4.Between8December2003and11October2004theTribunalconductedaninquiryintothecaseagainstMr.Poon,Mr.Kungandothers.Inits1stReport,theTribunalacceptedMr.Kung’sMarch2001statement.TheTribunalbelievedthat,althoughMr.Poonwasguiltyofinsiderdealing,Mr.Kungwasnot.
5.TheTribunalsaidofMr.Kung(at1stReport,p.41):
-
“WehavetakenparticularcareinassessingEdmundKung’sevidencegiventhat,notwithstandingthefactthatatendofhistwoSFCinterviewshisobligationtotellthetruthandtomaintainsecrecywereclearlyspelledouttohim,EdmundKungdeliberatelychosetodefytheseobligations.
Infavourofhiscredibilityisthefactthaton26March2001atarelativelyearlystage,albeitaftertheannouncementthattherewouldbeaninquiryandthathissecuritiesdealingsinMay1997wereto[be]partofthesubjectoftheinquiry,hevolunteeredastatementadmittingthathehadliedtotheSFCinhisearlierinterviewsandclaimingthathewasnowgivingatrueandfullaccountofhisactions.Mr.FredKinmonth,EdmundKung’ssolicitor,informedusthatadraftofthisstatementhadbeenreadouttoCarltonPoonon20March.AccordingtoMr.Kinmonth,Poonhadnotchallengedtheaccuracyofthecontentsofthestatement,buthadrepliedtotheeffectthatitscontentswere‘substantiallycorrect’.
WeweresatisfiedthatEdmundKungtoldthetruthinhis26March2001statementtotheSFCandinevidencebeforeusandthathisclaimthathehadnothingtodowiththetradesinHKCBHandHKCsecuritiesinhisWorldsecaccountoverthematerialtimeistrue.”
6.TheTribunalthenconcluded(at1stReport,pp.70):
-
“AsweacceptEdmundKung’sevidenceinsubstance,thetradescarriedoutinhisaccountwerenothisandwerecarriedoutwithoutanyoftheinformationneededtoconstituteinsiderdealingonhispart.”
7.Securities(InsiderDealing)Ordinance(Cap.395)(SIDO)s.26Aregulatestheawardofcostsinaninsiderdealinginquiry.Thesectionprovides:
-
“
(1)Subjecttosubsection(5),attheconclusionofaninquiryorassoonasreasonablypracticablethereafter,theTribunalmayawardto:
-
(a)...
(b)anypersonwhoseconductis,inwholeorinpart,thesubjectoftheinquiry,
suchsumasitthinksfitinrespectofthecostsreasonablyincurredbyhiminrelationtotheinquiry.
(2)AnycostsawardedbytheTribunalundersubsection
(1)shallbechargedonthegeneralrevenue.
(3)TheTribunalmayorderthatnaycostsawardedundersubsection
(1)maybetaxedonthebasisofanyoneofthescalesofcostssetoutintheSchedulestoOrder62oftheRulesoftheHighCourt(Cap.4sub.leg.).
(4)SubjecttoanyrulesmadebytheChiefJusticeundersection36,Order62oftheRulesoftheSupremeCourt(Cap.4sub.leg.)shallapplytotheawardandtaxationofanycostsawardedbytheTribunalunderthissection.
(5)Thissectionshallnotapplytoanypersonreferredtoinsubsection
(1)whois:
-
(a)apersonwhohasbeenidentifiedasaninsiderdealerinadeterminationundersection16(3);
(b)anofficerofacorporationwhohasbeenidentifiedassuchofficerinadeterminationundersection16(4);
(c)apersonwhoandinrespectofwhomitappearstotheTribunalhasbyhisownactsoromissionscausedorbroughtabout(whetherwhollyorinpart)theTribunaltoinquireintohisconductsubsequenttotheinstitutionoftheinquiryundersection16orduringthecourseofthatinquiry;or
(d)anyotherpersonwhoandinrespectofwhomitappearstotheTribunalhasbyhisownactsoromissionscausedorbroughtabout(whetherwhollyorinpart)theinstitutionoftheinquiryundersection16.”
8.Mr.Kungappliedforhiscostsfrom1May2001(thatis,adate6weeksafterserviceofhisvoluntarystatement).Byits2ndReportdated9August2005theTribunalrejectedMr.Kung’sapplicationforcosts.
9.Insodoing,theTribunalacceptedtheargumentofMr.Barlow(Mr.Kung’scounsel)thatMr.KungwasnotapersonwhowasbarredfromrecoveringhiscostsbySIDOs.26A(5).
10.Inparticular,Mr.Barlowsubmitted(asrecordedat2ndReportp.11)that:
-
“[I]tcannotbesaidthatEdmundKungdidanythingtocausetheinstitutionofthisInquirybecauseitcannotreasonablybesuggestedthatitwasEdmundKung’sfalsestatementstotheSFCinvestigatorswhentheyinterviewedhimon13May1998thathehadinstructedCarltonPoontopurchaseHKCBHandHKCwarrantsonhisbehalfinMay1997,[that]didanythingtobringitintobeing.EvenifEdmundKunghadtoldthetruthinthatinterview,ratherthanharbouritinhisbreastuntil26March2001oncehelearntthathewasanimplicatedperson,theInquirywouldstillhavebeeninstitutedbecauseoneoftheobjectsoftheInquirywouldhavebeenthecircumstancesunderwhichhisWorldsecaccountwasusedtotradeinthosewarrantsinMay1997.”
11.TheTribunalacceptedthelogicofthissubmissionat2ndReportp.265.But,intheexerciseofitsdiscretion,theTribunalfeltthatitwasinappropriatetoawardMr.Kunganycosts.
12.Asamatterofgeneralprinciple,theTribunalheldthatitcouldfollowthepracticeincriminalcases.Thus,costsmightbe:
-
“deniedtoanacquitteddefendant[suchasMr.Kung]wherehisconducthasbroughtsuspiciononhimselfand/ormisledtheinvestigatingauthoritiesintothinkingthatthecaseagainsthimselfisstrongerthanitis.”
13.TheTribunalgave2specificreasonsforitsdecision.
14.First,Mr.KunghadliedtotheSFC.TheTribunalthoughtthatwas“completelyunacceptable”.ThiswasespeciallysowhereMr.Kung:
-
“didnothingtorescind[hislies]untiltheydrewhimintotheInquiryandthatheonlydidthatafterlegaladvice,whenhisownconscienceasmarketprofessionalshouldhavetoldhimwherehisdutylay...”
15.TheTribunalfeltthat“tograntEdmundKunghiscosts...wouldonlyberewardingdeceitandmendacity”.
16.Second,Mr.KunghadallowedMr.PoontousehisWorldsecaccountwithoutexercisinganycontroloversuchuse.That(theTribunalbelieved)was“grosslynegligent”.
17.Worse,suchconductmightbecharacterised(theTribunalsaid)as“condoningorhidingpossibleinappropriateorillegaltransactionsonCarltonPoon’spart”.
III.Discussion
Inmyview,theTribunalwaswrongtoapplyaprincipleofcriminallawindeterminingwhethertoawardMr.Kungcosts.
18.TheChiefJusticehasnotmadeanyrulesinrespectoftheawardofcostsininsiderdealingcases.Consequently,bySIDOs.26A(4),thecivillawprinciplesinRHCOrder62mustgovernanyexerciseoftheTribunal’sdiscretiontoawardcoststoadefendant.Criminallawcostconsiderationsdonotenterthepicture.
19.Thebasicprincipleintheawardofcostsunders.26A
(1)mustbeOrder62,Rule3
(2).Thatprovidesthatcostsshould:
-
“followtheevent,exceptwhereitappearstotheCourtthatinthecircumstancesofthecasesomeotherordershouldbemadeastothewholeoranypartofthecosts”.
20.Indeed,IdonotunderstandMr.Cooney(whoappearsfortheFinancialSecretaryasaninterestedparty)tobevigorouslycontendingthatcriminallawprinciplesapplytotheawardofcosts.
21.Instead,Mr.CooneyhimselfstronglyreliesonguidelinesprovidedbythecivilcaseofRitterv.Godfrey[1920]2KB47(CA).ThereAtkinLJsuggested(at60):
-
“Inthecaseofawhollysuccessfuldefendant,inmyopinionthejudgemustgivethedefendanthiscostsunlessthereisevidencethatthedefendant
(1)broughtabouttheliti
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