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Financial Secretary v Felix Wong

Judgment Cited authorities 17 Cited in Precedent Map Related
Vincent
Judgment Date26 November 2003
Year2003
Citation(2003) 6 HKCFAR 476; [2004] 1 HKLRD 303
Judgement NumberFACV5/2003
Subject MatterFinal Appeal (Civil)
CourtCourt of Final Appeal (Hong Kong)
FACV000005/2003 FINANCIAL SECRETARY v. FELIX WONG

FACV No. 5 of 2003

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 5 OF 2003 (CIVIL)

(ON APPEAL FROM CACV NO. 96 OF 2001)

_____________________

Between:
FINANCIAL SECRETARY Appellant
AND
FELIX WONG Respondent

_____________________

Court: Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ, Mr Justice Litton NPJ and Lord Millett NPJ

Dates of Hearing: 24 October and 6 November 2003

Date of Judgment: 26 November 2003

__________________

J U D G M E N T

__________________

Mr Justice Bokhary PJ:

1. In this appeal the Court is faced with an unprecedented problem. We have to cope with the disaster caused by the Insider Dealing Tribunal's mishandling of an insider dealing inquiry seven years ago. The securities involved in that inquiry were the shares in a listed company. This was the company named Paragon Holdings Ltd at the material time but later re-named CNPC (Hong Kong) Ltd. In 1995 it appeared to the then Financial Secretary that insider dealing in Paragon shares had or may have taken place during the period from 3 March to 7 May 1993. So, by a notice dated 28 December 1995 given under s.16 of the Securities (Insider Dealing) Ordinance, Cap. 395, he exercised his power under that section to institute an inquiry into the matter. All my references to sections and subsections will be to those of this Ordinance.

2. By the s.16 notice the Insider Dealing Tribunal ("the Tribunal") was called upon to inquire into and determine:

"(a) whether there has been insider dealing in [those shares during that period];

(b) in the event of there having been insider dealing as described in paragraph (2), the identity of each and every insider dealer; and

(c) the amount of any profit gained or loss avoided as a result of such insider dealing."

Those terms of reference conform with s.16(3) which reads:

"The object of an inquiry shall be to determine at the conclusion of the inquiry or as soon as is reasonably practicable thereafter, within the terms of reference of the inquiry as defined under subsection (2)

(a) whether insider dealing in relation to a listed corporation has taken place;

(b) the identity of every insider dealer; and

(c) the amount of any profit gained or loss avoided as a result of the insider dealing."

Report

3. The Tribunal was chaired by Mr Justice Yam ("the Chairman") who sat with two other members, one a solicitor and the other a stockbroker. Sitting half days only, the Tribunal sat on 110 days during the period from 25 March to 25 November 1996. On 3 June 1997 it issued its report. This report suffered from an omission. It contained the Tribunal's finding that insider dealing within its terms of reference had taken place. And it contained the names of the three persons whom the Tribunal identified as insider dealers. But it made no mention of any profit gained or loss avoided as a result of their insider dealing. Even if only by reason of that omission, the Tribunal cannot be said to have completed its task.

Unfairly and contrary to the rules of natural justice

4. Of course if that omission had been the only problem, the situation could have been saved by a supplemental report. Unfortunately there was another problem, and it was a far more serious one. This brings me to the first set of judicial review proceedings involved in the present case. The three persons whom the Tribunal found guilty of insider dealing were two gentlemen surnamed Tan and the respondent to the present appeal, Mr Felix Wong. About three weeks after the Tribunal issued its report, the Tans brought judicial review proceedings seeking an order of certiorari (as such orders are still called in Hong Kong even though they are now called "quashing orders" in England where they originated) to quash all of the Tribunal's findings. They sought such relief on the grounds that the Tribunal had conducted the inquiry in a manner which was unfair and contrary to the rules of natural justice.

5. The Tans succeeded. On 1 April 1998 Sears J held that those grounds had been made out. And he made an order of certiorari quashing all of the Tribunal's findings. Sears J's decision is reported as Dato Tan Leong Min v. Insider Dealing Tribunal [1998] 1 HKLRD 630. The Tribunal appealed to the Court of Appeal. On 27 January 1999 the Court of Appeal dismissed the Tribunal's appeal. The Court of Appeal's decision is reported as Dato Tan Leong Min v. Insider Dealing Tribunal [1999] 2 HKC 83. There was no appeal from that decision of the Court of Appeal.

6. In what manner had the Tribunal acted unfairly and contrary to the rules of natural justice? That may be taken from Mortimer VP's judgment (with which Rogers JA agreed and to which Godfrey JA added a concurring judgment). Sears J had listed seven conclusions which he described as "general conclusions". At pp 91H-92B Mortimer VP, leaving out the first of those seven conclusions, quoted the other six:

"2. After the public hearing began, the Chairman adopted a procedure deliberately designed to exclude the public and parties from important decisions and discussions relating to the inquiry.

3. The Chairman used the counsel to the Tribunal to such an extent that they became part of the Tribunal.

4. Up to the time when the public hearing substantially finished in August 1996, he was encouraging counsel to draft the report.

5. From the conclusion of the public hearings in August 1996, the Tribunal received evidence which was never disclosed to the parties and he secretly evaluated the evidence with counsel until the end of the year.

6. When the Tribunal began to write the report, it secretly received comments from counsel and evidence from some parties.

7. The Tribunal in effect conducted an inquiry which breached the basic rules of fairness and openness and although the Chairman was warned about his unusual procedures, he nevertheless continued with them."

7. Then Mortimer VP turned to another conclusion to which Sears J had come, which was that the Tribunal had pre-judged certain issues. The learned Vice President felt unable to support the conclusion as to pre-judging. But he was satisfied that Sears J's other conclusions were justified and agreed with them. In the result, the Court of Appeal unanimously affirmed Sears J's order of certiorari quashing all of the Tribunal's findings on the grounds that the Tribunal had conducted the inquiry in a manner which was unfair and contrary to the rules of natural justice.

Mr Wong applies for costs

8. Unlike the Tans who are Malaysian residents and had chosen to absent themselves from the inquiry, Mr Wong is a Hong Kong resident and had been legally represented thereat. All of the Tribunal's findings having been quashed, Mr Wong applied to the Tribunal under s.26A for his costs of the abortive inquiry. This section reads:

"(1) Subject to subsection (5), at the conclusion of an inquiry or as soon as reasonably practicable thereafter, the Tribunal may award to -

(a) any witness;

(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 costs 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 any costs awarded under subsection (1) may be taxed on the basis of any one of the scales of costs set out in the Schedules to Order 62 of the Rules of the High Court.

(4) Subject to any rules made by the Chief Justice under section 36, Order 62 of the Rules of the High Court shall apply to the award and taxation of any costs awarded by the Tribunal under this section.

(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 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 other 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."

Contamination?

9. As can be seen from s.26A(5)(c) and (d), the Tribunal is precluded from awarding costs to any person who had wholly or partly brought an inquiry upon himself by his own acts or omissions. Mr Wong's legal advisers feared that the Tribunal might embark upon the question of whether Mr Wong had brought the inquiry upon himself. And they feared that the Tribunal might have regard to the evidence from the inquiry when answering that question. So counsel for Mr Wong submitted on his behalf that none of the evidence from the inquiry could be looked at because the matters which led to the quashing of the Tribunal's findings had "contaminated" such evidence. I will refer to this submission as the "contamination" submission.

10. By a ruling which he delivered on 24 September 1999, the Chairman gave his decision on the contamination submission. He said that the Tribunal would not use any evidence taken in private during the inquiry. But he declined to rule out the use of evidence taken by the Tribunal in public hearing at the inquiry. Mr Wong was dissatisfied with this decision. And he rapidly sought leave to challenge it by way of judicial review....

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