Law Fei Shing v. The Hong Kong Institute of Certified Public Accountants

HCMP 748/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 748 OF 2015

(ON AN INTENDED APPEAL FROM HCAL NO 132 OF 2014)

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J U D G M E N T
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Hon McWalters JA (giving the judgment of the court):

Introduction

1.This is an application for an extension of time to enable the applicant to appeal against a refusal by Zervos J (“the judge”) to grant leave to apply for judicial review.  The application for leave to apply for judicial review was filed on 10 October 2014 and was determined by the judge in chambers on 2 February 2015 without an oral hearing.  O 53, r 3(4) of the Rules of the High Court requires that any appeal from a refusal of leave be filed within 14 days after the judge’s order.  The 14 day time limit expired on 16 February 2015. 

2.The applicant wishes to appeal the refusal of leave by the judge but needs an extension of time in which to do so.  His summons seeking an extension of time was filed on 1 April 2015.  The summons was supported by an affirmation from the handling solicitor of the applicant’s firm of solicitors and exhibited to the affirmation is a copy of the draft notice of appeal.

3.On 2 April 2015 Kwan JA directed that the applicant serve a copy of the summons on the interested party and for the interested party to write to the court and the applicant indicating whether it would apply to join in to oppose the application.  The interested party wrote to the court on 14 April 2015 indicating it intended to appear and oppose the application and it did so.

4.At the hearing of the application we reserved our judgment and indicated we would hand it down at a later date.  This we now do.

The background to the application for leave to apply for judicial review

5.The applicant is a Certified Public Accountant. The respondent, the Hong Kong Institute of Certified Public Accountants (“the Institute”), is a body corporate incorporated by section 3 of the Professional Accountants Ordinance, Cap 50 (PAO).  Its objects include the regulation of the practice of the accountancy profession, the preservation and maintenance of its reputation, integrity and status and also:

“to discourage dishonourable conduct and practices by certified public accountants, and for this purpose to hold inquiries into the conduct of certified public accounts …”

6.The governing body of the Institute is the Council which is created under section 10 of the Ordinance.  There is also a Registrar who is appointed by the Council and whose role is to act as secretary to both the Institute and the Council.

7.On 5 September 2012 Mr Lee Kwong On lodged with the Institute a complaint of professional misconduct against the applicant. Upon receipt of this complaint the Institute initiated its own investigation and sent to the applicant on 28 January 2014 a Complaint Letter which it said was “the product of the Institute’s own findings on the matter after reviewing all the documents and receiving representations from your client [ie the applicant].”

8.Procedurally the first step in the disciplinary process is the referral of potential misconduct to the Council and the second step is the referral by the Council of such misconduct to the Disciplinary Panels which are created by section 33 of the Ordinance. Complaints of misconduct are made to the Registrar who on receipt “shall submit the complaint to the Council” (Section 34(1) of the Ordinance).  The Council may then, in its discretion, refer the complaint to the Disciplinary Panels. 

9.However, the Ordinance provides an alternative means by which an allegation of misconduct can be placed before the Council.  That is by section 34(1A) which provides:

“Where the Registrar has reason to believe that … (facts of misconduct) applies to a Certified Public Accountant … he shall submit the facts to the Council which, may, in its discretion, refer the complaint to the Disciplinary Panels.”

10.There are thus two ways by which an allegation of professional misconduct can be placed before the Council.  Both involve the Registrar taking action.  The first route is a complaint reactive one where the Registrar receives a complaint that satisfies section 34(1)(a) or (b).  In respect of that complaint he has a mandatory statutory obligation to refer the complaint to the Council.  The second route is where the Registrar plays a more pro-active role as a result of becoming aware of facts which are within section 34(1)(a) or (b).  If he determines that these facts provide him with the requisite reason to believe then he must submit those facts to the Council.  

11.The Institute has promulgated rules to regulate the disciplinary process.  They are the Disciplinary Committee Proceedings Rules.  Rule 5 provides:

“The Council, before deciding whether or not to refer a complaint to the Disciplinary Panels:

(a) …

(b) shall invite the Respondent to submit to the Council in writing any explanation of his conduct or of any other matter alleged in the complaint which he may have to offer.”

12.These rules further provide for the referral by the Council of the complaint to the Disciplinary Panels which is then referred to a Disciplinary Committee to decide whether a complaint has been proved and if so to determine the sanction to be imposed. 

13.After receipt of the Complaint Letter the applicant sought an extension of time in which to make his Rule 5(b) explanation.  The reason advanced for seeking the extension of time was in order to obtain legal advice.  The extension was granted and the extension period expired on 19 March 2014.

14.On 18 March 2014 the applicant, through his solicitors, wrote to the Institute making a number of legal complaints, none of which responded in a factual way to the contents of the Complaint Letter, and which ended with a request for the Institute to stay the disciplinary process.  Central to the applicant’s legal complaints was an argument in relation to jurisdiction to the effect that there is nothing in section 34(1) that allows the Registrar to make a complaint on his own initiative.  The solicitors wrote: “The Registrar is not proceeding under section 34(1A) by taking over Mr Lee’s complaint and so section 34(1A) is irrelevant.”  The applicant further asserted that, this being the legal position, “neither the Registrar nor the Council has the power to expand or improve the complaint lodged by Mr Lee against Mr Law.”

15.On 26 March 2014 the Institute, through its General Counsel Mr Donald Leo, replied to the applicant’s solicitor’s letter rejecting the request to stay the proceedings.  It allowed the applicant a further 7 days from the date of the letter in which to make his Rule 5(b) representations.  In response to the allegation that the actions of the Council and the Registrar were outwith their statutory jurisdiction, Mr Leo said:

“At the heart of your argument, is your assertion that the present complaint is a complaint from Mr Lee. This cannot be further from the truth. Whilst Mr Lee’s complaint initiated the Institute’s enquiry into this matter, the Complaint Letter is the product of the Institute’s own findings on the matter after reviewing all the documents and receiving representations from your client….

As your own letter admits, the Complaint Letter is an expansion of the grievances initially lodged by Mr Lee. The resulting expansion was based upon the Institute’s investigation and review of all the relevant materials provided by Mr Lee and your client and the explanations received from your client.

Clearly, the Registrar has the power to investigate a matter and refer a complaint based upon the investigations carried out. This he has done and the Complaint Letter is the product of an exercise of that power. Your Ground 1 is rejected.” (Original emphasis)

16.Six days later, on 1 April 2014, the applicant’s solicitors replied, repeating the argument in relation to jurisdiction, making further legal submissions and concluding their letter with the following paragraph:

“We look forward to the deliberations and determination of the Council, and would appreciate that full reasoning be given by the Council in the event that the Council resolves to make a determination adverse to Mr Law. We are of course more than happy to provide further information and/or arguments if the Council considers it necessary.”

17.On 15 April 2014 the applicant’s solicitors wrote to the Council suggesting a working meeting “to narrow down the issues and, if possible, to reach consensus on the pace of any further progress on the subject.”

18.On 25 April Mr Leo, wrote to the applicant personally and signed this letter which was on the letterhead of the Institute as “Representative of the Complainant.”  In this letter Mr Leo wrote:

“The Council of the Institute, having considered the above complaints and your representations in respect thereof, resolved to refer the matter to the Disciplinary Panels and to constitute a Disciplinary Committee.”

19.On 20 May 2014 the applicant’s solicitors wrote to the Council repeating its legal objections to the disciplinary process proceeding and threatening judicial review whilst repeating its offer of an amicable settlement.

20.The Institute replied to this letter on 15 July 2014 through its solicitors.  In this letter the solicitors indicated that the Council had decided not to accept the applicant’s proposal for settlement of the complaint against the applicant.  This letter also revealed that the Council had reviewed its earlier decision and re-affirmed it.  The letter said:

“In your letter of 20 May 2014, you request the Council to once again consider your client’s arguments in the following terms:

‘…’

In view of your request, and notwithstanding that there was no obligation to do so, all of your correspondence was submitted once again to the Council and considered by the Council for a second time.  The Council re-affirmed its original decision to reject your client’s procedural objections and to refer the Complaint against your client to the Disciplinary Panels for consideration by an independent Disciplinary Committee.”

21.This letter also repeated what had been said in earlier correspondence that the Registrar had placed the allegation of misconduct before the Council in accordance with the duty imposed upon him by section 34(1A). 

22.Thereafter there was various correspondence between the parties, none of which was productive of a settlement. 

23.On 11 September 2014 the Clerk to the Disciplinary Committee wrote to Mr Leo as Representative of the Complainant and the applicant’s solicitors setting out a timetable for the parties to submit their respective cases to the Disciplinary Committee.  Mr Leo then wrote to the Clerk to the Disciplinary Committee and sought a three week extension of the date by which the complainant had to file its case.  This would have meant that the complainanant’s case had to be filed by 24 October 2014.  The application for judicial review was filed on 10 October 2014.

The application for leave to apply for judicial review

24.The decision in respect of which relief is sought by the Form 86 is:

“The decision of the Council of The Hong Kong Institute of Certified Public Accountants at about a short while before 11 September 2014 to refer the complaint made by Lee Kwong On of Chong Luen Hing Garments Limited against Mr Law Fei Shing to the Disciplinary Panels.”

25.In the Form 86 there are a number of Grounds of Review but some of them are no longer being pursued. 

26.The first ground of review is that the decision of the Council is unlawful because it is ultra vires in that the Registrar could not reformulate the complaint of Lee Kwong On for referral to the Council, and thus the referral is void and this has rendered the Council’s decision unlawful.

27.The decision is also said to be unlawful in that the Registrar could not in law take over the complaint and then process it under section 34(1A) of the PAO.

28.The second ground of review is that the decision was reached as a result of procedural unfairness in that the Council failed to give adequate reasons in justification for proceeding under section 34(1A), rather than section 34(1) and failed to give adequate reasons for its decision to refer the Registrar’s complaints to the Disciplinary Panels.

29.The applicant in his relief sought in the Form 86 specifically requested a hearing of his application for leave to apply for judicial review under O 53, r 3(3) of the Rules of the High Court, Cap 4A if leave was not granted on the papers.

The judgment refusing leave

30.In his judgment the judge refused the application for leave because it was “both out of time and without merit”.  The reference to the application being out of time flowed from documents filed by the applicant in support of his leave application which clearly showed that a decision by the Council was made no later than 25 April 2014.  The judge referred to the reaffirmation of this decision that was mentioned in the letters of the respondent’s solicitors dated 15 July 2014 but treated the decision in respect of which relief was being sought as the decision mentioned in the letter of 25 April 2014 which was signed by the General Counsel of the Institute, Mr Leo, in his capacity as Representative of the Complainant.

31.The judge referred to the decision of Hartmann J in Dr Peter Po Fun Chan v. The Hong Kong Society of Accountants HCAL 176/2000, unreported 29 June 2000 where he rejected an argument that the Registrar was only permitted to act under section 34(1A) when facts relating to an allegation of misconduct come to his attention other than by way of a complaint.  He said:

“… if the Registrar believes the complaint has substance, he may take the matter over and become the prosecutor of the cause. The Registrar must then - his identity being known - state the details of the complaint. Section 34(1A) is expressed in broad language. Such language is necessary to encompass the wide range of circumstances in which matters may lawfully be brought to the Registrar’s attention. If that was not the case, it would undermine the clear intent of the legislation.”

32.The judge rejected the applicant’s contention that the Registrar did not have the power to make a complaint on his own initiative under section 34(1A) when a complaint had been received under section 34(1).  If the complaint of the Registrar was broader in its scope than that received under section 34(1) then the original complaint would be encompassed within the Registrar’s complaint and so the duty to place it before the Council would be satisfied and there would no duty on the Registrar to separately submit the original complaint to the Council.

The grounds of appeal

33.The first ground of appeal is that the judge exceeded his jurisdiction by refusing leave on the papers without giving the applicant the opportunity of an oral hearing that had been requested in the application for leave to apply for judicial review.  The second and third grounds of appeal approach the same issue on different bases.

34.The fourth ground of appeal is that on a proper construction of sections 34 and 34(1A) of the PAO it was mandatory for the Registrar to refer the original complaint to the Disciplinary Committee.

35.The fifth and sixth grounds of appeal were not pursued by the applicant.

36.In terms of the merits of the application for leave to apply for judicial review the applicant relied on his assertion of the illegality of the actions of the Registrar in reformulating the complaint. This is the same argument advanced under the fourth ground of appeal.  The only other ground relied on is that the decision was reached through procedural unfairness in that the Council failed to give adequate reasons for proceeding under section 34(1A) rather than section 34(1) of the PAO.

37.At the hearing of the appeal the applicant applied for leave to amend his Form 86 in respect of the decisions sought to be reviewed.  This was necessary because the applicant had assumed that the letter from the Clerk to the Disciplinary Committee of 11 September 2014 was preceded by a decision of the Council to refer the complaint to the Disciplinary Panels and to Constitute a Disciplinary Committee.  There was, however, no evidential basis for such an assumption.  Indeed all the evidence pointed to such a decision having been made on or before 25 April 2014 and this decision having been re-affirmed on or before 15 July 2014.  Consequently, the applicant sought to amend his Form 86 by adding the following decisions:

“1. The decision of the Council of the Hong Kong Institute of Certified Public Accountants (‘the Council’), as notified by letter, dated 25 April 2014, to refer the complaint of Lee Kwong On of Chong Luen Hing Garments Limited against Mr Law Fei Shing to the Disciplinary Panels (‘the Complaint’).

2.      The decision of the Council, as notified by letter, dated 15 July 2014, to re-affirm its original decision to reject the Applicant’s procedural objections and to refer the Complaint to the Disciplinary Panels for consideration by an independent Disciplinary Committee.”

38.We reserved our decision on whether to grant the application and said we would rule on the application in the course of giving our judgment on the appeal.  Although we should say at the outset that it is curious the applicant should refer to the decision of the Council as being a decision to refer the complaint of Lee Kwong On to the Disciplinary Panels when the whole basis of its case is that the Council acted unlawfully precisely because it did not refer the complaint of Lee Kwong On to the Disciplinary Panels but rather referred a complaint of the Registrar purporting to act under section 34(1A) of the PAO.

Discussion

39.The judge’s order was sealed on 20 March 2015.  Between the date of judgment and the date of seeking of the order no attempt was made by the applicant to seek an opportunity to be heard on the application for leave.  It is unfortunate that the applicant did not adopt that simple course.  But he did not.

40.The legal principles on which an appellate court acts when adjudicating upon an application for an extension of time in which to appeal a refusal of leave to apply for judicial review were set out in Re Li Jing [2015] 2 HKLRD 933.  At page 938, paragraph 20 Chu JA, in giving the judgment of the court said:

“The factors normally taken into account by the court in deciding whether to ground an application for extension of time for appealing are:

(1) the length of the delay;

(2) the reasons for the delay;

(3) the strength of the grounds of the intended appeal; and

(4) the prejudice likely to be done to the opposite party if time is extended.”

41.Here, as in the Li Jing case the delay is not great and the reasons for it are a misunderstanding by the applicant’s lawyers of the relevant time limits.  As Chu JA further commented at paragraph 22 of the Li Jing case:

“In any event, the crucial consideration in deciding whether an application for extension of time for appeal should be granted and whether the process of an appeal should be allowed to continue is whether the appeal intended to be brought by the applicant has a reasonable prospect of success.”

42.Here, the applicant has a procedural ground which is unanswerable, namely that he was denied an oral hearing, a right to which when requested in the Form 86, is accorded to him by the rules of the High Court.  However, this procedural ground of appeal is not sufficient, on its own, to satisfy the requirement that the intended appeal has a reasonable prospect of success.

43.Because we are determining whether the intended appeal should be allowed to continue we must be persuaded that the arguments the applicant proposes advancing on the appeal have a reasonable prospect of success.  We look not just to the merits of any procedural points relating to his appeal but more to the substantive merits of it.  This must be so for the simple reason that by his Notice of Appeal the applicant does not seek the re‑adjudication of his application with an oral hearing by the judge[1] or some other judge; rather he is asking this court, if granted the extension of time, to grant him the leave that was refused him by the judge.

44.As we have said the procedural ground is unanswerable, but not on its own a sufficient reason to grant leave, and so no more need to be said about it and we shall turn to a discussion of the merits of the grounds of appeal relating to the applicant’s case.

45.The applicant’s primary argument is that the decision of the Registrar is tainted by illegality in that his action in placing his own complaint before the Council, purportedly in accordance with section 34(1A), was unlawful.  Notwithstanding that it is the Registrar’s conduct that is said to be unlawful and that it was his decision that was unsupported by the power on which he sought to rely, it is the Council’s decision in respect of the Registrar’s complaint that is challenged.

46.The applicant sought to demonstrate that the Registrar’s complaint did not encompass everything contained in the original complaint.  To the extent that it omitted certain matters from the original complaint it could not be said to be an expansion of it.  This, it is argued, exposes the applicant to a second round of complaints should these omitted complaints ever be pursued by the Council.

47.It was submitted that by making the decision to refer the Registrar’s complaint to the Disciplinary Panels without considering the original complaint the Council acted ultra vires its powers under the Ordinance.  Moreover, by not considering the original complaint it acted with “Wednesbury unreasonableness”.  Finally, it is submitted, because the Council did not consider the original complaint, it remains extant and this is a breach of its duty to act fairly to the applicant.

48.What the applicant now complains of in his jurisdiction argument is that by his conduct the Registrar has filtered the original complaint and in doing so has acted in breach of his statutory duty. Because the Council only had an edited or filtered version of the original complaint they did not have before them all the relevant material when they made the decisions which are now being challenged.

49.As Mr Stock for the respondent points out this is a different argument from that advanced before the judge.  The Form 86 challenges the legality of the Registrar in taking over and re-formulating the complaint and then processing it under section 34(1A).  This challenge was rejected by the judge and, in our view, rightly so.  Now the applicant has reformulated his argument and submits that:

(i) the Registrar had a duty to place the original complaint before the Council;

(ii) without the original complaint before it the decision of the Council was taken in the absence of all relevant material and without consideration being given by it to the details of the original complaint.

50.The consequences are that:

(i) the Council acted ultra vires the Ordinance;

(ii) the Council’s decision was tainted by Wednesbury unreasonableness; and

(iii) the Council breached its duty to act fairly to the applicant.

51.Mr Stock submits that this is a quite different case from that formulated in the Form 86 and which, therefore, underlay the proceedings before the judge and on which his judgment refusing leave to apply for judicial review was based.  He draws to our attention the comments of Litton NPJ in Peter Po Fun Chan v Winnie Cheung (2007) 10 HKCFAR 676 at 693 paragraph 52 where he warned against the Court of Appeal being lured into departing from its appellate role and, in effect, exercise an original jurisdiction on a basis different from that advanced before the judge whose judgment is before it on appeal.

52.These comments are apposite to both the reformulated illegality ground and the reformulated procedural unfairness ground.  Nevertheless, we are also of the view that even if we were to give consideration in this judgment to both those reformulated grounds we would reject them as not having any reasonable prospect of success.

53.Once it is accepted that the Registrar could present his own complaint under section 34(1A) then that complaint is properly before the Council and the Council is duty bound to make a decision in respect of it.  Its decision was not ultra vires its powers under the legislation; rather, its decision was in conformity with its statutory duties.  There is no illegality in its decision to refer the Registrar’s complaint to the Disciplinary Panels.

54.That decision, in order to be fairly reached, must not be Wednesbury unreasonable.  All that the applicant has been able to demonstrate is that some of the matters in Lee’s original complaint have not made their way into the Registrar’s complaint.  However, he has not been able to show firstly that, factually, the Council was unaware of those matters and that there was, therefore, a failure to consider them and secondly, that even if there was, that those matters were relevant to the Council’s decision and so the failure to consider them renders the Council’s decision Wednesbury unreasonable.

55.The applicant’s complaint that the unpursued matters expose him to a continuing liability is simply not relevant at this stage.  The fact that they remain outstanding cannot taint the decision to refer other matters and should the Council at some future date act unfairly in relation to these outstanding complaints then that is a matter that can be addressed at the time.  We agree with Mr Stock that this potential prejudice to the applicant is fanciful and contrived.

56.In respect of the second ground on which relief is sought, we note that it was not made the subject of a separate ground of appeal.  Nevertheless, we shall briefly deal with it.  However, it is first necessary to place the decision in context.  It is simply a decision that certain matters placed before it warrant further investigation.  Given that those matters relate to the professional conduct of a person over whom the Institute has disciplinary responsibility, the decision is clearly made in fulfilment of its statutory objects.  It is not a decision which in any meaningful sense can be said to be prejudicial to any rights of the applicant. The disciplinary process many well exonerate the applicant.  Once it is accepted that the Registrar is entitled, pursuant to section 34(1A), to put his complaint before the Council then the reasons why the Council acted in the way it did are obvious.  The simple answer to the reasons why the Council made its decision is because it was acting in performance of its statutory duties and in order to advance the objects for which it was incorporated.

Conclusion

57.We are not persuaded that any of the applicant’s grounds of appeal have merit and we are not persuaded that any of the grounds on which relief is sought, whether in their original on reformulated form have a reasonable prospect of success.

58.We therefore refuse the application to amend the Form 86 and refuse the application for an extension of time in which to appeal.

Costs

59.The respondent claims the costs of the application.  The respondent appears because the court directed that it be served with the papers and could apply to join in and oppose the application.  The respondent relies on Leung Kwok Hung v The President of the Legislative Council (2014) 17 HKCFAR 841 in which the Court of Final Appeal gave the following guidance on the way the costs discretion should be exercised by the Court of Appeal on an appeal from a refusal of leave.  At page 854 the court said:

“The position on intermediate appeal

(8) The position on appeal to the Court of Appeal is different. At this stage, although an appeal lies as of right, the applicant will already have had the benefit of a hearing before the judge and the reasons for the judge’s refusal of leave. He will also have had the protection of the rule that he will only be at risk for an opposing party’s costs where special circumstances are shown. An appeal against a judge’s refusal of leave, which in practice proceeds on an inter partes basis, should therefore be subject to the usual rules as to costs, namely that the starting point in civil litigation, even that involving the public interest, is that costs should follow the event.

(9) The reversion to the normal costs rule as the starting point at this stage of the matter strikes a fair balance between the competing interests referred to above. The fact there is a right of appeal from a refusal of leave at first instance is not a good reason to depart from that normal rule and the application of the rule is particularly appropriate where the Court of Appeal’s reasons for dismissing the appeal are broadly the same as the first instance judge’s reasons for refusing leave.”

60.The Court of Final Appeal’s comments are predicated upon the applicant having already had a hearing before the leave judge. Although that did not happen here we are not persuaded that it should make any difference.  The applicant did have the benefit of a thoroughly considered and detailed judgment from Zervos J and precisely because of the benefit it received from that judgment the applicant sought to amend the Form 86 in respect of the decisions it sought to challenge and reformulated the grounds on which it sought to mount that challenge.

61.We are therefore of the view that, applying the principles laid down by the Court of Final Appeal in the Leung Kwok Hung case, costs should follow the event.  Consequently we order that the applicant pay the respondent’s costs.

62.We have received submissions from the parties for the purpose of making a gross sum assessment of costs.  After considering those submissions we order that the applicant pay the respondent’s costs of the application in the sum of $220,000.

Mr Nicholas Cooney SC, Mr Philip Wong and Mr Alexander Cheung, instructed by Lau, Chan & Ko, for the applicant

Mr Alexander Stock, instructed by Reed Smith Richards Butler, for the respondent