The Registrar of the Hong Kong Institute of Certified Public Accountants v. Wong Tak Man Stephen and Another

CACV 233/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 233 OF 2015

(ON APPEAL FROM THE ORDER MADE BY THE DISCIPLINARY COMMITTEE OF THE HONG KONG INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS DATED 8 SEPTEMBER 2015)

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D E C I S I O N

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Hon Cheung JA (giving the Decision of the Court) :

1.The respondents apply for leave to appeal against our judgment of 20 July 2016, reasons for which were given on 30 August 2016.

The three questions

2.The respondents rely on the following three questions which they said are of great general or public importance which ought to be considered by the Court of Final Appeal :

‘(1)  Whether section 34(1)(a)(vi) of the [Professional] Accountants Ordinance (Cap 50) on its proper interpretation is concerned only with a professional standard the compliance of which can be ensured by an accountant.

(2)  Whether on a proper interpretation of Hong Kong Accounting Standard 39 (“HKAS 39”), a financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, (a) there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and (b) that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

(3)  If Question (2) is answered in the negative, whether the interpretation of HKAS 39 as set out in Question (2) is a reasonable one so that its adoption by an accountant cannot constitute a failure or neglect to observe, maintain or otherwise apply a professional standard for the purpose of section 34(1)(a)(vi) of the Public Accountants Ordinance (Cap 50).’

Our view

Question 1

3.In our view the first question is not reasonably arguable having regard to the specific wording of section 34 of the Professional Accountants Ordinance (‘PAO’) (Cap. 50), namely, to ‘observe, maintain or otherwise apply a professional standard’ and the definition of professional standards under section 2(1) of the PAO.

4.Besides, this point is contrived. The stand taken by the respondents at the AIB investigation and at the hearing before the Committee was not that compliance lay only with Heng Tai and they were only concerned with professional standards the compliance of which can be ensured by an accountant.  On the contrary, as shown in our reasons for judgment, the respondents actually said that they had not neglected or failed to observe, maintain or apply HKAS 39 because they had come to the view that the loss in the value of the shares did not trigger the impairment provisions.  In so doing, the respondents had actually exercised their professional judgment and assumed the responsibility which they now said should not be theirs in the first place.  The professional standards are clearly aimed at providing a full and complete financial picture of the corporation.  It is difficult to see the value of professional auditing if this requirement was not within the remit of the respondents.

5.In any event, there is no evidence that the view advocated by the respondents is a commonly held view amongst professional accountants which engages the great general or public importance requirement.

Question 2

6.The second question is also not reasonably arguable having regard to the wording of HKAS 39.58, 39.59 and 39.61 together with the provisions of BC 105, 106 and 107.

Question 3

7.Question 3 is a fact specific question and is not reasonably arguable under the great general or public importance ground.

‘Or otherwise ground’

8.The respondents rely on paragraph 18 of its written submission on Question 3 to frame its case on the ‘or otherwise ground’.

‘18.  The Respondents’ contentions are summarised in §§ 4.34 to 4.38 of the CA’s Reasons for Judgment. The principal contention is that the DC erred in law when it held that there was no evidence adduced to show that the market was thin, when such evidence was in fact available. In other words, the Respondents sought to rely on the evidence placed before the DC to demonstrate that the market was thin. However, the CA regarded the Respondents as challenging a finding of fact (when they were not) and held that the DC was correct in its conclusion. The CA further held that the Respondents’ “thin trading” argument was strained and ignored the evidence before the DC.’

9.In our view the respondents have simply not crossed the ‘exceptional circumstances’ threshold required under the ‘or otherwise ground’.  In any event, the practice of this Court is to leave this matter to be considered by the Court of Final Appeal itself.

Conclusion

10.Accordingly, the application is refused with costs to the complainant.

Written Submissions by Wilkinson & Grist, for the 1^st and 2^nd respondents

Written Submissions by Mr Peter Duncan SC, instructed by Reed Smith Richards Butler, for the complainant