Registrar of the Hong Kong Institute of Certified Public Accountants v. Leung Kam Man Victor

CACV 37/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 37 OF 2016

(ON APPEAL FROM THE DISCIPLINARY COMMITTEE OF THE HONG KONG INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PROCEEDINGS NO D-13-0797C)

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BETWEEN

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REASONS FOR JUDGMENT
and
DECISION ON COSTS

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Hon Lam VP (giving the Reasons for Judgment and Decision on Costs of the Court):

1.This is an appeal by the 1^st Respondent in respect of the decision of the Disciplinary Committee [“the Committee”] of the Hong Kong Institute of Certified Public Accountants on 31 December 2015.  The other respondent in the case, WB CPA Limited [“WB”], a company of which the 1^st Respondent is and was the managing director, did not appeal.  Before the Committee, there were altogether six complaints arising from the respondents’ handling of the audit works for six companies in 2012.  Of the six complaints, the respondents admitted the first to fifth ones.  The first and fourth complaints were in respect of the requirements of identification of the practising director responsible for the audit works and communication with outgoing auditors before accepting appointments.  The second, third and fifth complaints were in respect of deficiencies in standards in relation to the audits of two companies which were signed off by the respondents.  

2.The only complaint which they did not admit was the sixth complaint:

“ Sixth Complaint

Section 34(1)(a)(viii) of the PAO [Professional Accountants Ordinance] applies to Leung and WB (by virtue of section 34(1AA)) in that they have been guilty of professional misconduct as they had not comply with multiple professional standards and the Corporate Practice (Registration) Rules in respect of the audits of the Six Companies.”

3.The stance of the respondents regarding the sixth complaint was recorded by the Committee at §8 of the Reasons for Decision:

“8. Leung and WB maintained that they had not committed any professional misconduct. They raised the following arguments:

(1) At the material time, WB had only been set up for a few months, and the deficiencies were due to negligence of their newly recruited staff and their previous manager;

(2) some of the deficiencies were not deliberate omissions and they had been put right afterwards including recruiting a competent accountant;

(3) WB had maintained their proper office guidelines and audit procedures but as a result of lack of supervision and poor management, deficiencies occurred;

(4) Poor management is not tantamount to professional misconduct; and

(5) No complaint had ever been received from the clients and no damage had been caused to the clients.”

4.By the decision of 31 December 2015, the Committee found all six complaints against the respondents proved.  The Committee ordered the practising certificate issued to the 1^st Respondent in 2016 be cancelled and that no practising certificate shall be issued to him for 3 months.  The Committee also ordered that WB be reprimanded.  The respondents were also ordered to pay costs and expenses of the proceedings in the sum of $69,812.00.

5.On 22 February 2016, the 1^st Respondent issued a notice of appeal against the decision of the Committee.  In the notice of appeal, he asked for the sixth complaint to be dismissed and the orders against him be quashed.

6.However, in the skeleton arguments of 3 January 2017, the 1^st Respondent focused on the penalties imposed on him.  He did not mount any arguments regarding the finding that the sixth complaint was established.

7.On the facts of the case, in light of the admission by the respondents of the 1^st to 5^th complaints, we are of the view that the Committee was perfectly entitled to find the sixth complaint established for the reasons set out by the Committee.  There were multiple breaches of professional standards and the relevant rules governing audit practices.  The matters raised by the respondents before the Committee (as set out above) could not amount to a defence to the complaint.  The Committee duly took account of the situation of the respondents and their submissions and reached the conclusion they did.  There is simply no basis for this court to intervene.

8.Turning to the penalties, the 1^st Respondent referred us to two instances where respondents received lighter sanctions for breaches of audit standards.  The first case was a decision by another committee on 18 September 2015 in which a respondent found guilty of 15 complaints were punished by a reprimand plus a penalty of $50,000.  The second case was a decision by a committee on 17 November 2014 in which 3 respondents (each found guilty of one charge) were punished again by reprimands and financial penalties.  The 1^st Respondent submitted that he was unfairly treated as he was given a more severe punishment requiring him to suspend his practice.

9.He further asked us to take account of the financial difficulties faced by him if he had to suspend his practice for more than 3 months (if one were to take account of processing time to issue practising certificate after the period of suspension). 

10.On 17 January 2017, after hearing submissions from the parties, we dismissed the appeal.  We said we would give our reasons in writing, which we now do.

11.Since the appeal was only concerned with sanctions, we start off by stating some guiding principles in this kind of appeals in this court.  As the sanction was imposed by a specialist tribunal whose members consisted of members of the same profession as the 1^st Respondent and possessed the expertise and knowledge in professional standards, this court would interfere only if the sanction imposed is plainly wrong: see Lie Han Ji v Registrar of HKICPA CACV 265 of 2009, 9 March 2012; Chan Cheuk Chi v Registrar of HKICPA CACV 38 of 2012, 8 February 2013; Registrar of HKICPA v Chan Kin Hang Danvil [2014] 2 HKLRD 723.

12.As held in Evans v General Medical Council, unreported, The Times 19 November 1984, quoted in Ghosh v General Medical Council [2001] 1 WLR 1915, and applied in Hong Kong in Lau Koon Leung v Medical Council of Hong Kong [2006] 3 HKLRD 225 at [70]:

“ The principles upon which this Board acts in reviewing sentences passed by the Professional Conduct Committee are well settled. It has been said time and again that a disciplinary committee are the best possible people for weighing the seriousness of professional misconduct and that the Board will be very slow to interfere with the exercise of the discretion of such a committee …

The committee are familiar with the whole gradation of seriousness of the cases of various types which come before them … The Board does not have that advantage nor can it have the same capacity for judging what measures are from time to time required for the purpose of maintaining professional standards.” 

13.Thus, though the court can examine a penalty imposed by a disciplinary tribunal or committee to see if it is excessive or disproportionate, it would accord an appropriate measure of respect to the judgment of such tribunal or committee. 

14.What does this mean in practice? The court acknowledges that a disciplinary tribunal or committee has to exercise their judgment on penalty by reference to the facts of that particular case, their assessment of the seriousness of the findings and the measures that need to be imposed to reflect the same and to maintain the standard of the profession.  In these matters, in particular the latter two aspects, professional judgment and expertise are highly germane.  In line with the approach recently confirmed by the Court of Final Appeal in Sin Chung Yin Ronald v The Dental Council of Hong Kong FACV 6 of 2016, 4 November 2016, the court will give due weight to such professional judgment and expertise.

15.The court further accepts that there could be variations in sanctions imposed by different members of the committee.  It is not at all surprising that committees differently constituted could reasonably take different views on the seriousness of a contravention of a particular rule (especially viewed against different sets of factual background) and on the measures that should be imposed by way of sanctions.  So long as the sanction imposed falls within the reasonable range of options, the court will not intervene.  In short, the disciplinary tribunal or committee has a margin of discretion in deciding the appropriate sanction to maintain the standards of the profession, see Lau Koon Leung v Medical Council of Hong Kong, supra at [75(2)].

16.It follows that the mere citation of other decisions in which the sanctions appear to be lighter cannot be a valid ground of appeal.  This is well illustrated in the present appeal.  On the one hand, the 1^st Respondent referred us to two decisions in which lighter sanctions were imposed by the committee.  On the other hand, Mr Leung (appearing for the Institute) referred us to 5 cases in which the committee imposed more serious sanctions.

17.No doubt the underlying factual matrix for each case is different.  As pointed out by the 1^st Respondent, some of the cases identified by Mr Leung involved listed companies.  However, the 1^st Respondent has not been able to persuade us that his case was less serious than all those cases. 

18.In our judgment, these cases demonstrated that there is a range of reasonable sanctions that could be imposed by the committee for these kinds of complaints.  It is not possible to say that the decision of the committee in the present case is so out of tune with the sanctions imposed in other cases that this court can characterize this decision as excessive or disproportionate.

19.As shown by the Reasons for Decision of the Committee of 31 December 2015, the committee duly took account of the seriousness of the complaints as well as the 1^st Respondent’s remedial works (see §12 of the Reasons for Decision) before deciding on the sanction to be imposed.  At §9(3)-(5), the committee came to the following conclusions on the seriousness of the matter,

“ (3) In this case, the deficiencies and substandard work occurred in a total of six companies involving both quality control as well as audit deficiencies;

(4) In terms of quality control, a lot of deficiencies were results of more than mere oversight. Many of them were serious and fundamental defects;

(5)   The audit deficiencies are numerous, serious and diverse; and …”

20.Though the sanction would involve some financial hardship on the 1^st Respondent, as submitted by Mr Leung it would not deprive him of the privilege of practising as a tax consultant or providing book-keeping services as his means of livelihood.  As he would not be able to provide audit services during the period of suspension, he would have to make adjustments in his practice.  We have no doubt that the committee (comprising of members of the same profession) had taken this into account in deciding the appropriate sanction.

21.All in all, we did not find any valid ground for intervention in the decision of the committee.  We dismissed the appeal accordingly.

22.We do not see any reason why the 1^st Respondent should not be responsible for the costs of the appeal and we order him to pay the costs of the Institute in the appeal. 

23.The Institute submitted a statement of costs (which adds up to $345,659).  The 1^st Respondent agreed to have the costs summarily assessed.  Having considered the statement of costs, the complexity of the appeal and the works undertaken by those representing the Institute, we fix the costs at $150,000.

Mr Wilson Leung, instructed by Smyth & Co, for the complainant

1^st respondent appearing in person