Cheng Chak Ngok v. Securities and Futures Commission

FAMV No. 125 of 2018

[2019] HKCFA 17

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 125 OF 2018 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 95 OF 2017)

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REASONS FOR DETERMINATION

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Mr Justice Fok PJ:

1.We dismissed this application for leave to appeal at the conclusion of the hearing and indicated that we would hand down our reasons for doing so in due course, which we now do.

2.The applicant was the subject of an inquiry before the Market Misconduct Tribunal[1] into whether, in the period from 15 November 2011 to 6 December 2011, he had engaged in insider dealing in respect of dealings in the securities of China Gas Holdings Limited (“China Gas”).  The Tribunal, although finding the applicant was a connected person in relation to China Gas and that he had relevant information in relation to China Gas (and was aware that this was relevant information), concluded that he had not dealt in the listed securities of China Gas on the dates he was alleged to have done so.[2]

3.On appeal from the Tribunal,[3] the Court of Appeal allowed the appeal of the Securities and Futures Commission (“SFC”) and held that the Tribunal had been wrong in not finding that the applicant had engaged in market misconduct by way of insider dealing.  The formal order made by the Court of Appeal was to remit the matter to a differently constituted Tribunal to determine solely the question of whether the applicant had dealt with the shares of China Gas.

4.The Court of Appeal identified the real issue in the appeal as being whether the Tribunal had erroneously applied the criminal standard of proof beyond reasonable doubt.  Cheung JA, with whom Yuen and Kwan JJA agreed, said:

“I am of the view that this is one of the rare cases where the Tribunal had failed to properly evaluate the evidence because, notwithstanding its express statement that the civil standard of proof was to be applied, it had actually applied the criminal standard.”[4]

5.The applicant sought leave to appeal to the Court of Final Appeal on both the question of law limb and the “or otherwise” limb of section 22 of the Hong Kong Court of Final Appeal Ordinance.[5]

6.The question of law for which leave to appeal was sought is as follows:

“Whether the concept or principle of burden of proof (or alternatively, ‘forensic burden’ or ‘onus or persuasive burden’) applies in any way to an inquiry conducted by the Market Misconduct Tribunal (the ‘Tribunal’) pursuant to the [sic] section 252 and Schedule 9 of the Securities and Futures Ordinance (Cap.571) (the ‘Ordinance’)? And if the answer is in the affirmative:

(a) what is the nature and effect of such burden?

(b) to what extent the Securities and Futures Commission bears such burden?

(c) to what extent an identified person within the meaning set out in Schedule 9 of the Ordinance bears such burden?”

7.We were not persuaded that this question is involved in the proposed appeal.  In his judgment, Cheung JA dealt at length with the principles governing the nature of an inquiry into market misconduct, including the appropriate approach to the burden and standard of proof.[6] We discern no material error on his Lordship’s part in setting out those principles.  The issue in the appeal boiled down to that identified by Cheung JA as the “real issue”, namely whether the Tribunal erroneously applied the criminal standard of proof beyond reasonable doubt when, being an inquisitorial tribunal, it was simply required to satisfy itself on the balance of probabilities with neither party bearing any burden of proof.

8.In considering that issue in the appeal, Cheung JA conducted a thorough overview of the evidence concerning the dealings in China Gas shares that the SFC alleged were dealings on the part of the applicant.[7]  As Cheung JA observed, the evidence “point[ed] strongly to [the applicant] as the person who dealt with the China Gas shares”.[8] His Lordship’s analysis of the Tribunal’s treatment of the evidence before it demonstrates that the Tribunal was looking for a degree of certainty akin to proof beyond reasonable doubt and not, as it should have done, assessing the evidence on the balance of probabilities, applying a standard commensurate with the seriousness of the allegation in question.

9.We were similarly not persuaded that leave to appeal to the Court of Final Appeal should be granted on the “or otherwise” basis.  Two grounds were advanced in support of the grant of leave on this basis. 

10.First, it was submitted that such leave should be granted because the Tribunal had not erred in misapplying the burden of proof and had correctly applied the applicable civil standard of proof so the Court of Appeal was not entitled to interfere with the Tribunal’s findings of fact.  We rejected this submission because, as demonstrated in Cheung JA’s judgment, the Tribunal did adopt the wrong approach to the burden of proof and so it was appropriate for the Court of Appeal to evaluate whether the Tribunal’s findings could stand.

11.Secondly, it was submitted that the Court of Appeal’s evaluation and comments on the evidence were such as to make it “difficult and impracticable, if not impossible, in practice” for another Market Misconduct Tribunal to give the applicant a fair rehearing on the issue of whether he in fact dealt with the shares of China Gas.  We also rejected this submission because the Court of Appeal’s views on the evidence that was before the Tribunal, as originally constituted, will not bind a differently constituted Tribunal hearing the remitter.  Nor, do we think that a differently constituted Tribunal will be unduly or improperly influenced by the Court of Appeal’s reasons for setting aside the original Tribunal’s findings on the issue of whether the applicant dealt with the China Gas shares.  Save that it is the reason for the remitter, the judgment of the Court of Appeal will not be relevant to the determination of the issue that has been remitted to the Tribunal to be newly and differently constituted.  That Tribunal will have to consider and evaluate the relevant evidence on the issue of dealing that is before it and come to its own conclusion on that issue on the basis of that evidence before it.

12.For these reasons, we dismissed the application with costs to the respondent.

Mr Paul Lam SC, Mr Bernard Mak and Mr Ernest C.Y. Ng, instructed by Michael Li & Co., for the 1^st Respondent (Applicant)

Mr Selwyn Yu SC, instructed by the Securities and Futures Commission, for the Appellant (Respondent)

Market Misconduct Tribunal, the 2^nd Respondent, unrepresented and absent