Competition Commission v. T.H. Lee Book Co Ltd and Others

CTEA 2/2020

[2020] HKCT12

IN THE COMPETITION TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COMPETITION TRIBUNAL ENFORCEMENT ACTION NO 2 OF 2020

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D E C I S I O N

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1.A narrow procedural issue was raised at the first CMC in this case which was deferred pending further written submissions. This is the Tribunal’s determination of that issue.

2.The action is brought by the Competition Commission (“Commission”) for pecuniary penalties against the respondents for breach of the first conduct rule arising out of alleged agreements or concerted practices between principally the 1^st and 2^nd respondents that had the object of preventing, restricting or distorting competition in Hong Kong.  The alleged agreements or concerted practices limited the level of discounts to be offered in tenders for textbooks for primary and secondary schools which were already served by another retailer.  The 3^rd respondent is said to be the parent company in control of the 2^nd respondent and the 4^th respondent is alleged to be the 1^st respondent’s general manager involved in its contravention of the first conduct rule.  A disqualification order is in addition sought against the 4^th respondent. The respondents have denied any contravention or involvement in the contravention of the first conduct rule.

3.The procedural question that has arisen is whether, as the applicant suggests, the Tribunal should direct that witness statements be simultaneously exchanged between the applicant and the respondents, or whether, as the 1^st and 4^th respondents contend, the applicant should file and serve all its witness statements first, before the respondents decide what to file.  The 2^nd and 3^rd respondents have not taken part in this debate and are content to abide by the Tribunal’s decision.

4.While the 1^st and 4^th respondents have approached the question as a matter of law and fundamental rights, it seems to me that in the ultimate analysis it is a case management issue where a dogmatic or categorical approach should be avoided.  Section 144(3) of the Competition Ordinance (Cap 619) states that the Tribunal is to conduct its proceedings with as much informality as is consistent with attaining justice.  Section 144(1) empowers the Tribunal to decide its own procedures and expressly authorises the Tribunal, in so far as it thinks fit, to follow the practice and procedure of the Court of First Instance “in the exercise of its civil jurisdiction”.  Rule 78(1) of the Competition Tribunal Rules (Cap 619D) (contained in Part 4 of the Rules which concerns applications for enforcement before the Tribunal) provides that the Tribunal may give any directions about the further conduct of the application for enforcement including the filing of witness statements.  The practice of the Court of First Instance, in civil proceedings where pleadings have been filed, is generally for witness statements to be exchanged between the parties simultaneously: RHC Order 38 rule 2A(2).  In all the enforcement actions commenced in the Tribunal which had proceeded past the relevant stage, the parties had been directed to exchange witness statements. 

5.The issue has to be seen in the procedural context of enforcement actions under the Ordinance.  By the Rules, the action is commenced by the filing of an Originating Notice of Application setting out the grounds for the application, the material facts and the relief sought.[1]  As stated in the Tribunal’s Practice Direction 1 (at §88), this document, which may loosely be called a pleading, is to contain not only the material facts relied upon, but also a succinct presentation of the arguments of fact, economics (if applicable) or law supporting the findings and relief sought, so that from the outset the Tribunal and the respondents are apprised of the substance of the case advanced by the applicant.  (In the present case the respondents have been served with a 136‑paragraph Originating Notice of Application.)  Following this a respondent has to file a Response, to which the applicant may file a Reply.  If there is genuine difficulty in understanding the applicant’s case, further and better particulars of the Originating Notice of Application or the Reply may be sought.  An important objective is for proceedings to be conducted “so that the parties’ respective cases are disclosed and the real issues identified and focused upon as early as possible”.[2]  In addition, the Commission has, since the very first case in the Tribunal, accepted that it will disclose to the respondents both “used” and “unused materials” in its possession.[3]  These will ordinarily include all the information and documents the Commission has obtained from the investigation, including, for example, records of voluntary interviews of individuals or of compulsory interviews held under section 42 of the Ordinance, voluntary statements taken from individuals, documents gathered including those obtained pursuant to a search warrant under section 50 or pursuant to a written notice to produce documents issued under section 41.  While the 1^st and 4^th respondents had not yet received such discovery as at the first CMC (and there may be scope for reviewing the practice as to the time for making such discovery), they will have done so long before the time for the filing of witness statements.  There is in my view little basis for the 1^st and 4^th respondents to assert they do not or will not sufficiently know the applicant’s case they have to meet. 

6.In their written submissions on behalf of the 1^st and 4^th respondents, Ms Maggie Wong SC (who did not appear at the CMC), Mr Kenneth Lee and Ms Emily Ting submit that article 11 of the Bill of Rights[4] applies to these proceedings because pecuniary penalties are being sought.  They submit that the right to a fair trial entails adequate knowledge of the case to be made by the applicant.  The right to adequate facilities for preparation of the defence includes access to all materials and evidence that the applicant intends to offer against a respondent.  A respondent enjoys a right of silence and the privilege against self‑incrimination.  There is also at common law a privilege against exposure to penalties.[5]  The effect of these safeguards is, they submit, that the 1^st and 4^th respondents should not be ordered to file evidence before they have had sight of all the materials and evidence which the applicant will adduce against them.  Reliance is also placed on certain Australian court decisions in competition cases where monetary penalties were sought, that an individual defendant should not be required to file witness statements prior to the close of the regulator’s case at trial.[6]

7.I do not agree with this submission.  Whilst the Commission accepts that an enforcement action in the Tribunal seeking a pecuniary penalty involves the determination of a criminal charge within the meaning of article 11 of the Bill of Rights, and the Tribunal has on that basis held that the criminal standard of proof beyond reasonable doubt applies in such an action,[7] it does not follow that such an action is for all purposes to be treated as a criminal prosecution on indictment or that every feature of criminal proceedings in the High Court is to be imported into an enforcement action: Competition Commission v W Hing Construction Co Ltd [2020] HKCT 1, §§129-133.

8.There is no principle of law mandating the conclusion that the procedure hitherto adopted in relation to the exchange of witness statements in all enforcement actions was unfair or violated the Bill of Rights.  The content of procedural fairness is “infinitely flexible” and variable, and must depend on matters such as the character of the decision‑making body, the nature of the inquiry, the subject matter under consideration, the kind of decision it has to make and the statutory or other framework in which it operates: De Smith’s Judicial Review (8^th ed), §7-040.

9.The right of silence, privilege against self‑incrimination and privilege against exposure to penalties prayed in aid by the 1^st and 4^th respondents do not, in my view, preclude directions for the advance disclosure and exchange of the evidence to be relied on.  The privilege against self‑incrimination protects a person against compulsion on pain of punishment to give answers which may incriminate him: HKSAR v Lee Ming Tee & another (2001) 4 HKCFAR 133, 171F.  The privilege against exposure to penalty is likewise a protection against compulsory interrogatories or discovery.  The direction under consideration does not compel the respondents to give evidence, but only require them, if they wish to adduce evidence from any witness, to disclose it in written form in advance of the trial at a specified time.  Under Order 38 rule 2A(6), where the party serving a witness statement does not in the end call the witness, no other party may put the statement in evidence at the trial.  Nor does the direction itself have the effect of enabling adverse inferences to be drawn against the 1^st and 4^th respondents should they decide not to call any witness to give evidence after all.[8] 

10.The Australian authorities of Amcor and FFE do not, in my view, assist the 1^st and 4^th respondents.

(1)     It was decided in those cases that an individual respondent to proceedings for penalty should not be required to file any witness statement before the close of the regulator’s case[9] at trial.  In the present case, the 1^st and 4^th respondents accept that this Tribunal may properly direct them to disclose, in advance of trial, statements of witnesses they intend to call.  The authorities relied on do not concern the issue raised here, namely, whether there should be sequential service or simultaneous exchange.

(2)     Those decisions concern respondents who are individuals.  The Australian courts had no difficulty at all with requiring corporate respondents to disclose in advance the evidence they might wish to rely upon, since the privilege against self‑incrimination does not apply to companies in Australia.[10] The legal context in Hong Kong is quite different, since the privilege has been held to apply to companies.[11]  The adoption of a similar rule here will have far more significant consequences, bearing in mind that our competition rules primarily target “undertakings”,[12] which are in practice mostly companies.  Indeed, in the present case, the principal respondents said to have contravened the first conduct rule are the 1^st to 3^rd respondents, all limited companies.  The 4^th respondent is said to have been involved in the contravention by the 1^st respondent.

(3)     The approach applied in Amcor and FFE is not consistent with the well‑established position in proceedings for committal for contempt in Hong Kong.  In those proceedings, where a person’s liberty is at stake, while the respondent cannot be compelled to give evidence, the court has the power to regulate its own procedure by directing a respondent to file affidavits or witness statements upon which he may wish to rely and to file them at an appropriate time before the hearing.  At the hearing the respondent is free to decide whether to deploy such evidence.  Any evidence filed by the respondent in advance which is eventually not adduced may not be used by the applicant: In re B (a Minor) (Contempt of Court: Affidavit Evidence) [1996] 1 WLR 627; Kin Ming Holdings International Ltd v Lin Man Yuan & another (CACV 216/2012; 4 October 2013), §24; BT v CBY (Committal for Contempt) [2020] 3 HKLRD 287, §7.1; Secretary for Justice v Li Pang Kay & another (HCMP 1851/2013, 20 August 2015), §12.

(4)     In Australia itself, there are conflicting authorities supporting the practice of requiring individual respondents to produce witness statements or affidavits in advance of the trial in penalty proceedings.  In Sidebottom & another v Commissioner of Taxation of the Commonwealth of Australia [2003] VSCA 2, where the statute in question expressly authorised excise prosecution to be proceeded with in accordance with the usual practice and procedure of the court in civil cases, the Victoria Court of Appeal upheld a procedural order requiring the defendant to file and serve witness statements in advance of the trial.

11.In an enforcement action in the Tribunal, it is of course for a respondent to decide whether to give evidence himself (if an individual) and what other witnesses to call.  Even where witness statements have been disclosed, the respondent is not bound to call any particular witness.  But the respondent’s rights do not in my view preclude directions being given by the Tribunal in the regulation of its own procedure and in accordance with the practice and procedure of the Court of First Instance in the exercise of its civil jurisdiction as specifically provided for in section 144(1) of the Ordinance, requiring the disclosure of such statements at the same time as the Commission.  Ordering witness statements to be exchanged is not only consistent with the Tribunal’s practice, but also generally makes for more expeditious conduct of the proceedings and reduces the temptation for subsequent witnesses consciously or otherwise to tailor their evidence in light of the earlier statements.

12.For these reasons I reject the 1^st and 4^th respondents’ submission.  The provisional direction given at the CMC for the filing and service of witness statements by way of exchange will stand.  I have not referred above to expert reports, for they may stand on a different footing.  Even in ordinary civil actions, there is sometimes good reason for expert reports to be served sequentially.  The proper direction as regards expert evidence is a matter of case management that can only be dealt with in context if and when it arises.

13.There will be an order nisi that the 1^st and 4^th respondents pay the applicant’s costs relating to this issue.

Mr Jonathan Chang SC (written submissions only), Mr Peter Dong, instructed by Woo Kwan Lee & Lo, for the Applicant

Ms Maggie Wong SC (written submissions only), Mr Kenneth K H Lee and Ms Emily Y Ting, instructed by C L Chow & Macksion Chan, for the 1^st and 4^th Respondents

Mr Abraham Chan SC and Mr Carter Chim, instructed by Deacons, for the 2^nd and 3^rd Respondents

[1] Rule 74.

[2] Competition Tribunal’s Practice Direction 1, §12.

[3] Competition Commission v Nutanix Hong Kong Ltd & Others [2017] 3 HKLRD 584, §4, following the approach the Court of First Instance in disqualification proceedings under s 214 of the Securities and Futures Ordinance (Cap 571): Securities and Futures Commission v Wong Yuen Yee [2017] 1 HKLRD 788.

[4] See section 8 of the Hong Kong Bill of Rights Ordinance (Cap 383).

[5] Martin v Treacher (1886) 16 QBD 507.

[6] Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (1999) 163 ALR 465; Australian Competition and Consumer Commission v FFE Building Services Ltd & others (2003) 130 FCR 37.

[7] See Competition Commission v Nutanix Hong Kong Ltd & others [2019] HKCT 2, paras 50-72.

[8] The question of whether adverse inferences may be drawn against a respondent has not arisen and the Tribunal is not called upon to decide it in the present context.

[9] The regulator there was the Australian Competition and Consumer Commission.

[10] Environmental Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477; Trade Practices Commission v Abbco Ice Works Pty Ltd & others (1994) 52 FCR 96.

[11] Salt & Light Development Inc & Others v SJTU Sunway Software Industry Ltd [2006] 2 HKLRD 279.

[12] defined in section 2 of the Ordinance to mean “any entity, regardless of its legal status or the way in which it is financed, engaged in economic activity, and includes a natural person engaged in economic activity.”