Competition Commission v. W. Hing Construction Company Ltd and Others

CACV 257/2019

[2021] HKCA 877

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 257 OF 2019

(ON APPEAL FROM CTEA 2/2017)

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Before:  Hon Lam VP, Barma and Au JJA in Court

Date of Hearing and Judgment: 5 May 2021

Date of Reasons for Judgment: 18 June 2021

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REASONS FOR JUDGMENT

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Hon Lam VP (giving the Reasons for Judgment of the Court):

1.This is an appeal by two individual partners named in the title of the proceedings as the partners of the firm Tai Dou Building Contractor (“Tai Dou”) against the judgment of 17 May 2019 [2019] HKCT 3 (“the Judgment”) by Godfrey Lam J sitting as the President of the Competition Tribunal. By that judgment, the learned President found that “the 4^th Respondent” contravened the first conduct rule under the Competition Ordinance Cap 619 (“the Ordinance”). In light of the contentions before us, we shall have more to say as to the identity of the 4^th Respondent at the proceedings below as well as in this appeal.

2.We should also record that Mr Hui SC (who argued the appeal together with Mr Lam and Mr Wong) informed this Court at the hearing of the appeal that he only acted for the two named individuals Mr Cheung and Mr Wong.  Counsel also said he had no instructions to act for the partnership firm Tai Dou.

3.Subsequent to the Judgment, the President imposed sanction by way of pecuniary penalties by another judgment of 29 April 2020 [2020] HKCT 1 (“the Sanction Judgment”).  There is an appeal by the Commission in respect of the penalties in CACV 143/2020.  That appeal is to be heard later.

4.This Court is only concerned with the appeal against liability in the present appeal.

A.      Background

5.The relevant factual background can be taken from the Judgment as there is no appeal against those findings, at least as far as Tai Dou is concerned[1].  As we shall explain, the focus of Mr Hui is whether the two named individual partners Mr Cheung and Mr Wong should be held liable in light of the absence of personal acts or mens rea constituting the breach of the first conduct rule on their part.

6.At the hearing, Mr Hui also confirmed that he did not challenge the conclusion of the President that the partnership Tai Dou Building Contractor was liable.  Counsel confined his arguments in the appeal to the personal liabilities of Mr Cheung and Mr Wong.

7.The case concerned anti-competition arrangements in 2016 of several decoration contractors appointed by the Housing Authority under its Decoration Contractor System to divide the market for three buildings in Phase 1 of On Tat Estate, Kwun Tong which was then a new public housing estate.  The findings regarding the anti-competitive scheme by which the breach of the first conduct rule was carried out were set out at [330] to [332] of the Judgment:

“ 330.   Between June and November 2016, the respondents, each an Appointed DC in On Tat Estate (Phase 1), made and gave effect to an agreement — the Floor Allocation Arrangement — with one another, whereby they were each allocated 4 floors in each of the 3 buildings in the pattern set out in §29 above for the purposes of taking up decoration business.  They agreed not to actively seek business from tenants on floors allocated to the other respondents.  If approached by those tenants, they would direct them to the respondents who had been allocated the relevant floors and, unless the tenants insisted, they would decline business from them.  This agreement was implemented, resulting in the pattern of distribution of the flats decorated by the respondents as shown in Appendix 2.  Such conduct consisted of the allocation of market for the supply of services and hence constituted ‘serious anti-competitive conduct’.

331.   During the same period of time, the respondents made and gave effect to an agreement — the Package Price Arrangement — with one another, whereby they agreed on the prices of the Packages to be put on a joint Flyer for On Tat Estate (Phase 1).  Each of them agreed to and contributed financially to the printing of the Flyers.  The Flyers were used by the respondents for promotional purposes and distributed to tenants.  The prices in the Flyer served as a starting point or anchoring reference point for negotiations with many if not all customers where their requirements included the Package items. In a number of contracts, the prices in the Flyer were or were near the final prices.  Such conduct consisted of fixing the price for the supply of services and therefore also constituted ‘serious anti-competitive conduct’.

332.   Both the Floor Allocation Arrangement and the Package Price Arrangement had the object of preventing, restricting or distorting competition in Hong Kong.”

8.The actual works done by the respondents in accordance with the Floor Allocation Arrangement were set out at [28] to [30] of the judgment:

“ 28.   Between June and November 2016, out of the total of 2,582 flats in the 3 buildings, the respondents carried out decoration works for 867 flats.  It is not entirely clear how many tenants moved in without decoration, or decorated the flats by themselves or their friends or relatives, or engaged commercial decoration contractors other than the Appointed DCs (‘outside contractors’).

29.   It has since been discovered that the distribution of the vast majority of the flats decorated by the 10 respondents fell into a strikingly regular pattern.  According to this pattern, each respondent worked on 4 and only 4 floors in each of the 3 buildings.  The 4 floors each respondent worked on in each building are each 10 floors apart, so that the last digit of the floor number is constant.  The pattern is shown in the following table:

Appointed DC	Floors worked in Chun Tat House	Floors worked in Oi Tat House	Floors worked in Shing Tat House
W Hing (R1)	1, 11, 21, 31	4, 14, 24, 34	8, 18, 28, 38
Sun Spark (R2)	2, 12 , 22, 32	5, 15, 25, 35	9, 19, 29, 39
Mau Hang (R3)	3, 13, 23, 33	6, 16, 26, 36	10, 20, 30, 40
Tai Dou (R4)	4, 14, 24, 34	7, 17, 27, 37	1, 11, 21, 31
Kam Kee (R5)	5, 15, 25, 35	8, 18, 28, 38	2, 12 , 22, 32
Hip Yick (R6)	6, 16, 26, 36	9, 19, 29, 39	3, 13, 23, 33
Tai Wah (R7)	7, 17, 27, 37	10, 20, 30, 40	4, 14, 24, 34
Wai Sun (R8)	8, 18, 28, 38	1, 11, 21, 31	5, 15, 25, 35
Wide Project (R9)	9, 19, 29, 39	2, 12 , 22, 32	6, 16, 26, 36
Luen Hop (R10)	10, 20, 30, 40	3, 13, 23, 33	7, 17, 27, 37

30.   832 of the 867 flats worked by the respondents follow this pattern, while 35 flats do not. …”

9.Tai Dou was one of these appointed decoration contractors found by the President to have participated in the anti-competitive conduct.

10.The business of Tai Dou and its organization was discussed by the President at [324] to [328] of the Judgment:

“ 324.     Tai Dou (R4) is a partnership consisting of 4 partners, being the two persons named in the Originating Notice of Application (namely, Cheung Yiu Fai Danny and Wong Tung Hoi) as well as Mr Pacquet Wong and Madam To Suet Chun.[39] It attempted at a very late stage to raise a similar argument but, for the reasons set out in this Tribunal’s Reasons for Decision dated 31 October 2018, was not allowed to do so.  In so far as counsel sought in closing submissions to run the sub‑contractor defence on behalf of Tai Dou (R4), I consider that the argument is inadmissible.

325.   On the basis of its existing Response (filed jointly with the 2^nd, 3^rd, 6^th, 7^th, 8^th and 10^th respondents), Tai Dou (R4) admits that it attended the worship ceremony at the Site Office on 16 June 2016 and that lots were drawn there (though it is averred it was for the purpose of allocating desks in the Site Office).  From the evidence, it can be seen that Pacquet Wong, an undisputed partner of Tai Dou (R4), signed the reply accepting the appointment as an Appointed DC, signed the surety bond, signed the Licence, signed and submitted to HKHA a list of staff and workers, attended the briefing session on 20 August 2015 and named KC Ho as the contact person.  The evidence shows that those working in On Tat Estate (Phase 1) in the name of Tai Dou (R4) included KC Ho and Ma Yick Yin. 

326.   A witness statement of KC Ho was originally filed on behalf of Tai Dou (R4), in which he described himself as the General Manager of Tai Dou (R4).  In early October 2018, Tai Dou (R4), having replaced its previous lawyers, indicated that it would not be calling KC Ho.  The 2^nd, 3^rd, 5^th, 6^th, 7^th, 8^th and 10^th respondents then indicated their intention to call him and also filed a witness statement of Ma Yick Yin.  Eventually, KC Ho was not called to testify, and his statement is therefore to be disregarded.  Ma Yick Yin was called, and said that he considered KC Ho the general manager of Tai Dou (R4), that he worked in On Tat Estate (Phase 1) in accordance with KC Ho’s instructions, and that he and the workers used business cards with Tai Dou (R4)’s name. There are also receipts issued to tenants bearing an oval chop stating ‘Tai Dou Building Co’ in both Chinese and English. 

327.   Despite KC Ho’s absence, based on all the other evidence there is no doubt that KC Ho and the team working there in the name of Tai Dou (R4) had engaged in the Floor Allocation Arrangement and the Package Price Arrangement.  Counsel’s argument that there is a possibility that Tai Dou (R4) did not enter into any arrangement with others but simply obtained decoration work from the remaining floors because they were not allocated to any of the other respondents, seems to me, with respect, to be wholly unrealistic.

328.   It is clear that the undertaking operating in On Tat Estate (Phase 1) was the partnership Tai Dou.  The two named persons each being a partner must be held responsible as persons comprised in the undertaking.  Counsel’s argument that there is nothing to show that they personally took part in or were aware of the conduct impugned is beside the point.

11.At footnote 39 at [324], the President noted as follows:

“ It is not clear why only two of the four partners have been named as respondents, but the Commission accepts that as such, only the two named persons can be subjected to any sanctions and orders imposed by the Tribunal in these proceedings.”

B.      The appeal

12.In the context of the present appeal, this Court (Lam VP and Au JA) held in a judgment of 16 November 2020 [2020] HKCA 930 (“the Striking Out Judgment”) that it was an abuse of process for the 4^th Respondent to attempt to revive the sub-contractor defence (which had been held by the President to be inadmissible due to case management reasons) in the appeal when there was no appeal against the President’s case management ruling as set out in the judgment of 31 October 2018, [2018] HKCT 6. Parts of the Notice of Appeal were struck out by the judgment of 16 November 2020.

13.The 4^th Respondent filed an amended Notice of Appeal on 4 February 2021 to reflect the outcome of the Striking Out Judgment.

14.In the Striking Out Judgment, this Court identified the permissible arguments to be entertained in this appeal at [34], [36] and [37]:

“34.   In our judgment, any attempt by the 4^th Respondent to rely upon the sub-contractor defence without appealing the Dismissal Decision constitutes an abuse of process and should be struck out.  Without the sub-contractor defence, and in light of the pleaded case of the 4^th Respondent as outlined above, we agree with Mr Chiu that the 4^th Respondent should not be permitted to rely on any arguments in the appeal challenging the attribution of the acts of Mr KC Ho to the Partnership by the Tribunal.

…

36.   The position regarding the other parts of the Notice of Appeal is different.  To some extent, the position on the face of the Notice of Appeal was not very clear because of the inherent ambiguity in the reference to ‘the 4^th Respondent’: it can either be taken as a reference to the Partnership (viz the firm) or a reference to Mr Danny Cheung and Mr Wong Tung Hoi personally.

37.   Based on Mr Lam’s submissions, we understand that the arguments raised in paragraphs 8(b), (c) and 9 are directed not at the finding against the Partnership (the firm), but rather at the finding that the 4^th Respondent (i.e. Mr Cheung and Mr TH Wong) should be held liable because of the finding against the Partnership.  In that sense, paragraphs 8(b), (c) and 9 do not engage the impermissible challenge of attribution which Mr Cheung and Mr TH Wong are precluded by the Dismissal Decision from advancing in this appeal.”

C.     The identity of the 4^th Respondent

15.After reading the respective submissions of Mr Hui and Mr Beard QC (who appeared with Mr Chan SC and Mr Chiu for the Commission), this Court discerned that a fundamental difference between the two sides stems from their respective understanding as to who were the 4^th Respondent in these proceedings.  At the hearing, upon query by the Court, Mr Hui intimated that his team only acted for the two named individual partners and as mentioned above had no instruction to act for Tai Dou, the firm.

16.On the other hand, the stance of the Commission is that Tai Dou, the partnership firm, was the 4^th Respondent and parties had always proceeded on that basis in the Tribunal.

17.We agree with the Commission and reject the submissions of Mr Hui that only the two named individual partners were the 4^th Respondent but not the firm Tai Dou.

18.There had been changes of solicitors acting for the 4^th Respondent.  In the Tribunal and in this appeal, the 4^th Respondent was represented by different firms of solicitors at different stages.  However, at every stage of the proceedings before the Tribunal it was clear to all parties that though Mr Cheung and Mr Wong were also named, the undertaking against which the proceedings were brought by way of the 4^th Respondent was Tai Dou the firm.  The liabilities of the named partners flowed from their capacity as partners of that firm, not in their capacity as individuals distinct from the firm.

19.At the time of the appeal hearing, the 4^th Respondent was represented by Henry Yu & Associates.  This firm of solicitors came on record in this appeal by a Notice of Change of Solicitors of 1 February 2021.

20.Mr Hui only came on record when he signed the Amended Notice of Appeal dated 4 February 2021 after the Striking Out Judgment.

21.His juniors, Mr Lam and Mr Wong, acted for the 4^th Respondent in the striking out application in this Court on the instructions of Bryan Chan & Co.  Bryan Chan & Co were the solicitors on record for the 4^th Respondent in this appeal by a Notice of Change of Solicitors of 2 October 2019.

22.When the original Notice of Appeal was filed on 14 June 2019, the 4^th Respondent was represented by another firm of solicitors Chan & Associates with another team of leading and junior counsel.

23.The junior counsel signing the original Notice of Appeal, Ms Ng, was also the counsel who acted for the 4^th Respondent at the trial and sanction hearing before the Tribunal.  She was however instructed by two different solicitor firms: by Bryan Chan & Co at the sanction hearing and by Henry Wan & Yeung at the trial.

24.Another counsel Mr Dong acted for the 4^th Respondent on instruction from Henry Wan & Yeung at the pre-trial review.  The application for amendments of the Response (to enable the 4^th Respondent to take the sub-contractor defence) was made at that hearing and rejected by the Tribunal in a judgment of 31 October 2018, [2018] HKCT 6 (“the Amendment Judgment”).

25.Henry Wan & Yeung actually came on record by a Notice of Change of Solicitors on 14 September 2018.  Before that, the solicitors acted for the 4^th Respondent was JCC Cheung & Co.

26.JCC Cheung & Co became solicitors for the 4^th Respondent on 25 June 2018 by a Notice of Change of Solicitors.  Before that, the solicitors on the record for the 4^th Respondent was Littlewoods.

27.At the hearing before us, after taking instructions from his clients Mr Hui informed this Court that instructions were given by Mr Cheung and Mr Wong to Henry Wan & Yeung and Bryan Chan & Co.  However, counsel could not confirm the identity of the person(s) who gave instructions to JCC Cheung & Co and Littlewoods.

28.Whilst the naming of the 4^th Respondent in the Originating Notice of Application of 14 August 2017 as “Cheung Yiu Fai Danny and Wong Tung Hoi (in partnership trading as [Tai Dou]” and its description at paragraph 4(4) was ambiguous, upon reading this document as a whole and in context, there is no doubt that the proceedings were brought against Tai Dou the firm.  Thus, at paragraphs 22 to 24, it was pleaded that the Respondents (including the 4^th Respondent) were the Appointed Contractors appointed by the Housing Authority and each of them had received letter from it and executed a Licence.  Tai Dou was so appointed, received such letter and executed such Licence, not Mr Cheung nor Mr Wong.  Paragraph 33(1) referred to the allocation of floors to Tai Dou, not Mr Cheung nor Mr Wong.  Paragraphs 37 and 38 referred to the performance of decoration works by the Respondents and paragraphs 40 and 44 referred to the use of the flyers by the Respondents to promote their services to the tenants: again Tai Dou did so, not Mr Cheung nor Mr Wong.  On the whole, the acts and conduct pleaded as contraventions of the first conduct rule were those of Tai Dou, not the acts or conduct of the individuals. 

29.The Response of the 4^th Respondent was in the same document as the Response of the 2^nd, 3^rd, 6^th, 7^th, 8^th and 10^th Respondents which was prepared and filed by Littlewoods on 28 September 2017.  The Statement of Truth in that document was signed by Mr KC Ho as “General Manager” of Tai Dou.  Thus, Tai Dou was regarded as the 4^th Respondent, not the two named individuals.  It is also plain from the reading of the Response that those acting for the 4^th Respondent understood that Tai Dou (the firm) was the 4^th Respondent instead of the two named individual partners.  At paragraph 19 of the Response, it was pleaded that the Respondents (thus including the 4^th Respondent) agreed to observe the terms of the Licence (which was executed by Tai Dou).  At paragraph 22(a), there was the plea that it was more economical and costs saving for the Respondents to carry out decoration works for the flats at the same floor and at paragraphs 22(b) and 32 that the Respondents would accept and conduct businesses with the tenants.  In the context of the 4^th Respondent, these pleas had to be referring to Tai Dou, not Mr Cheung and Mr Wong who did not as individuals carry out decoration works or accept business at this estate. Paragraph 29(f) referred to the obligation of the Respondents as Appointed Contractors and paragraphs 44 and 46 referred to the use of the flyers by the Respondents.  In the context of the 4^th Respondent, such references had to be taken as referring to Tai Dou rather than Mr Cheung and Mr Wong as individuals.  

30.Had it been the belief of Mr Cheung and Mr Wong that they were sued as individuals without having the firm being made a party to the proceedings, their Response would not need to refer to the affairs of the firm.  Instead, they should have set out their own lack of participation in the business concerning the decoration works in question.  In that case, it would indeed be inappropriate for such response to be verified by a statement of truth made by Mr KC Ho instead of themselves. 

31.Not surprisingly, the witness statement of the 4^th Respondent was made by Mr KC Ho on behalf of Tai Dou and filed with the Tribunal on 19 April 2018: see [7] of the Amendment Judgment.  The evidence was prepared on the basis that Tai Dou was the 4^th Respondent.

32.As mentioned above, there was a late application for amendment of the Response by the 4^th Respondent to run the sub-contractor defence.  It was rejected by the Tribunal in the Amendment Judgment.  That application was filed by Henry Wan & Yeung for the 4^th Respondent.  As acknowledged by Mr Hui, at that stage instructions came from Mr Cheung and Mr Wong.  The contents of the proposed amended response were set out at [12] and [13] of the Amendment Judgment.  In that document, a distinction was drawn between the 4^th Respondent (which the President understood to be Tai Dou) and its partners.  The application was presented on the basis that Tai Dou was the 4^th Respondent and it was supported by three new witness statements: from Mr Cheung, Mr Wong and another partner Pacquet Wong.

33.At [16] of the Amendment Judgment, the President referred to the explanation put on behalf of Tai Dou as the 4^th Respondent as regards the delay in making the application.  Pacquet Wong, the unnamed partner, authorized Mr KC Ho to handle the defence of the 4^th Respondent.  In [17] to [22], the President further alluded to the involvement of Pacquet Wong (as partner of Tai Dou) being informed of the developments in the litigation by Mr KC Ho.  The tenor of the Amendment Judgment clearly bears out that at that stage it was common ground that Tai Dou was the 4^th Respondent.  

34.With the rejection of the amended Response, the trial proceeded on the original Response which, as we have seen, treated Tai Dou as the 4^th Respondent.  Hence, naturally the President regarded Tai Dou to be the 4^th Respondent in the Judgment, see in particular [324] to [328].  In the sealed judgment of 17 May 2019 (filed on 9 July 2019), it was Tai Dou that was adjudged (as the 4^th Respondent) to have contravened section 6 of the Ordinance.

D.     The liabilities of Mr Cheung and Mr Wong as partners of Tai Dou

35.The President explained the practical consideration for naming Mr Cheung and Mr Wong as partners at [303]:

“ 303.   While the competition rules target undertakings, in accordance with general legal principles, applications brought in the Tribunal and orders made by the Tribunal are necessarily addressed to legal entities.  Thus ss 92‑94 of the Ordinance allow the Commission to apply for and the Tribunal to make orders against persons who have contravened or been involved in a contravention of a competition rule. Accordingly, when liability is to be attached for infringement by an undertaking, the infringement must be imputed to one or more person against whom legal proceedings may be instituted and on whom orders including financial penalties may be imposed.”[2]

36.In the Sanction Judgment at [79] to [87], the President found it necessary to address the same point in light of the arguments advanced on behalf of Mr Cheung and Mr Wong at the Sanction hearing that they as “salaried partner” and “silent partner” should not be liable for the pecuniary penalty.  For present purposes, in light of the submissions of Mr Hui, it would be useful to refer to [87]:

“ 87.   In contrast with these two cases, we are not here concerned with criminal offences and mens rea.  As explained in the Judgment, while the competition rules apply to undertakings, ss 92–94 of the Ordinance allow the Commission to apply for, and the Tribunal to make, orders against persons who have contravened or been involved in a contravention of a competition rule.  ‘Person’ as defined in s 2 of the Ordinance, in addition to the meaning given by s 3 of the Interpretation and General Clauses Ordinance (Cap 1), includes an undertaking.  Where a partnership, as an undertaking, has contravened the first conduct rule, it seems to me generally that its partners as such are persons who have contravened the rule.  An agreement entered into by a partnership is an agreement to which the partners are jointly party.  Here, the persons specifically named in the Notice of Application are Mr Cheung and Mr TH Wong in partnership trading as Tai Dou.  They were undoubtedly partners of Tai Dou and were proceeded against as such.  As partners of Tai Dou, they joined in making and giving effect to the agreements in question which contravened the rule and therefore likewise contravened the rule: cf Clode v Barnes [1974] 1 WLR 544.  Whether the application could have been brought against the partnership as a ‘person’ without naming any individuals does not strictly arise.” 

37.In addition to pecuniary penalties, under Section 94 the Tribunal can impose other sanctions against a person who has contravened or been involved in a contravention of a competition rule by way of orders specified in Schedule 3 to the Ordinance.  Such orders include orders restraining or prohibiting some specified acts or conduct[3] or orders requiring some specified acts to be done[4].  Hence, insofar as the Commission may wish to apply for such orders against any individual partner(s), there is a practical need to name some individuals for each undertaking.

38.It is clear from these paragraphs that the President held Mr Cheung and Mr Wong to be liable for the penalties by virtue of their roles as partners of Tai Dou instead of any personal acts and conducts on their parts as individuals.

39.In our judgment, such legal consequence flowed from the law relating to the liabilities of a partner for the civil obligations of a partnership.

40.Under Section 155A of the Ordinance, a pecuniary penalty imposed under Section 93 can be enforced in the same manner as a judgment of the Court of First Instance for the payment of money.  Subsection (2)(b) further provides that the Registrar is to enforce payment as a judgment debt due to the Registrar.  In other words, such pecuniary penalty can be enforced as a civil liability.        

41.By reason of Section 11 of the Partnership Ordinance Cap 38, every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while he is a partner.  Thus, Mr Cheung and Mr Wong are jointly liable (together with other partners) for the pecuniary penalty imposed on Tai Dou.

42.Mr Hui submitted that such analysis fails to take account of the criminal nature of the proceedings.  Relying on Lindley & Banks on Partnership,20^th Ed paragraph 14-02, R v W Stevenson & Sons [2008] 2 Cr App R 14 at [30] to [31], counsel submitted that in the criminal context, partners should be treated as a separate entity from the partnership and in the present case Mr Cheung and Mr Wong were named as individuals and they were the only parties identified as the 4^th Respondent in the proceedings before the Tribunal.  Thus, Mr Hui submitted, the President erred in finding liability on the basis that the 4^th Respondent was the partnership, Tai Dou.  He said though it was possible for the Commission to proceed against Tai Dou, this was not the course adopted and it is now bound by the choice it made when instigating the proceedings.

43.Based on that premise, Mr Hui relied on the presumption for the need to prove mens rea (citing Hin Lin Yee v HKSAR [2010] 2 HKLRD 826 at [10] and Kulemesin v HKSAR (2013) 16 HKCFAR 195 at [41] and submitted that there was no evidence to establish the mens rea of Mr Cheung and Mr Wong in the contravention of the first conduct rule as found by the Tribunal.  These partners should not be held criminally liable for the acts of another partner without proof of their own requisite mens rea for such contravention, see Riley v Director of Public Prosecutions [2017] 1 WLR 505 at [32].

44.With respect, these submissions are flawed and we cannot accept the same.

45.First and foremost, though the allegations of contravention are, as held by the President, to be classified as criminal charge for the purpose of article 11 of the Hong Kong Bill of Rights (“art 11”), it does not follow that the contravention of the first conduct rule is to be regarded as a criminal offence for the purpose of domestic law incorporating the requirement of mens rea as submitted by Mr Hui.  Unlike the stricter standard of proof, the requirement of mens rea is not one of the safeguards prescribed by art 11.  It is thus a matter of substantive criminal law and it depends on whether the legislature has created a statutory offence of contravention of the first conduct rule.

46.As submitted by Mr Beard, it is legally possible for such allegations to be determined in civil proceedings (as classified under domestic law) notwithstanding the attraction of art 11 protection based on the autonomous human right definition of criminal charge, see Secretary for Justice v Cheung Kai Yin [2016] 4 HKLRD 367 at [36] and [37].

47.In that case, this Court held at [25] that the applicability of a stricter standard of proof (by reason of the safeguard under art 11) is a separate question from determining if the proceedings is essentially criminal in character as a matter of domestic law. 

48.Likewise, the attraction of the safeguards under art 11 (which guarantees the procedural fairness of a trial on a criminal charge by way of human right protection) is a distinct question from determining if the Ordinance has created an offence of contravention of the first conduct rule with all the incidental characteristics of a criminal offence.  The latter is essentially a question of statutory construction.

49.Adopting such approach, it is plain to us that the Ordinance does not create an offence of contravention of the first conduct rule.  The only criminal offences in the Ordinance are those specified in Sections 52 to 55 and Sections 172 to 175.  Contravention of the first conduct rule is not included in those parts of the Ordinance.  It is also provided specifically in Section 171(1) that criminal proceedings for an offence under the Ordinance may not be brought in the Tribunal.  Persons charged with such offences would be prosecuted in the criminal courts.  It is also pertinent to note that the prosecution of such offences is not within the scope of function and power of the Commission under Sections 130 and 133 of the Ordinance.

50.In contrast, proceedings for contravention of the first conduct rule must be brought in the Tribunal and application for pecuniary penalty is only to be brought by the Commission, see Sections 92, 108 and 109 of the Ordinance.

51.Subject to modifications in the Competition Tribunal Rules Cap 619D (“the Rules”), proceedings in the Tribunal are to follow the practice and procedure of the Court of First Instance in the exercise of its civil jurisdiction: see Section 144 of the Ordinance and Section 4 of the Rules (which provide for the application of the Rules of the High Court Cap 4A to proceedings in the Tribunal).  The appeal mechanism as set out in Sections 154 and 155 is similar to the one for appeals from a civil judgment of the Court of First Instance, with leave requirement for interlocutory appeals.

52.Thus, there cannot be any prosecution by the Secretary for Justice in a criminal court in respect of the contravention of the first conduct rule.

53.Sections 45 and 148(3) of the Ordinance which provide for inadmissibility of answers given under compulsion in subsequent proceedings refer to criminal proceedings (under 45(3)(b)) and proceedings for pecuniary penalty (under 45(3)(a)) separately.  Thus, the legislature did not regard proceedings for pecuniary penalty as criminal proceedings.  

54.As we have already mentioned, the pecuniary penalty ordered by the Tribunal shall, as provided under Section 155A, be enforced in the same way as a civil judgment.

55.As stated in the preamble to the Ordinance, the purpose of the legislation is to prohibit conduct that prevents, restricts or distorts competition and to prohibit mergers that substantially lessen competition.  In respect of a contravention of the first conduct rule, the Ordinance provides various options and means to achieve such objective by way of enforcement actions by the Commission:

(a)  Acceptance of a commitment by the Commission from a person and the enforcement of such commitment under Division 1 of Part 4 of the Ordinance;

(b)  Issuance of infringement notices by the Commission under Division 2 of Part 4 of the Ordinance offering not to bring proceedings on condition that the persons involved make a commitment to comply with the requirements of the notice;

(c)  The Commission may make a leniency agreement with a person in exchange for his co-operation in an investigation or in proceedings under Division 3 of Part 4 of the Ordinance;

(d)  The Commission may under Division 4 of Part 4 of the Ordinance issue a warning notice to an undertaking requiring it to cease its contravening conduct and not to repeat the same;

(e)  The Commission may apply to the Tribunal for pecuniary penalty under Division 2 of Part 6 of the Ordinance;

(f)    Under Section 94 in Division 3 of Part 6, the Tribunal, whether or not it makes an order for pecuniary penalty, can make other types of order as specified in Schedule 3 to the Ordinance;

(g)  Under Section 95 in Division 3 of Part 6, the Tribunal can also make interim orders pending its determination of an application under Section 94; and

(h)  Under Division 5 of Part 6, the Commission can apply to the Tribunal for disqualification order against a person to debar such person from being a director of a company or in any way be concerned or take part in the promotion, formation or management of a company for a specified period not exceeding 5 years if such person is a director of company which has contravened a competition rule and such person’s conduct as director makes him unfit.

56.Options (a) to (d) are enforcement options in the hands of the Commission and cannot be regarded as actions in prosecuting a criminal offence.  As regards options (e) to (h), there will be proceedings in the Tribunal.  Since the Tribunal does not have any criminal jurisdiction (as it has been made clear in Section 171), the applications for such relief cannot be regarded as the prosecution of a criminal offence.

57.Reading the Ordinance as a whole, the contravention of the first conduct rule is not regarded as a criminal offence in the statutory scheme to combat anti-competitive conduct.  This accords with the conclusions reached by the President in Competition Commission v T.H. Lee Book Company Limited [2020] HKCT 12 at [7] and in the Sanction Judgment at [129] to [133].

58.There is therefore no basis for Mr Hui to import the requirement of mens rea on the part of the individual partners into proceedings for pecuniary penalty under Section 93.  There is no room for the application of the principle in R v W Stevenson & Sons, supra and Riley v Director of Public Prosecutions, supra(which concerned convictions and trials of criminal offences) and our analysis above[5] as to the civil nature of the liabilities of each partner for the acts of the firm is not undermined by that case.

59.Lest it be thought that the President had not considered the state of knowledge of Tai Dou as to the anti-competition arrangements, such suggestion is refuted by a reference to [325] to [327] of the Judgment.  In particular, the President made this finding at [327]:

“ 327. Despite KC Ho’s absence, based on all the other evidence there is no doubt that KC Ho and the team working there in the name of Tai Dou (R4) had engaged in the Floor Allocation Arrangement and the Package Price Arrangement. Counsel’s argument that there is a possibility that Tai Dou (R4) did not enter into any arrangement with others but simply obtained decoration work from the remaining floors because they were not allocated to any of the other respondents, seems to me, with respect, to be wholly unrealistic.”

60.Before us, Mr Hui did not challenge this finding and he accepted that there is no basis for disturbing the President’s conclusion on liability against Tai Dou.

61.Hence, with our rejection of the submission that the proceedings involved a trial of a criminal offence, it is plain that Mr Hui’s contention based on lack of finding of mens rea on the part of Mr Cheung and Mr Wong has no merit.  

E.      Order 81 Rule 1

62.Coming back to the naming of the 4^th Respondent, Mr Hui referred to a commentary in Hong Kong Civil Procedure 2021, vol 1 at paragraph 81/1/10 which suggested that because the liability of partners is joint and not several, “a suit by or against an ordinary partnership would have been defective for want of parties unless all the partners were before the court”.

63.It follows, Mr Hui submitted, that the Commission could not have been suing in respect of the joint liability stemming from the acts of the Tai Dou the firm since it was conceded by Mr Beard before the Tribunal that the Commission was not proceeding against the other two unnamed partners[6].  Therefore, the Commission was actually suing the two named partners as individuals regarding their own personal involvement in respect of the contravention of the first conduct rule.

64.With respect, we cannot accept these submissions.

65.Firstly, such submission ignored the reality as discussed in Section C above.  All parties had proceeded in the Tribunal on the basis that Tai Dou the firm was the 4^th Respondent and Mr Cheung and Mr Wong were proceeded against by virtue of their capacity as partners of Tai Dou.  In such circumstances, if there were irregularities in the naming of the 4^th Respondent, we see no difficulty in granting leave for such irregularities to be rectified insofar as it is necessary to do justice between the parties in light of the fact that Tai Dou had actually been party to the proceedings in substance and those acting for Mr Cheung and Mr Wong in the Tribunal were fully aware of the nature of the claims against them.

66.In so saying, we have not forgotten the concession of Mr Beard on Day 17 which was also taken up by the President at footnote 39 of the Judgment.  However, the concession seemed to have been made on the basis it is legally permissible to sue in respect of the liability of the firm with the naming of some but not all the partners.  Likewise, the President proceeded on that basis in the Judgment and the Sanction Judgment.  As far as we are aware, no point had been taken before the Tribunal that one cannot pursue an application in respect of the liability of the firm without proceeding against all the partners.

67.This bring us to our second ground for rejecting Mr Hui’s submissions.  As a matter of law, there is no rigid rule that in advancing a claim on a joint liability the plaintiff or applicant must join all the parties who were jointly liable to the proceedings.  However, if objection is taken by a defendant that there were other parties who were jointly liable, the court may consider if such other persons should be joined as parties to the proceedings in the interest of justice.  Thus, in Robinson v Geisel [1894] 2 QB 685, the English Court of Appeal refused to grant a stay of the action against some but not all of the joint guarantors because the plaintiff had done everything in his power to serve the remaining joint guarantor without success. In the context of legal proceedings against a partnership, it means that a plaintiff can sue some but not all the partners in respect of the liabilities arising from the business of the firm.  Depending on the circumstances of the case, on the application of the defendants, the court may direct the other partners to be joined as parties, see Halsbury’s Laws of England, 5^th Ed.  2020, Vol 79 paragraph 84; Lindley & Banks on Partnership, 20^th Ed paragraphs 14-43 and 14-44.  But the cause of action would not be defeated by non-joinder of parties.

68.As Mr Cheung and Mr Wong did not complain about non-joinder of the other two partners in the Tribunal and there was no application for staying the proceedings on that ground, it is not necessary for us to consider whether in the present case the other two partners should have been joined if such application were made.  It suffices for us to hold that in light of the above analysis, Mr Cheung and Mr Wong cannot now rely on the omission to name the other two partners as a ground for challenging the finding of the Tribunal against them in respect of the contravention by Tai Dou.

69.The President did not find it necessary to address the question whether orders could be made against a firm under Sections 93 to 96 as a ‘person’ without naming any individuals.  We are sure that the President has not overlooked Order 81 Rule 1 which, as far as we can see, is applicable to proceedings in the Competition Tribunal by reason of Section 4 of the Competition Tribunal Rules as there is nothing those rules negating such application.  As explained by the President[7], the definition of “person” in the Ordinance is wide enough to cover a partnership.  Hence, in terms of proceedings in the Tribunal in general, it is permissible to name a partnership as a respondent without naming all the partners.  The effect would be the same as the naming of a firm in civil proceedings in the High Court, viz all the partners are treated to have been joined as respondents.

70.When the individual partners are not named, the enforcement of a judgment against the firm would be subject to the conditions laid down under Order 81 Rule 5.

71.We believe that the President had the practicalities of enforcement of orders other than that of pecuniary penalty in mind (as alluded to by us at [37]) when he eschewed expressing a view on the feasibility of suing a firm without naming the partners.

72.In the present case, as far as we are aware, the Tribunal has only imposed sanction by way of pecuniary penalty.  In such context, we cannot see any difficulty regarding enforcement pursuant to Order 81 Rule 5 even if the individual partners were not named.        

73.Mr Hui submitted that it was unjust that the Commission only targeted against Mr Cheung and Mr Wong in seeking pecuniary penalty.  With respect, counsel failed to take account of:

(a)  As the penalty was ordered against the 4^th Respondent, the assets of the firm Tai Dou would be subject to execution;

(b)  Even assuming that enforcement actions were taken against the personal estates of Mr Cheung and Mr Wong, they would have the right to seek indemnity or contribution from their partners under the general law of partnership; and

(c)  As partners of Tai Dou, there is no injustice in sanction being imposed against Mr Cheung and Mr Wong.   

F.     Disposal of the appeal

74.For the above reasons, we dismissed the appeal with costs at the hearing on 5 May 2021.

G.     The Respondent’s Notice

75.By the Respondent’s Notice, the Commission asked this Court to reverse the President’s ruling on the standard of proof in proceedings for pecuniary penalty.  In Competition Commission v Nutanix Hong Kong Limited [2019] HKCT 2, the President held that the standard of proof is proof beyond reasonable doubt.  That judgment was handed down on the same date as the Judgment.  At [39] of the Judgment, the President adopted the same view in the present case.  The Commission sought to argue that the standard of proof should be the civil standard of balance of probabilities with cogent evidence being required commensurably with the seriousness of the allegations.

76.Notwithstanding the sustained efforts of Mr Beard, we were not persuaded that we should determine this issue in this appeal when we had already concluded that the appeal by Mr Cheung and Mr Wong should be dismissed on the other grounds set out above.  As the Commission is understandably anxious to have the question of standard of proof to be reconsidered at the appellant level, we shall explain in greater detail the reasons for our refusal to determine the issue in this appeal.

77.We have read the judgment in Competition Commission v Nutanix Hong Kong Limited and skeleton submissions of Mr Beard and Mr Hui and discussed the same amongst ourselves before the hearing.  Our preliminary view was as follows.

78.Since it is common ground that proceedings for pecuniary penalty involved a determination of criminal charge for the purpose of art 11, the implication of art 11(1) on standard of proof as explained by the Court of Final Appeal in Koon Wing Yee v Insider Dealing Tribunal (2008) 11 HKCFAR 170 has to be considered.  As mentioned in the course of hearing, one should start from the position is that in order to be art 11 compliant criminal standard of proof is the norm for the determination of criminal charges.

79.It is possible to have a statute providing otherwise if the relaxation of standard of proof can be justified according to the proportionality test.  However, it is also common ground that the Ordinance does not contain any provision which explicitly spells out the standard of proof for penalty proceedings.  Hence, one must first consider if the Ordinance has laid down by necessary implication that the standard of proof should be the civil standard before one considers the proportionality of such relaxation.

80.In short, if one cannot conclude by way of statutory interpretation that the Ordinance has provided for the civil standard to apply, the criminal standard should be applicable by virtue of the principle of legality as explained by Lord Hoffmann in Regina v Secretary of State for the Home Department, Ex parte Simms [2000] 2 AC 115 at p.131.  If it is held that criminal standard of proof applies as a matter of statutory interpretation, no issue of proportionality arises.

81.The relevant approach for determining by way of statutory construction if a fundamental right like the one provided for under art 11(1) has been impliedly abrogated was discussed by the Supreme Court in Beghal v Director of Public Prosecutions [2016] AC 88 and recently applied by this Court in Kot See For v Lam Man Cheung [2021] HKCA 348.  At [42] of the latter case, the Court held that purposive construction should consider whether the statutory objective would be nullified if full effect is given to the fundamental right. 

82.The question of implied abrogation or derogation was addressed by the President at [63] to [67] of Competition Commission v Nutanix Hong Kong Limited, supra.  He could not find such implication from the fact that civil procedure is adopted for the proceedings and the legislative materials.  At [68] to [71], the President summarized the other points canvassed by the Commission but held that they were of no avail when there is no express provision or necessary implication for the application of civil standard.

83.One of these points was the difficulty in meeting the criminal standard of proof in the potentially complex and technical nature of the issues in competition proceedings, see [68] to [69].  On our reading of Mr Beard’s skeleton submissions, counsel relied strongly on this point to contend that the Ordinance has relaxed the standard of proof by necessary implication by virtue of the potential frustration of effective enforcement of competition law by a criminal standard of proof.

84.Whilst we can see that there is a reasonably arguable basis (and we put it no higher than that) for suggesting the President might not have given sufficient consideration to the potential frustration of effective enforcement  in assessing if there is derogation by necessary implication (since he did not discuss this in the context of addressing the issue of necessary implication at [68] to [71] and this could be attributable to how the matter was argued before him by another leading counsel in Nutanix), we find it very difficult to assess the validity of this contention based on consideration of potential frustration on a high level of abstraction.  With due respect, we do not think it is sufficient for us to adopt some passages from the decisions of the UK Competition Appeal Tribunal[8] or a textbook[9] on competition law as making good this contention.

85.We are not suggesting Mr Beard intended to invite us to take such a course.  Counsel indicated that he would need to take us through the scheme of the Ordinance and the elements that the Commission would have to establish in respect of each type of anti-competition conducts and the different types of evidence the Tribunal would have to assess.

86.Whilst we would not doubt that, with his immense experience in this field, Mr Beard could provide the Court with able assistance in so doing, the actual facts and evidence in the present appeal are also relevant to our assessment of whether this appeal afforded a good opportunity to embark on such exercise.  On the facts, the President was able to conclude that the contravention of the first conduct rule was proved on the criminal standard.  We could discern nothing in the evidence that had been adduced in the trial which can give rise to potential frustration of the enforcement objective because the criminal standard of proof was applied.

87.Mr Beard urged upon us that there are other cases in which the different standards of proof could make a difference, not only in respect of actual penalty proceedings but also in respect of the Commission’s investigation and decisions on enforcement options.

88.We took such submission into account.  However, in the end, we came to the clear conclusion that it would be much better for the argument of potential frustration of enforcement objective to be tested in an actual case where the application of criminal standard of proof would have a real impact.  And it would also be much better if the Competition Tribunal (with its expertise in handling competition cases) have had the opportunity of dealing with this issue squarely and fairly with regard to actual (instead of conceptual or notional) evidential assessment in regard to specific pieces of evidence on a particular competition issue before the point is considered by the Court of Appeal.

89.In this connection, we disagreed with Mr Beard’s concern as to the futility of re-arguing the issue of standard of proof before the Competition Tribunal in light of the judgments in Nutanix and the present case.  As we have highlighted above, it would appear that the angle of potential frustration of enforcement objective had not been fully canvassed, perhaps not surprisingly in light of the evidence and the contentious issues in these cases.

90.Mr Beard also advanced arguments based on the statutory scheme of the Ordinance and its similarities with overseas competition regimes where civil standard of proof is applied.  However, there are also some special features in our Ordinance which we have highlighted in our directions of 4 May 2021:

(a)  There is no parallel regime for criminal offence in respect of anti-competitive conduct as in England; and

(b)  In Sections 45, 147 and 148, proceedings for pecuniary penalties are treated in the same manner as proceedings for other criminal offences under the Ordinance.

91.Also, at the time when the Competition Bill was debated, the legislature (and the administration which put forward the bill) was aware of the Court of Final Appeal’s judgment in Koon Wing Yee v Insider Dealing Tribunal, supra.  Though the President attached little weight to it, the criminal standard of proof and Koon Wing Yee had been alluded to during the legislative debates.  Notwithstanding this, the legislature did not include any specific provision in the Ordinance to stipulate that civil standard of proof is to be applied.

92.We do not express any view on these matters as we have not heard counsel on whether these features would affect, and if so how, the assessment of the implied derogation point.  However, these may require further research and arguments than those which have already been placed before us.

93.Mr Beard relied on the observations of the Ma CJHC (as he then was) in Chit Fai Motors Co Ltd v Commissioner for Transport [2004] 1 HKC 465 at [20] to invite this Court to address the issue of standard of proof notwithstanding that we had been able to determine the appeal without doing so.  In particular, counsel emphasized that this is a recurrent issue which has great public importance in relation to the development of competition law in Hong Kong.

94.We respectfully agree with Ma CJHC that this Court still retains a discretion to hear an appeal even though the lis between the parties has gone (whether by way of settlement or determination on other grounds).  We also accept that there are cases where it is appropriate to exercise such discretion because of the great public interest in having the issue determined at the appellate level.  However, the Court must still consider whether the appeal is the appropriate occasion to determine such important issue.

95.As highlighted by Lord Slynn of Hadley in Regina v Secretary of State for the Home Department, Ex parte Salem [1999] 1 AC 450 at p.457 (and cited by Ma CJHC at sub-paragraph (3) in [20] of Chit Fai), even in the public law context, the discretion must be exercised with caution. After all, it would not be in the public interest to have a highly controversial but important point determined when the Court does not find the underlying materials before it provides a solid basis for assessing the competing arguments.

96.Though the question of standard of proof, as analysed above, can be said to be a matter of statutory construction, for the reasons we have given above, the implied derogation point is not an issue which we found appropriate to be determined in the present appeal.  We therefore declined to embark on such course.

Certificate for three counsel

97.We have already ordered Mr Cheung and Mr Wong to pay the costs of the Commission in this appeal.  The outstanding issue is whether there should be certificate for three counsel.

98.In light of our above reasons for determining the appeal and declining to address the question of standard of proof, we would only give the Commission certificate for two counsel.

Mr Daniel Beard QC, Mr Abraham Chan SC and Mr Byron Chiu, instructed by King & Wood Mallesons, for the applicant

Mr Martin Hui SC, Mr Solomon Lam and Mr Joshua S Kanjanapas Wong, instructed by Henry Yu & Associates, for the 4th respondent