HKSAR v. Chen Keen (Alias Jack Chen) and Others
Read the full judgment text of HCCC 309/2019 on BabelCite. This High Court CFI judgment was delivered on 12 October 2021.
1. The prosecution intends to call two witnesses from the Stock Exchange of Hong Kong Limited (“SEHK”). They are Mr Wong Chun-ling, William and Ms Ngai Sze-yee, Cindy. Both are employees of the SEHK. In 2012, Mr Wong was an Assistant Vice President of the Listing Division of the SEHK. In 2012, Ms Cindy Ngai was an Assistant Manager in the Listing Division. She is now an Assistant Vice President.
Cites 5 cases
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HCCC 309/2019 [2021] HKCFI 3046 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CRIMINAL CASE NO 309 OF 2019 __________________
__________________ Before: Deputy High Court Judge Bruce SC in Court Date of Hearing: 30 March 2021 Dates of Ruling: 9 and 13 April 2021 Date of Reason for Ruling: 12 October 2021 __________________________________________________ APPLICATION TO EXCLUDE ASPECTS OF THE __________________________________________________ INTRODUCTION: issues for consideration 1.The prosecution intends to call two witnesses from the Stock Exchange of Hong Kong Limited (“SEHK”). They are Mr Wong Chun-ling, William and Ms Ngai Sze-yee, Cindy. Both are employees of the SEHK. In 2012, Mr Wong was an Assistant Vice President of the Listing Division of the SEHK. In 2012, Ms Cindy Ngai was an Assistant Manager in the Listing Division. She is now an Assistant Vice President. 2.The SEHK is, amongst its many functions, the frontline regulator of companies listed on the Main Board of the Exchange (exchange company) and also the Growth Enterprise Market (GEM). Section 21 of the Securities and Futures Ordinance, Cap 571 (“the Ordinance”) articulates the duties of the Exchange. The relevant parts of section 21 provide:
The SEHK must operate its facilities in accordance with the rules made under section 23 of the Ordinance and approved under section 24.[1] The Exchange is required to formulate and implement appropriate procedures for ensuring that its exchange participants comply with the rules of the company.[2] 3.There are three levels of enforcement of the rules referred to in section 23. The first is sanctions imposed by the SEHK. The second is the obligation under section 21(5) of the Ordinance which provides as follows:
In that provision, the Commission is the Securities and Futures Commission (“Commission”). This provision is much more than a provision for enforcing rules made under section 23. The Commission under the Ordinance has a wide range of sanctioning powers and investigatory powers as well as the provision of criminal sanctions to regulate matters within its purview. The third level of enforcement is the use of ordinary criminal sanctions. The line between the second and third levels is, to some extent blurred because the Commission can in some circumstances prosecute. In any event, criminal proceedings may occur where the Commission is not the prosecutor or the informant. Within this category there are cases where the rules made under section 23 may be an important part of the background of a case involving a listed company and there are cases where the indictment alleges an offence and explicitly avers conduct which is in breach of those rules. 4.The Ordinance contemplates more than one recognised stock exchange in Hong Kong. There is only one at the moment and that was the position at the time germane to these proceedings. 5.Section 23 of the Ordinance empowers the SEHK to make rules. Section 23(1) provides that those rules “for such matters as are necessary or desirable” may be made for the purpose of:
Section 23(1)(c) is not presently relevant. What is necessary or desirable must be understood against the background of the duties of such an exchange articulated in section 21. Section 23(2) lists a non-exclusive list of topics upon which the Exchange may make rules. That subsection provides:
6.Sections 23(3)-(5) and 24(1)-(7) of the Ordinance recognise the importance of the Securities and Futures Commission and the Financial Secretary in the making of rules. Critically, section 24(8) declares:
7.The declaration under section 24(8) obviates the need for the rules made under section 23 to be treated as subsidiary legislation under the Interpretation and General Clauses Ordinance, Cap 1. Ordinarily, the definition of subsidiary legislation in section 3 of that Ordinance would make such rules a candidate for treatment as subsidiary legislation. The relevant part of section 3 provides a definition of subsidiary legislation to cover a: “any proclamation, rule, regulation, order, resolution, notice, rule of court, bylaw or other instrument made under or by virtue of any Ordinance and having legislative effect”. One of the important consequences of being one of the things mentioned in the definition of subsidiary legislation is that by reason of section 34 of the Interpretation and General Clauses Ordinance is to subject such items to the scrutiny of the Legislative Council. Plainly, such an arrangement might be viewed as inconsistent with the provisions of sections 23(3)-(5) and 24(1)-(7) of the Ordinance which give the Securities and Futures Commission and the Financial Secretary a great deal of input as the content of rules made under section 23 of the Ordinance. SUBMISSIONS The position of the accused 8.Counsel for the accused submit that Mr Wong and Ms Ngai should not be permitted to give evidence on:
9.The basis for these submissions is:
The position of the accused 10.The prosecution contention is that no definitive interpretation is required because the Listing Rules do not form part of the subject matter of the charges in the indictment. It is contended that “evidence of how the SEHK interpret and apply the Rules is relevant to the issue of the exercise of their public duty (to ensure so far as is practicable a fair, open and transparent market for the buying and selling of shares) and whether the actions/inaction of the Defendants dishonestly risked impeding that”. DISCUSSION 11.What underlies the primary submissions of the accused is, in essence, twofold. First, the Listing Rules are a species of law or are rules to be treated as a species of law and it is, accordingly, for the Court to direct the jury as to the meaning of those Rules. Second, as the rules are a species of law or are rules to be treated as a species of law is not open to a witness, in this case a prosecution witness, to give expert evidence on the meaning and application of such laws. It is trite law that construction of domestic law is not a matter upon which expert evidence may be admitted: British Celanese Ltd v Courtaulds Ltd (1935) 52 RPC 171, 198; Chen Paul & Anor v Lord Energy Ltd [1998] 1 HKC 702, 703; Re Setaffa Investments [1998] 2 HKLRD 236, 244. The situation would be different if the issue was foreign law. Plainly, the effect of the legislative provisions to which I have referred make it plain that the Listing Rules made under section 23 are not subsidiary legislation. 12.The rule as to the construction of domestic (as opposed to foreign) statutory material may extend to provisions which are to be treated as a species of law: R v Spens [1991] 1 WLR 624, 93 Cr App R 194. 13.The decision in R v Spens is critical to the argument of the accused. In that case, the appeal concerned a conviction for conspiring to induce shareholders to enter into an agreement by the dishonest concealment of material facts, and with false accounting. At the heart of the conviction was a breach or breaches of the City Code on Take-overs and Mergers. The appellant complained that at a preparatory hearing the trial Judge had ruled that although the relevant Code was not law as such the issue of construction of the Code was a matter for him and not the jury. The Court of Appeal endorsed the following description of the Code:[3]
Later in the decision of the Court of Appeal, Watkins LJ observed:[4]
Watkins LJ observed that the Code does not have the force of law.[5] 14.The central contention of the appellant in R v Spens was that the construction of the Code was a matter for the jury and not for the Judge. The Court of Appeal held:[6]
15.The correctness of the approach in Spens (above) has never been doubted. The approach underlies the basis of decisions of the English Court of Appeal in R v H [2015] EWCA Crim 46 and R v Merchant and Mathew [2018] 1 Cr App R 11 concerning the London Interbank Offered Rate (LIBOR) and R v Bermingham and Anor [2020] EWCA Crim 1662 about the Euro Interbank Offered Rate (Euribor) subject to a Code of Conduct. The issues in each of those cases was different to that in Spens (above) and, indeed, basically assumed the correctness of that approach. 16.In many respects, the decision of the Court of Final Appeal in HKSAR v Cheng Chee Tock Theodore (No 2) (2016) 19 HKCFAR 86 proceeded on the same kind of assumption. That case is more germane to the issue at hand because it considered the application of the Listing Rules in the context of a charge of conspiracy to defraud. As a matter of detail, it appears that the charge of conspiracy to defraud in Cheng Chee Tock Theodore included specific reference to the Listing Rules. The Court of Final Appeal considered and applied aspects of the Listing Rules and as those representing the accused point out, there was never any suggestion that these were issues for the jury. 17.The issue was considered at the first hearing of these proceedings before Anthea Pang J[7]. She held:[8]
18.As Anthea Pang J rightly observed, this is an important component of the public duty of the SEHK. She further held:[9]
19.Anthea Pang J also considered the issue of whether in the context of explaining the operation of the Listing Division of the SEHK how the Listing Rules might be referred to. She held:[10]
20.The issue was considered by the Court of Appeal as well.[11] That Court agreed with the ruling of Anthea Pang J. The Court held that the evidence given at the first hearing by Mr Wong and Ms Ngai was admissible. The Court of Appeal made the point that the essence of the charges against the accused does not require to proof that there was a breach of the Listing Rules. The Court indicated that if that had been the case then a definitive direction as to the meaning of those Rules would have to be given by the trial Judge. 21.It seems to me that whatever the precise legal status the Listing Rules have, it is undoubtedly right that the issue of the construction and meaning of the Rules is an issue for direction by the Court if that became necessary. I can foresee circumstances in which it would be necessary to give directions on meaning of aspects of those Rules, even though the breach of them is not part of the case for the prosecution. The duty and daily operation of the SEHK is based on the Rules and the principles articulated in section 21 of the Ordinance. If Mr Wong and Ms Ngai proceeded on a legally incorrect appreciation of the Listing Rules, and that affected how they did their duty on behalf of the SEHK then it would be appropriate to give directions to the jury as to the meaning of the Listing Rules. I do not perceive that either Anthea Pang J or the Court of Appeal held that it was outside the province of the trial Judge to give such directions. In essence, the position of Anthea Pang J and the Court of Appeal was that the issue has never arose and does not arise. To the extent, I have a respectful disagreement with their position, my position is that a construction of the rules may arise and if it does then it is for the Court to direct the jury as to the correct construction of those rules. 22.Having reviewed their committal depositions and their testimony at the previous hearing, I do not perceive that they were giving expert evidence to the meaning of any of the Listing Rules. They could not, in any event, give expert evidence as to the legal meaning of the Listing Rules as they are not qualified to do so. They are, on the basis of the depositions and their former testimony, capable of giving evidence as to the operation of the Listing Division of the SEHK. Whether that evidence is truly opinion evidence is an interesting question. Plainly, both of these proposed witnesses are vastly experienced in the operation of the Listing Division. Expertise may be acquired by experience and subject to submission, it seems to me that their experience is sufficiently extensive to be characterised as expert. 23.Of course, the day-to-day operation of that Division is very much a rules-based operation. For example, underlying the requirements for announcements of price-sensitive information, what is required when a proposed transaction on the part of a listed company is of a certain size, the requirements of disclosure imposed on listed companies and their directors are all based on the Rules and it would be artificial in the extreme for Mr Wong and Ms Ngai to give their evidence about those topics as it applies or may apply to the accused without reference to the rules and to their understanding of the rules. 24.Ms Draycott, SC points out, in relation to Counts 1 and 2 of the indictment, it is alleged that the SEHK was defrauded in the sense of acting contrary to its public duty. The identification of what its duty was and how it would have acted, had it been aware of what the prosecution alleges are the true facts are critically important issues. The duty of the SEHK is defined by reference to the Listing Rules and aspects of the Ordinance. Further, in relation to Counts 3 and 4 of the indictment, the Listing Rules are important in understanding how the SEHK reacted to the events and representations germane to the particulars of those 2 counts. 25.It is correct to remember that on no account do any of the first 4 counts on the indictment allege a breach of the Listing Rules. However, in my opinion, that is not a complete answer to the problem. Each of the first 4 counts aver misrepresentation, failure to declare and concealment. If, in considering Counts 1 and 2, any of those activities diverted the SEHK from its duty, it is because the duty of the SEHK to do what it is required to do is referable to the requirements and standards of the Ordinance and the Listing Rules. The SEHK has many tools to carry out its regulatory obligations. Applying that to the present case, part of the determination of whether or not the accused are guilty of Counts 1 to 4 involves what, by reference to the Ordinance and the Rules, the SEHK would have done if the concealment is proved and if it was known by the SEHK. If those carrying out the duty of the SEHK had a wrong appreciation of the content of the Ordinance or the Rules that may affect the determination of whether or not the accused are guilty of some or all of the accusations in the indictment. 26.Thus, for example, the case for the prosecution on the failure to disclose a document known in this trial as the Commission Sharing Agreement (CSA) had many consequences including the potential treatment of the agreement between the 2nd Accused and the listed company as a connected transaction under the Listing Rules. If the agreement between the 2nd Accused in the listed company was treated as a connected transaction, its treatment in relation to SEHK’s determination of whether or not to approve the transaction would be significantly different and significantly more onerous than if the agreement was not to be treated in that way. Further, there would be procedural aspects of the Extraordinary General Meeting which would be different depending on whether or not the transaction was a connected one. The point of all this is that the duty of the SEHK as to the treatment of the transaction between the 2nd Accused in the listed company might vary depending on whether or not there is an obligation to disclose the CSA. The public duty of the SEHK depends on the administration of rules depending on the circumstances. It is, in my opinion, unavoidable that Mr Wong and Ms Ngai will need to explain what they did, why they did it and why they might have acted in another way, had they been aware of other facts and given that the operation of the Listing Division is fundamentally rules-based, Mr Wong and Ms Ngai will of necessity have to refer to their understanding of the Listing Rules. 27.Even on the premise that the Ordinance and the Rules form part of the background to how officers of the Listing Division of the SEHK carried out their duties on behalf of the SEHK as submitted by the prosecution, whether or not they were right about their views of the rules and the Ordinance is pertinent and relevant to the issues to be tried. If that is the position then it will be necessary for the Court to give directions to the jury as to the correct position. Thus, even if Mr Wong and Ms Ngai firmly believed that there was an obligation to disclose the CSA but, on a correct construction of the Listing Rules that is not so, then it is the obligation of the Court to direct the jury to reflect this. 28.Let me be clear, in coming to this decision I do not say that Mr Wong and Ms Ngai were wrong or possibly wrong in their application of the Ordinance and the Rules. That issue will be a matter for submission in the future. 29.In an attempt to promote an ease of understanding on the part of the jury, what I propose to do is prior to the calling of Mr Wong and Ms Ngai, I will inform the jury that the interpretation of the Listing Rules is an issue for the Court and if the approach of Mr Wong and Ms Ngai to a particular Rule or Rules is at variance with the correct position, the jury would be obliged to follow the Court’s direction. Those directions would be given in the course of the summing up that becomes necessary. The precise content of any such direction at the time for summing up will have to await events. 30.There is an issue as to the legal effect of the CSA. The determination of the facts which might resolve that question is a matter in due course for the jury. If the CSA is of no legal effect then that would have a profound effect on the consequences of any breach of any obligation to disclose or failure to disclose such an agreement. Of necessity, it might be necessary in due course to give the jury some directions about that issue. However, I consider that it would be open to the prosecution to show the document to one or both of the witnesses and ask them on the assumption that the CSA was legally effective whether (and if so how) that would affect how the SEHK did its duty. I do not think it would be appropriate or helpful for Mr Wong and Ms Ngai to be asked theoretical or hypothetical questions. The questions should focus on either the proved facts or those facts which are capable of being proved.
31.As presently advised it is intended that the Court will give the jury directions as to the meaning of the Ordinance and relevant Listing Rules in due course and any expression by either Mr Wong and Ms Ngai as to the meaning of the Rules is subject to those directions.
Ms Charlotte Draycott, SC leading Mr Li Chun Ngai Martin, on fiat and Miss Ng Oi Lam, Joycelyn SPP of the Department of Justice, for HKSAR Mr Tim Owen QC leading Mr Tsoi Y M Benson, instructed by Boase Cohen & Collins, for the 1st accused Mr Ian Winter QC leading Mr Cao Yuan Shan and Ms Chiu Betty instructed by Haldanes, for the 2nd accused Mr David A S Khosa, instructed by Hobson & Ma, for the 3rd accused [1] Securities and Futures Ordinance, Cap 571, section 21(3). [2] Securities and Futures Ordinance, Cap 571, section 21(4). [3] [1991] 1 WLR 624, 626. [4] [1991] 1 WLR 624, 627. [5] [1991] 1 WLR 624, 626. [6] [1991] 1 WLR 624, 632. [7] As Anthea Pang JA then was. [8] Ruling 15 February 2016, §30. [9] Ruling 15 February 2016, §21. [10] Ruling 15 February 2016, §27-29. [11] CACC 172/2016, [2018] HKCA 121. | ||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCC 309/2019