The Registrar of the Hong Kong Institute of Certified Public Accountants v. Zhonghui Anda Cpa Ltd and Another

CACV 297/2024

[2026] HKCA 1148

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEL

CIVIL APPEAL NO. 297 OF 2024

(ON APPEAL FROM THE DISCIPLINARY COMMITTEE OF THE HONG KONG INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTING PROCEEDINGS NO. D‑19‑1514F)

________________________

________________________

________________________

________________

JUDGMENT

________________

Hon Cheung JA (giving the Judgment of the Court) :

I.  The appeal

1.This is an appeal by Zhonghui Anda CPA Limited (‘the 1^st Respondent’) and Mr Sze Lin Tang (‘the 2^nd Respondent’) against the decision dated 19 June 2024 of the Disciplinary Committee of the Hong Kong Institute of Certified Public Accountants (‘the Institute’) in respect of three complaints lodged against the Respondents by the Registrar of the Institute (‘the Complainant’).

II.  Background

2.We will adopt mainly the background of the case from the written submissions of Mr Chan (together with Ms Chan) for the Complainant and supplement it by materials from the written submissions of Mr Wong for the Respondents and from the appeal papers.

3.Ko Yo Chemical (Group) Limited (‘the Company’) was and still is listed on the Main Board of The Stock Exchange of Hong Kong Limited. In 2015, the principal business of the Company and its subsidiaries (collectively, ‘the Group’) was the manufacturing of chemical products and chemical fertilizers. The Group’s two cash generating units and its only source of income were two plants for the production of the said products referred to as the ‘Dazhou  Plant’ and ‘Guangan  Plant’ respectively (collectively, ‘Plants’).

4.On 19 February 2016, the Company accepted the resignation of another firm of auditors and engaged the 1^st Respondent to audit the financial statements of the Group (‘2015 Financial Statement’) for the financial year ended 31 December 2015 (‘ Financial Year 2015’). The 2^nd Respondent, a certified public accountant, was the engagement quality control reviewer.

5.The 2015 Financial Statement recorded net current liabilities of RMB 1.4 billion, leading to material uncertainties as to whether the Group could continue as a going concern. The Group’s main assets were the Dazhou Plant and the Guangan Plant, which were recorded at their carrying amounts, i.e. RMB 1.1 and 2.1 billion respectively. In the Chairman’s statement in the 2015 Financial Statement, it was recorded that the Group had mitigated its losses in Financial Year 2015 by temporarily suspending production at the Plants ‘resulting in a serious low utilization of Dazhou Plant and Guangan Plant’. It was also projected that the Group would continue to be adversely affected by ‘the sluggish economic situation and difficulties of chemical fertilizers and chemical industries’. However, the Group did not recognise any impairment loss in relation to the Plants in the 2015 Financial Statement on the ground that the discounted cashflows from the Plants were higher than their carrying amounts.

6.The 2015 Financial Statement also recorded losses of RMB 106 million. The recorded losses would have been far larger but for a purported change in the fair value of a put option (‘Put Option’) of RMB 214.8 million. The Company acquired the Put Option, which gave it the right to require the counterparty to subscribe for convertible bonds in the aggregate principal amount of no more than $1.44 billion, for $1 on 18 January 2015. The Company recognised the entire difference between the transaction price of the Put Option ($1) — which was treated as the fair value at initial recognition — and its purported fair value as at 31 December 2015 (RMB 214 million) as a profit for the financial year.

7.The 1^st Respondent gave an unqualified opinion in relation to the 2015 Financial Statement, albeit noting the uncertainty as to going concern.

8.By letter dated 7 September 2020, the Complainant made three complaints (collectively, ‘Complaints’) against the 1^st Respondent and the 2^nd Respondent in relation to their failure to observe professional standards under section 34(1)(a)(vi) of the Professional Accountants Ordinance  (Cap. 50) (‘the PAO’) in auditing the 2015 Financial Statement. The first was concerned with the 1^st Respondent’s failure or neglect to observe, maintain or apply professional standards in the audit of the change in the fair value of the Put Option (‘First Complaint’). The second was concerned with the 1^st Respondent’s failure or neglect to observe, maintain or apply professional standards in the audit of the impairment assessment of the Plants (‘Second Complaint’). The third was concerned with the 2^nd Respondent’s failure or neglect to observe, maintain or apply professional standards in relation to these audit issues (‘Third Complaint’). The Complaints were raised based on the findings of an investigation by the Audit Investigation Board of the Financial Reporting Council.

9.A Disciplinary Committee consisting of a chairperson and four other members was constituted under the PAO.  The chairperson and two of the members were lay members while the remaining two members were certified public accountants (‘the professional members’) and a Notice of Commencement of Proceedings was issued on 5 November 2020. The hearing of the complaints was adjourned a few times due to, amongst other things, the COVID outbreak. Eventually, the Disciplinary Committee conducted the hearing on 14 June 2022.

10.After the hearing but before the decision was given, the Disciplinary Committee by a letter dated 10 February 2023 informed the parties that the membership of one of the five members Mr Chu Kin Wing (‘Mr Chu’) serving as a Disciplinary Panel A member had expired on 31 January 2023. The Disciplinary Committee referred to section 33B(2) of the PAO for the Respondents to object to the proceedings in the absence of a Disciplinary Committee member and invited the parties to register any objection.

11.Following further correspondence, the Disciplinary Committee appeared to be satisfied by representations from the Head of Legal of the Institute that the provision for objection did not in fact apply, and directed by a letter dated 10 March 2023 that the Complaint be dealt with ‘by the remaining four members of the Disciplinary Committee’.

12.The Disciplinary Committee found that all three Complaints were established. The Reasons for Decision dated 5 January 2024 (‘Misconduct Decision’) were signed by four of the five members of the Disciplinary Committee due to the expiration of Mr Chu’s term.

13.By their Decision on Sanctions and Costs dated 19 June 2024 (‘the Sanctions Decision’), also signed by four members, the Disciplinary Committee reprimanded the 1^st Respondent and the 2^nd Respondent, imposed a penalty of $200,000 jointly and severally on the Respondents and ordered them to pay costs.

III.  Statutory framework of complaints against a certified public accountant

14.The relevant version of the PAO considered by the Disciplinary Committee and in this appeal was the one in force on 24 September 2020. The parties labelled this version as the Pre‑Amended PAO. It was called pre‑amended because this version was repealed in 2021 by the Financial Reporting Council Ordinance (Cap. 588). Sections 73‑83 of the Accounting and Financial Reporting Council (Transitional and Saving Provisions and Consequential Amendments) Regulation (Cap. 588B) (‘Transitional Provisions’) provide for transitional arrangements for complaints submitted before the transition date, but ongoing after the Pre‑Amended PAO was repealed. In short, the Complaint is to be dealt with as if the Pre‑Amended PAO continues to apply, see sections 73(2) and (3) of Transitional Provisions.

15.Under section 34(1) of the Pre‑Amended PAO, a complaint that a certified public accountant has, amongst other things, failed or neglected to observe, maintain or otherwise apply a professional standard shall be made to the Registrar of the Institute who shall submit the complaint to the Council of the Institute (‘the Council’) which may, in its discretion, refer the complaint to the Disciplinary Panels. Section 33(3) then provided that :

‘ (3)(a) Where pursuant to section 34 a complaint is referred to the Disciplinary Panels, the Council shall constitute a Disciplinary Committee to deal with the complaint by directing the Disciplinary Committee Convenor to appoint the chairman and other members of the Disciplinary Committee, and the Disciplinary Committee Convenor shall act in accordance with such direction.

(b) Subject to section 33B(4), a Disciplinary Committee constituted pursuant to paragraph (a) shall consist of the following 5 members—

(i) a person appointed by the Disciplinary Committee Convenor from Disciplinary Panel A who shall be the chairman of the Disciplinary Committee;

(ii) 2 persons appointed by the Disciplinary Committee Convenor from Disciplinary Panel A; and

(iii) 2 persons appointed by the Disciplinary Committee Convenor from Disciplinary Panel B of whom one shall be the holder of a practising certificate.’                                                     

16.Panel A of the Disciplinary Panels is the panel of not less than 18 lay persons and Panel B is the panel of not less than 12 professional members, of whom not less than six are holders of practising certificates: section 33(1)(a) and (b).

17.By virtue of section 33(3), where the complaint is referred to the Disciplinary Panels, the Council shall constitute a Disciplinary Committee to deal with the complaint and direct the Disciplinary Committee Convenor to appoint the Chairman (a lay member) and other members of the Disciplinary Committee consisting of two lay members and two professional members.

18.Section 35 provides for the disciplinary powers of the Disciplinary Committee which include, amongst other things, orders for removal of the name of the certified public accountant from the register, reprimand and penalty.

19.Sections 33B(2), (3) and (4) make detailed provisions for dealing with, amongst other things, absent members from the Disciplinary Committee and the power of the Council to dissolve the Disciplinary Committee. We will set out the relevant provisions and discuss them later in the judgment.

‘ 33B. Dealing with complaints

(1) Subject to subsection (2), the quorum for a Disciplinary Committee shall be 4.

(2) If immediately before commencing to deal with a complaint, or if at any stage in the course of dealing with a complaint (being a stage at which the certified public accountant against whom the complaint has been made is entitled to be present or represented) one of the members of the Disciplinary Committee is absent, such certified public accountant or his representative may object to the complaint’s being dealt with in the absence of such member, and in case an objection is made pursuant to this subsection and is not withdrawn the Disciplinary Committee concerned shall neither commence to deal nor, where appropriate, further deal with the relevant complaint until either the objection is withdrawn or the member whose absence occasioned the objection is present.

(3) Where -

(a)(i) a Disciplinary Committee, having given the certified public accountant concerned or his representative an opportunity of being heard in the proceedings, is unable to decide whether an order under section 35, or what kind of such order, should be made; and

(ii) the committee’s inability so to decide is because one of its members is absent or is otherwise unable to participate in the committee’s deliberations regarding the decision; or

(b) the Council is of opinion that because an objection made under subsection (2) which has not been withdrawn or because of the death, illness or other incapacity or the absence from Hong Kong of the person who is the chairman of a Disciplinary Committee, it is impracticable for the committee to continue to deal with the complaint with which it is concerned,

the Council shall by resolution dissolve the committee.

(4)(a) Where a Disciplinary Committee is dissolved pursuant to subsection (3), the following shall apply—

(i) subject to paragraph (b), the Council shall at the same time constitute another Disciplinary Committee to deal with the complaint with which the dissolved committee was concerned; and

(ii) in dealing with the complaint, the Disciplinary Committee constituted pursuant to the requirement of subparagraph (i) shall deal with it afresh and, accordingly, it shall not have any regard to the proceedings of the committee which before its dissolution under subsection (3) was concerned with the complaint.

(b) Where a Disciplinary Committee is dissolved under subsection (3), a person who was a member of the dissolved committee and who participated in any way in its proceedings shall not be eligible for membership of the Disciplinary Committee constituted pursuant to the requirements of paragraph (a)(i).’

IV.  Grounds of appeal

20.Mr Wong did not seek to challenge to the Disciplinary Committee’s findings, reasoning or ultimate conclusions in the Misconduct Decision or the Sanctions Decision. Instead, the three grounds of appeal advanced by him involve matters of jurisdiction, procedural fairness and sufficiency of reason of the Sanctions Decision, namely,

1)  Whether the Disciplinary Committee without a majority of lay members was properly constituted consistently with its statutory mandate; and if not, whether a decision from an improperly constituted Disciplinary Committee should be quashed (Ground 1);

2)  Whether it was procedurally unfair to allow three lay members to hear the Respondents’ case, but have only two of those lay members to make the decision (Ground 2); and

3)  Whether the Sanctions Decision gave sufficient reasons in categorising the breaches as ‘serious’, when it appeared inconsistent with a previous categorisation (Ground 3).

21.We will now discuss these three grounds.

1)  Ground 1

(1)  The Respondents’ case

22.Mr Wong submitted that public bodies generally have no free-standing function but can only act according to statutory terms giving them power: Cheung Tak Wing v Communications Authority & Anor [2018] 5 HKLRD 515, [118] per Au J (as he then was) citing R v Somerset County Council, ex p Fewings [1995] 1 All ER 513, 524F, per Laws LJ. Where there is a detailed and extensively provisioned statutory framework, public law powers should not be lightly implied: Cheung Tak Wing, [116]. Further, the Disciplinary Committee is wholly a creature of statute. It possesses no inherent public law powers. Where a statutory body fails to fulfil the statutory conditions precedent, it acts without jurisdiction: Anisminic Limited v Foreign Compensation Commission [1969] 2 AC 147, p.195B‑C.

‘ Lack of jurisdiction may arise in various ways. There may be an absence of those formalities or things which are conditions precedent to the tribunal having any jurisdiction to embark on an inquiry. ………. Thereby it would step outside its jurisdiction. It would turn its inquiry into something not directed by Parliament and fail to make the inquiry which Parliament did direct. Any of these things would cause its purported decision to be a nullity.’

23.That the ratio of 3:2 for lay to professional membership of the Disciplinary Committee is a statutory condition precedent necessary for jurisdiction is evident from the plain language and purpose of the legislation.

24.After Mr Chu’s term expired on 31 January 2023, the resulting constitution of the Disciplinary Committee which gave the Misconduct Decision and Sanctions Decision was two professional members from Panel B and only two lay members from Panel A. The Disciplinary Committee of the Pre‑Amended PAO, properly construed, must be constituted by a majority of lay members. There is no power for the remaining Disciplinary Committee to decide to proceed to a decision without such a majority. The powers provided under section 35 of the Pre‑Amended PAO are only available to be exercised by a Disciplinary Committee under the Pre‑Amended PAO. As the Disciplinary Committee making the Order is not constituted in accordance with the statutory requirements, the Order was therefore made ultra vires and must be set aside.

25.The relevant provisions of Pre‑Amended PAO were introduced by the Professional Accountants (Amendment) Bill 2004 (‘the Amendment Bill’). The legislative materials such as [14] of the Explanatory Memorandum to the Amendment Bill (‘the Explanatory Memorandum’) stated that Clause 35 amends the then existing section 33 in order to provide for a panel of lay members; prescribe that the Convenor is a lay member; prescribe that the Disciplinary Committee Chairman is a lay member; and that ‘the ratio of lay members to certified public accountants being 3:2’.

26.The emphasis of adding lay members is consistent throughout the Amendment Bill: four government appointed lay members were also added to the constitution of the Council of the Institute: [4] of the Explanatory Memorandum; and the same amendments were made to the constitution of the Investigation Committee: [23]‑[24] of the Explanatory Memorandum.

27.The Report of the Bills Committee on the Amendment Bill (LC Paper No. CB(1)2265/03‑04) (‘the Report’) at [11] also stated the purpose of the amendment was that ‘lay members, including the chairman will form the majority of a Disciplinary Committee. The ratio of lay members to professional accountants will be 3:2’. The purposes of the amendments were to improve transparency and objectivity in the disciplinary process: [16] of the Report. The amendments mandated a specific quality of the composition of the Disciplinary Committee, and not just quantity.

28.The amendments were initiated by the Hong Kong Society of Accountants (the previous form of the Institute) and the Amendment Bill was presented by Dr Eric Li Ka Cheung (‘Dr Li’), then the Legislative Council representative for the accountancy sector. Dr Li stated on 9 July 2004 during the Second Reading of the Amendment Bill (Hansard p.9144‑9145) that the purpose of the amendments was ‘to enhance lay members’ role on the HKSA’s Council’ and ‘… to open up its governance structure after noting that the main purpose of introducing a majority of lay members into the Investigation Committee and the Disciplinary Committee is to provide further assurance to the public on the transparency and objectivity in these due processes’.

29.Mr Wong relied on the case of Regina (Bridgerow Ltd) v Cheshire West and Chester Borough Council [2014] EWHC 1187 (Admin) [2015] PTSR 91 where it was held that if the legislation was specific as to the composition of a panel, a panel without that specific composition had no power to make the decision. Ground 1 is jurisdictional. Mr Wong accepted that if this ground succeeds, the Respondents need not rely on Grounds 2 and 3.

(2)  The Complainant’s response

30.Mr Chan submitted that a Disciplinary Committee is constituted by way of direction from the Council of the Institute to the Disciplinary Committee Convenor: see section 33(3)(a). It is constituted even before members are appointed and remains constituted even if members step down or are replaced. The constituted status of the Disciplinary Committee is therefore ‘separate and separable from the life of its members’: see Chao Pak Ki v Hong Kong Society of Accountants (unrep., CACV 12/2005, 18 October 2005) at [20]. There is no question that the Disciplinary Committee was properly constituted in this case.

31.The real issue of whether there were sufficient participants to make a valid decision is a question of quorum. The Disciplinary Committee was quorate when both Decisions were made. Under section 33B(1), the quorum for a Disciplinary Committee shall be four. Four members signed off on both Decisions. Sections 33B(2) and (3) are the exceptions which prove the general rule. Section 33B(3)(a) in particular shows that a four‑member panel is quorate even at the post‑hearing deliberations stage. The Respondents do not suggest that these exceptions apply. Section 33B(2) in particular is inapplicable because the term ‘absence’ in section 33B(2) refers to situations where a member does not attend a hearing or meeting, as opposed to non‑participation due to cessation of membership: see Chao Pak Ki at [21]. Mr Chu was not absent in this sense. In any event, section 33B(2) only applies if objection is raised pursuant to that subsection. No such objection was raised.

32.Insofar as the Respondents seek to read into section 33B(1) the requirement that the quorum must include three lay members, their position is unsustainable. Section 33B was enacted in 1994: see the Amendment Bill 1994 at [20]. It predated section 33(3) — which introduced the ‘lay member majority’ requirement — by more than 10 years. At the time section 33B(1) was enacted, there plainly was no legislative intention to mandate the participation of three lay members. If the legislative intention was to mandate the participation of three lay members, the legislature would have two options. First, it would have repealed section 33B(1): see for example Legal Practitioners Ordinance (Cap. 159) sections 9AB‑10 (solicitors), sections 35‑35B (barristers), Buildings Ordinance (Cap. 123) sections 5 and 7, Medical Registration Ordinance (Cap. 161) sections 20X‑21, Architects Registration Ordinance (Cap. 408) sections 21‑24, Veterinary Surgeons Registration Ordinance (Cap. 529) sections 17‑19. Second, it would have added a ‘three lay member’ requirement into section 33B(1): see for example Dentists Registration Ordinance (Cap. 156) sections 5R‑5T, Social Workers Registration Ordinance (Cap. 505) sections 25‑30, Chinese Medicine Ordinance (Cap. 549) sections 98‑99. Regina (Bridgerow Ltd) is not materially analogous, since it involved the interpretation of a very different statutory framework.

(3)  Our view

i)  Quorum of four members

33.Ground 1 is essentially a matter of construction of the relevant provisions of the Pre‑Amended PAO whether the lay member majority requirement for the Disciplinary Committee under section 33(3)(b) continues to apply when its members fall below five and has only four members which by virtue of section 33B(1) constitutes the quorum.

34.Mr Wong has submitted that the composition of the Disciplinary Committee is prescriptive in nature. His position is that the Disciplinary Committee must compose of five members with the ratio of 3:2 for lay members and professional members throughout the proceedings including the decision stage. We accept that the wording of section 33(3)(b) supports the view that the legislative intent is that the Disciplinary Committee is to have a majority of lay members and a minority of professional members in the ratio of 3:2. This is shown by the provision that the chairman and the two members from Disciplinary Panel A are lay members. This is further supported by the legislative materials leading to the amendment of section 33(3). The purpose of having this requirement is spelt out in [16] of the Report :

‘ 16. The Bills Committee notes that the purpose of increasing the number of lay members in the Council and introducing a majority of lay members into the Investigation Committee and Disciplinary Committee is to provide further assurance to the public on the transparency and objectivity in HKSA’s investigation and disciplinary processes. The Bills Committee supports the initiative of HKSA to open up its governance structure.’

35.We, however, disagree that the decision could only be made by a five‑member Disciplinary Committee even in a situation where a member’s term has expired. This is contrary to section 33B(1) which provides that the quorum for the Disciplinary Committee is four members. In other words, the Disciplinary Committee is validly constituted by four members. It would be most unusual that such a validly constituted Disciplinary Committee would, nonetheless, lack jurisdiction because it does not have a lay member majority. That this quorate four‑member Disciplinary Committee has jurisdiction is further supported by section 51 of the Interpretation and General Clauses Ordinance (Cap. 1) (‘IGCO’) which provides that a vacancy in the membership of a tribunal does not affect its power :

‘ Where any board, tribunal, commission, committee or similar body is established by or under any Ordinance, the powers of such board, tribunal, commission, committee or similar body shall not be affected by –

(a) any vacancy in the membership thereof;’

36.Section 51 of IGCO is, of course, subject to section 2(1) that there is no contrary intention from either the IGCO itself or from the context of any other Ordinance i.e. the Pre‑Amended PAO. It is not argued that there is any contrary intention from the IGCO itself and the only issue is whether there is any contrary intention from the Pre‑Amended PAO. Section 33B(1) of the Pre‑Amended PAO stated that it is subject to section 33B(2). Mr Wong who had not addressed the quorum provision in his main written submission when he challenged the jurisdiction of the four‑member Disciplinary Committee which made the decision, argued that the quorum provision in section 33B(1) is not applicable because it is subject to section 33B(2) being applicable. He submitted that section 33B(2) is not applicable because the provision for objection to the complaint being dealt with, is only available to the accountant respondent when a member of the Disciplinary Committee is absent and not when that member’s term has expired. In other words, the Respondents could only avail themselves of section 33B(2) if Mr Chu was absent and not when he had ceased to be a member.

37.We are unable to accept this argument. Section 33B(2) deals with the situation where the accountant respondent objects to the complaint being dealt with in the absence of a member who is absent immediately at the commencement or in the course of the Disciplinary Committee. Unless the objection is withdrawn or the absent member is present again, the Disciplinary Committee shall not commence to deal or further deal with the complaint. If this happens and the objection is not withdrawn and the Council is of the view that it is impracticable to continue to deal with the complaint, it shall dissolve the Disciplinary Committee under section 33B(3)(b).

38.In our view, the clear meaning of the phrase ‘subject to’ in section 33B(1) refers to the situation where by reason of the objection raised under section 33B(2) there is an impasse to the continuation of the proceedings and which may cause the Institute to dissolve the Disciplinary Committee. In such a situation, the four‑member Disciplinary Committee provision will not be operative. If, on the other hand, section 33B(2) is not available to the accountant respondent because it only applies when the absent member is a serving member (Chao Pak Ki at [21]) and not when there is vacancy due to expiration of his term, then the quorum position in section 33B(1) will apply and become the default position. It does not mean if section 33B(2) is not applicable, then the quorum provision in section 33B(1) is also not applicable.

39.One of the purposes of a quorum is to enable the remaining members of a tribunal to continue to act for it in the event of a vacancy of its members. In Re Ballard and Arkin et al 34 D.L.R. (3d) 758, Freedman C.J.M of the Manitoba Court of Appeal at page 760 held :

‘ ……. There must be countless administrative bodies whose ranks are depleted by a death or resignation of a member. Is the effect of such an event to paralyse the body and rob it of the capacity to function until the vacancy has been filled? Surely such a view of the law would result in great inconvenience and disorder. The better and more practical view is that a vacancy does not denude a body of its legal status or place it in a state of suspended animation until its numbers are again brought to full strength. That is surely one of the reasons why such bodies commonly have a provision for a quorum. The remaining members of the body can continue to act for it, provided that their numbers are at all times sufficient to satisfy the requirements of the applicable quorum.’ (emphasis added)

40.This decision was applied in Jhanji v. Law Society of Manitoba [2022] MBCA 78 (Manitoba Court of Appeal). Regina (Bridgerow Ltd) relied upon by Mr Wong is clearly distinguishable. Under the constitution of a local authority，the renewal of a particular type of licence is to be determined by a panel ‘comprising’ three members drawn from the licensing committee on a politically proportionate basis. The renewed application was refused by a panel consisting of 12 members from the licensing committee. It was held by Stuart‑Smith J that, in context, ‘comprising’ was prescriptive rather than permissive so that the decision could only lawfully be taken by a three‑member panel; that, therefore, it had not been open to the full licensing committee to arrogate the power to itself; that the fact that the decision to refuse the claimant’s application had been taken by 12 members of the full licensing committee, rather than the appropriate panel of three was not merely a negligible violation of the local authority’s constitution; and that, accordingly, the decision to refuse the claimant’s application had been taken by persons with no power so to do and fell to be quashed. The issue in this appeal is different and the case does not assist Mr Wong.

41.In our view, the quorum provision in section 33B(1) provides a complete answer to Mr Wong’s insistence on a five‑member Disciplinary Committee with the 3:2 ratio of lay to professional members.

ii)  Absence of provisions addressing vacancy

42.Mr Wong’s insistence for a five‑member Disciplinary Committee throughout the proceedings is also not sustainable when we consider the provisions in sections 33B(2) and (3) on the dissolution of the Disciplinary Committee by the Council. Three situations are envisaged by these provisions. The first situation is the one we have already discussed in [37] above. The second situation where the Council shall dissolve the Disciplinary Committee is covered by sections 33B(3)(a)(i) and (ii). This is at the decision stage of the proceeding where the Disciplinary Committee having given the accountant an opportunity of being heard in the proceedings, is unable to decide whether an order under section 35, or what kind of such order should be made : section 33(3)(a)(i). The Disciplinary Committee’s inability to decide is specifically provided by section 33B(3)(a)(ii), namely, one of the members is absent or otherwise unable to participate in the deliberation of the decision. There is no requirement that the Council must be of the view that it is impracticable to continue with the complaint before it dissolves the Disciplinary Committee. The third situation where the Council shall dissolve the Disciplinary Committee is under section 33(3)(b) where the chairman of the Disciplinary Committee is dead, ill or has other incapacity or is absent from Hong Kong and the Council is of the view that it is impracticable for the Disciplinary Committee to continue to deal with the complaint. Where the Disciplinary Committee is dissolved pursuant to section 33(3), the Council pursuant to section 33(4)(a) shall at the same time constitute another Disciplinary Committee to deal with the complaint.

43.We have earlier referred to Chao Pak Ki on the meaning of member in section 33B(2). Whether inability to participate in the deliberations as referred to in section 33B(3)(a)(ii) is wide enough to cover the expiration of a member’s term of appointment is debatable. We tend to think the meaning of member as interpreted by Chao Pak Ki also applies to section 33B(3)(a) so that the absent member or the member who is otherwise unable to participate in the deliberations regarding the decision must be a serving member. However, it is not necessary to come to a firm view on this. Further, although there is some discussion in the course of submissions before us whether section 33B(3)(a) may also potentially cover the situation of a four‑member Disciplinary Committee when one of its members is otherwise unable to participate in the deliberation, it is not necessary to go into that issue because that is not the issue we are faced with.

44.The point about the three situations envisaged by sections 33B(2) and (3) is that none of them suggests the Disciplinary Committee would automatically lack jurisdiction in a situation like the present where a vacancy in the Disciplinary Committee occurred because a member ceased to be a member by the expiration of his term. There is no provision for the accountant respondent to object to the complaint being dealt with. Even assuming section 33B(3)(a) applies, there is no provision for dissolving the Disciplinary Committee unless it is unable to reach a decision. On the contrary, the legislation contains an express provision for a quorum of four members without any further requirement that the lay member majority should continue to apply. As the Disciplinary Committee is created by statute, the Court should not lightly imply a term that the quorate four‑member Disciplinary Committee which continues to make the decision lacks jurisdiction unless it is a five‑member Disciplinary Committee with a lay member majority or the four‑member Disciplinary Committee itself has a lay member majority. As Au J (as he then was) observed in Cheung Tak Wing v. Communications Authority [2018] 5 HKLRD 515 :

‘ 116. As submitted by Mr Chan for the Authority, it is well established that public law powers and duties should not be lightly implied. This is particularly so when there exists a detailed and extensively provisioned statutory framework. The court will only imply a statutory duty or obligation when it is clearly necessary to do so.

117.  Hence, on implying statutory duties, the learned editors of  Craies on Legislation (10th ed.) observe at [12.1.1] that:

“As to the creation of obligations, similarly the courts will presume that legislation does not intend to impose an obligation unless it does so expressly or by clear implication.

In determining whether an Act has impliedly created a statutory duty the courts will consider, in part, whether the system established by the Act can properly work without the implied creation of the duty and in part whether the provisions of the Act have provided, in effect, a system for the enforcement of the duty that gives it sufficient meaning...”

118.  Thus, as matter of general principle:

(1)  Public bodies generally have no free-standing function but can only act according to statutory terms giving them power: R v Somerset County Council, ex p Fewings [1995] 1 All ER 513, 524F per Laws LJ.’

iii)  Other professional disciplinary legislations

45.Further, as can be seen from the following legislation dealing with disciplinary proceedings of other professions, where the legislature intended the quorum of the tribunal should contain lay members, they are expressly provided for.

a)  The Dentists Registration Ordinance (Cap. 156) provides for a quorum of three members with at least one lay member    

‘ 5R. Composition of Preliminary Investigation Committee

(1) If the Council decides to establish a Preliminary Investigation Committee under section 5AC(2)(e), it must appoint the following persons to be the members of the Committee—

(a) 1 member of the Council who is a registered dentist;

(b) 2 registered dentists, who are not members of the Council, nominated by the Chairperson; and

(c) 2 members of the Council who are lay persons.’

‘ 5T. Quorum of Preliminary Investigation Committee’s meeting

(1) At a meeting of a Preliminary Investigation Committee, 3 members of the Committee form a quorum.

(2) At a meeting of a Preliminary Investigation Committee—

(a) at least one member must be a member described in section 5R(1)(c); [i.e. lay persons];

(b) at least 2 members must be registered dentists; and

(c) — ’ (emphasis added)

b)  Social Workers Registration Ordinance (Cap. 505) provides for a quorum of three members with at least one lay member    

‘ 26. Disciplinary committee panel

(1) The Board shall appoint persons (not being members of the Board) to be members of a disciplinary committee panel in accordance with the following numbers and categories—

(a) not less than 12 registered social workers (category 1) who each hold a recognized degree in social work;

(b) not less than 12 registered social workers (category 1) who each hold a recognized diploma in social work; and

(c) not less than 10 persons who are not registered social workers.

27. Decision of disciplinary committee and Board on complaint, etc.

(3) The quorum at any meeting of the disciplinary committee shall be 3 members of whom—

(a) not less than 1 shall be a person who is not a registered social worker; and

(b) —.’ (emphasis added)

c)  Chinese Medicine Ordinance (Cap. 549) provides for a quorum of three members with at least one lay member    

‘ 99. Meetings of Practitioners Board for purpose of an inquiry

(1) The meetings of the Practitioners Board held for the purpose of conducting an inquiry under section 98 shall require a quorum of 5 members subject to at least one being a lay member.’ (emphasis added)

46.The Medical Registration Ordinance (Cap. 161) also has express provisions dealing with vacancy of members in the inquiry panel :

‘ 20X(4) If, before the proceedings of an inquiry panel are concluded, a vacancy occurs in the membership of the panel because of the death, resignation or otherwise of a member, the Council must, as soon as possible, appoint another inquiry panel to hold a new inquiry.’

47.In this case, the legislature has simply provided for a quorum of four members for the Disciplinary Committee and has not specifically required it to have a lay member majority. This being the case, the four‑member Disciplinary Committee which gave decisions on the complaint must have the jurisdiction to do so.

iv)  Lay member majority implemented in substance

48.We would observe that, in a way, the lay member majority requirement is still being implemented in substance in the four‑member Disciplinary Committee which consists of the chairman (a lay member), one lay member and two professional members, by reason of the casting vote available to the chairman. This is provided by section 52(2) of IGCO :

‘ Whenever such body or number of persons is assembled, the chairman or other member presiding shall have a casting as well as a deliberative vote, in all matters in which a decision is taken by vote by whatever name such vote may be called.’

49.The exercise of the chairman’s casting vote would, in effect, provide a lay member majority in the four‑member Disciplinary Committee.

v)  Other matters

50.There were arguments with reference to Chao Pak Ki as to when the Disciplinary Committee is constituted. It is clear that the wording of the version of section 33(3) in Chao Pak Ki and the version in the Pre‑Amended PAO in regard specifically to this issue are different. However, this topic is not germane to the issue, because, irrespective of when the Disciplinary Committee is constituted, its power is not affected by a vacancy in the membership by reason of section 51 of IGCO.

51.In the course of the submission, this Court referred the parties to the High Court Ordinance (Cap. 4) which expressly provides the power for a recorder or deputy judge whose appointment is terminated or a judge who reaches retirement age to continue to complete the unfinished case: see section 11 and section 11A(2). These provisions would easily address the problem we are facing. The Pre‑Amended PAO has, of course, now been replaced and we have not been addressed on the disciplinary provisions in the new legislation. The Institute may wish to consider adopting a similar provision if it is not already included in the new legislation.

52.For the reasons we have discussed, Ground 1 has no merits.

2)  Ground 2

(1)  The Respondents’ case

53.There was ample time for the Disciplinary Committee to hand down the Misconduct Decision between 14 June 2022 (the date of the hearing) and 31 January 2023 (when Mr Chu’s term expired). Further, the Disciplinary Committee’s Reasons (which named but was not signed off by Mr Chu from Panel A) was handed down on 5 January 2024, almost a whole year after Mr Chu’s appointment expired. The Disciplinary Committee had allowed the Respondents to make their submissions before a panel that was predominantly lay, and specifically before Mr Chu as a member, only for the Misconduct Decision to be decided and issued by a panel that was not, in fact, predominantly lay, and without Mr Chu. Any submission catered to Mr Chu or a lay person was an exercise in futility. In this context, the Respondents faced the following substantive issues of unfairness, amongst other things, (1) the Disciplinary Committee deprived itself of the relevant insight and reasonings of a lay person as mandated by the legislative scheme, (2) the Disciplinary Committee deprived the Respondents of the right to be heard by a panel where the majority of its members are lay persons, (3) the Disciplinary Committee undermined the Respondents’ and the public’s trust and confidence in the disciplinary process, and (4) the Disciplinary Committee deprived the Respondents of any further inquiries of Mr Chu, or any dissenting reasoning, on which the Respondents could have acted to further their case either in the disciplinary process or on appeal.

54.Mr Wong referred to the statement of Lam VP (as he then was) in Hysan Development Company Ltd v Town Planning Board (‘Hysan’) (unrep. 13 November 2014, CACV 232/2012 [166] ‘…It is equally trite that a right to be heard is worth nothing if the decision‑maker can simply close his mind to whatever were being said or put forward by way of submissions at a hearing.’  The right to be heard must therefore be ‘worthwhile’. See also Re Doyle v Restrictive Trade Practices Commission et al (‘Doyle’)(1985) 21 D.L.R. (4th) 366 page 371. Conversely, there is no worth in directing submissions to a member who ultimately takes no part in the decision.

55.Just as the mere presence of non-member in the decision-making process is objectionable and gives rise to a ‘perception of unfairness’ (Dr Chan Hei Ling Helen v Medical Council of Hong Kong) (‘Dr Helen Chan’) [2009] 4 HKLRD 174, [16]), the absence of a lay member and the imbalance between lay and professional members, contrary to what is promised by the statute, would cause the same perception of unfairness. ‘Justice must not only be done, but also seen to be done’: Dr Chan, [73] (and see also [64]). The Transitional Provisions expressly ensure the Respondents can be subject to the same procedures as all those before 2021. The appearance of procedural unfairness cannot be brushed aside as a mere technicality, but is fundamental and goes to the validity of the decision: Dr Chan [26].

(2)  Our view

i)  Right to be heard/He who hears must decide

56.The Complainant has submitted detailed response to Ground 2. We do not need to repeat them. We are of the view that this ground is not sustainable. First, proceeding on the basis that a four‑member Disciplinary Committee is validly constituted with jurisdiction, the complaint of unfairness about this Disciplinary Committee cannot get off the ground. The rule of natural justice or fairness on ‘the right to be heard’ expressed by the Latin maxim ‘Audi alteram partem’ is well established by the statement of Lord Denning in B. Surinder Singh Kanda v. Government of the Federation of Malaya [1962] A.C. 322 at page 337 :

‘ (this right) “must carry with it a right in the accused man to know the case which is made against him. He must know what evidence has been given and what statements have been made affecting him : and then he must be given a fair opportunity to correct or contradict them….” ’

57.Lord Diplock in O’Reilly and others v. Mackman and others [1983] 2 A.C. 237 at page 279 expressed this right as follows :

‘ to have afforded to him a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it.’

58.Another aspect of the rule of natural justice or fairness is ‘He who decides must hear’ : see Hysan at [174] applying R (Hill) v Institute of Chartered Accountants [2014] 1 W.L.R. 86 which in turn applied Re Doyle.

59.In this case, the Respondents were already given the opportunity to put forward their opposition to the complaints against them before the five‑member Disciplinary Committee. We do not see how this right to be heard can be labelled as ‘not worthwhile’ if one of the members who heard the submissions did not take part in the deliberation, when the remaining four members who now constituted the Disciplinary Committee had all taken part in the hearing prior to Mr Chu having ceased to be a member. Regina v Greater Manchester Valuation Panel, Ex parte Shell Chemicals UK Ltd [1982] 1 Q.B. 255 shows that where there is a multi‑member tribunal/panel and the statutory framework allows for the decision to be made by some of the members, there is nothing preventing the pre‑existing members from making a decision in the event that one of the members is unable to participate due to intervening circumstances. In that case, the local valuation court (‘the court’) consisted of three members. After hearing an appeal, the court reserved judgment and the court agreed on the decision. But before the decision was published, the chairman died. The remaining two members gave the decision. The relevant regulation provided that the decision of the majority of the court shall be the decision of the court. Glidewell J at page 264 held :

‘ (2) Was the decision of July 1, 1980, valid as a decision of the majority? The answer to this question is very much a matter of impression. Despite Mr. Horton’s forceful argument to the contrary, I hold that the decision was valid as the decision of the majority. I have already said that the fact that the chairman had in February 1980 indicated his agreement to the decision which was eventually given in July did not mean that that decision was a decision to which he was a party. But if he was not a party to it, both the other members of the court were, and they remained consistent in their views from February until July. Even if the chairman had changed his mind, the other members would thus presumably have continued of the same mind and the decision given in July if the chairman had remained alive would have been the decision that was eventually given. Thus though it is unusual to describe a decision of a court of which one member has died as a decision of the majority of that court, it is a decision of the majority of those who heard the appeal. Thus in my judgment on this basis the decision of July 1, 1980, of the local valuation court was a perfectly valid decision.’

60.The emphasis is on the ones who decided the case are the ones who had heard the case. The situation in Re Doyle relied upon by Mr Wong is different. Two of the three commissioners in the Restrictive Trade Commission were absent for short periods during the hearing. Pratte J of the Federal Court of Appeal of Canada at page 372 referred to the maxim ‘he who decides must hear’, and held at page 373 :

‘ It is not sufficient, however, in order to determine how the commission should have dealt with the evidence presented to it, to consider only the nature of the decision it was to render. It is also necessary to take into account all the statutory provisions governing the commission. It is clear that sections 114(24), (25), (26) and (29) that Parliament intended the commission to obtain the evidence and information to be used in preparing its report during hearings which all parties concerned would be invited to attend and at which they would have the right to be heard, in person or by counsel; in other words, it seems that Parliament attached so much importance to the commission’s report that it intended that the latter should hold hearings and that those who prepared the report should hear the evidence by attending these hearings. It therefore seems to me to be clear from section 114 that the commissioners who sign a report pursuant to section 114(25) must be those who were present during the hearings held pursuant section 114(24). The fact that, in the case at bar, two of the three persons who signed the report did not attend all the hearings is sufficient to invalidate the report in the same way as if it were a judicial or quasi‑judicial decision.’

61.Again, the emphasis is on those who decide the case must hear the case. Mr Wong had also referred to this Court judgments of Hysan and Dr Helen Chan. Both decisions have in fact been considered by the Court of Final Appeal. Again, Hysan (the challenge is to the decision of the Town Planning Board itself) and Dr Helen Chan (the Legal Advisor to the Medical Council was present during the deliberation of its members) are all concerned with the role of persons who participated in the decision‑making. They were not concerned with the absence of a person from a decision‑making process. Mr Wong has not cited any authority in support of his argument that there is no worth directing submissions to a member who ultimately takes no part in the decision.

62.Further, as stated earlier, the casting vote available to the Chairman who is a lay member would in substance if not in form comply with the lay member majority requirement if the ethos of such a requirement is to be continued in the four‑member committee.

ii)  Contribution of the absent member?

63.We turn to the argument that the vacancy of Mr Chu would deprive the Disciplinary Committee of the benefit of his insight as a lay member, even if Mr Chu had expressed sympathetic views to the Respondents’ case during the course of hearings, it does not necessarily mean that he would adopt the same views when it came to the deliberation in private by the Disciplinary Committee. Experience tells us that often views expressed by the Court at hearings are tentative in nature and may not necessarily reflect the final view after mature consideration of the issues. The case of Boodhoo and another v. Attorney General of Trinidad and Tobago [2004] 1 WLR 1689 is instructive on the ordinary risk associated with litigation. Lord Carswell stated :

‘ 14. Citizens who are engaged in litigation have to face a number of possible hazards. The members of a court consisting of an even number of judges may divide evenly, so giving rise to the need for a rehearing. A jury may have to be discharged or a judge to recuse himself at an advanced stage of a trial, without anyone having been at fault. A judge may die or take ill before concluding the hearing of a case or before judgment is given. These constitute the ordinary risks inseparable from litigation, which cannot be laid to the door of the state or be regarded as breaches of constitutional rights. There are limits to the obligation of a state to provide a remedy for misfortunes of this kind. …’ (emphasis added)

64.We do not accept that public trust and confidence in the disciplinary process would be undermined by the four‑member Disciplinary Committee or that any perception of unfairness would be caused.

iii)  Appointment of new member?

65.Mr Wong has referred to the lapse of time between the hearing on 14 June 2022, the expiration of Mr Chu’s term of 31 January 2023 and the handing down of the Misconduct Decision on 5 January 2024, but he has not suggested that a new member should be appointed to replace Mr Chu. In our view, any suggestion of a replacement after 31 January 2023 would not have been appropriate because this new member would not have had the benefit of hearing the evidence and arguments that had already been gone into prior to the conclusion of the hearing on 14 June 2022. One would anticipate that objection would be made against a new appointment unless the case is heard afresh which is not conducive to efficient use of time and financial resources of the Disciplinary Committee and it would also add further costs to the Respondents. In fact, the Respondents expressed their concerns about their potential exposure to duplicated costs should a new hearing be required in their response to the Institute’s inquiry about the case being dealt with by the four‑member Disciplinary Committee.

iv)  No waiver

66.The remaining matter we need to discuss is the response of the Respondents that they ‘continue to reserve their rights as regards any decision made by the Disciplinary Committee’ to the inquiry by the Disciplinary Committee after Mr Chu ceased his membership. We accept that this is not an unequivocal acceptance of the decision of the Disciplinary Committee to continue with four members which may otherwise be construed as a waiver on their part to this new arrangement. This is not a point that we will hold against the Respondents in deciding against Ground 2. Ground 2 has no merits.

3)  Ground 3

(1)  The Respondents’ case

67.Mr Wong referred to the well‑known decision of the Court of Final Appeal in Oriental Daily Publisher Ltd v Commissioner for Television and Entertainment Licensing Authority (1997-98) 1 HKCFAR 279 page 290F on the benefits of giving reasons for the decision. Another reason for giving adequate reasoning is to avoid ‘the sense of injustice’: R (Citizens UK) v Home Secretary [2018] 4 WLR 123, [82].

68.The adequacy of reasons will depend on the statutory context and context of the case. Prior to the Disciplinary Committee being constituted on 5 November 2020, the Institute on 4 February 2020 proposed to the Respondents a resolution by agreement (‘RBA’) to resolve the complaints against them. The Institute’s Guidelines for RBA states that the RBA is a mechanism reserved for cases of ‘moderate’ severity with a financial penalty not exceeding $50,000. Subsequently, in the Complainant’s submissions on sanction, the Complainant changed its stance and submitted that the alleged complaints should be regarded as ‘serious’, a position which necessarily contradicts the proposal of an RBA and significantly alters the permissible level of penalty. This change in stance was at the crux of the Respondents’ submissions against sanction. There being no change in circumstances, the Complainant had failed to reason how there could be a change to the category of seriousness. Given the centrality of this point the Disciplinary Committee should have referred to the RBA and the change in the Complainant’s submissions on sanctions and explained how a case which was at first considered ‘moderate’ could be elevated to ‘serious’. The Disciplinary Committee failed to do so in the Decision on Sanctions and Costs.

69.Further, beyond stating that the Disciplinary Committee has ‘fully considered’ the set of mitigating factors raised by the Respondents, the Disciplinary Committee has not stated whether the mitigating factors were accepted, rejected, or whether they had any impact on the sanctions imposed. The Disciplinary Committee has failed to give sufficient reasons for the sanction. This failure to give sufficient reasons has caused the Respondents unfairness, namely, (1) the Respondents cannot be confident that their submissions on the Complainant’s change of stance have been fully addressed, nor understand why their submissions failed, (2) the Respondents are justified in feeling a sense of injustice as the Disciplinary Committee has not given any reason for rejecting their submissions on the Complainant’s change of stance, and in fact, there is no indication that such submissions were considered by the Disciplinary Committee at all, and (3) the Disciplinary Committee’s failure to give reasons on whether the mitigating factors raised by the Respondents were accepted or rejected, or their impact on sentence, and why these factors were accepted or rejected, does not allow the Respondents to fully determine whether they may have an available appeal.

(2)  Our view

i)  The RBA

70.We will deal first with the RBA. The Institute has prepared a report entitled ‘Compliance Operations Report Regulating the Profession’ which includes an appendix entitled ‘Resolution by Agreement’ (‘RBA’) where the Institute stated that the RBA is an effective way to deal with complaints :

‘ Guidelines for Resolution by Agreement

In order to better serve the interests of the public and the profession, the Institute should ensure complaints are being dealt with in an effective, efficient manner. In accordance with Council powers outlined in the Professional Accountants Ordinance, a Resolution by Agreement may be offered to respondents involved in cases considered to be moderate after taking into account:

• the nature and seriousness of a complaint;

• any relevant precedent cases;

• any past disciplinary records of the Respondent; and

• any aggravating or mitigating circumstances.

Criteria and results

Resolution by Agreement would apply to complaints of the following nature:

1)  Complaints under the following sub-paragraphs of section 34(1)(a) of the Ordinance that a certified public accountant

“(vi) failed or neglected to observe, maintain or otherwise apply a professional standard”;

“(viii) has been guilty of professional misconduct”;

“(ix) refused or neglected to comply with the provisions of any bylaw or rule made or any direction lawfully given by the Council”; and

“(x) was guilty of dishonourable conduct”.

2)  Cases not contested by the respondents; and

3)  Cases not involving complaints of dishonesty.

The Resolution by Agreement includes a mandatory public censure which entails publication of the name of the respondent, facts of the case and areas of non‑compliance with professional standards, and the terms of the resolution. An optional administrative penalty not to exceed HK$50,000, and other actions, such as payment of costs, and additional conditions and restrictions, as deemed necessary by Council may be specified in the terms.’

71.The RBA was offered to the Respondents in February 2020, long before the disciplinary hearing in June 2022 and before the parties filed their submissions in 2021. It was open to the Disciplinary Committee to take a different view based on all of the material which was filed after the RBA was offered and after hearing the case when it gave its Sanctions Decision. As submitted by Mr Chan the reality is that in pursuing the objective of resolving complaints by agreement (and thus saving time and costs), regulatory and professional bodies often put forward resolution proposals which may not reflect the full severity of the misconduct, so as to give the Respondents some incentive to resolve the matter without a full hearing. It would be absurd to treat these as if they involved assessments of severity which are binding on the Institute, still less the Disciplinary Committee.

72.In our view, given the circumstances of the case, it was unnecessary for the Disciplinary Committee to specifically explain why they adopt a different approach in their Sanctions Decision. The Respondents in their joint submissions on sanctions and costs submitted to the Disciplinary Committee also accepted that the Disciplinary Committee was not bound by the view of the Institute when offering the RBA. They clearly understood the nature of the RBA.

ii)  Adequacy of reasons

73.The duty to give reasons only requires ‘brief’ reasons which ‘address the substantial issues before it’ and need not ‘address every single issue’: Oriental Daily Publisher Ltd at 290J‑291H. As this Court observed in Registrar of Hong Kong Institute of Certified Public Accountants v Tang Chung Wah [2022] 5 HKLRD 298 [63], the adequacy of the reasons given by a disciplinary tribunal must depend on the nature and circumstances of the case. It is clear from the Sanctions Decision, the Disciplinary Committee was aware of the principles on how sanction is to be imposed.

‘ 8. Reference has been made to the Guideline to Disciplinary Committee for Determining Disciplinary Orders (“Guideline”). It is noted that the Guideline mentions that sanctions are to be not only proportionate to the nature of the failure and the harm or potential harm caused by the breach, but also with the aim to: (a) protect public interest; (b) deter non‑compliance with professional standards; (c) maintain and promote public confidence in the profession; and (d) declare and uphold proper standards of conduct and performance.

9. Paragraph 4.1 of the Guideline sets out recommendations steps in determining a disciplinary order: (1) determine the seriousness of the offence; (2) determine appropriate sanctions based on case severity before considering other factors; and (3) consider impact of other factors on sanctions (i.e. past similar cases, aggravating and/or mitigating factors).’

74.It then considered that the complaints against the Respondents were serious.

‘ Seriousness

10. The public interest involved in the audit of a listed company is acknowledged by the Respondents. The Respondents have submitted that the failures as found by the [Disciplinary Committee] in relation to one audit year do not reasonably undermine the overall public confidence in the audit profession in auditing the financial statements of listed companies. The [Disciplinary Committee] reviews the seriousness of the offence in question and notes it is committed as to the audit of one financial year or more. As stated in the Decision, the nature of the failure involves fundamental requirements including professional scepticism and proper documentation. In relation to the Second Respondent, the [Disciplinary Committee] has expressed its views regarding the failure of the Second Respondent to discharge his duty as the [engagement quality control reviewer]. Overall we believe that the Complaints should be regarded as “serious”.’  

75.In our view, the reasons given in the Sanctions Decision are adequate. The Disciplinary Committee in its 20‑page Misconduct Decision had already given detailed reasons why each of the three complaints was proved and why the Respondents had failed to observe the professional standards required of them. These reasons must be read together with the Sanctions Decision as why the Disciplinary Committee regarded the complaints as serious. Further, the sanctions imposed by the Disciplinary Committee involve a value judgment which does not always require detailed explanation or analysis. As this Court stated in Tang Chung Wah :

‘ [64] …. the question of whether certain conduct is dishonourable or discreditable to the profession is ultimately a value judgment of the Disciplinary Committee, and as such, it is not necessarily susceptible to any detailed explanation or analysis after the tribunal has set out the primary facts which ground its conclusion: see also Meadow v GMC [2007] QB 462, [122] and [197].’

76.Ground 3 has no merits.

V.  Conclusion

77.The appeal is, accordingly, dismissed with costs to the Complainant.

Mr Albert N B Wong, instructed by Chan, Tang & Kwok, for the 1^st and 2^nd Respondents

Mr Joshua Chan and Ms Celeste Chan, instructed by MinterEllison LLP, for the Complainant