Re Tse Chu Fai Ronald
Read the full judgment text of HCMP 3646/1992 on BabelCite. This High Court CFI judgment.
1. The applicant in proceedings for judicial review challenged the powers of an inspector appointed by the Financial Secretary under the Companies Ordinance to investigate the affairs of several companies where it was suspected that the business of the companies had been conducted fraudulently on the grounds that the powers contravene a number of articles contained in the Hong Kong Bill of Rights Ordinance 1991 and were therefore deemed to have been repealed under s.3(2).
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HCMP003646/1992 ---------------------- H E A D N O T E ----------------------- These proceedings for judicial review involve a challenge to some of the powers of an inspector appointed by the Financial Secretary under the Companies Ordinance to investigate the affairs of a company where it is suspected that the business of the company has been conducted fraudulently. It is contended that those powers contravene certain rights that are now enshrined in the Hong Kong Bill of Rights Ordinance (the Hong Kong Bill) with the result that the relevant provisions in the companies Ordinance were deemed to have been repealed under s.3(2) of the Hong Kong Bill on the 8th June 1991 when the ordinance came into operation. 1992, No.MP3646 IN THE SUPREME COURT OF HONG KONG HIGH COURT MISCELLANEOUS PROCEEDINGS --------------------
------------------- Coram: Hon Jones J. in Court Dates of hearing: 12th and 13th November 1992 Date of delivery of judgment: 20th November 1992 ----------------------- J U D G M E N T ------------------------ 1. The applicant in proceedings for judicial review challenged the powers of an inspector appointed by the Financial Secretary under the Companies Ordinance to investigate the affairs of several companies where it was suspected that the business of the companies had been conducted fraudulently on the grounds that the powers contravene a number of articles contained in the Hong Kong Bill of Rights Ordinance 1991 and were therefore deemed to have been repealed under s.3(2). 2. The submission on behalf of the applicant related to the right against self-incrimination under Article 11(2)(g), the right to privacy under Article 14, the right to freedom of conscience under Article 15 and the right to freedom of opinion and expression under Article 16. 3. It was held that the powers of the inspector under s.145 of the Companies Ordinance do not breach the provisions of the Hong Kong Bill of Rights Ordinance with the result that the motion for relief was dismissed. 4. The facts reveal that on the 14th August 1992, Mr Nicholas Allen (the respondent) was appointed as inspector by the Financial Secretary under s.143(1)(c) of the Companies ordinance to investigate and to report upon the affairs of the Allied Group and three affiliate companies, Allied Properties (HK) Limited, Crusader Holdings Limited, Paragon Holdings Limited and another public listed company Wai Yick Limited. The scope of the investigation was later enlarged by the Financial Secretary on the 17th October 1992 for the purpose of investigating a further eight Hong Kong companies and fourteen foreign companies. 5. The terms of reference for the investigation cover the period from the 1st January 1990 and include a provision for the inspector to obtain admissible evidence in criminal or civil proceedings in respect of any matter which may constitute fraud or any other offence against Hong Kong law. 6. The powers of the inspector have been delegated to Mr Robert Grome by s.145A of the Companies Ordinance. 7. An interim report was required to be submitted to the Financial Secretary on or before the 14th December 1992 to be followed by a final report on or before the 14th February 1993, or as soon as practicable after that date. 8. In the course of his investigations, the inspector or his delegate seeks to examine Mr Ronald Tse (the applicant) who is a director of the Allied Group and a director and secretary of various subsidiaries in the group. 9. On the 23rd October 1992, Mr Grome wrote to the applicant in the following terms : "Appointment of Inspector under Section 143(1)(c) Companies Ordinance
10. Following a request by the applicant, the dates for the interview were rearranged. 11. However, on the 11th November 1992, the applicant filed an ex parte application on notice to the respondent for leave to apply for judicial review which was heard by me on the same day. Mr Huggins, counsel who appeared for the respondent, did not oppose the application provided that the substantive motion was heard as a matter of urgency. As a result, I granted leave to the applicant to argue three grounds of relief and fixed the hearing of the motion for the following day. 12. The three forms of relief for which leave was granted are first, an order of prohibition prohibiting the respondent from further involving the applicant in any part of the investigation carried out by him into the affairs of the Allied Group and other companies referred to; second, a declaration that the provisions of s.145 of the Companies Ordinance or alternatively, subsections (1), (2), (3) and (3 A) of the section were repealed on the 8th June 1991 by the provisions of s.3(2) of the Hong Kong Bill; and third, an order of certiorari to quash the decision of the respondent in the letter of the 23rd October 1992 requiring the applicant or any legal adviser he may have to undertake not to communicate to third parties the content of any interview or a transcript thereof between him and the applicant. The third ground for relief was not pursued for Mr Huggins said that the reference to the undertaking required was not intended to be compulsory, but amounted to a request which the applicant was entitled to refuse. 13. Mr Huggins submitted that the order sought for prohibition is inappropriate, but accepted that a declaration is available to the applicant if warranted by the facts. 14. The applicant's case amounts, as I have said, to a constitutional challenge upon the legality or validity of the exercise or purported exercise of the powers of the respondent under s.145 which, it is contended, are in breach of the provisions of the Hong Kong Bill and should therefore be repealed under s.3(2). The argument was principally concerned with the protection of the right against self-incrimination under Article 11(2)(g) of the Hong Kong Bill with subsidiary arguments on the right to privacy under Article 14, the right to freedom of conscience under Article 15, and to freedom of opinion and expression under Article 16. 15. I now turn to the relevant provisions of the Companies Ordinance. The respondent, as I have said, was appointed to be the inspector under s.143(1)(c) which, where relevant, provides : "143. (1) Without prejudice to his powers under section 142, the Financial Secretary -
16. No challenge has been made to this section by the applicant with regard to the legitimacy of the appointment of the respondent as inspector by the Financial Secretary, nor to his terms of reference. There is also no challenge to the Financial Secretary's power to appoint the inspector. 17. The inspector derives his powers under s.145 which provides where relevant :-
At the conclusion of his investigation, the inspector is required to make a report to the Financial Secretary under s.146(1). The report can be used in evidence under s.149 which reads :-
Section 149A provides that an answer given to the inspector in response to a question put when exercising his power under s.145 may be used in evidence. 18. I will now deal with the submissions that were addressed to me by counsel and my conclusions. Self-Incrimination - Article 11(2)(g) 19. The headnote to Article 11 reads : "Rights of persons charged with or convicted of criminal offence". Article 11(2)(g) provides :-
Mr Huggins submitted that the Article has no relevance to an investigation by an inspector under the Companies ordinance for it is restricted to the rights of persons charged with or convicted of a criminal offence. 20. Mr Fung, counsel for the applicant, submitted that the respondent's contention that Article 11(2)(g) can be invoked only when there is a "lis" or proceedings as between the individual and a prosecuting authority is wrong. He said the protection afforded by the Article would be worthless or rendered nugatory if the narrow construction contended for by the respondent is correct. He went on to say that if the submission of Mr Huggins is right that the common law privilege against self incrimination co-exists alongside the entrenched right provided by the Article, the state or government could always abridge a common law right or privilege see R. v. Director of Serious Fraud Office, ex parte Smith [1992] 3 WLR 66 so as to provide that any admission obtained extra-judicially in circumstances where a person had not yet been charged with an offence would be admissible in evidence. The net result of giving a narrow interpretation to the entrenched provision would be to place a premium on securing admissions before the commencement of proceedings. 21. As a result, Mr Fung urged me to give a generous and purposive interpretation to the constitutional provisions entrenching fundamental rights recognising instruments such as the Hong Kong Bill to be sui generis rather than adopt a parsimonious or miserly approach or to take a "black letter lawyer's approach": see Minister of Home Affairs v. Fisher [1980] AC 319 which was followed by the Hong Kong Court of Appeal in R. v. Sin Yau-ming [1992] HKCLR 127. 22. Mr Fung also asserted that as there is no legislative requirement for the Financial Secretary to disclose the circumstances of the existence of a state of affairs that gave rise to the appointment of the inspector, the basis of the enquiry is unknown to the applicant which could, therefore, lead to an abuse or infringement of entrenched rights. Accordingly, the court should scrutinise the legislation by adopting the proportionality test vis-a-vis the Hong Kong Bill. As the applicant has not been charged, he is dealing with questions of privilege in a vacuum so that under s.145, he will be in a worse position than a defendant in criminal proceedings. Accordingly, the powers under s.145 cannot be read consistently with the Hong Kong Bill with the result that the statutory provision should be repealed under s.3(2). 23. Mr Fung also referred to the case law of the UNHRC which he submitted supports his contention that the interpretation of the respondent is not correct. He said that in a number of cases under the Optional Protocol concerning human rights abuses by the Uruguayan Government in breach of Article 14(3)(g) of the International Covenant on Civil and Political Rights, which is identical to Article 11(2)(g) of the Hong Kong Bill, were found where confessions had been obtained extra-judicially and which were later used in court proceedings. The UNHRC regards Article 14(3)(g) as being violated when attempts are made extra-judicially to compel an individual to testify against himself and confess guilt. He contended that this interpretation is consistent with the House of Lords' approach in R. v. Director of Serious Fraud Office, ex parte Smith and Istel v. Tulle [1992] 3 WLR 344. 24. Mr Fung also put forward an alternative argument that the applicant apprehends a breach of the Article as the material or documents obtained by the inspector under s.145(1) may be used against him in criminal proceedings with no safeguard or no safeguard equivalent to that which is provided in relation to answers given to questions under s.145(3A). 25. Mr Fung drew my attention to the construction of section 434 of the Companies Act, 1985 in England which is the equivalent of s.145 of the Companies ordinance referred to in Re London United Investments plc [1992] BCLC 91 where it was held that the privilege against self-incrimination did not apply to persons who were being questioned by inspectors appointed under the Act. He therefore contended that the provisions of s.145 of the Companies Ordinance except for the limited protection afforded under s.145(3A) do not admit of the possibility of the person obliged to answer questions or otherwise to assist the inspector in his investigation refusing to comply by praying in aid the privilege against self-incrimination since Parliament has abrogated the same. Accordingly, there arises an inconsistency between s.145 and Article 11(2)(g) with the result that the offending provisions must be deemed to have been repealed. 26. Mr Fung emphasised that s.145(1) purports to impose three obligations upon an officer or agent of a company under investigation, namely, (a) to produce books and documents, (b) to attend before the inspector and (c) otherwise to give all assistance in connection with the investigation. He submitted that none of these matters protects the officer against his right against self-incrimination. He drew a distinction between a requirement to answer questions and the three requirements that I have just referred to and that the words "or otherwise" enables the inspector to make enquiries from the officer or agent which is outside the interview process. Mr Fung argued that the possibility of exposure to risk of a criminal conviction or the imposition of a penalty is sufficient to trigger off the protection. Accordingly, the section impinges upon the right from self-incrimination although no criminal proceedings have been commenced. 27. Mr Huggins drew my attention to two passages from the judgments of Lord Denning when he considered the nature of an inspector's investigation. The first In re Pergamon Press Limited [1971] 1 Ch 388 at 399, he said :-
The second Maxwell v.. Department of Trade and Industry [1974] 1 QB 523 at 533, he said :
Conclusion 28. The applicant's duty as a director under s.145(1) is to produce all books and documents relating to the companies specified in the terms of reference, to attend before the inspector when required and otherwise to give all assistance in the investigation. By subsection (2), the inspector may examine the applicant on oath, but he is not bound to do so for it is a matter for his discretion. If the applicant refuses to comply with any of the inspector's requirements under s.145(1), the inspector, in his discretion, may refer the matter to the court for determination. The court may then proceed to hear witnesses and any statement that the applicant may wish to make before deciding whether any penalty should be imposed. There is no power conferred upon the inspector to prefer a criminal charge against the applicant, nor may he hear and determine a criminal charge. His role is directed to an investigation of the facts and to make a report to the Financial Secretary with the right to make a reference to the court if the applicant refuses to co-operate. It is therefore quite clear from the terms of the subsection that the applicant will not be placed at risk during the course of the investigation by the inspector when he is not bound to answer questions or be compelled to produce documents. He will not be in any jeopardy unless and until the court upon the matter being referred by the inspector decides upon evidence that his refusal was not justified so that he can be punished as if he had been guilty of a contempt of court. 29. Accordingly I do not accept Mr Fung's submission that the trigger to the protection arises if there is a possibility of exposure to a risk of a criminal conviction or the imposition of a penalty. Although the inspector's report may result in criminal charges being brought, no part of the investigation is concerned with the determination of a criminal charge. The words in Article 11(2)(g) are unequivocal for they are clearly restricted to the rights of a person charged or convicted of a criminal charge. I am therefore unable to accede to Mr Fung's submission to widen the scope of the Article by adopting a generous and purposive interpretation. Article 11(2)(g) is in no way relevant to an inspector's investigation under s.145 of the Companies ordinance. The argument advanced on behalf of the applicant that s.145 contravenes Article 11(2)(g) is therefore rejected. Article 14 - Privacy
30. It was contended for the applicant that the requirement for the production of documents amounted to an unreasonable seizure within the meaning of s.8 of the Canadian Charter of Rights and Freedoms which protect the right of privacy. Mr Dykes cited a Canadian authority R. v. McKinlay Transport Limited [1990] 76 CR (3d) 283 which was concerned with the powers under the Income Tax Act to demand information or documents constituting seizure, but not being unreasonable seizure under s.8 of the Charter of Rights and Freedoms. This case distinguished the strict criteria applied in Hunter v. Southam Inc [1984] 2 SCR 145 which was a criminal case and that applicable to a search under a regulatory statute when the test is not so high and is one of reasonableness. Mr Dykes submitted that the applicant was in the position of being forced to produce documents to the inspector without any judicial control which amounted to an intrusion on his right of privacy. Whereas he accepted that there is an administrative requirement by the regulatory authorities for the filing of documents, such as annual returns, it does not apply when the investigation is designed to secure evidence which may amount to a criminal offence. As the situation here is not a routine inspection, but an investigation into suspected criminal offences, an independent judicial scrutiny should be expected. 31. Mr Dykes also cited Rice v. Connolly [1966] 2 QB 414 and R. v. Director of Serious Fraud Office, ex parte Smith [1992] 3 WLR 66 in support of his submission that the common law recognises the right of an individual to refuse to answer questions from police officers or other persons in authority. He then submitted that s.145 purports to interfere with the right of privacy guaranteed in Article 14 as the section does not require the inspector or Financial Secretary to specify what are the circumstances suggesting the existence of the state of affairs referred to under s.143(1)(c) which led to the appointment of the inspector. 32. Mr Huggins submitted that the notion of non-arbitrariness under the Hong Kong Bill may be one of reasonableness and proportionality. In relation to the word "arbitrary" in Article 9(1) of the ICCPR (Article 5(1) of the Bill of Rights) the Human Rights Committee has noted that :-
Van Alphen v. Netherlands, Human Rights Committee, Communication No.305/1988, A/45/40, vol.2, Annex IX.M (23 July 1990), para.5.8. The inspector's use of his powers in this case however contains none of these elements. Conclusion 33. An inspector is required to act in accordance with his terms of reference and if he does so, he cannot be described as acting arbitrarily. Nevertheless, if he goes beyond his terms of reference, the court, would under those circumstances be entitled to intervene, see Clinch v. Inland Revenue Commissioners [1974] 1 QB 76. 34. However, there is no requirement in the legislation for the Financial Secretary to specify the circumstances upon which he relied for the appointment of the inspector. Indeed, as submitted by Mr Huggins, I accept that it would be wholly inappropriate to do so, see National Companies and Securities Commission v. News Corporation Ltd (1984) 156 CLR 296 where three judges of the High Court of Australia at 323 and 324 said :-
35. In my judgment Article 14 has no relevance to an investigation by an inspector for the Article clearly relates to an unlawful interference with the applicant's privacy in his personal and private affairs and does not extend to his affairs in his capacity as a director. Nor is there any evidence that the investigation will amount to an arbitrary or unlawful interference with the applicant's privacy in the sense that the inspector will act capriciously or on a whim in carrying out his statutory duties. Further, I do not consider that the Canadian authority provides any assistance in this case having regard to the privacy sought to be protected under Article 14. 36. Accordingly, the argument based upon this ground is rejected. Article 15 - Freedom of Thought, Conscience and Religion
37. The grounds advanced under this Article are set out in paragraph 20 of the notice of application for leave which reads :
38. The proposition that s.145 is inconsistent with the applicant's right to freedom of thought can only be described as ludicrous. The inspector is not concerrned with the applicant's thought processes but with obtaining factual evidence. The second sentence under this ground was described by Mr Huggins as at best an unnecessarily elaborate statement of the obvious and at worst, gobbledegook, but, in either event, it is torture to the ears of speakers of plain English. That criticism, in my judgment, is wholly justified. The contention that the requirement by the inspector for the applicant to be examined on oath amounts to an infringement of his rights under the Article is absurd. In fact, as I have said before, the inspector is not obliged to examine the applicant on oath. Finally, under this ground, it is asserted that no one should be compelled to affirm the truth unless there is an independent and judicial determination of the relevance of the issue whatever that means. There is no basis for this objection under the Article and it is in any event unrealistic and impracticable. The argument on this ground therefore fails. 39. I now turn to the final ground under Article 16 which is concerned with freedom of opinion and expression. Article 16
Conclusion By this ground, it is contended that s.145(2) is inconsistent with the right to freedom of opinion and expression guaranteed under Article 16 inasmuch as the power of the inspector to examine the applicant on oath under threat of penalty amounts to an interference with the right of the applicant to hold opinions as guaranteed under Article 16(1) or, alternatively, the right not to impart information, which is implicit in the right to freedom of expression guaranteed under Article 16(2). However, as I have said on previous occasions in this judgment, the inspector is required to obtain facts and is not concerned with the applicant's opinion. Indeed no evidence has been adduced to show that the applicant will be asked questions with regard to his opinion. As was submitted by Mr Huggins, Article 16 is concerned with the entrenched right of freedom of opinion and expression, not with providing an immunity from disclosing information. This ground is untenable. 40. The object of the legislation that has been attacked in this case is for the purpose of carrying out investigations into possible fraud in the conduct of a company's business for the benefit of the creditors and the shareholders. A director owes a fiduciary duty to the company to act in good faith, honestly and in the best interests of the company. He occupies a position of trust and privilege. In his capacity as a director, the applicant is required to assist the inspector in carrying out his statutory duties under the Companies Ordinance. He is obliged to attend interviews for the purposes of answering questions put by the inspector, to produce documents and to give all reasonable assistance. The applicant is entitled to raise objections upon which the court will adjudicate if a reference is made by the inspector. At this stage he is not a person who has been charged with a criminal offence. He is merely required to be interviewed in the public interest. 41. The submissions put forward on behalf of the applicant sought to abrogate the investigative powers in the Companies Ordinance enacted for the benefit of the creditors and shareholders. The result of a successful application would have been to emasculate those powers and render the legislation nugatory. However, in my judgment, there was no merit in any of the arguments that were canvassed on behalf of the applicant. The motion is therefore dismissed.
Representation: Mr Daniel Fung, Q.C. and Mr Philip Dykes (Ada Y.M. Chan & Co.) for Applicant Mr Adrian Huggins, Q.C. and Mr Russell Coleman (Herbert Smith) for Respondent |
Cases cited in this judgment