In Re Commission Ordinance
Read the full judgment text of HCMP 3039/1992 on BabelCite. This High Court CFI judgment was delivered on 8 January 1993.
1. The Securities and Futures Commission (the Commission) was established on the 1st May 1989 by the Securities and Futures Commission Ordinance, Cap.24 (the SFC Ordinance). The Commission was set up in the wake of the stock market crisis that occurred in October 987. Amongst its functions is the power to carry out investigations into possible offences of fraud in the dealing of securities.
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HCMP003039/1992 1992, No. MP3039 ________________ H E A D N O T E ________________ The powers of investigation of the Securities and Futures Commission into a possible offence of fraud in dealing in securities under s.33 of the Securities and Futures Commission Ordinance, Cap.24 were challenged in proceedings for judicial review on the grounds that they were inconsistent with the provisions of the Hong Kong Bill of Rights Ordinance. The applicant raised arguments in respect of Article 5 - Liberty and Security of Person, Article 11(2)(g) - Right against Self-Incrimination, Article 14 - Right to Privacy, Article 15 - Right to Freedom of Conscience and Article 16 - Right to Freedom of Opinion and Expression. It was held that none of the powers set out in s.33 infringed the Bill of Rights Ordinance so that the notion was dismissed. 1992,No. MP3039 IN THE SUPREME COURT OF HONG KONG HIGH COURT MISCELLANEOUS PROCEEDINGS _____________
_____________ Commission Ordinance Coram: Hon. Jones J. in Court Dates of hearing: 14 - 17 December 1992 Date of handing down judgment: 8 January 1993 _______________ J U D G M E N T _______________ INTRODUCTION 1. The Securities and Futures Commission (the Commission) was established on the 1st May 1989 by the Securities and Futures Commission Ordinance, Cap.24 (the SFC Ordinance). The Commission was set up in the wake of the stock market crisis that occurred in October 987. Amongst its functions is the power to carry out investigations into possible offences of fraud in the dealing of securities. 2. On the 8th October 1992, Mr Lee Kwok-hung (the applicant) was granted leave by Godfrey J. to apply for judicial review to make a constitutional challenge to some of the investigatory powers conferred upon the Commission by the SFC Ordinance on the grounds that those powers are inconsistent with certain articles of the Hong Kong Bill of Rights Ordinance (BOR Ordinance). Accordingly, it is asserted that the provisions challenged were deemed to have been repealed on the 8th June 1991 when the Ordinance came into operation under s.3(2) which reads :-
3. The grounds advanced on behalf of the applicant were substantially the same as those that were argued before me and rejected in Re Tse Chu Fai Ronald, MP3646/1992 where certain powers of an inspector appointed under the Companies Ordinance, Cap.32 were contended to be inconsistent with the BOR Ordinance. FACTS 4. The applicant is a production executive with Truly International Holdings Limited (Truly), a public listed company engaged in the manufacture of electronic calculators and components. The company has a paid-up capital of $29.6 million and has its registered office in the Cayman Islands. In 1991 the turnover of the company was $324 million with profits in the region of $41 million. The company was floated in July 1991 when it raised approximately $75.5 million from the market. 5. On the 6th August 1992 pursuant to s.33 of the SFC Ordinance, the applicant was served with a notice (the 1st notice) which reads :- " SECURITIES AND FUTURES COMMISSION ORDINANCE (Cap 24) NOTICE BY A PERSON UNDERTAKING AN INVESTIGATION UNDER SECTION 33 OF THE SECURITIES AND FUTURES COMMISSION ORDINANCE (CAP 24) -----------------------------------------------------------------------------------------
Carrying out investigation ...(Sd)...... (Dennis Ho)" Accompanying the notice were two separate directions signed by Mr P.R. Bailey the Assistant Director of the Enforcement Division of the Commission issued under s.33(1) of the SFC Ordinance covering the two periods in question which also set out the Commission's belief that offences may have been committed contrary to s.135 of the Securities Ordinance in respect of dealings in the shares of Truly and that it may not have been in the interest of the investing public or the public interest. The directions also set out the names of six employees of the Commission who had been instructed to carry out the investigation. 6. The applicant obtained a postponement of the interview on the 14th August 1992 until the 19th August 1992 when he attended with counsel and a solicitor before Mr Dennis Ho one of the investigators, but the interview did not proceed beyond the applicant being informed of the concerns of the investigator. 7. On the 25th August 1992 the applicant's solicitors wrote to the Commission requesting that they be supplied with further information or evidence to support the Commission's belief that an offence had been committed. The Commission replied on the 7th September 1992 declining the request stating that they had already supplied sufficient information in the notice and directions. The Commission also informed the applicant's solicitors that it was not prepared to provide any further evidence on the grounds that it would prejudice the investigation and that in any event there was no statutory requirement to do so. The applicant's solicitors were informed of the penalties that could be imposed for non-compliance under s.33(12) of the SFC Ordinance, or in the alternative, that an issue could be certified for consideration by the High Court under s.33(13) for which penalties could also be imposed. Enclosed with the Commission's letter was a fresh notice (the 2nd notice) of the same date superseding the 1st notice which enlarged the investigation to include the names of four companies incorporated in the British Virgin Islands which had been identified as traders in Truly shares for the same periods referred to in the 1st notice. The 2nd notice was also accompanied by directions that were identical to the directions that accompanied the 1st notice. The applicant was asked to attend the Commission's office for interview on the 1st October 1992. However, the appointment was not kept as the applicant took steps to apply for judicial review. The present motion was filed on the 8th December 1992. BACKGROUND TO THE S.F.C. ORDINANCE 8. Following the stock market collapse on the 19th October 1987 the Securities Review Committee (the Committee) was appointed by the Governor to review the constitution, management and operation of the two exchanges and their regulatory bodies. The Committee in its report, known as the Hay Davison Report, after the name of its chairman, referred to the necessity to improve regulation in paragraph 1.8 which reads :-
9. The recommendations of the Committee included the replacement of the Securities Commission, the Commodities Trading Commission and the Office of the Commission for Securities and Commodities Trading with a single independent statutory body outside the civil service with the task of ensuring the integrity of markets and the protection of investors. 10. The recommendations were accepted by the Government with the result that the SFC Ordinance was passed and the Commission established as I have said on the 1st May 1989. S.F.C. ORDINANCE 11. In respect of the present proceedings, the following provisions of the SFC Ordinance are relevant :
12. The Commission is empowered to carry out investigations by s.33 of the SFC Ordinance which provides where relevant as follows :-
13. By s.36, a magistrate may issue a warrant upon the application of the Commission for a police officer or an authorised person to enter premises to search for and seize any records or documents required in connection with the investigation. 14. Section 61 provides that if any person commits an offence under s.33(6) of the SFC Ordinance, he will be liable on conviction upon indictment to a fine of $1,000,000 and to imprisonment for 2 years and upon summary conviction to a fine of $100,000 and imprisonment for 6 months. 15. Section 62 deals with the prosecution of certain offences by the Commission and provides where relevant as follows :-
ROLE OF THE COMMISSION 16. The Commission is concerned with a number of regulatory activities including the supervision of the Stock Exchange and the Futures Exchange. As the regulatory body of the securities industry, the Commission seeks to ensure that the financial community operates with integrity in order to protect the interests of investors. In order that it may carry out its duties the Commission has been vested with certain investigatory powers under s.33 of the SFC Ordinance for the purposes of adequate enforcement. 17. If the investigator makes a report under s.33(9), the Commission may refer the matter to the Financial Secretary under s.4 for further action. This includes reports where insider dealing is suspected. In these cases the Financial Secretary may refer the matter for inquiry to the Insider Dealing Tribunal (the Tribunal) under the Securities (Insider Dealing) Ordinance, Cap.395. The Commission also has power to refer matters to the Attorney General to consider whether criminal proceedings should be instituted. 18. A primary objective of the Commission is to promote Hong Kong's position in the world as a major financial centre for the benefit of the economy. GROUNDS 19. Upon the application for leave for judicial review, Godfrey J. made an order granting the application on the grounds that the investigation under s.33(4) is inconsistent with the right of privacy under article 14, the right of freedom of thought under article 15, and the right of freedom of opinion and expression under article 16. However, on the first day of the hearing of the motion for judicial review, I granted leave to the applicant to argue two further grounds namely that the provisions are also inconsistent with the right of liberty and security of person under article 5 and the right to protection from self-incrimination under article 11(2)(g). In the alternative, the applicant seeks to contend that if s.33(4) is consistent with the BOR Ordinance and has not been repealed, s.33(8) of the SFC Ordinance, which empowers an investigator to require information to be verified by statutory declaration, is a violation of articles 15 and 16 and is therefore repealed. RELIEF SOUGHT 20. By way of relief the applicant seeks an order of certiorari to quash the directions given to the applicant under s.33(4) of the SFC Ordinance requiring the applicant's attendance for interview, or alternatively, an order of prohibition and a declaration that the provisions of s.33(4), (6), (8), (12) and (13) of the SFC Ordinance were repealed on the 8th June 1991 by the provisions of s.3(2) of the BOR Ordinance. THE APPLICANT'S CHALLENGE 21. Mr Fung, counsel for the applicant submitted that the application is made by reason of the applicant's apprehension that his rights under the BOR Ordinance in respect of any answers and documents produced may be used in subsequent criminal proceedings under the exceptions set out in ss.33(6) and 33(12) of the SFC Ordinance, s.36 of the Crimes Ordinance that relates to a false statement on oath, perjury and under the Securities (Insider Dealing) Ordinance, so that the degree of penalty warrants protection under article 11. 22. The applicant's challenge is restricted to the investigatory powers conferred upon the Commission under s.33(4) and the directions issued thereunder and the consequential subsections (6), (8), (12) and (13). No challenge is made to the validity of the investigation under s.33(1) nor to the exercise of the powers of investigation. It is not contended that the Commission should not have investigatory powers, but that sufficient safeguards have not been provided by s.33(4) so that the legislation should go back to the drawing board for further consideration. APPROACH TO THE BOR ORDINANCE 23. As the BOR Ordinance is a constitutional instrument, the Court of Appeal in R. v. Sin Yau Ming (1992) 1 HKCLR 127 held that it should be given a generous and purposive interpretation following the dictum of Lord Diplock in A.G. of the Gambia v. Jobe (1984) AC 689 where he said at 700 :-
However, R. v. Sin Yau Ming went on to hold that if legislation is inconsistent with the BOR Ordinance, it will be necessary for the Crown to justify the inconsistency which involves balancing the interests of the individual against the interests of the state and society with a bias towards the interests of the individual. This has been described as the "bifocal test" that was referred to in the Canadian case R. v. Oakes (1986) 26 DLR (4th) 200 or the proportionality test. In this respect, it is necessary to take into account the social and economic conditions of Hong Kong and to the fact that Hong Kong is an international financial centre with a regulatory system for the supervision of its financial markets. RE TSE CHU FAI RONALD 24. On the 20th November 1992, I delivered judgment in the Tse case on a motion for judicial review in which it was contended that some of the powers of an inspector appointed by the Financial Secretary under the Companies Ordinance to investigate the affairs of a company where fraud was suspected, contravened the same articles that have been invoked in the present proceedings except article 5. There was no challenge in that case to the appointment of the inspector by the Financial Secretary nor to his terms of reference. The challenge was directed to the powers set out in s.145 of the Companies Ordinance which where relevant reads :-
25. The inspector is required to make a report to the Financial Secretary at the conclusion of his investigation under s.146(1) which can be used in evidence under s.149. 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. 26. I held that none of the powers of the inspector set out in s.145 of the Companies Ordinance were inconsistent with any of the four articles relied upon in the BOR Ordinance. A notice of appeal was filed and at the hearing, the Court of Appeal refused an application by the applicant to amend the grounds of appeal by adding Article 5 as an additional ground. The appeal was then withdrawn. 27. I now turn to the grounds advanced on behalf of the applicant under the five articles of the BOR Ordinance which are said to have been contravened. In some respects the argument overlapped more than one article. I will deal first with article 11(2)(g). ARTICLE 11 - RIGHTS OF PERSONS CHARGED WITH OR CONVICTED OF CRIMINAL OFFENCE 28. Article 11(2)(g) provides:
29. Mr Fung repeated his argument in Tse that the right not to answer incriminating questions guaranteed by article 11(2)(g) of the BOR Ordinance includes the right not to answer questions of an incriminating nature put extrajudicially so that it does not merely arise during the course of criminal proceedings. He cited a passage from the speech of Lord Mustill in R. v. Director of Serious Fraud Office, Ex p. Smith [1992] 3 WLR 66 at p.74 with regard to the right of silence, where he said :-
It was submitted by Mr Fung that either of the two categories which have been quoted above could apply to the applicant. 30. Mr Fung also cited Istel v. Tully [1992] 3 WLR 344 which held that the right includes the right not to produce material of an incriminating nature. 31. Mr Li submitted that the cases cited relate to the common law privilege which is wider in scope than the provisions in article 11 and may extend to a period before any criminal charge is laid so that they are different concepts which co-exist. He went on to say that the common law privilege is not an entrenched right, unlike the entrenched right in article 11(2)(g) which is restricted to criminal proceedings and it can therefore be modified or abrogated by the legislature in the public interest. Accordingly, any modification of the common law privilege by s.33(4) and (6) is in any event valid. 32. Although I held in Tse that the words in article 11(2)(g) are unequivocal and are restricted to the rights of a person charged or convicted of a criminal charge, Mr Fung contended that there are material differences between the powers of a company inspector and an investigator appointed by the Commission. He submitted in particular the three following matters :-
33. Mr Fung conceded that s.33(6) protects the right against self-incrimination by providing that answers to questions put by the investigator cannot be used in evidence in criminal proceedings, but criminal offences remain if there is a failure to comply with the investigator under s.33(12), for making a false statement on oath under s.36 of the Crimes Ordinance and for perjury. He submitted that the statutory scheme under s.33(6) differs materially from and is qualitatively more draconian than that provided under s.145 of the Companies Ordinance, for unlike the Companies Ordinance, a failure to comply under s.33(12) amounts ipso facto to a criminal offence whilst all questions and answers arising on an examination are admissible for all the purposes of the Securities (Insider Dealing) Ordinance, Cap.395. I shall return to the Securities (Insider Dealing) Ordinance later in this judgment. 34. Mr Li, counsel for the Commission relies upon the decision in Tse, but also contends that the powers of an investigator under s.33 of the SFC Ordinance are no different from those of a company inspector and that the instant case is a fortiori. I shall return to this submission later. 35. He also submitted that the Financial Secretary has a duty and power to investigate companies by appointing inspectors and is also closely involved in the work of the Commission. The Financial Secretary inter alia receives advice from the Commission under: s.4(1)(a) of the SFC Ordinance and reports under s.4(1)(c) with regard to occurrences of insider dealing. CONCLUSIONS 36. I am satisfied that there are no material differences between the powers of an inspector and an investigator. Both are appointed in order to carry out investigations to ascertain whether fraud has been committed. It is clear that the Financial Secretary is closely connected with the investigation of fraud under the Companies Ordinance through an inspector and through the Commission under the SFC Ordinance. 37. Although a company inspector carries out investigations into a company, in fact he will be concerned during his investigations with the acts of individual persons. 38. The assertion that an investigator has a right to initiate a prosecution under s.62(1) of the SFC Ordinance relates to the three offences which underpin the Ordinance. They are not offences under the SFC Ordinance and have nothing to do with the powers of an investigator. The offences except that relating to insider dealing are in fact the same as those which underpin the Companies Ordinance. Indeed, an essential ingredient of the offence for failure to comply under s.33(12) is that the failure is without reasonable excuse. The same position applies under s.33(13) for the investigator may only certify a failure to comply to the High Court when the failure was without reasonable excuse, whilst the High Court may only punish for contempt if it finds that the failure was without reasonable excuse. It is therefore clear that Mr Fung's submission that a failure to comply amounts ipso facto to a criminal offence is erroneous. Further, pursuant to s.33(14) a person cannot be punished under subsections (12) and (13) for the same failure. 39. I accept Mr Li's submission that neither R. v. Director of Serious Fraud Office ex parte Smith and Istel v. Tully are relevant for they relate to the common law privilege which is distinct from the entrenched right provided by article 11(2)(g). 40. I now turn to the argument relating to questions and answers being admissible for the purposes of the Securities (Insider Dealing) Ordinance. ARE PROCEEDINGS UNDER THE SECURITIES (INSIDER DEALING) ORDINANCE CRIMINAL 41. Mr Li drew my attention to the history of insider dealing legislation in Hong Kong. 42. When the original ordinance in respect of insider dealing, the Securities Ordinance 1974, was passed, it was provided by s.140 that insider dealing would be a criminal offence with a maximum penalty of 2 years imprisonment and a fine of $50,000. However, this section was never brought into operation and was repealed by the Securities (Amendment) Ordinance 1978. This ordinance established the Insider Dealing Tribunal. 43. Although insider dealing has been made a criminal offence in other jurisdictions including the United Kingdom, Hong Kong decided not to adopt this course, but recommendations were made to improve the definition of insider dealing and the sanctions available. This led to the present Securities (Insider Dealing) Ordinance being passed in 1990. By s.16 of this ordinance if the Financial Secretary following representations from the Commission or another source is satisfied that insider dealing in relation to the listed securities of a corporation has or may have taken place, he may refer the matter to the Tribunal for inquiry. The Tribunal is required to determine whether insider dealing has taken place, and if so, the identity of those involved and the extent of their culpability. 44. By s.19, a person shall be obliged to answer questions put to him at the inquiry, but if the answers might tend to incriminate him and he so claims before answering the question, neither the question nor the answer shall be admissible in evidence against him in criminal proceedings other than proceedings for an offence under s.20 of the SFC Ordinance or s.36 of the Crimes Ordinance or for perjury. Section 20 sets out a number of offences that can be committed under the Securities (Insider Dealing) Ordinance and reads as follows :-
45. Orders may be made by the tribunal under s.23(1) which reads where relevant as follows :-
46. By s.30, an offence is committed if anyone contravenes an order made by the Tribunal under s.23(1)(a) and is liable on conviction on indictment to a fine of $1,000,000 and to imprisonment for 2 years and on summary conviction to a fine of $1000,000 and to imprisonment for 6 months. 47. My attention was also drawn to offences by a corporation under s.34 which provides :-
48. Mr Fung submitted that having regard to the three offence creating provisions under s.19 and the offence under s.30 for contravention of an order made under s.23(1)(a), the proceedings conducted by the Tribunal are criminal. He emphasised that classification by the domestic law that an offence is not criminal is not conclusive but that it is necessary to look at the nature of the offence and the severity of the penalty. In support of his argument, he cited Engel and Others v. The Netherlands (No.1) [1976] 1 EHRR 647. In that case the court considered whether the classification of proceedings by the domestic law as disciplinary precluded the operation of article 6 of the European Convention of Human Rights that relates to the hearing of a criminal charge. The court held at p.649 as follows :-
In the judgment, the Court had this to say at pp.678 and 679 :-
This case was referred to in Kaplan v. United Kingdom D & R 21 (1981) (Eur HR Comm) 5 where at p.35 the court accepted that one of the factors to be taken into account in determining whether a matter is criminal was the degree of severity of the penalty that the person concerned risks incurring. CONCLUSIONS 49. In the present proceedings, no issue of insider dealing has in fact been raised. However, if during the Commission's investigations evidence of insider dealing is obtained, that evidence can be used by the Tribunal if the case is referred by the Financial Secretary. No charge, however, is preferred against anyone who appears before the Tribunal. The Tribunal, if it decides that insider dealing has taken place, may make one of the orders referred to under s.23(1). However, these penalties are quite clearly disciplinary in nature and do not reflect criminal sanctions and relate exclusively to the pecuniary benefit derived or losses avoided by the insider dealing together with a disqualification for loss of office. The orders made by the Tribunal are not convictions so do not constitute a criminal record. Further, the offences under s.20 have been conferred upon the Tribunal to underpin the Tribunal when carrying out its duties for the purpose of compliance. None of these offences are concerned with insider dealing. 50. Whilst I accept the validity of the decisions in Engel and Kaplan, they relate to cases heard in other jurisdictions and that it is necessary to examine the present case in a Hong Kong context. Although the classification of the Tribunal is not conclusive, the history of the legislation in Hong Kong clearly indicates that it was not intended that insider dealing be treated as a criminal offence. This is reinforced by the decision to repeal the criminal sanction contained in s.140 of the original ordinance in 1978. 51. I am therefore quite satisfied that the proceedings before the Tribunal are not criminal or quasi criminal, but are disciplinary in nature and form part of the regulatory system of the financial markets. IS ARTICLE 11 RESTRICTED TO CRIMINAL PROCEEDINGS 52. Although I held in Tse that article 11 only applies to criminal proceedings, I had previously given judgment to the same effect in Duty Free Shoppers Hong Kong Limited v. Wong Kwok Pong and Others, A6091/1991. 17th October 1991. Meanwhile Sears J. in Ng Hung Yiu v. Government of the United States of America, MP2007/1992, 30th July 1992 and Penlington J.A. in Re Suthipong Smittachartch, MP1119/1992, 12th October 1992 have expressed the same opinion. 53. Indeed, in my judgment, it is clear beyond peradventure that article 11 is restricted to criminal proceedings for the other subparagraphs of article 11(2) can only admit of that interpretation. The other subparagraphs read as follows :-
54. Reference was made by Mr Fung in connection with the protection afforded to extrajudicial statements to a comment of the UNHRC in CCPR/C/21/REV on the content of article 14 ICCPR, but this citation is not relevant for it relates to an accused person. 55. The argument advanced under article 11(2)(g) is therefore rejected. 56. I now turn to article 14 on the issue of privacy, ARTICLE 14 - PROTECTION OF PRIVACY, FAMILY, HOME, CORRESPONDENCE, HONOUR AND REPUTATION 57. Article 14 provides :-
Mr Fung submitted that the extent to which the investigator can compel the applicant to answer questions put to him under s.33 is a power which interferes with privacy rights, the basis for the interference for which must not be arbitrary. The production of documents under compulsion may violate the right to privacy on the basis that there has been a seizure of material in which an individual may have a privacy interest, see McKinlay Transport Limited v. R. [1990] 76 CR (3d) 283. Accordingly, he submitted that there should be a system of prior authorisation by an impartial and neutral arbiter such as a magistrate who will act judicially. He illustrated his argument by referring to s.36 of the SFC Ordinance that provides for a magistrate to issue warrants for the seizure and removal of documents. Mr Fung also relied on the dissenting speech of Lord Salmon in R. v. IRC Ex p. Rossminster [1980] AC 952 that concerned the search and seizure powers exercised by the Inland Revenue under a warrant issued upon the authority of a judge when he held that a citizen's basic human right of privacy extends to both his home and business premises. CONCLUSIONS 58. Article 14 makes no reference to a person's business premises so that it is restricted, as I said in Tse to the applicant's privacy in his personal and private affairs and does not extend to the realm of business transactions. However, even if privacy does extend to an individual's business affairs, that expectation of privacy is minimal. However, in my judgment, the holding of shares in the circumstances where regulatory controls apply does not come within the ambit of article 14 when a criminal offence is suspected to have been committed. 59. The suggestion on behalf of the applicant that the investigator can summon a person before him upon a whim as he is not accountable to any independent body for the exercise of the power is unreal for before an investigation can be launched, the Commission must have a reasonable belief or suspicion that an offence has been committed. Further, an investigator cannot act unlawfully as the investigation must be carried out in accordance with the provisions, set out in the SFC Ordinance. If the Commission exceeds its jurisdiction, proceedings can be taken for judicial review. 60. The argument advanced under this article is therefore rejected. 61. I now turn to article 5 which was not raised in the Tse case. ARTICLE 5 - LIBERTY AND SECURITY OF PERSON
62. Mr Fung linked article 5 with the rights under articles 11(2)(g) and 14. He submitted that to take away the right of silence of a suspect or a witness is the deprivation of a guaranteed right under the BOR Ordinance whether the right is the right not to be compelled to testify or confess guilt under article 11(2)(g), the right to privacy under article 14 or the right to liberty and security of person under article 5. 63. Mr Fung drew my attention to a decision of the Supreme Court of Canada, Thomson Newspapers Ltd. v. Canada [1990] 67 DLR (4th ed) 161. In that case the appellants were served with orders to appear before the Restrictive Trade Practices Committee to be examined on oath and to produce documents in connection with an inquiry being conducted by the Director of Investigation and Research under s.17 of the Combines Investigation Act to determine whether evidence existed that the corporate appellant had committed the indictable offence of predatory pricing. Issues were raised as to whether s.17 contravened ss.7 and 8 of the Canadian Charter of Rights and Freedoms. These sections provide as follows :-
In the Supreme Court, two judges, La Forest and L'Herureux-Dube J.J. held that s.17 did not violate either section whilst Wilson J. held that the section violated both sections. Sopinka J. agreed with Wilson J. that the section violated s.7, but not s.8 whilst Lamer J. agreed with Wilson J. with regard to s.8, but did not express an opinion on s.7 because he said that the appellant had challenged the wrong section. There was therefore no majority on s.7 but there was on s.8 for different reasons. 64. La Forest and L'Herureux-Dube J.J. held that the legislation was regulatory in order to maintain a particular economic system and that the use of criminal sanctions was necessary to induce compliance. They held that s.17 does not unreasonably infringe the limited expectation of privacy of those subject to the Act. With regard to the power to compel oral testimony, they said that it constitutes a deprivation of liberty within s.7 but was not contrary to the principles of fundamental justice to testify under s.17. Both Wilson and Lamer J.J. held that s.17 violated s.8 as it amounted to a seizure and it was regarded as unreasonable because the proceedings were criminal or quasi criminal although they held that it may be reasonable in a regulatory or civil context. 65. Essentially, Wilson J. said that although the s.17 procedure is in itself investigatory as opposed to prosecutorial, it is irrelevant when criminal prosecution is a potential consequence of the investigation. She considered that the compulsion would undoubtedly result in the answers and material produced being used for the purpose of criminal or quasi criminal proceedings. However, it is significant that in Thomson's case in contrast to the instant case, the director was not required to have a reasonable and probable cause for believing that an offence had been committed when he applied for the orders. 66. Although copious passages were cited from the judgments in Thomson, I do not derive much assistance from them for the purposes of the present case for the wording of article 5 differs materially from s.7 of the Charter. Article 5 without doubt is concerned with the physical arrest and detention of a person in connection with criminal proceedings. Section 7 of the Charter on the other hand makes no reference to physical arrest and detention. Section 8 of the Charter has been compared with article 14 concerning the issue of privacy upon which I have already ruled. 67. In Hong Kong there is no provision for derivative use immunity either at common law or by statute and the introduction of the BOR Ordinance has made no change. 68. The reliance placed upon article 5 is misconceived and is rejected. 69. I now turn to article 15. ARTICLE 15 - FREEDOM OF THOUGHT, CONSCIENCE AND RELIGION 70. Article 15 provides where relevant :-
71. Mr Fung submitted that s.33(8) is inconsistent with the right to freedom of thought guaranteed under article 15 of the BOR Ordinance for it provides the Commission with the power to require a person under investigation to make a statutory declaration under threat of a penalty. He contended that no one should be compelled to affirm to the truth of facts unless there is an independent determination of the relevance of the issue in respect of which such affirmation is sought. This argument is identical to that advanced in the Tse case when I found that s.145 of the Companies Ordinance was in no way inconsistent with article 15. I am satisfied that the appointment by the Commission of an investigator, like the inspector in Tse, is not concerned with the applicant's thought processes but with obtaining factual evidence. 72. The argument presented in respect of article 15 was devoid of merit with the result that this ground fails. 73. I now come to the final article that was invoked which is article 16. ARTICLE 16 - FREEDOM OF OPINION AND EXPRESSION 74. Article 16 provides :-
75. In respect of this ground, it was contended that s.33(8) is inconsistent with the right to freedom of opinion and expression guaranteed under article 16 as the powers of the Commission to compel a person under investigation to make a statutory declaration under threat of a penalty amounts to an interference with the right of that person 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). 76. This was the same argument that was raised in Tse which I rejected on the grounds that article 16 is concerned with the entrenched right of freedom of opinion and expression, not with providing an immunity from disclosing information. This ground also fails. FINAL DETERMINATION 77. Mr Fung submitted that the present case raised the question as to whether the Commission has justified arrogating to themselves powers which the legislature has sought not to confer on police officers charged with investigating offences far more serious than those to be investigated by the Commission. He said that the only reason advanced by the Commission was that the powers are needed to make it more effective. 78. Mr Fung went on to say that the difficulties concerning the ascertainment of the ultimate issue of ownership of shares are not insuperable and are no different in many respects from the problems encountered by police officers in nearly all criminal investigation work, including commercial fraud. Although Mr Fung did not elaborate as to how these difficulties could be overcome without the powers that have been conferred upon the Commission, they have been encapsulated by Mr G.J. McMahon, the Director of the Enforcement Division of the Commission, in paragraph 21 of his affidavit of the 24th November 1992 which reads :-
79. Those difficulties were also appreciated by La Forest J. in Thomson Newspapers Ltd. v. Canada supra where he had this to say at pp.234 and 235 :-
80. Apart from Thomson Newspapers v. Canada supra, three other Canadian decisions support the arguments of the Commission in the instant case. In the first case Ontario Securities Commission v. Biscotti 40 DLR 160 it was held that the examination of witnesses under s.11(4) of the Securities Act (Ontario) amounted to proceedings which were purely investigatory. The same result obtained in British Columbia Securities Commission v. Branch 68 DLR (4th ed) 347 where it was held that the powers under the Securities Act SBC 1985 were investigatory. It was further held in this case that there was no violation of liberty because the investigator did not have the power to determine guilt. In the third case McKinlay Transport Limited v. R. supra, it was held that the Income Tax Act was essentially regulatory. 81. The object of the legislation is to supervise trading in the market and to ensure that it is carried out honestly for the benefit of private investors and in the public interest. Effective regulation is essential to the continuance of Hong Kong's economic prosperity as a commercial and international financial centre. By the Joint Declaration and the Basic Law, Hong Kong's free trade policy and its position as a free port have been guaranteed to continue for 50 years after the territory reverts to Chinese sovereignty in 1997. It is therefore of vital importance that the regulatory authorities have sufficient powers to investigate suspected malpractice. As it is the persons who carry out the actual trading in the market who will have the information that is required it is essential that the Commission should be invested with the powers set out in s.33(4) of the SFC Ordinance to investigate suspected malpractice, Those powers are reasonable and necessary to enable the Commission to carry out its statutory duty of investigation. 82. The complaint that there are inadequate safeguards is without foundation. In the first instance there is the right to apply for judicial review. Further, the applicant is entitled to legal representation before the investigator under s.33(5) of the SFC Ordinance when his legal adviser may take part in the examination. The applicant is also protected against self-incrimination under s.33(6) of the SFC Ordinance if the answers might tend to incriminate him and he claims the protection before answering the question. Neither the question nor the answer will be admissible in evidence against him in criminal proceedings other than for making a false statutory declaration or for perjury, but will be admissible in proceedings under the Securities (Insider Dealing) Ordinance which are not criminal proceedings. The investigator is also obliged under s.33(6) of the SFC Ordinance to inform the applicant of the limitation in respect of the admissibility of the evidence. However, no reference to insider dealing has been made in this case. Indeed, if s.33(4) was repealed, it would result in the legislation being rendered unenforceable. 83. It is abundantly clear that the powers of the Commission are regulatory and administrative and not criminal or quasi criminal for the Commission has no power to determine guilt or innocence. The investigation is preliminary to any proceedings that can be instituted for any criminal offence that may be discovered. 84. The applicant is not a person who has been charged with a criminal offence nor is he a suspect for no allegations have been made against him that he has committed a criminal offence. He is therefore required to attend the interview as a witness. 85. Although the applicant complained that he did not have sufficient information or evidence when he was required to attend for interview, this is quite clearly wrong because he was aware that the suspected offence is contrary to s.135 of the Securities Ordinance into the dealings of shares in Truly in respect of two periods which have been specified. He has also been informed of the names of four major traders. It would therefore be inappropriate to provide further information which would be clearly prejudicial to the investigation. 86. The use of criminal sanctions in the SFC Ordinance is appropriate in order to enforce compliance with the law. Due to the complexity of transactions and the difficulties encountered when there are nominees and off-shore companies, it is imperative that these sanctions are available. These sanctions merely underpin the Ordinance in order to give it proper effect. 87. I find that s.33(4) is in no way inconsistent with any of the articles of the BOR Ordinance that were invoked, whilst I reject the alternative argument based upon s.33(8). As a result the second stage of the bifocal or proportionality test was not reached. However, if I had found that there had been any contravention of the BOR Ordinance, I would have held that the interests of the state and the community far outweighed those of the individual for it is a matter of public interest that suspected offences of fraud should be investigated. 88. The arguments advanced on behalf of the applicant were without merit and were doomed to failure. Accordingly the motion will be dismissed and there will be an order nisi for costs to the Commission.
Representation: Mr Daniel Fung, Q.C. and Mr Andrew Chung, (Pang Wan and Choi) for Applicant Mr Andrew Li, Q.C. and Mr Benjamin Yu (the Securities and Futures Commission) for Respondent |