Securities and Futures Commission v. Mong Man Wai William
Read the full judgment text of HCMA 1052/2004 on BabelCite. This High Court CFI judgment was delivered on 24 March 2005.
1. The appellant, Dr William Mong Man Wai (“Dr Mong”) faced a total of 12 summonses brought by an officer of the Securities and Futures Commission (“SFC”) under the Securities (Disclosure of Interests) Ordinance, Cap. 396 (“SDIO”). On 30 August 2004 he was convicted by a magistrate after trial on two of them, nos. WSS 15993 and 15994 of 2003, and sentenced to pay a fine of $2,500.00 for each offence. He now appeals against conviction and sentence.
Cites 2 cases
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HCMA1052/2004 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE (Appellate Jurisdiction) MAGISTRACY APPEAL NO. 1052 OF 2004 (ON APPEAL FROM WSS 15993 AND 15994 OF 2003) --------------------- BETWEEN
---------------------- Before : Deputy High Court Judge Muttrie in Court Date of Hearing : 4 March 2005 Date of Judgment : 24 March 2005 ------------------------- J U D G M E N T ------------------------- 1.The appellant, Dr William Mong Man Wai (“Dr Mong”) faced a total of 12 summonses brought by an officer of the Securities and Futures Commission (“SFC”) under the Securities (Disclosure of Interests) Ordinance, Cap. 396 (“SDIO”). On 30 August 2004 he was convicted by a magistrate after trial on two of them, nos. WSS 15993 and 15994 of 2003, and sentenced to pay a fine of $2,500.00 for each offence. He now appeals against conviction and sentence. 2.The events concerned here occurred in 1995. The summonses were brought under sections 28(1)(b) and 28(8)(a) of the SDIO. That Ordinance was repealed in 2003 and its provisions were replaced by Part XV of the Securities and Futures Ordinance, Cap. 571 (“SFO”). 3.It is not necessary to set out the legislation in full here. Its effect is that a person who becomes a director of a listed company, and at the time when he does so is interested in shares in the listed company, is under a duty to notify both the listed company and the exchange in writing of the subsistence of his interest at that time (including the number and class of shares). This duty to notify must be performed within five days of his becoming a director, if he knows of the existence of the interest on the day on which he becomes a director. Since this last point is important I set out here paragraph 13(2) of Part II of the Schedule to the SDIO which provides :
4.In WSS 15993 of 2003 it was alleged :
The wording of the summons in WSS 15994 of 2003 was the same except that it alleged a duty to notify the Exchange Company. 5.Before the magistrate, the following facts were agreed under section 65C of the Criminal Procedure Ordinance, Cap. 221 :
The issue for the magistrate’s decision was whether Dr Mong knew of the existence of his interest in the shares on 1 June 1995 when he became a director of BEA. 6.The prosecution called one live witness, Mr Yau Chi Shing. From January 1993 he was a director of SHET with responsibilities for dealing with daily accounting and financial matters. He said that he had attended a meeting of SHET on 27 March 1995 chaired by the appellant, that the purchase of the shares was approved at that meeting and that SHET had bought the shares at that time. He produced a copy of a cheque signed by the appellant and dated 21 March 1995 in favour of Tung Shing Securities Co. Ltd for $40,888,441.00 (Exhibit P1) from the company records and stated that it related to the purchase of the 2,000,000 BEA shares. He also referred to the minutes of the meeting and confirmed that they were signed by the appellant. 7.The minute records the following resolutions :
8.Under cross-examination Mr Yau said that in 1995 the annual turnover on the Shun Hing Group could be measured in billions of dollars. The turnover of Shun Hing Electronic Trading would be about $2 billion. The group employed about 2,000 persons and operated 160 bank accounts. The chairman and the group made various donations to Hong Kong University and many other universities in mainland China, the United States and Britain. These amounted to more than $300 million since the founding of the Shun Hing Charity Fund. The purchase of the 2,000,000 shares in this case was not unusual, indeed it was a normal transaction. It would happen fairly often that purchases of large quantities of shares with large amounts of money would be made. Dr Mong had many different matters to deal with every day. 9.Various other documentary exhibits were before the magistrate including the record of an interview of the appellant by an officer of the SFC. The appellant did not give evidence or call witnesses. 10.The relevant part of the learned magistrate’s Statement of Findings reads as follows :
11.The appellant has raised five grounds of appeal. The first relates to the magistrate’s ruling against the appellant’s application for a permanent stay of the proceedings and the last relates to the authority of the SFC to institute prosecutions in its own name of offences alleged to have taken place prior to 1 April 2003. The second to the fourth grounds relate to the evidence. I propose to deal with these first. Grounds relating to evidence 12.The second ground is that the verdict is unsafe and unsatisfactory by reason of the magistrate’s finding that the acquisition of the shares came to the appellant’s knowledge on or before 27 March 1995. Five reasons are given for this. 13.The first of these reasons is that the copy cheque, Exhibit P1, produced by Mr Yau from the accounting files was created prior to the original cheque being tendered for payment. There was no evidence that the cheque was in fact presented for payment and honoured. Any evidence of the cheque being used to pay for the shares was hearsay and inadmissible. 14.The second reason is that the magistrate erred on the facts by stating that Mr Yau testified that the cheque was for the purpose of the shares. His evidence was merely that this is what the accounting entries showed. His evidence on this point was opinion and not fact. 15.The third reason relates to Mr Yau’s evidence that the figure on the cheque was not an unusual amount. 16.The fourth reason relates to Mr Yau’s evidence of the size of the Shun Hing Group’s operations. It is said that in both cases the magistrate failed to take into account the impact of this evidence as to whether, even if the appellant knew of the purchase on or before 27 March he retained that knowledge on 1 June 1995. These points really go to the third ground of appeal and I will consider them with that ground. 17.The fifth reason relates to the terms of the resolution, namely that the company “will purchase” the shares “on 16-3-95”. It is said that the magistrate’s finding that this was a grammatical error could only be supported by the erroneous finding that Exhibit P1 constitutes evidence that the original cheque was presented and honoured. 18.I have noted above that it was agreed for purposes of section 65C that on or about 17 March 1995 Tung Shing Securities Ltd purchased 2,000,000 shares in BEA. The effect of section 65C is that the purchase is conclusively proved. The shares were bought and paid for on 17 March 1995. Ultimately, therefore it does not matter whether the particular cheque, signed by the appellant or some other cheque was used to pay for the shares. Nor do I need to go into the other documentary evidence such as the Bought Note and other documents relating to the transaction which were before the magistrate. Quite simply, the shares were bought, and on 27 March 1995 the appellant chaired a meeting which passed a resolution approving the purchase. The resolution was obviously grammatically incorrect; it said that the company “will purchase” on an earlier date; but really that is neither here nor there. The appellant must have known of the purchase by the time he signed the minutes of the meeting, even if the cheque with his signature on it were to be totally disregarded. The magistrate was entitled to make the finding that she did. There is nothing in this ground of appeal. 19.The third ground of appeal is that the verdict is unsafe and unsatisfactory in that there was insufficient evidence to support the convictions because the SFC did not lead evidence to show that the appellant was interested in shares of the BEA on 1 June 1995, or, if he was, that the appellant knew of that interest. As indicated the third and fourth reasons for the second ground go to this latter point. 20.I do not see how the appellant could say that there was no evidence to show that he was interested in the shares on 1 June 1995. One of the exhibits referred to in the list of admitted facts for the purpose of section 65C was a statement of the transactions in the share account which clearly showed that the 2,000,000 shares were acquired on 21 March 1995. This was appended to Dr Mong’s first notification of his interests to the Exchange Company on 12 April 2003. It ran up to 25 March 2003, and showed various further acquisitions of shares by way of scrip dividends but no disposals. In any event, Dr Mong in his letter to the SFC dated 12 April 2003 effectively admitted that he was interested in the shares as at 1 June 1995. One might add that if he were not so interested as at that date he would hardly have notified his interest later on. 21.The issue of Dr Mong’s knowledge of his interests as at 1 June 1995, and the magistrate’s treatment of that, was the major matter of argument on the evidence in the appeal. The argument was that the magistrate failed to take into account the impact of the evidence of Mr Yau which tended to show that Dr Mong did not know of his interests as at 1 June 1995. 22.Mr McCoy SC for the appellant referred in particular to differences between the magistrate’s verdict, delivered in open court after reservation, and her statement of findings. He argued that in the first place there was a matter of jurisdiction. He said that once a magistrate has elected to deliver a reserved written verdict, as distinct from brief oral reasons with the right reserved to add to them later, that verdict must stand as the statement of findings, and the magistrate has no jurisdiction to alter it. It is said that the statute must be viewed in the light of modern conditions where the proceedings are electronically recorded and a transcript is available, unlike former times when the magistrate’s own notes formed the sole official record of the proceedings. 23.With respect, I cannot agree with this proposition, which does not seem to be based on any authority. The magistrate is a creature of statute and his duties are codified by the Magistrates Ordinance Cap. 227. The proceedings at a hearing are governed by section 19; and subsection (2) thereof provides :
24.There is at the hearing stage no requirement that the magistrate give reasons for his verdict. Where, as here a defendant appeals under the procedure set out in section 113 of the Magistrates Ordinance, the procedure to be followed is that provided in section 114(b); once the notice of appeal is given to the magistrate’s clerk, the magistrate must prepare a “signed statement of his findings on the facts and other grounds of his decision and within 15 days after the day on which the notice of appeal was given cause a copy to be served upon the appellant and respondent…”. There is nothing in the statute or the authorities to indicate that, if the magistrate gives reasons for his verdict, he has no jurisdiction to alter them when he comes to fulfil his statutory duty to write the statement of findings. 25.Of course, if the magistrate does make any alteration, he may lay himself open precisely to the criticism laid here, that he did not consider some point when reaching his decision, and has sought to rectify the omission later. Many convictions have been set aside on appeal because some discrepancy between the reasons delivered with the verdict and the statement of findings indicated some irregularity. The appellate judge or even the reasonable bystander may be left with the impression that justice has not been done or has not been seen to be done. The case of HKSAR v. Chan Wing Yin, HCMA219/2003 referred to by counsel for the appellant is a case in point. In that case confusion as between the oral reasons and the statement of findings caused the appeal judge, Beeson J to believe that the magistrate had erred in dealing with the evidence. 26.A prudent magistrate will either give no reasons, or only the briefest of reasons when he pronounces the verdict, or will give full reasons at that time and simply indicate, when he comes to write the statement of findings, that his findings on the facts and other grounds of his decision are to be found in the reasons earlier delivered. This is however a matter of prudence and does not go to jurisdiction. 27.In the instant case the magistrate has expanded in her Statement of Findings on her reserved oral reasons for verdict and it is necessary to consider whether this shows that she erred in dealing with the evidence. The relevant part of the oral reasons as they appear in the transcript are as follows :
28.In her oral reasons the magistrate clearly showed that she had in mind that the duty of notification is imposed if the person knows of his interest on the day that he becomes a director. She then went on to consider and make a finding that Dr Mong knew of his interest in the shares by reference to the cheque and the resolution at the meeting on 27 March 1995. That in fact is what the SFC set out to prove; the averment in the information was that “such acquisition came to your knowledge on or before 27 March 1995”. 29.The magistrate did not at that stage advert to the evidence of Mr Yau or the specific submissions made by Mr Bruce SC who appeared below, although she had earlier remarked generally that she had “carefully considered all the submissions of counsel as well as all the evidence adduced before me”. The transcript shows that Mr Bruce argued primarily there was no proof that Dr Mong was fixed with knowledge of his interest at the time averred in the charges, i.e. on or before 27 March. He added that if Dr Mong was fixed with that knowledge, the court would “have to then be sure that he knew, that he remembered, he made the connection on 1 June 1995, some I think about 10 weeks later.” 30.The appellant’s case here and below is, in effect that that even if the prosecution could show that Dr Mong knew that he had an interest in the shares on 27 March, it must still show that he had not forgotten that he had it by 1 June 1995. With respect this seems to me a strange and indeed untenable proposition. Knowledge is not the same as memory. One cannot remember something which one has never come to know. Once one has come to know a fact, he may temporarily forget but later remember it and it may be said that he knew that fact all along. If the appellant’s contention were right it would lead to the absurd situation in which the duty of notification imposed on a person by section 28(1)(b) would only arise if that person actually remembered his interest on the day on which he became a director. It would be impossible to prosecute the failure to notify, because it can never be proved that on any given day a person remembers everything that has earlier come to his knowledge. The subsection would be meaningless. Indeed I would go further and suggest that it would be impossible to prosecute any offence which had an element of knowledge because the accused person could always say that he had forgotten, and there would be nothing to gainsay him. 31.If this is wrong, the prosecution must prove that the appellant, having come to know of his interest on or before 27 March, had not forgotten it by 1 June 1995. It is reasonable to expect that once someone knows a fact, he will continue to know it. It is reasonable to expect that even the richest of men, if he has authorised the purchase of $40 million dollars’ worth of shares in a bank, will remember that when he becomes a director of the same bank ten weeks later. To raise a reasonable doubt of continued knowledge, some evidence of actual forgetting would surely be necessary. I do not think that evidence that the person concerned was very busy, which is essentially what Mr Yau agreed to under cross-examination would be enough. Memory varies from person to person and a busy person may have highly retentive memory while an idle one may have a memory like a sieve. There is no real connection between the amount of business a person has to do and the retentiveness of his memory. In any event one might expect a very successful businessman to have a good memory for the investments of his companies. 32.It is true that the magistrate did not, in her reasons for verdict specifically refer, as she did in her Statement of Findings, to the argument that the prosecution had failed to establish knowledge on 1 June 1995. When she did refer to it later, she simply said that she did not accept it. Of course she is criticised for that as well, but in my view she was quite entitled not to accept it, because it is simply a non-point. It would not have been accepted at any stage. It therefore makes no difference that the magistrate did not refer to the point earlier. There is no suggestion that justice has not been done or has not been seen to be done. 33.I do not therefore accept that the conviction is unsafe and unsatisfactory for the reasons given in the third ground of appeal, and the third and fourth reasons for the second ground of appeal. 34.The fourth ground of appeal is that the verdict is unsafe and unsatisfactory by reason of the magistrate’s total failure to take into account the effect of the delay of nine years in evaluating the evidence of Mr Yau and/or satisfying herself that the appellant had a fair trial. 35.As I have indicated, the evidence under cross-examination of Mr Yau went no further than to suggest that Dr Mong was a very busy man. This does not on its own mean that Dr Mong must or even might reasonably be expected to have forgotten by 1 June what he knew on 27 March. It was of course argued that Mr Yau had no memory of the meeting on the latter date, the cheques, and so forth but in my view this made no difference, given the agreed facts and the incontrovertible nature of the documentary evidence. There is nothing in this point. Stay 36.I return to the first ground of appeal which is that in ruling against the applicant’s application for a permanent stay of the proceedings, the trial magistrate erred in law in failing to provide adequate and proper reasons therefor. That is as far as it goes. It is not said that the magistrate was wrong in refusing the stay or that the appellant did not have a fair trial because of delay, which was the primary ground relied on in the application for stay. 37.It was argued before the magistrate that the lapse of time before the incidents giving rise to the informations and the trial necessarily meant that Dr Mong would not have a fair trial. The main reason cited for this was the effect of delay on the memories of the witnesses including Dr Mong. 38.The magistrate ruled as follows :
39.The appellant now relies heavily on HKSAR v. Li Chi Shing [2000] 4 HKC 168. In that case the magistrate ruled simply that having considered the submissions and the authorities :
40.On appeal Beeson J held that the magistrate should have given reasons, however brief, to illuminate, or support her reason for refusing the stay. 41.This case can be distinguished. Here the magistrate did give a reason, namely that the defendant had not discharged the burden of showing grounds sufficient to justify the stay. For my own part, I think that that was enough, at the beginning of a trial. Further, the circumstances are different here. In Li Chi Shing there was an appeal against the refusal of stay and not just a complaint of lack of reasons. Also the defendant in that case, who was in effect being tried a second time on the same facts had much stronger grounds to expect a stay. 42.The fundamental reason for stay is the expectation of unfairness. Per Lord Bingham in AG’s Reference (No. 2 of 2001) [2004] 2 WLR 1 at 13 :
43.In fact there was no unfairness here. The appellant was convicted on the basis of the admitted fact that the shares had been bought and the incontrovertible written record of the meeting. Nothing really turned on the recollection of witnesses. There was no unfairness caused by the delay which could in any event only be laid at the appellant’s own door. 44.There is nothing in this ground of appeal. Jurisdiction 45.The fifth ground of appeal is that the summary offences of which the appellant was convicted took place before the commencement of the SFO on 1 April 2003. These offences were not investigated or prosecuted until after the commencement of that Ordinance. Section 388 of the SFO does not authorise the SFC to institute prosecutions in its own name of offences alleged to have taken place prior to 1 April 2003. 46.It is necessary to set out the legislation. Before 1 April 2003 the SFC was empowered by section 62 of the Securities and Futures Commission Ordinance (“SFCO”) to prosecute in its own name offences under the SDIO punishable by summary conviction. Subparagraph 1 provides :
47.After 1 April 2003 the SFC was similarly empowered by section 388 which appears in Part XVI of the SFO. Subparagraph 1 provides :
48.Section 406, which appears in Part XVII of the SFO repeals various ordinances whose provisions the SFO consolidated, including the SFCO and the SDIO. Section 407 provides :
Section 408 provides :
Paragraph 91 of Part I of the Schedule provides :
49.Section 23 of Cap. 1 is of course the general provision as to the effect of repeal. It provides :
Section 23 is subject to section 2 which provides :
50.As I understand the argument of counsel for the appellant it is this. Section 388 is prospective. It appears in Part XVI of the SFO. There is no linkage between paragraph 91 of Part I of the Schedule and section 388, because it is not in the relevant Part. Section 408 gives validity to transitional arrangements, but not in relation to the prosecutions brought by the SFC in its own name because they do not fit with Part 17. If it be said that section 23 of Cap. 1 applies to give the SFC power to prosecute in its own name, this is not so, because section 23 is subject to section 2, i.e. “where a contrary intention appears”, and a contrary intention appears, because it was not given in the new Ordinance to allow old offences to be prosecuted by the SFC in its own name. By paragraph 91 of Schedule 10, the SFC is deemed to be given powers pursuant to Cap. 571; but that depends on the power appearing in Part XVII of the Ordinance. The legislature has not allowed the linkage between paragraph 91 and Part XVI; the linkage is only to Part XVII. 51.I have had some difficulty in understanding this and trust that I have set it out properly. Section 407 of Cap. 571 is the parent section of Schedule 10 and is of general application. Part I of Schedule 10 refers to various Parts of the Ordinance. For instance paragraphs 82 to 88 refer to Part XV (Disclosure of Interests) and paragraph 82 provides that a duty of disclosure under the SDIO is not affected by the repeal of that Ordinance. It is true that there is nothing in Part I of Schedule 10 which deals specifically with Part XIV (except for paragraph 89 which is not relevant here); and there is no specific provision that the repeal of the SFCO is not to affect the SFC’s prosecuting powers under it, in respect of offences committed under it. But this is simply a lack of provision and I do not see how such a lack could be taken as being in derogation of section 23 of Cap. 1. There would have to be some positive provision which expressed a contrary intention, rather than a simple lack of provision. 52.Paragraph 91 comes under the “General” heading, in Part I of Schedule 10, i.e. paragraph 89 onwards. Mr Westbrook SC argues that the reference to an information issued or served by the SFC covers the information laid before a magistrate for the purpose of the private prosecution. I think this must be right and if there needs to be something in Part I of Schedule 10 to cover the continuation of private prosecutions this must be it. But since the provisions of Part XIV and Schedule 10 are declared by section 408 to be in addition to, and not in derogation of section 23 of Cap. 1, except as otherwise provided, it seems to me that where nothing is provided one simply has to go back to the latter section. Subsection 4 thereof provides that the legal proceeding, etc. may be instituted, as if the repealing Ordinance had not been passed and that seems to me to cover the continuation of the power of private prosecution. 53.I am satisfied that the SFC had jurisdiction to prosecute in its own name and that this ground of appeal cannot stand. Result 54.The appellant’s appeal against conviction is dismissed. Appeal against Sentence 55.This court will only interfere with the sentence if it was wrong in principle or manifestly excessive. 56.The appellant argues that the fines here were wrong in principle or manifestly excessive; the appellant should have been given an absolute discharge. There were various exceptional features here which were grounds for the imposition of an absolute discharge, not least of which was that the appellant had, as Mr McCoy put in the vernacular, “dobbed himself in”; he had on learning of his failure in compliance eight years after the event, taken the initiative to admit the same to the authorities. The failure was in any event due to the failure of his corporate and legal advisers to advise him of his duty. 57.Mr McCoy relies on a dictum of Viscount Dilhorne in Smedleys Ltd v. Breed [1974] AC 839, (an appeal in a case where the company was prosecuted for selling a tin of peas containing a caterpillar) at 857B that :
58.Here it was argued before the magistrate that the prosecution did not serve the interests of the investing public but she failed to address that point, instead concentrating on the question of whether or not the offences were trivial. 59.In fact the magistrate considered the views of the learned authors, Cross and Cheung, in their Sentencing in Hong Kong, 4th Edition and a local case cited by them, Secretary for Justice v. Tse Sheung Kai & Ors [2001] 3 HKLRD 487 in which Stuart-Moore JA (as he then was) said at page 501 :
60.The magistrate went on to say that the charges had been properly brought and were not trivial. She said that the appellant had been convicted after trial, and that she had considered all the mitigation put forward as well as the letters attesting to the good character of the appellant and his contribution to society; but she did not consider that an absolute discharge was appropriate in the circumstances of the case. 61.Triviality is not the only reason for an absolute discharge. Lack of moral culpability is also a reason. It seems to me that more consideration should have been given to the lack of moral culpability here. This was, at the end of the day, a statutory offence of strict liability, committed inadvertently by a director who was probably relying on his own compliance department to keep him right on such things. There was no moral culpability; and of course to this must be added the fact of volunteering the admission after so many years. In my view the proper disposal is by way of absolute discharge. So the sentences will be set aside and an order for absolute discharge substituted in respect of both convictions.
Mr Gerard McCoy, SC, leading Mr John Brewer, instructed by Messrs Mallesons Stephen Jaques, for the Appellant Mr Simon N. Westbrook, SC, instructed by Securities and Futures Commission, for the Respondent | ||||||||||||||||||||||||||||||||||||||