Ab (A Firm) and Another v. Hong Kong Institute of Certified Public Accountants

HCAL 65/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 65 OF 2005

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BETWEEN

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Before : Hon Hartmann J in Court

Date of Hearing : 30 June 2005

Date of Ruling : 30 June 2005

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R U L I N G

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1.On 28 June 2005, the applicants filed a notice of application for leave to apply for judicial review pursuant to O.53, r.3.  If leave was not granted on the papers, the applicants sought an oral hearing.  The application being urgent, I have heard submissions from the applicants’ counsel today.  The hearing has been ex parte.

2.I have informed Mr Coleman, the applicants’ counsel, that I am not prepared to grant leave.  My reasons now follow.

The test applied

3.The test that I have applied, while subject to criticism by some commentators, is now well established.  The test is whether the material before me has disclosed matters which on further consideration might demonstrate an arguable case for the grant of the relief sought.  That test has often been given the shorthand description of whether or not the matters disclosed are prima facie arguable.  The test is not an onerous one.  But that is not to say it is no test at all.  If, in my judgment, I am of the view that at a substantive inter partes hearing the judicial review is bound to fail then it must follow that leave should be refused.

Brief background

4.The 1^st applicant is a firm of accountants.  At all material times, the 2^nd applicant was a partner in the 1^st applicant, having responsibility for auditing. 

5.In or about 1997, the applicants were responsible for auditing the books of a listed Hong Kong company including the books of an operating subsidiary engaged in the construction business. 

6.In or about July 1999, what was then called the Council of the Hong Kong Society of Accountants appointed an Investigation Committee to consider whether in the auditing of the Company and its subsidiary there may have been some breach of professional obligations.

7.In or about September 2003, the Investigation Committee submitted a report to the Council which, having considered the report, referred the matter to two disciplinary committees.  It appears that two committees rather than one were constituted for technical reasons.  However, each had the same membership.  I shall refer to them in the singular.

8.The constitution of the disciplinary committee appears to have been formalized in or about July or August 2004.  Directions hearings then took place before the committee.  One of the issues raised was whether the hearings should be held in private.

9.On 14 April 2005, a directions hearing took place.  It is the decision of the committee arising out of submissions made during the course of this hearing which forms the basis of this application for leave to apply for judicial review.

10.Prior to the hearing on 14 April 2005, a joint letter was sent to the disciplinary committee by the solicitors representing the applicants and what is now called the Hong Kong Institute of Certified Public Accountants.  That letter recommended to the committee that future hearings should be held in private.  In this regard, portion of the letter reads as follows :

“On a separate matter, you may be aware that in the concurrent disciplinary proceedings concerning the same company but a different firm [the Previous Auditors], a different Disciplinary Committee has directed that all future hearings, including the substantive hearing of the complaints, should be held in private.  To be consistent, we both agree that all hearings in the present matter, subject to the approval of the Disciplinary Committees, should also be in private.  It would not make sense for the disciplinary proceedings concerning two firms but one company to be held as to one in public and one in private.”  [my emphasis]

11.While both firms of solicitors recommended that future hearings be in private, it was recongised of course that this would be subject to the approval of the disciplinary committee itself, the committee being the master of its own procedures.

12.As it turned out, the committee directed that oral submissions should be made concerning the issue of whether future hearings should be in private rather than in public.  The committee stated clearly that the reasons given in the joint letter were not considered ‘satisfactory’. 

13.Accordingly, submissions were made at the hearing on 14 April.  This resulted in a lengthy ruling being given by the committee, that ruling being dated 14 June 2005.  The final paragraph of that ruling is to the following effect :

“For these reasons, we reject the Application and order that all future hearings should be held in public.  If there should be any change of circumstances in the future which would justify our directing that any or any part of the hearings shall be held in private, we would be prepared to consider any fresh application based on any such change of circumstances.  For that purpose, we would give liberty to apply.”

The challenge made

14.It is this decision of the disciplinary committee dated 14 June 2005 which is the subject of the notice of application for leave to apply for judicial review.  The applicants seek an order of certiorari to bring up and quash the decision and, in addition, seek either a declaration or an order of prohibition which will ensure that future hearings are held in private.

15.The issue raised is one of considerable general importance, going, as it does, to the issue of whether, in ordering that its deliberations should be opened to the public gaze, the disciplinary committee has or has not acted lawfully. 

The first challenge : error of law

16.The Professional Accountants Ordinance, Cap.50, and the rules made under it have been the subject of considerable amendments.  I understand that this is an on-going process.

17.In respect of disciplinary proceedings, it appears that s.36(1)(c) of the Ordinance, which was repealed in 2004, gave the general power to admit or exclude the public from disciplinary proceedings.  The repealed provision has been replaced by s.36(1A) which now directs that every hearing of a disciplinary committee shall be held in public unless the committee determines that the interests of justice demand that it be held in private.

18.I am told that, although the Ordinance itself has been amended, the Disciplinary Committee Proceedings Rules have not yet been amended.  These rules – r.11(1) – still direct that, unless a committee otherwise decides, hearings shall be in camera. 

19.During the course of submissions to the disciplinary committee, there was apparently considerable argument as to how the committee should guide itself in determining whether hearings before it should be in private or in public.  Should the committee follow r.11(1) and work on the presumption that, unless there was good reason otherwise, hearings should be in private or should it follow s.36(1A) – the new provision in the Ordinance – and work on the presumption that, unless there was good reason otherwise, hearings should be in public?  The applicants have submitted that the committee erred in law in the manner in which it directed itself in this regard.

20.In my view, however, this issue is essentially superfluous.  By that I mean that, as the committee itself recognized, whether its view of the law is right or wrong, it would still have come to the same conclusion.  In this regard, the committee said the following :

“We would add that even if we were wrong to hold that section 36(1)(a) is applicable; and if (contrary to what we held above) it is rule 11 which governs the present proceedings, we would still have exercised our discretion to direct that the hearings in this case be held in public.  As pointed out above, under r.11, our discretion is unfettered.  We consider it right to exercise our discretion to order the hearings to be held in public because, even if s.36(1A) is not strictly applicable, we consider that the emphasis of transparency of disciplinary proceedings (as manifested by that subsection) is a matter to which we should nevertheless pay regard. ….

… we do not see what prejudice may be caused to the Respondents in the case by holding the hearings in public and we would exercise our discretion to do so even if r.11 were the applicable rule in the present case.”

21.Of importance, the committee continued by saying the following :

“We consider that in this day and age, unless the opening up of a hearing to the public is going to cause prejudice to any of the parties to the proceedings, it is generally right to exercise the discretion conferred by rule 11 to hold the hearing in public so that the proper administration of justice in disciplinary proceedings can be openly seen to be done.”

22.It was, in my view, entirely legitimate for the committee to rule that, whatever law applied, it would still order all hearings in this particular case to be in public.  That is why, in my view, to employ the term used earlier, the question of what law should apply – while no doubt a nice issue for debate – has been rendered superfluous by the committee’s ruling.

Legitimate expectation

23.Expressed broadly, it has been submitted on behalf of the applicants that if their matter had been pursued in a timely fashion, it would have been resolved under what I will call the old legal regime.  If it had been resolved under the old regime, so it has been argued, it is inevitable that the disciplinary committee would have conducted its hearings in private.  Accordingly, they have been entitled to rely on some form of legitimate expectation based presumably on past practice.

24.I find nothing in this submission.  The old legal regime vested each disciplinary committee with a discretion and it must be presumed that in each and every case that discretion was exercised having regard to the law and to the particular facts of the matter.  I do not see how that could give rise to any form of legitimate expectation even if it could be shown that all, or almost all, committees ordered that hearings should be in private.  It would be a startling submission to propose that, because historically a court or tribunal has exercised its discretion in a particular way, it has thereby bound itself to continue to exercise its discretion in that way no matter what the facts of each case or the nature of any change in the legitimate concerns of society as to how the discretion should best be guided.

25.It must be remembered that these disciplinary proceedings go directly, not simply to the interests of these applicants and to their governing body, but, of equal importance, to the broader public interest.  As I have said in an earlier judgment, it is important to observe that the accountancy profession plays a critical role in ensuring the orderly and lawful conduct of commercial activities.  Dereliction or culpability on the part of its members can and does have a far reaching effect, not only in the sphere of business activities but in matters concerning the financial well-being of individuals.

Procedural impropriety

26.While the applicants’ disciplinary proceedings were taking place, I am told that another set of proceedings – concurrent proceedings – were taking place before another disciplinary committee.  The concurrent proceedings, I understand, related to the auditing of the accounts of the same company but covered a different accounting period.  In addition, of course, the auditing was carried out by a different firm.  I am informed that the disciplinary committee dealing with the concurrent proceedings had ordered that those proceedings be held in private and not in public.

27.This was clearly a relevant matter and one that was raised in the decision now under challenge.  In this regard, the committee heard from the solicitor representing the Institute as to why he had agreed with the applicants’ solicitors that the proceedings should be in private.  In this

regard, the committee said the following in its ruling :

“We have inquired of Mr Hunsworth on his position.  We understand his position to be that he supported the Application only on the basis that another Disciplinary Committee hearing another complaint made against another firm of accountants regarding their conduct of the audit of the accounts of the particular company in question, had ruled that the hearing of that complaint would be held in private.  The complaints in the present case also relate to the accounts of that company, but the accounts were of a different accounting period (the 16 months ending 31 December 1997), and the audit of the same was of course carried out by a different firm of accountants.  Be that as it may, Mr Hunsworth told us that he supported the respondent’s application simply ‘as a matter of consistency’.”

28.The committee went on to say : 

“We are not persuaded that merely because another disciplinary committee has held in another set of disciplinary proceedings that its hearing should be held in private, that we must do the same in the present case.  As pointed out above, the other set of disciplinary proceedings involve different complaints against a different firm of accountants involving a different set of accounts that relate to a different accounting period.”

29.The complaint made by the applicants is that the disciplinary committee should at least have obtained the reasons given by the committee dealing with the concurrent proceedings as to why that committee had decided that the interest of justice favoured private hearings in that case.   Clearly, if the two proceedings were linked, that reasoning would be relevant.  Mr Coleman, for the applicants, has argued that the failure to obtain those reasons and the giving of the ruling in the absence of those reasons has constituted a material procedural unfairness.

30.I do not see how that can be argued.  First, it is apparent that an attempt was made to obtain the reasons.  In this regard, on page 2 of its ruling, the committee said :

“We do not know what were the reasons for the decision of the other disciplinary committee to hold its hearings in private.  Those reasons may be based on circumstances peculiar to the other case and may have little or no relevance at all to the consideration of the application in the present case.  Accordingly, we had invited the parties to provide us with a copy of the reasons for the decision of the other disciplinary committee and in the meantime we would defer our ruling on the application.  It now transpires that there were in fact no written reasons for the decision given by the other disciplinary committee.  Although the parties had written to the clerk of the other disciplinary committee for the transcript of the oral reasons, no such transcript has since been provided to us.”  [my emphasis]

31.Nothing has been put before me to demonstrate that the committee was plainly in error in saying that it appeared that the committee dealing with the concurrent proceedings had given no written reasons.  There is nothing to suggest that inertia took hold and one must presume, therefore, having regard to the presumption of regularity, that some attempt was made; that is, some proper attempt was made to obtain the reasons.  When this failed, the committee decided that it could wait no longer and that indeed its obligation at the behest of the parties, was to get on with the matter and to avoid further delay.  In this regard, the following is said in the ruling :

“Both parties to the present proceedings have indicated their wish to have a ruling by us as soon as possible.  We consider that we should not defer our ruling on the application any further.  As nothing has been provided to us regarding the reasons for the decision by the other disciplinary committee, we cannot speculate on those reasons.  Without being informed of the reasons underlying the decision of the other disciplinary committee, we do not consider that there is any question of consistency such as would require us to come to the decision that the hearings of the present complaint should also be held in private.”  [my emphasis]

32.As I have said earlier, the disciplinary committee is the master – subject to law – of its own proceedings.  While a committee will no doubt take account of rulings before other committees that may be relevant to its own proceedings, it is not bound by those rulings, certainly not in respect of purely procedural matters.

The application by consent

33.On behalf of the applicants, Mr Coleman has submitted that, the application to have the matter heard in private being a joint application, the committee erred in law in failing to take this fact into account more fully than it did.  I am unable to agree.  It is common in our courts to have judges presented with applications made by consent.  Often those applications, because they are made by consent and because the court considers them reasonable, are granted.  But there are also many occasions when applications are made by consent and the court rejects them.  In the present case, the disciplinary committee took into account the fact that the application had been a joint application and gave reasons – entirely rational – for why nevertheless it intended to adopt a different course.  What is being challenged here is an exercise of discretion in respect of a procedural matter.  I fail utterly to see how it could be argued that the exercise of discretion in this case fell so far outside of the allowable parameters as to constitute an irrational exercise. 

Miscellaneous matters

34.In the course of his submissions, Mr Coleman emphasised that there were a number of material factors that favoured the granting of an order of privacy.  I agree.  However, there is nothing to suggest that the committee, in coming to its ruling, did not take into account all the matters properly put before it.  It was for the committee to decide what weight to give to them. 

35.Mr Coleman also criticised the wording of the committees’ reasoning in the passage to which I have referred earlier; that is in paragraph 20.  I do not see that the committee has said anything in that passage which would vitiate its ruling.  I understand the plain meaning of that passage to be that, even if section 36(1A) is not applicable, the committee nevertheless feels that it is proper in today’s circumstances to have regard to what is said in section 36(1A); namely, that the transparency of disciplinary proceedings should – in today’s changing society – be an important consideration.

36.It is for these reasons that I had to refuse leave.  However, my earlier ruling as to anonymity will remain of effect until 4 p.m. on Monday, 11 July 2005.  This is to enable the applicants, if they deem it advisable, to have time to appeal this ruling. 

Mr Russell Coleman, instructed by Messrs Barlow Lyde & Gilbert, for the 1^st and 2^nd Applicants