Re C

CACV 405/2004
cacv 406/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 405 AND 406 OF 2004

(ON APPEAL FROM HCB NO. 19401 OF 2003)

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BETWEEN

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CACV 230/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 230 OF 2005

(ON APPEAL FROM HCB NO. 10764 OF 2003)

______________________

BETWEEN

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Before:  Hon Ma CJHC, Stock JA & Kwan J in Court

Date of Hearing: 12 July 2006

Date of Handing Down Judgment: 28 September 2006

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J U D G M E N T

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Hon Stock JA:

Introduction

1.Section 138 of the Bankruptcy Ordinance Cap. 6 (‘the Ordinance’) provides as follows:

“Where the Official Receiver or a trustee in bankruptcy reports to the court that in his opinion a bankrupt who has been adjudged bankrupt has been guilty of any offence under this Ordinance, or where the court is satisfied upon the representation of any creditor or member of the creditors’ committee that there is ground to believe that the bankrupt has been guilty of any such offence, the court shall, if it appears to the court that there is a reasonable probability that the bankrupt will be convicted and that the circumstances are such as to render a prosecution desirable, order that the bankrupt be prosecuted for such offence, but no such order shall be a condition antecedent to any prosecution under this Ordinance.”

2.On 10 December 2004 Lam J dismissed an application made by the Official Receiver under section 138 for an order that the bankrupt C be prosecuted for certain offences contrary to that Ordinance.  Similarly he dismissed a like application for an order that the bankrupt L be prosecuted.  He did so because in his opinion the power conferred upon the court under section 138 is constitutionally impermissible as contravening the requirement of article 63 of the Basic law that stipulates that:

“The Department of Justice of the Hong Kong Special Administrative Region shall control criminal prosecutions, free from any interference.”

3.These are appeals by the Official Receiver from those decisions, and an appeal by the Secretary for Justice from the first of those two decisions, the Secretary having been granted leave by Lam J to intervene and make representations.  Since applicationsunder section 138 for an order to prosecute are made ex parte, this is an ex parte appeal.  We have received detailed submissions from Mr Godfrey Lam on behalf of the Official Receiver and the Secretary for Justice as well as from the amicus, Ms Linda Chan.  We are grateful to them for the depth of their industry as well as for the clarity of their submissions.

The court’s  role in bankruptcy

4.The court empowered by section 138 to make the order is the Court of First Instance ‘sitting in its bankruptcy jurisdiction’: section 2.  The role of that court is central to the entire process prescribed by, and the policy underlying, the Ordinance from petition to discharge.  The nature of the court’s function in the exercise of that jurisdiction is peculiar in the sense that it is a continuing one in the case of any person in respect of whom a petition is presented and a bankruptcy order is in due course made.  The court, with the assistance of its officer, the Official Receiver, exercises a supervisory role, balancing the interests of creditors and the rights of the bankrupt with an eye as well on the policy of the law to maintain proper commercial standards.  That balancing exercise has been thus described:

“The very complexity and diversity of which human affairs are capable means … that the law of bankruptcy must regulate a variety of elements simultaneously.  Primarily, it must safeguard the interests of the creditors, so that they receive payment of what is owed to them to the fullest possible extent.  In doing so, the law must adjudicate fairly as between all the creditors, so that no one acquires an unfair advantage over the others.  But due allowance must be made for whatever securities may have been taken, and a number of preferential claims must receive protection.  Furthermore, the law must afford some measure of assistance to the debtor, and enable the honest, but unfortunate, debtor to free himself from the accumulated burden of debts and eventually to make a fresh start with as much dignity as possible.  But in the case of the debtor who has been positively dishonest, or whose recklessness has been such that it has brought undeserved loss upon those who have had dealings with him, the law adopts a more severe attitude, in order to ensure that the illicit fruits of such conduct are not subsequently enjoyed by the debtor.  It is as a counter to such possible dishonesty or unfairness that the law contains a number of provisions for the annulment of any fraudulent transactions, and may also combine these with the imposition of penalties designed not only to restrain the miscreant himself from perpetrating fresh acts of dishonesty but also to deter others from aspiring to act in a similar way.  Such penalties may take the form of a continuation of the civil disabilities imposed upon a bankrupt who remains undischarged, or even of a criminal conviction, where appropriate.  In this way, the law seeks to advance the general observance of a high standard of morality in commercial dealings.” 

Fletcher ‘Law of Bankruptcy’ (1978), pp 3-4.

5.We shall shortly examine the offences to which section 138 applies but it is pertinent to note that they relate to conduct prior to the presentation of a petition, to conduct after the presentation of a petition, as well as to conduct after adjudication of bankruptcy.  The policy of these provisions is to punish and to deter:

“The offences established by the [Bankruptcy] Act [1914] and by later legislation are designed both to punish wrongful conduct, and also to operate as a deterrent against its ever being perpetrated.  In so far as this element of deterrence is effective in preventing any debtor from behaving fraudulently or recklessly, a corresponding degree of protection is secured on behalf of all those who extend credit, for… the acts from which a debtor must refrain if he is to escape the potential application of the criminal law are precisely those acts which would be prejudicial to his creditors’ interests.  Additional purposes which are served by some of the criminal provisions of the Act may be listed as the securing of the bankrupt’s fullest co-operation in the administration of his bankruptcy, and in facilitating the tracing and recovery of all his property which is properly divisible among his creditors.”  

Fletcher, above, page 311.

6.The point of this emphasis upon the court’s continuing supervisory role in bankruptcy and the relationship between that role and the policy of the criminal provisions, is to suggest how well placed is the court, sitting in its bankruptcy jurisdiction, to make the determination entrusted to it by section 138 and to suggest further that the power there granted to order a prosecution is incidental to, and sits comfortably with, the prime judicial functions carried out by the court under the Ordinance’s scheme.  That is especially so since in determining whether an order should be made, the court is directed to consider whether ‘the circumstances are such as to render a prosecution desirable’, a determination that can best be made by one who has an overview of the case, and a feel for the balance of the particular competing interests.  And the matter goes beyond that because the effect of an order for prosecution is not to divest the bankruptcy court of further responsibility for that bankruptcy, since the prosecution of a bankrupt for an offence under the Ordinance has itself an impact upon the court’s future role in the bankruptcy in that by virtue of section 30A(4)(g) of the Ordinance, the commission of a bankruptcy offence provides a ground for objection to the discharge of the bankrupt.

The statutory offences

7.The offences to which section 138 relates are offences by the bankrupt himself (not, for example, an offence under section 130 by persons other than a bankrupt) and only to offences under the Ordinance.

8.The offences are listed in Part VIII of the Ordinance and include the failure by a person adjudged bankrupt to discover to the trustee in bankruptcy (‘the trustee’) all his property and to whom disposed, the concealment and disposal of property, the making of material omissions in the statement of affairs, the removal and concealment of documents (section 129); the obtaining by an undischarged bankrupt of credit in circumstances that are proscribed (section 131); the transfer of property with intent to defraud creditors (section 132); engaging in gambling conduct or rash speculation that has materially contributed to his insolvency (section 133); failure by a person adjudged bankrupt to keep proper accounts (section 134); absconding from Hong Kong taking property with him (section 135); and concealing himself after the making of a bankruptcy order with intent to avoid service of any process in bankruptcy(section 136).

9.Sections 133 and 134 give rise to a specific question in this appeal, for each contains a provision that: ‘[a] prosecution shall not be instituted against any person under this section except by order of the court’.  That provision is said to be relevant because in the case of bankrupt L, the order sought from Lam J was one that L be prosecuted for an offence contrary to section 134, and the argument is that the requirement that no prosecution may be commenced without a court order goes further than section 138 in that sections 133 and 134 exclude the Secretary for Justice from launching a prosecution save with the court’s sanction, an interference, it is said, that contravenes the prohibition of article 63 of the Basic Law.

The reports

10.The report that may give rise to a section 138 order is one made pursuant to a duty imposed upon the Official Receiver by section 77 of the Ordinance whereby he is required:

“(a)  to investigate the conduct of the bankrupt and to report to the court, stating whether there is reason to believe that the bankrupt has committed any act which constitutes an indictable offence under this Ordinance or which would justify the court in refusing, suspending or qualifying an order for his discharge.”

11.In the case of the bankrupt C, a report was presented dated 13 August 2004 asserting that he had assigned three properties in consideration of which he was granted a licence to live in one of them, the contention being that he fraudulently removed property contrary to section 129(e) of the Ordinance, transferred property with intent to defraud his creditors, contrary to section 132(b), and removed property with intent to defraud creditors, contrary to section 132(c).  The Official Receiver submitted in the application that there was a reasonable probability of a conviction of these offences and that the circumstances were such as to render a prosecution desirable, and applied for an order under section 138 accordingly.

12.As for the bankrupt L, the application was dated 26 January 2005 and an order was sought that he be prosecuted for an offence under section 134(1) of the Ordinance for failing to keep proper books of account.

Legislative history

13.We have been presented with a helpful history of Hong Kong’s bankruptcy legislation, in many ways a mirror image of developments in England.  It is not, I think, necessary here to rehearse that history in detail, save to recount certain salient features.

14.Section 138 of the Ordinance is in the same terms as section 16 of the Debtors Act 1869 save that section 138 has the additional provision that no order by the court under section 138 ‘shall be a condition antecedent to any prosecution under this Ordinance’ and save, further, that section 16 stated that the order was an order to the trustee to prosecute, whereas section 138 is silent in that regard – it merely provides for an order ‘that the bankrupt be prosecuted for such offence’ without expressly designating the Official Receiver or the trustee as the prosecutor.  Prior to 1869, the court in England, by virtue of sections 222 and 223 of the Bankruptcy Act 1861, had the power to commit the bankrupt for trial and to direct the Official Assignee or the Creditors Assignee or any creditor in bankruptcy to act as prosecutor and the production of a certificate of such direction was sufficient warrant for an order that the costs of the prosecution be paid from public funds.

15.It is noteworthy that section 166 of the Bankruptcy Act 1883 provided that where an order was made for the prosecution of an offender under the Debtors Act, ‘it shall be the duty of the Director of Prosecutions to institute and carry on the prosecution’, a duty repeated by the terms of section 165 of the Bankruptcy Act 1914.  There is no such duty specified in the Ordinance.

16.Section 16 of the 1869 Act was said to be a substitute for the power originally reposed in the court in its bankruptcy jurisdiction itself to punish fraudulent debtors: see Ex Parte Marsden.  In re Marsden (1876) 2 Ch 786, in which Bacon CJ said, at p 791, that: 

“It is for the protection of society at large that this method [section 16] of punishing defaulting debtors is intended.  Under the former law the power of punishing them was exercised by the Commissioners in Bankruptcy.  There is no alteration in the law now, except as to the mode in which the power is to be exercised.”

As for that suggestion that there was now no difference, the point was made by Mellish LJ, at p 794, that the 1861 Act had been altered by the 1869 Act in that there was under the later statute no power to examine for the purpose of committal no doubt ‘because the Legislature thought that a bankrupt was liable to be prejudiced by going up to be tried after a preliminary conviction by the Court of Bankruptcy’.  It is to be noted that the 1869 Act contained a provision absent from the Ordinance, namely, section 17, that where an order was made under section 16 the expenses of a prosecution thus launched were to be borne from public funds.

Analysis

17.Article 63 of the Basic Law refers to the depository of the guarantee of prosecutorial independence as the Department of Justice, but it is convenient and appropriate to refer in this judgment to the depository as the Secretary for Justice, for he heads that Department and with him ultimately rest the prerogatives covered by that guarantee.

18.The prosecutorial independence of the Secretary for Justice is a linchpin of the rule of law.  He is in the discharge of that duty to be ‘actuated by no respect of persons whatsoever’ (Sir Robert Finlay, 1903, Parl. Debates Vol. 118, cols.349-390) and ‘the decision whether any citizen should be prosecuted or whether any prosecution should be discontinued, should be a matter for the prosecuting authorities to decide on the merits of the case without political or other pressure. … any practice savouring of political pressure, either by the executive or Parliament, being brought to bear upon the Law officers when engaged in reaching a decision in any particular case, is unconstitutional and is to be avoided at all costs.’: ‘The Law Officers of the Crown’ Edwards (1964), page 224.  That these statements of fundamental principle were made in reference to the prosecutorial role of the Attorney General in England is of no present consequence for they reflect accepted and applied fundamental principle in this jurisdiction the continuation of which is preserved by the entire theme of the Basic Law as well, specifically, as by article 63.  I have no doubt but that it is to these principles that the reference to ‘control’ in conjunction with the requirement that that control be free from interference, is there directed.  They are principles underpinned by a number of statutory provisions:

i.  Section 14(1) of the Criminal Procedure Ordinance, Cap 221 which provides that:

“The Secretary for Justice, if he sees fit to institute criminal proceedings, shall institute such proceedings in the court against the accused person as to him may seem legal and proper ….”  (Emphasis added);

ii.  Section 14B of the Criminal Procedure Ordinance:

“Where any Ordinance provides that no prosecution for an offence shall be commenced without the consent of some person other than the Secretary for Justice, such a provision shall not derogate from the powers of the Secretary for Justice in respect of the prosecution of that offence.”

iii.  Section 15(1) Criminal Procedure Ordinance:

“The Secretary for Justice shall not be bound to prosecute an accused person in any case in which he may be of opinion that the interests of public justice do not require his interference.”

19.The suggestion is made in argument that it is to political control to which article 63 is directed.  In support of that proposition, Mr Lam has referred us to Lloyd Brooks v Director of Public Prosecutions [1994] 1 AC 568, where the Privy Council suggested, at p 579, that section 94(6) of the Jamaican Constitution, in its provision that in the exercise of his power to institute, take over and discontinue criminal proceedings, ‘the Director of Public Prosecutions shall not be subject to the direction or control of any other person or authority’ was a provision that did ‘not refer to a court because its primary purpose is to protect the D.P.P. from the type of objectionable political interference referred to in the passage of the speech of Lord Diplock already cited.  It is not intended to apply to judicial control of the proceedings.’  The speech there referred to was in Grant v Director of Public Prosecutions [1982] AC 190, 201:

“The office of the Director of Public Prosecutions was a public office newly-created by section 94 Constitution.  His security of tenure and independence from political influence is assured.  In the exercise of his functions, which include instituting and undertaking criminal prosecution, he is not subject to the direction or control of any other person.”

20.I apprehend that it is to such interference, that is to say, interference of a political kind, to which article 63 is directed.  But the rule that ensures the Secretary’s independence in his prosecutorial function necessarily extends to preclude judicial interference, subject only to issues of abuse of the court’s process and, possibly, judicial review of decisions taken in bad faith:

“The gravity of the power to bring, manage and terminate prosecutions which lies at the heart of the Attorney General’s role has given rise to an expectation that he or she will be in this respect fully independent from the political pressures of the government. … It is a constitutional principle in this country that the Attorney General must act independently of partisan concerns when supervising prosecutorial decisions. … This side of the Attorney General's independence finds further form in the principle that courts will not interfere with his exercise of executive authority, as reflected in the prosecutorial decision-making process.  In R v Power [1994] 1 SCR 601, L’Heureux-Dubé J, said, at pp 621-23:

‘It is manifest that, as a matter of principle and policy, courts should not interfere with prosecutorial discretion.  This appears clearly to stem from the respect of separation of powers and the rule of law.  Under the doctrine of separation of powers, criminal law is in the domain of the executive….’”

Krieger v Law Society of Alberta [2002] 3 SCR 372, 387-388.  (Emphasis added).

21.The emphasis that I have added to those passages from Krieger is an emphasis designed to highlight the character of the prohibited judicial role with which we are concerned.  We are concerned with judicial interference with a decision-making process.  If that process has not yet commenced – and section 138 when invoked comes into play when no such process has been engaged – then it is difficult to see whence comes the interference, unless it be said that the initiation of prosecutions is exclusively the preserve of the Secretary, or that he is bound by the order.  To these latter points, I will return.  As for control, the judgment of the Supreme Court in Krieger goes on, at pages 387 – 388, to refer to the control of prosecutorial powers and it does so by reference to judicial review and abuse of process and by reference to ‘judicial deference to prosecutorial discretion’.  It is there said that: “Subject to the abuse of process doctrine, supervising one litigant’s decision-making process – rather than the conduct of litigants before the court – is beyond the legitimate reach of the court.’  (Emphasis added).  What article 63 does, apart from its prime purpose of prohibiting political interference is to reflect the boundary that protects the Secretary from judicial encroachment upon his right to decide whether to institute a prosecution, what charge to prefer, whether to take over a private prosecution, and whether to discontinue proceedings.  Those are the prerogatives with which we are concerned:

“The Attorney-General has many powers and duties.  He may stop any prosecution on indictment by entering a nolle prosequi.  He merely has to sign a piece of paper saying that he does not wish the prosecution to continue.  He need not give any reasons.  He can direct the institution of a prosecution and direct the Director of Public Prosecutions to take over the conduct of any criminal proceedings and he may tell him to offer no evidence.  In the exercise of these powers he is not subject to direction by his ministerial colleagues or to control and supervision by the courts.” 

per Viscount Dilhorne in Gouriet v Union of Post Office Workers [1978] AC 435, 487.  See also Krieger, above, at p 394.

22.This is not to say that the Courts are powerless to prevent an abuse of their process, but the exercise of such a judicial power, even though it may have the effect of bringing proceedings to a halt, arises after the institution of proceedings and, as the phrase ‘abuse of process’ itself illustrates, is a power directed at the preservation of the integrity of the judicial process.  It is a necessary corollary to the exercise of judicial authority, itself preserved by the Basic Law.  There is also authority for the proposition that “dishonesty, bad faith or some other exceptional circumstances” might found a basis for challenge in the courts of the exercise in a particular case of a prosecutorial prerogative: see R v Director of Public Prosecutions ex parte Kebilene [2000] 2 AC 326, 376; though in this regard see also Kwan Pearl Sun Chu v Department of Justice, Civil Appeal 314 of 2005, 30 May 2006, unreported.

23.By reference to the principles thus far identified, we are able more readily to cull the question that has in this case to be answered.  I suggest that the question is this: In making an order under section 138 of the Ordinance, does the Court thereby control any of the prosecutorial prerogatives of the Secretary for Justice; that is to say, his discretion to institute, or direct the institution of, a prosecution; to decline to institute a prosecution; to take over proceedings commenced by others; and to discontinue proceedings he has commenced?

24.Viewed thus, it seems to me sufficiently clear that the answer to the question posed is ‘No’, for by the exercise of the section 138 power the court interferes with, and controls, none of those prerogatives.  In neither of the cases before us had the Secretary sought to put into motion any prosecution or to make any decision in relation to a subsisting prosecution, in respect of which a court has intervened.  Nor has there been any decision by him not to institute proceedings which a court has by order sought to overturn.  That being so, it is difficult to see how it can be said that the court has interfered with or controlled the Secretary in the exercise of any one of his prosecutorial prerogatives – unless it be that a section 138 order is a direction to the Secretary that he is to institute proceedings for a specific offence under the Ordinance, an issue to which I must return.

25.There is no rule that only the Secretary may originate a criminal prosecution.  That has long been the law and it is well established that:

“... it cannot properly be said that the institution of prosecutions and the conduct of prosecutions is essentially a function of the Executive Government.  In the absence of some special statutory restriction any person is at liberty to institute and conduct a prosecution for a breach of the law.”

per Latham CJ in R v Federal Court of Bankruptcy; ex parte Lowenstein [1937-1938] 59 CLR 556, 567. 

The reference there to statutory restriction will be significant in those cases where statute prescribes that the consent of the Secretary for Justice is required as a condition antecedent to the institution of proceedings, but the statute with which we are concerned includes no such condition.

26.A private prosecution, once commenced, may be taken over by the Secretary and continued or discontinued as he sees fit.  In the case of proceedings before a magistrate this is provided for by section 14 of the Magistrates Ordinance, Cap. 227 and in the case of proceedings beyond that: “The Secretary for Justice may intervene and effectively prevent a private prosecution from proceeding to the District Court and the Court of First Instance by a refusal to sign either the charge sheet or the indictment (as required by sections 74 and 75 of the District Court Ordinance and section 17 of the Criminal Procedure Ordinance)”: Archbold Hong Kong 2005 para. 1-228.  It is further to be noted that proceedings may be stayed by the entry of a nolle prosequi, a vehicle available to the Secretary alone (see para 1-228 Archbold Hong Kong 2005).  The powers of the private prosecutor, which extend to enabling him to conduct proceedings launched by him, sit side by side with the powers of the Secretary.  No-one could correctly suggest that the exercise of such a private power was a manifestation of control of the Secretary’s prerogatives or of interference with the exercise of his prosecutorial function. 

27.Where then does room remain for asserting accurately that a power such as that provided by section 138 constitutes control or interference?  There would be such room were the order to prosecute directed at, and bind, the Secretary himself or were the direction to prosecute be one that indirectly bound the Secretary.  It will be remembered in this regard that section 138 does not contain a provision, as did section 166 of the 1883 Act or section 165 of the 1914 Act, that where an order to prosecute was made the Director of Public Prosecutions (or the Secretary) is bound to prosecute.  On the other hand, section 138 does not specify to whom the order is directed and it was the potential indirect effect of an order seemingly directed at no-one in particular that, understandably, troubled the judge at first instance in this case.  What he said, at paragraph [6] of his judgment, was this: ‘Hence, an order under section 138 cannot be an order directing the Director of Public Prosecutions or Secretary for Justice to prosecute since they are not party to these proceedings.  But they might be affected by such an order under the principle of AG v Newspaper Publishing plc [1997] 1 WLR 926 and section 110 of the Bankruptcy Ordinance.’  Section 110 of the Ordinance stipulates that:

“Where default is made by a trustee, bankrupt or other person in obeying any order or direction made or given by the court under this Ordinance, the court may make an immediate order for the committal of such trustee, bankrupt or other person for contempt of court:

Provided that the power given by the section shall be deemed to be in addition to and not in substitution for any other right, remedy or liability in respect of such default.”

28.The position adopted by the Secretary for Justice in the Notice of Appeal is that since neither the Secretary nor the Director of Public Prosecutions were in these cases parties to the applications – and in practice they never are – the orders cannot be treated as directed at them; and that as for the potential liability for contempt of court by a non-party in allegedly thwarting the purpose which the court, in making its order, was intending to fulfil (the A-G v Newspaper Publishing plc point), this does not arise, the argument goes, if section 138 of the Ordinance is so construed as to be consistent with article 63 of the Basic Law.

29.I am of the opinion that the position taken by the Secretary for Justice in this regard is correct.  It is true that the power we see in section 138 is unusual, in that the normal course to be adopted by a court that uncovers from the evidence before it in a civil action a prima facie case of crime, is to refer the papers to the Secretary for examination and for such course as he then sees fit.  The power has, in relation to the like provisions in the English Acts, been described, in the Report of the Committee on Bankruptcy Law and Deeds of Arrangement Law Amendment, 1957 (known as the Blagden Report) as curious:

“153.   This curious procedure whereby a Court of civil jurisdiction is empowered to order that prosecution shall take place before a criminal Court appears to us to be anomalous and, in addition, we are informed it can cause considerable administrative difficulties.  Some provisions in the Act relating to bankruptcy offences make the order of the Court a necessary pre-requisite to the prosecution of a bankrupt.  There are a number of Sections which constitute prosecutable offences, but it is only under Sections 157 and 158 that it is necessary for a Court order to be obtained.  We are of opinion that this procedure should be abolished, but the matter will be dealt with further in this Report when the Sections relating to criminal proceedings against a bankrupt are under consideration.  As a result, however, of our considerations, we are of opinion that no obligation should be placed upon the Official Receiver to report any matters relating to prosecutions to the Court, but that such reports should be made to the Board of Trade so that, when instructed by the Board, the Solicitor to that Department can consider the Official Receiver's report and decide whether the evidence is sufficient to justify the institution of criminal proceedings.  We are informed that it has often been found to be inconvenient under the present procedure in cases where the Court may have made an order to prosecute on the Official Receiver's report, but the Solicitor, upon investigation, is of opinion that the evidence is insufficient to obtain a conviction, and conversely when the circumstances of the bankruptcy and the evidence available are such as to make a prosecution desirable in the public interest and the Court has failed to provide an order for the prosecution to be instituted.”

30.We have not been informed of any difficulties experienced in the administration of section 138, no doubt because it is in practice the Official Receiver who seeks the order and then has the conduct of proceedings, wherefore there arises in practice no dichotomy between the state of the case which prompts the court to order a prosecution and the state of the case in the hands of the prosecutor.  Whether as a matter of policy the law should be changed to avoid all prospect of a conflict, actual or perceived, between a court order for a prosecution and intervention by the Secretary for Justice under one of the powers to which I have referred, is not a matter for us.  Our remit for the purpose of this appeal is to determine only whether the power under section 138 constitutes judicial intervention upon prosecutorial independence.  The answer to that question is, in my opinion, ‘No’, first because the power under section 138 is ancillary to a function that is judicial and, secondly, because the power may reasonably, and therefore must, be construed as subject to the rights of the Secretary to decline to proceed where his signature to a charge sheet or an indictment is required, or to stop a prosecution by the entry of a nolle prosequi where he sees fit so to do.

31.In paragraph [6] above, I suggested that the power under section 138 to order prosecution in an appropriate case was incidental to the Court’s supervisory role in bankruptcy, a power designed for the protection of creditors, as well as for the protection of the debtor.  I believe that support for that approach may be found in the decision of the High Court of Australia in The King v The Federal Court of Bankruptcy and Another; Ex Parte Lowenstein [1937-1938] 59 CLR 556.  Under consideration were sections 209(g) and 217 of the Bankruptcy Act 1924-1933.  Section 209(g) provided that: “Whoever… being a bankrupt, has omitted to keep such books of account as are usual and proper in the business carried on by him and as sufficiently disclose his business transactions and financial position during any period within the five years immediately preceding the date of his bankruptcy, shall be guilty of an offence.”  Section 217 provided that: “(1) If the court, in any application for an order of discharge either voluntary or compulsory, has reason to believe that the bankrupt has been guilty of an offence against this Act punishable by imprisonment, it may – (a) charge him with the offence and try him summarily; or (b) commit him for trial before any court of competent jurisdiction.  (2) Where the court tries the bankrupt summarily it shall serve him with a copy of the charge and appoint a day for him to answer it.  On the day so appointed, the court shall require the bankrupt to plead to the charge, and if the bankrupt admits the charge, or if after trial court finds that the bankrupt is guilty of the offence, the court may sentence him to imprisonment for any period not exceeding six months.  (3)  … .” 

32.It was contended before the High Court that these provisions were outwith the powers of the Commonwealth Parliament as constituting an attempt to invest the courts with a non-judicial function inconsistent with its judicial function.  The argument was that section 217 in particular made the court party to the criminal proceedings and gave it the carriage of the prosecution, and that it was the function of the executive government to decide whether or not the law should be put in motion against any particular individual.  It is to be noted in particular that the powers there conferred upon the court in the exercise of its bankruptcy jurisdiction went considerably further than the power conferred by section 138 of the Ordinance, in that the Australian bankruptcy court was given the power itself to try the bankrupt for an offence.  The argument echoed the point that troubled the first instance judge in this case and, as we see from the judgment of Latham CJ at page 567, included the contention that:

“ … the institution of prosecutions is so peculiarly a function of the Executive Government that at least this function cannot be removed from the executive and invested in a judicial tribunal.  The simplest answer to this contention is that it cannot properly be said that the institution of prosecutions and the conduct of prosecutions is essentially a function of the Executive Government.  In the absence of some special statutory restriction any person is at liberty to institute and conduct a prosecution for a breach of the law.”

He added, at page 569, that:

“The well-known procedure for contempt in the face of the court which has existed for some centuries provides an example of the same court charging and actually trying a prisoner for an offence and imposing a penalty for the offence.  This single instance is sufficient to show that the nature of judicial power as understood in England and in Australia is not such as to exclude the possibility of the initiation by a judge of proceedings in relation to an offence and the trial for that offence by the same judge.”

33.One pauses here to note that in the instant case we are not concerned with the trial of the offence by the Hong Kong court that makes the section 138 order.  Nor does the court in making a section 138 order itself institute the prosecution.  The prosecution is instituted by the laying of an information, and the court in the exercise of its bankruptcy jurisdiction has no control upon the course which the criminal case takes.  In so far as the majority of the High Court of Australia considered the powers under sections 209 and 217 not at odds with the judicial function or executive prerogative, e fortiori can it be said that the significantly more limited power under section 138 does not offend.  The joint dissent of Dixon J, as he then was, and Evatt J was triggered by the conferring upon the one judicial body of the dual duties of prosecutor and judge as inseparable functions.  What, for our purpose, is of interest in that dissenting judgment is what it is that was said to be acceptable.  Parliament, they said, at pages 587-588, had the authority to confer powers on the courts that were incidental to such powers as obviously did belong to the judicature; but that begged a question of definition: what was and what was not properly described as incidental to judicial power:

“... a law with respect to a matter incidental to the execution of judicial power, must, in order to answer that description, deal with something arising in the course of exercising judicial power, something attendant upon or incidental to the fulfillment of powers truly belonging to the judicature.

From the foregoing general statement of the powers of Parliament in relation to jurisdiction in bankruptcy, it will be seen that, according to our view, it is not enough that a law such as sec. 217 giving authority to punish bankruptcy offences should be relevant to the subject of bankruptcy.  It must fall within the power to confer jurisdiction upon courts exercising part of the judicial power of the Commonwealth or be incidental to that jurisdiction.  It is here that the dual character of the function imposed upon or reposed in the courts of bankruptcy jurisdiction creates a difficulty.  No one doubts that a law directing the mode of investigating the question whether offences have been committed against the bankruptcy laws is within the legislative power over bankruptcy and insolvency.  Nor is there any doubt that laws prescribing the manner in which prosecutions are to be instituted and conducted are within that power.  Doubtless, it is competent also to deal with such matter as the admissibility of evidence and the burden and mode of proof.  It may be conceded further that a power of committing for trial a person who, upon evidence tendered for other purposes before the court, appears to have been guilty of an offence may be bestowed upon a court of bankruptcy jurisdiction as a matter incidental to the exercise of its judicial power.  All these are matters relevant to the subject of bankruptcy and consistent with the exercise of judicial power by the courts of bankruptcy jurisdiction.  But when the legislature confers on the courts, as inseparable functions, the duties of prosecutor and judge, the question at once arises whether this is not outside the conception of judicial power.”  (Emphasis added).

34.What I draw from this is that the power to order a prosecution under section 138 is an incident of the judicial function conferred by the Ordinance on the court in the exercise of its bankruptcy jurisdiction.  The court does no more than direct a prosecution.  It does not itself control that prosecution nor itself determine the case that is then presented.  Nor is there any obligation upon the court before which the information is laid pursuant to such an order to act other than it normally would act in determining whether a summons should issue or whether to commit for trial, a point made by Mellish LJ in Marsden, above, at page 795, namely that ‘… it is perfectly plain that it is not intended that the magistrate should commit, as a matter of course, simply because the Court of Bankruptcy has ordered the prosecution.’

35.The concern of the judge below that the Secretary for Justice may fall foul of a court order by thwarting its purpose were he to intervene, is a concern that does not arise if the power under section 138 is read as one that does not preclude the Secretary from the exercise of such powers as are provided to him by law to withhold his authority for the continuation of a prosecution where that authority is needed, or to intervene and bring an end to such proceedings; or put another way, section 138 should be read as subject to those powers.  That in my judgment is how it can and should be read.  The well-established principle to which Mr Lam draws our attention has been expressed thus in DPP v Hutchinson [1990] 2 AC 783, 818:

“... the accepted view in the common law jurisdictions has been that, when considering legislation the validity of which is under challenge, the first duty of the court, in obedience to the principle that a law should, whenever possible, be interpreted ut res magis valeat quam pereat, is to see whether the impugned provision can reasonably bear a construction which renders it valid.”

In this case the provision can readily be read so as to avoid the suggested conflict with article 63 and that can be done without recourse to section 2A(1) of the Interpretation and General Clauses Ordinance, Cap. 1 which makes provision for construction of all laws ‘with such modifications, adaptations, limitations and exceptions as may be necessary so as not to contravene the Basic Law ….’.

36.Sections 12 and 13 of the Magistrate’s Ordinance state that:

“12.  The Secretary for Justice is hereby entrusted with the duty and discretion of conducting the prosecution of all offences cognizable by a magistrate:

Provided –

(a)  that it shall be lawful for any member of the police force and such other public servant as the Secretary for Justice may from time to time by any general or special direction authorize to lay before a magistrate or an officer of a magistrate’s court who is authorized under section 8(1) an information in respect of an offence and any such information shall be deemed to have been laid on behalf of the Secretary for Justice;

(b)  that in any such case the Secretary for Justice shall be deemed to be a party to the proceedings and such member or public servant shall not be so deemed.

13. The Secretary for Justice may appoint any public officer or class of public officers to act as public prosecutor or prosecutors and to conduct generally on his behalf any prosecution before a magistrate or any specified classes of prosecutions or any particular case.  Any public prosecutor so appointed may without any written authority appear and plead before a magistrate any case of which he has charge which is being inquired into, tried or reviewed.”

It happens that authorizations have been issued by the Secretary for Justice under those two sections authorizing the Official Receiver to lay informations for offences under the Ordinance and to conduct such prosecutions on behalf of the Secretary.  That does not, however, mean that the court by an order under section 138 directs the Secretary to institute the proceedings.  The section must be read as a direction to the Official Receiver, where he has made the application, to prosecute and when he does so, it so happens that he does so on behalf of the Secretary; but this is not to denude the Secretary of his power to withdraw his authorization either generally or in relation to a particular case, or of his power to offer no evidence, to refuse to sign a charge sheet or indictment, or to enter a nolle prosequi.

37.Finally, the question was raised, in the course of submissions before us, whether the provisions of sections 133(2) and 134(2) constituted an infringement of article 63 of the Basic Law in that they preclude prosecution without an order of the court.  It is unnecessary for us to decide the point for it does not arise in this case.  It is a point that would only arise were a prosecution commenced without the making of such an order and were the prosecutor then to assert that the institution of such a prosecution was valid because the restriction imposed by the two subsections was invalid.   There does however appear to be a conflict between these particular provisions on the one hand and, on the other, the proviso to section 138 that no order by the court shall be a condition antecedent “to any prosecution under this Ordinance”.  Whilst this apparent conflict does not affect the issue in this appeal, it is a matter that requires attention.

Conclusion

38.For the reasons I have provided, I am satisfied that the power of the court in section 138 to order a prosecution does not contravene article 63 of the Basic Law.  In my judgment, the judge below ought to have entertained the applications for orders under section 138, and the appeal should be allowed.

Hon Kwan J:

39.I agree with the judgment of Stock JA.

40.In respect of the bankrupt in HCB No. 19401 of 2003 (CACV Nos. 405 and 406 of 2004), we are given to understand that the bankrupt was prosecuted in the magistrates’ court, notwithstanding that the Official Receiver’s application under section 138 was refused by Lam J, as it is provided in that section that a court order is not a condition antecedent to any prosecution under the Bankruptcy Ordinance and the offence in section 132 does not require a court order for prosecution to be brought.  Hence, no further order is required in this instance other than allowing the appeal. 

41.For the bankrupt in HCB No. 10764 of 2003 (CACV No. 230 of 2005), Mr Lam has sought an order at the hearing that the application of the Official Receiver made under section 138 be remitted to the Judge, to consider if there is a reasonable probability that the bankrupt will be convicted for an offence under section 134(1) and whether the circumstances are such as to render a prosecution desirable, and to make such order as he thinks fit, as section 134(2) requires a court order for a prosecution under sub-section (1).

42.Subsequent to the hearing, we received a letter from the Official Receiver that as the limitation period for the prosecution of the bankrupt in HCB No. 10764 may have expired under section 140, the appeal in CACV No. 230 of 2005 has become academic.  So for this appeal as well, no further order is required in this instance other than allowing the appeal.

43.As the Official Receiver and the Secretary for Justice have not sought any order on the costs of the appeal, no order should be made.  

Hon Ma CJHC:

44.I agree with the judgments of Stock JA and Kwan J.  The appeal is accordingly allow.  There will be a costs order nisi that there be no order made as to costs.

Mr Godfrey Lam instructed by the Official Receiver for the Appellant (CACV 405/2004 and CACV 230/2005)

Mr Godfrey Lam instructed by the Secretary for Justice for Appellant (CACV 406/2004)

Ms Linda Chan as Amicus Curiae