Securities and Futures Commission v. Zou Yishang

HCMA859/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 859 OF 2005

(ON APPEAL FROM ESS 12652 OF 2004)

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BETWEEN

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Before : Hon Stuart-Moore Ag CJHC, Burrell and McMahon JJ in Court

Date of Hearing : 1 March 2007

Date of Judgment : 14 March 2007

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J U D G M E N T

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McMahon J (giving the judgment of the Court) :

1.The appellant was convicted by Mr Allan Wyeth at Eastern Magistracy after trial of an offence of dealing in securities with an intention of creating a false or misleading appearance of active trading in those securities, contrary to section 135(1)(a) and section 139 of the now-repealed Securities Ordinance, Cap. 333.  He was sentenced to 4 months’ imprisonment and ordered to pay the costs of the SFC investigation into the matter totalling $56,924.  He appealed his conviction, sentence and the order made against him.

2.The matter then came before Deputy Judge Longley in the High Court who on 11 July 2006 referred it to this court pursuant to the provisions of section 118(1)(d) of the Magistrates Ordinance, Cap. 227 on the basis that the matters raised by ground 6 below involved an important question of law.

3.The prosecution case at trial was that the appellant between 7 December 2001 and 18 January 2002 operated five share trading accounts held at separate broker’s firms, one account being in the name of his wife and four being in the name of a company Able Technology Ltd, of which he was the controlling director and shareholder.

4.Those share trading accounts were used by him to buy and sell the shares of a company called Dynamic Holdings Ltd (“Dynamic”).  The appellant, during the charged period, on various occasions sold Dynamic shares held in one account controlled by him to another account controlled by him so that there was no change in beneficial ownership.  His ability to do so was facilitated by the system for automatic matching of buy and sell orders used by the Hong Kong Stock Exchange at the time.  The prosecution case was that there were a number of such transactions which are known as “wash” sales, on eleven days during the charged period and those sales created a false impression of active trading in Dynamic shares.

5.The prosecution case was presented on the basis that the appellant intended to create a false or misleading impression of active trading in Dynamic’s shares or, alternatively, even if there was some other purpose in the wash sales undertaken by the appellant, nonetheless he knew that the creation of a false or misleading impression of active trading was a virtually certain consequence of his actions.  It was the respondent’s contention that such knowledge on the part of the appellant was sufficient to establish the required intention.

6.The appellant’s case was that his trading was carried out for entirely legitimate purposes.  He conducted the wash sales so as to enhance his cash flow in the sense that he could delay his liability to pay for shares he purchased on one of his accounts by selling the shares on to another of his accounts within the two-day period allowed him before he had to pay for the original purchase of the shares.  This also enabled him to retain the Dynamic shares involved which he regarded as significantly undervalued at the time.  He also wished to make himself a more valued customer with the various stockbrokers he dealt with by increasing his own trading turnover.  His case was presented to the court by way of cross-examination of prosecution witnesses and exculpatory statements made by him in recorded interviews with Securities Futures Commission (“SFC”) officers.  In this regard he also called two expert witnesses as to the commercial realities of what was contained in the statements he had made to those SFC officers.  The appellant did not himself give evidence at trial. 

7.The appellant finally asserted that the prosecution in any event had not proven he possessed the specific intention to create a false or misleading appearance of active trading in Dynamic’s shares.

8.The grounds of appeal against conviction advanced by Lawrence Lok SC, and Messrs Hectar Pun and Newman Lam of counsel on behalf of the appellant may be set out as follows :

(1)     the magistrate was wrong to have, on the one hand accepted the expert witnesses called on behalf of the defence as honest and experienced witnesses but then, on the other hand to have rejected their evidence;

(2)     the magistrate misunderstood the evidence of one of those expert witnesses called on behalf of the appellant;

(3)     the magistrate misunderstood the evidence of a number of prosecution witnesses;

(4)     the evidence of the prosecution expert witnesses was wrongly admitted and gave rise to a real possibility that the magistrate was biased;

(5)     the magistrate failed to give sufficient weight to the evidence of the expert witnesses called on behalf of the appellant;

(6)     in determining the question of the appellant’s mens rea the magistrate applied the wrong test, and wrongly inferred the appellant intended to create a false or misleading impression of active trading in Dynamic’s shares; and

(7)     the conviction was unsafe and unsatisfactory.

9.The ground of appeal advanced against sentence is that it was manifestly excessive and wrong in principle.  The ground of appeal against the costs order is that it was wrong in principle and was not warranted in the circumstances of the case. 

Grounds 1 and 5

10.These grounds can conveniently be dealt with together.  In the course of his oral reasons for verdict (adopted subsequently as part of his statement of findings), the magistrate said of the two defence expert witnesses, Messrs Toby Heale and Elton Man :

“… The essence of this evidence of Messrs Heale and Man, put shortly, was to the effect that the defendant’s trading practices over the relevant period were in keeping with his explanations to the SFC, in particular as to the maintaining of the margin facilities.

Both Mr Heale and Mr Man addressed the issue of wash sales, with Mr Heale providing the opinion the claimed wash sales were wrongly so characterised as they had, on the defendant’s various accounts to the SFC, a commercial purpose albeit the trading did not produce direct profit from sales.  Mr Heale proffered the view that rather than the defendant’s trading being wash sales ‘designed to dupe the unwary’, the trading may have been a modern-day example of a centuries old English ‘cash flow enhancing practice’, the implication being such a practice, called ‘contango’, was and is legitimate.

Mr Heale did conclude, with some emphasis, that there were much better ways for the defendant to go about ‘enhancing his cash flow’ than the manner he did adopt, and that the practice he engaged in was an expensive way to achieve his claimed object of enhanced cash flow margin facility maintenance.  Messrs Heale and Man presented as honest witnesses, experienced in the securities field.  I do not doubt their opinions were honestly put forward before the court.

However, I do not accept the basis upon which they proceed.  The explanations before the court from the defendant are not only not rational, they are inherently improbable to say the least of them. …”

11.It was contended on behalf of the appellant that the magistrate’s reasoning in this regard was flawed in that, after finding the two witnesses to be honest and experienced, he nevertheless rejected their evidence. 

12.The evidence of the two defence witnesses centred on the commercial reasonableness of the explanations given for his trading by the appellant to the SFC officers during the course of his interviews.  The magistrate was perfectly entitled to, and indeed obliged to, come to his own conclusions in this regard.  The magistrate, in doing so, no doubt adverted to the evidence of both defence expert witnesses (together with the other evidence before him including that of the two prosecution experts).  In ultimately rejecting the defence experts’ evidence and accepting the evidence to the contrary of the two prosecution experts, Miss Stella Fung and Mr Clive Rigby, he was doing no more than he was entitled to do.  A tribunal of fact, it is trite law, is not obliged always to accept the opinions of an expert witness (who will in the normal course be both experienced and honest) but may, after weighing those opinions in the balance, accept or reject them partly or in their entirety.  In the present case there was conflicting expert evidence and the magistrate was wholly entitled to accept the evidence of the prosecution expert witnesses in forming his own view of the credibility of the appellant’s explanations for his wash sales.  That the magistrate understood the correct approach to the evidence of expert witnesses is plain from what he said in his statement of findings :

“It was clear from the outset of this trial that the evidence of the experts to be called would be all important.  Receiving, assessing and rejecting or accepting evidence from witnesses tendered as experts, either by the prosecution and/or the defence, in magistracy trials is commonplace, indeed it seems to be coming even more so.  I am familiar with the requirements and limitations as to persons presented as experts and their testimony.  Out of an abundance of caution I reacquaint myself as to these matters from time to time and did so in the course of this trial, …

…

… The evidence of the expert witnesses in this case included material which could be regarded as moving into the courts’ province as to the ‘ultimate issue’.  This is a common feature of expert evidence in many cases, be the expert a witness for the prosecution or defence.  What is important is for the Court to remain well aware ‘ultimate issues’ are for the Court alone to pronounce upon.  Any evidence, ‘expert’ or not, is only received to provide a foundation for the Court’s decision making not to supplant it or otherwise intrude upon the Courts’ function.  I was aware of this throughout and well knew the boundaries within which the evidence was confined.”

13.No substantial complaint can be made of the magistrate’s approach to the expert evidence and grounds 1 and 5 must fail.

Ground 2

14.Mr Lok alleges on behalf of the appellant that the magistrate misunderstood part of the evidence of Mr Toby Heale, one of the experts called in the defence case.  The complained-of passage in the magistrate’s oral reasons for verdict is as follows :

“      Mr Heale did conclude, with some emphasis, that there were much better ways for [the appellant] to go about ‘enhancing his cash flow’ than the manner he did adopt. …”

15.Mr Lok argues that the magistrate misunderstood the evidence of Mr Heale in this regard because, quite simply, Mr Heale in fact gave no such evidence.   It is true that Mr Heale’s evidence was not in given in terms of the precise words used by the magistrate but what he did say in evidence during cross-examination is as follows :

“Q.  So he’s got two days credit, three lots of transaction costs and the same number of shares.

A.    Yes.

Q.   That may be good business for the broker but doesn’t look like very good business for him, off of two days credit.

A.    I didn’t say it was good business … I never said this is good quality business.

p. 1849F-T

Q.   There must be better ways of doing it, aren’t there Mr. Heale?

A.   There are no worse ways of doing it, to answer your question.  It’s a short-term fix.  It works.  It’s cash flow but it’s expensive.”

16.We agree with Mr Bell’s submission on behalf of the respondent that while the magistrate’s comment was expressed in terms which differed from the evidence of Mr Heale it was nevertheless a sufficiently accurate reflection of that evidence.  We particularly note that portion of Mr Heale’s evidence where he agreed, in the context of the defence case that the appellant was merely trying to enhance his cash flow, that there were “no worse ways” of doing so than the system of wash sales the appellant claimed he had used.  The obvious concomitant of that, in the words of the magistrate, is that there “were much better ways” of doing so. 

17.There is nothing in this ground. 

Ground 3

18.In his oral reasons for verdict the magistrate said this :

“Five witnesses gave full and detailed evidence in expressing their opinions as to the defendant’s trading activities amounting to the creating of a false or misleading appearance of active trading in Dynamic shares over the relevant period. …”

19.Mr Lok points out that there were no “five” witnesses who did this and that the only witnesses who gave opinion evidence as to the defendant’s trading activities creating the appearance of active trading in Dynamic shares were the four expert witnesses called by the prosecution and the defence. 

20.Mr Lok argued that the reference to “five” witnesses in this part of the magistrate’s oral reasons may have been a reference to nine brokers and dealers who gave evidence and who were from the securities firms where the appellant maintained his accounts.  Mr Lok says if that be the case the magistrate completely misunderstood their evidence as none of those witnesses gave any evidence remotely going to the effect of the appellant’s trading activities on the market for Dynamic shares. 

21.However we do not think that to be so as the magistrate had earlier, in his reasons for verdict, referred to the evidence of those nine individuals albeit in brief and general terms.  The totality of the oral evidence before him consisted of those nine brokers and the four expert witnesses.  It is most unlikely, in our view, that he could have confused the evidence of the two quite distinct groups of witnesses.  Additionally, the complained-of passage occurred in the midst of a relatively long segment of the magistrate’s reasons dealing with the expert evidence.  In our view, the only realistic conclusion which can be drawn is that the magistrate had made a slip of the tongue and referred to “five” witnesses when he was really referring to the four expert witnesses who were the only witnesses who had in fact given opinion evidence on that subject matter. 

22.We might add that we had been concerned that the word “five” appearing in the excerpted passage was merely a typographical error and accordingly listened to the recording of the magistrate’s oral reasons for verdict.  We are satisfied that he did in fact refer to “five” witnesses, and that the reference was a slip of the tongue.  In our view, it did not render his finding that the appellant’s wash sales had created an appearance of active trading unsafe and this ground must also fail. 

Ground 4

23.By this ground Mr Lok complains that by admitting and eventually accepting the expert evidence of Miss Stella Fung the magistrate put himself in a position of apparent bias.  

24.We accept, as has been urged upon us, that the test for bias has moved on from R. v. Gough (1993) AC 646 and is now as approved by the Court of Final Appeal in Deacons v. White & Case Ltd [2003] 3 HKC 374 as being dependant in the circumstances of a particular case on whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased. 

25.Mr Lok, we emphasise, was not arguing that Stella Fung’s evidence was inadmissible in itself.  His reasoning was somewhat more convoluted.  It was the creation of apparent bias on the part of the magistrate through the admission of her evidence which was complained of, and for that reason the evidence should not have been admitted.  What is specifically complained of is that Stella Fung was at the time of giving evidence employed by the prosecuting agency.  She was a senior manager in the Enforcement Division of the SFC.  Part of her duties concerned detecting trading patterns which may have been related to unlawful market activities. 

26.The fundamental hurdle Mr Lok was confronted with was that Stella Fung’s evidence was relevant and admissible.  The magistrate had no basis in common law to exclude it : see R v. Chung Chen Hsin [1996] 2 HKC 156.  In that case Stuart-Moore J (as he then was), said :

“From time immemorial, there has never been a requirement that an expert witness must be independent of the prosecuting authority or, if called by the defence, of the accused.  If such a restriction were imposed on the prosecution, police officers could, by way of examples, never give evidence in drugs’ cases as to value or the average consumption of an addict, or in road traffic cases about accident reconstruction, or in fingerprint cases about the result of their comparison with the accused’s known prints.  Equally, if an inspector from the Labour Department is able to give competent expert evidence in a case prepared and presented by his Department, the law says nothing which would prevent this.”

27.Mr Lok complains further in this regard that Stella Fung worked within the very division of the SFC responsible for detecting irregularities in share trading patterns.  In that regard, Stuart-Moore J in Chung Chen Hsin, in referring to another case, went on the say :

“In the example of R v Manfield Building Contractors Ltd, no doubt the prosecution was unwise to choose, as its expert, the officer who was in charge of that particular prosecution.  Even that, however, would not prevent him from giving evidence as an expert in his field, provided that the prosecution was able to lay the foundation for him to be accepted as such.  The danger in such a case is that if an expert comes too close to the facts about which he may have an interest, this may colour his judgment and produce a biased opinion.  This will be a matter for the tribunal which will then have to judge the weight to be attached to the evidence.  The question of admissibility does not arise.”

We think those statements of principle in Chung Chen Hsin to be correct.

28.In the present case there was no suggestion that Stella Fung was in charge of the investigation, but in any event, her position within the SFC was simply one matter the magistrate had to take into account.  In the course of his statement of findings the magistrate expressly referred to Stella Fung’s status.  In that regard, he said :

“… Of course I was aware Ms Fung was a senior staff member ‘of the prosecuting agency’.  I remained aware of that and had appropriate regard to it, as one routinely does in receiving and assessing the evidence of other ‘employees of the prosecuting agency’ such as Ballistics and Triad experts from the Police Force and experts in construction, engineering and labour matters from the Department of Labour etc.”

29.In the context of the circumstances of this case where the magistrate did no more than comply with the law governing the admissibility of an expert witness’ evidence and expressed himself to have taken into account the witness’ close connection with the prosecuting authority, we cannot see how any fair-minded and informed observer would conclude that there was any real possibility that the magistrate in taking this principled approach to Stella Fung’s evidence was biased. 

Ground 6

30.It is fair to say that this is the appellant’s primary ground and indeed was the ground responsible for this appeal being reserved to this court.

31.The mens rea required to be proven against the appellant is set out in the terms of section 135(1)(a) of the Securities Ordinance which is as follows :

“Section 135 :

False markets and trading

(1)   A person shall not intentionally create or cause to be created, or do anything with the intention of creating—

(a)   a false or misleading appearance of active trading in any securities on the Unified Exchange;

…”

32.The offence accordingly requires proof of a specific intent to create a false or misleading appearance of active trading in listed shares. 

33.The findings of the magistrate which gave rise to this ground were those going to the appellant’s intention in conducting the wash sales.  The magistrate said in his oral reasons for verdict in this regard :

“… the one clear inference to be drawn from the evidence I accept, is that by conducting the wash sales in the methodology and timing used, it must have been the defendant’s intention to create a false or misleading appearance of active trading, or at least he well knew that the creation of a false or misleading appearance of active trading was a virtually certain consequence of his deliberate actions.”  [Emphasis added]

34.Mr Lok argued that the alternative basis for the magistrate’s finding of mens rea, i.e. that the appellant knew that the creation of a false or misleading appearance of active trading was a virtually certain consequence of the transactions he conducted, was not a sufficient basis to enable the magistrate to find the appellant intended those results as required by section 135(1)(a).

35.In that regard he makes a number of complaints.  The first is that the alternative basis of the finding of the magistrate was a rule of evidence restricted to allegations of murder only.  We agree that the phraseology used by the magistrate in setting out the alternative basis for his finding is derived from the well known cases of R v. Nedrick (1986) 1 WLR 1025 and R v. Woollin [1999] AC 82.  Those cases concerned murder convictions.  In the first the Court of Appeal and in the second the House of Lords were both dealing with circumstances where a death had been brought about by the defendant’s manifestly dangerous act and as to what direction should be given to a jury where, in those circumstances, something more than a simple reference to a finding of intention to kill or cause grievous bodily harm was necessary.

36.Lord Lane CJ in delivering the judgment of the court in Nedrick said :

“Where the charge is murder and in the rare cases where the simple direction is not enough, the jury should be directed that they are not entitled to infer the necessary intention, unless they feel sure that death or serious bodily harm was a virtual certainty … as a result of the defendant’s actions and that the defendant appreciated that such was the case.”

37.In Woollin the House of Lords in the judgment delivered by Lord Steyn approved this direction except that it thought that the word “find” should be substituted for the word “infer” for purposes of clarity.

38.It is plain that the direction is a rule of evidence which allows a finding of the requisite intention where the defendant appreciated that the results of his act were virtually certain.  The direction encapsulated decades of judicial refinement of an evidential test as to whether a defendant possessed a specific intention.  See DPP v. Smith [1961] AC 290, R v. Hyam [1975] AC 55, R v. Moloney [1985] AC 905 and R v. Hancock [1986] AC 455.   It was the degree of foresight which was necessary to be found by a jury before it was open to them to conclude a defendant intended the results of his actions which was the central concern of those judgments.

39.The question before us is whether the evidential principle now expressed in Nedrick and Woollin as to a defendant’s intent to bring about a certain result being found from his appreciation of the virtual certainty of his actions bringing about that result, is applicable generally in the common law or whether it is restricted to the determination of intent in murder offences.

40.The Nedrick and Woollin evidential rule which allows a jury to find that a defendant held a specific intention is simply one approach which may be helpful in the circumstances of a particular case in determining intention.  It is not and has never been intended to amount to a different formulation of the meaning of intent in common law.  If the principle expressed in Nedrick and Woollin is an evidential rule, as we are satisfied it is, and simply goes to proof of a specific intention then it is a rule which logically would apply to proof of a specific intention whatever the offence.  If the meaning of intention remains the same throughout the common law then there seems little reason why a test of intention would have applicability to one offence but not to others.  That the rule itself was developed in the context of the offence of murder does not mean it is not in principle capable of more general application.  Indeed in judgments preceding those in Nedrick and Woollin a number of statements were made suggesting that the principle was of general application at least to offences of specific intent.  It is sufficient to refer to two House of Lords decisions.

41.In Moloney (supra) Lord Bridge in giving the judgment of the court said this :

“I am firmly of the opinion that foresight of consequences as an element bearing on the issue of intention in murder, or indeed any other crime of specific intent belongs, not to the substantive law, but to the law of evidence …”  [Emphasis added]

42.On the basis of that principle Lord Bridge formulated questions which a trial judge could leave to a jury for the purpose of determining a defendant’s intention based on the defendant’s foresight of the consequences of his act.  His Lordship specifically referred to these questions applying not only to murder but “to any other case”.

43.In the case of Hancock (supra) which followed shortly afterwards, Lord Scarman referred to the decision in Moloney and said in respect of the guideline questions posed by Lord Bridge :

“As the House then recognised the guidelines as formulated are applicable to cases of any crime of specific intent and not merely murder …”

44.We are satisfied these statements of principle are correct.  It follows that the Nedrick and Woollin test has in principle general applicability to all offences of specific intent, though it may well be that it will be relatively few cases where the test is of any practical benefit.  Those cases will mostly arise where the offence charged was not the primary purpose of the defendant.

45.Why then has all judicial consideration of this principle of law occurred in the context of murder cases?  It may well be that other offences are customarily determined on the basis of recklessness which, as a matter of practicality, would encapsulate the Nedrick and Woollin principle, and that discussion of the principle arose only in the context of murder where the principles of recklessness cannot apply.  In any event we are satisfied, as we have said that the principle is of general applicability to offences of specific intent.

46.We do not think the Australian decisions of ASC v. Nomura International Ltd (1999) FCR 301 or North v. Marra Developments (1981) 148 CLR 42 which were relied upon by Mr Lok to support an argument that a different test of intention applies to offences such as the present are of assistance.  The latter case was concerned with legislation where the words “calculated to” were contained in the New South Wales Securities Industry Act 1970 and the former suggested a test of “sole or dominant purpose” in determining intention for the purposes of, inter alia, an offence under section 998 of the Australian Corporations Law which provided a defence where the defendant’s intention was not or did not include the bringing about of the prohibited result : see section 998(6) of that law.  The judge in Nomura was not purporting to lay down a more general test of intent as Mr Lok argued but was merely formulating a test designed to meet the terms of the particular legislation and the defence provided by section 998(6). 

47.One further complaint was made of the magistrate’s approach to his finding of intent in the present case.  It can be seen from the passage excerpted above that the magistrate did not express himself in terms of the appellant’s foresight of the virtual certainty of an appearance of active trading being brought about by his trading as being a test of intention but rather as being in itself an alternative form of intention.  In this he was wrong.  The question of foresight is no more than a factual basis from which a tribunal of fact may proceed to find intention.  But we do not think this matters.  In R v. Matthews (2003) 2 Cr. App. R. 30, 461, the English Court of Appeal in referring to the Nedrick and Woollin principle and its history also accepted that it was a principle of evidence rather than one of substantive law, but went on to say :

“Having said that, however, we think that, once what is required is an appreciation of virtual certainty of death, and not some lesser foresight of merely probable consequences, there is very little to choose between a rule of evidence and one of substantive law. …”

48.The reason that is so is that an appreciation of the virtual certainty of some consequence being brought about would, in the normal case, and in our view must have done in the present case, lead to the inescapable inference that the defendant intended that consequence.  In the present case whether or not the Nedrick and Woollin principle was applied as a principle of evidence or wrongly as an alternative form of intention, the result would have been the same.  This ground must fail also.  There was nothing unsafe or unsatisfactory about his conviction and the appellant’s appeal against conviction is dismissed.

Sentence

49.The appellant firstly argues his sentence was wrong in principle as it departed from the “usual” sentences imposed for this offence which were generally non-custodial.  We do not think, however, that it can be said that the present offence would normally attract a non-custodial sentence.  The offence is of a nature which may vary enormously from case to case in terms of the method of creating a false impression of active trading and the degree of success in creating that false market impression.  The context in which that is done will also be of relevance in determining sentence.  Nor do we think that comparisons with sentences in other cases are of great assistance.  The important principle is that the appellant be sentenced on the facts of the present case and that is a principle the magistrate apparently followed.

50.The appellant conducted some 40 transactions on 11 days during a period of six weeks.  On occasion during that period his wash sales, which had a total nominal value of over $7,000,000 accounted for a significant percentage of the market’s total turnover in Dynamic shares, although he traded on only 11 days during that period.  On the four days on which the appellant conducted his most active wash sale trading, the percentage of his wash sales of the total market turnover in Dynamic shares ranged from 50% to 81%.  In short, his trading activities were significant and conducted over an extended period of time.

51.The protection of the integrity of the stock market is an important public concern in Hong Kong and deterrent sentences, depending on the facts of an individual case, are justified. 

52.The present case, in our view, was serious enough to warrant a sentence of imprisonment.  The evidence accepted by the magistrate was that the appellant’s trading had a material effect on both the turnover and price of Dynamic’s shares.  Given the sustained course and volume of the appellant’s wash sales transactions, we are satisfied the sentence of four months’ imprisonment after trial is not excessive, nor was it wrong in principle and the appeal against sentence is dismissed.

The costs order

53.Mr Lok argues that there were no special circumstances in this case which required the appellant to pay the investigation costs of the respondent.

54.Section 33(15)(a) of the Securities and Futures Commission Ordinance, Cap. 24, is in these terms :

“Where the person under investigation or any other person is convicted by a court or magistrate on a prosecution instituted as a result of an investigation under this section, the court or magistrate may order him to pay to the Commission the whole or part of the costs or expenses of the investigation.”

55.It was accepted before us that the present case was prosecuted as the result of an investigation under that section.  The magistrate plainly had jurisdiction to make the investigation costs order.  The appellant was not ordered to pay the costs of the trial and cases such as HKSAR v. Cheng Tak Wai [2002] 4 HKC 458 relied upon by Mr Lok, which deal with costs awarded pursuant to section 15 of the costs in Criminal Cases Ordinance, Cap. 492, are not applicable.

56.The costs of the investigation awarded against the appellant were reasonable and moderate and there was no issue as to his ability to pay.  Such costs have been customarily awarded against those convicted of offences such as the present and, in our view, the award of costs made by the magistrate was neither wrong in principle nor unwarranted, and the appeal against the order is also dismissed.

Mr Adrian Bell, instructed by Securities and Futures Commission, for the Respondent

Mr Lawrence Lok, SC, leading Mr Hectar Pun and Mr Newman Lam, instructed by Messrs Li & Partners, for the Appellant