Lau Luen Hung Thomas v. Insider Dealing Tribunal and Another

HCMP 1751/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1751 of 2007

(ON AN INTENDED APPEAL PURSUANT TO SECTION 31 OF THE SECURITIES (INSIDER DEALING) ORDINANCE CAP. 395 (“THE ORDINANCE”) FROM DETERMINATIONS OF THE INSIDER DEALING TRIBUNAL IN RELATION TO ASIA ORIENT HOLDINGS LIMITED)

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Before: Hon Ma CJHC & Stock JA in Court

Date of Hearing: 28 February 2008

Date of Judgment: 28 February 2008

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J U D G M E N T

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Hon Ma CJHC :

1.The question before us is whether an extension of time should be given to appeal where the main or only reason is a change in the law which, if the extension is given, would most probably result in a successful appeal.  Cheung JA granted the extension on 5 September 2007.  The 2nd Respondent now applies for the Order to be set aside.

2.The question arises in the present case in the context of insider dealing proceedings.  By a Report of the Insider Dealing Tribunal dated 14 December 2006 and an Order of the same date, the Appellant was identified as an insider dealer in his dealings concerning shares in Asia Orient Holdings Limited between 14 September 1999 and 20 September 1999.  Orders were made disqualifying the Appellant from being a director, ordering him to disgorge profits, fining him and ordering him to pay the expenses of the inquiry.  All payments were made by the Appellant within the time ordered by the Tribunal.

3.As Cheung JA observed in his Reasons for Decision, the time for lodging an appeal from the Tribunal’s Order expired on 16 January 2007.  The application for extension of time was made on 18 June 2007, a delay of 157 days.  The catalyst for the application was the decision of this court in Koon Wing Yee v Insider Dealing Tribunal and Anor, unreported, CACV 358 & 360/2005, 30 May 2007, in which the court held that Insider Dealing Tribunal proceedings were criminal in nature and that, accordingly, the criminal standard of proof applied.

4.In the summons applying for the extension, it was pointed out that the Insider Dealing Tribunal inquiry in Koon Wing Yee took place at around the same time as the inquiry in the present case.  It was therefore wrong and unfair that what was held by the Court of Appeal to be the appropriate standard of proof in the Koon Wing Yee case should not similarly apply.  It was also pointed out that there was real injustice inasmuch as the Appellant had been censured for insider dealing and had been ordered to pay in excess of $30 million by way of disgorgement, penalty and costs.

5.In his judgment, Cheung JA granted the extension, notwithstanding the fact that there had been substantial delay, on the basis that there were exceptional circumstances.  He said this : -

“        Whether the circumstance which would justify an extension is described as strong, special or exceptional, I am satisfied that this requirement has been satisfied in the present case.  When the change of law is so fundamental as a change in the standard of proof and the compellability of an implicated person to testify against himself, the applicant clearly should be given a change to pursue his appeal and rely on this new development of law.  This is particularly so when the misconduct of the insider dealers of the case of Koon Wing Yee occurred at about the same time as that of the applicant and that the Insider Dealing enquiries of the two cases were also conducted at about the same time.”

6.The judge recognized the importance of finality in judgments but was of the view that it was “equally important that an individual should in the appropriate circumstance avail himself of a development in the law and should not suffer any injustice.”

7.Since Cheung JA’s decision, this court (comprising two judges : Tang VP and Yuen JA) has had the opportunity to consider the correctness of the approach adopted by him.  In Tsang Yiu Kai and Ors v Insider Dealing Tribunal, unreported, HCMP 1322/2007, 18 December 2007, the Court of Appeal was faced with almost exactly the same factual position as the present.  There, the appellant sought an extension on the basis of the decision of Koon Wing Yee and there has also been substantial delay.  The only difference was that the appellant there was himself the subject of investigation at the same inquiry as the appellant in Koon Wing Yee.  The Court of Appeal in Tsang Yiu Kai reaffirmed the principle that a mere change in the law was by itself insufficient to justify an extension being granted, even if (as in that case and in the present) the change in the law was as fundamental as the standard of proof.  The starting point of course must be that where time for appeal has expired, the matter is at an end : see R v Unger [1977] 2 NSWLR 990.  Cheung JA appeared to recognize that a mere change would be insufficient to allow an extension of time even in criminal proceedings but was of the view that the existence of “exceptional circumstances” might justify an extension.  He had in mind the decision of the Court of Final Appeal in HKSAR v Hung Chan Wa and Another [2006] 9 HKCFAR 614, where at page 632 (paragraphs 23 to 25), the Chief Justice said this : -

“23.   Whatever be the level of court, in dealing with applications for extension of time to appeal against conviction on the ground that the previous view that the relevant provisions imposed legal or persuasive burdens has now been authoritatively held to be incorrect and that the relevant provisions only impose evidential burdens, the principle to apply is that this ground by itself would not justify an extension of time.

24.     Such a principle is well-established by overseas jurisprudence.  In overseas jurisdictions, the courts in dealing with applications for extension of time for appeal against conviction have consistently applied the principle that time should not be extended for appeal only on the ground that an authoritative judgment subsequent to the conviction has held the previous understanding of the law to be incorrect.  See R v Ramsden [1972] Crim LR 547, R v Mitchell [1977] 1 WLR 753, R v Hawkins [1997] 1 Cr App R 234, R v Ballinger [2005] 2 Cr App R 433, R v Unger [1977] 2 NSWLR 990, R v Knight [1998] 1 NZLR 583 and R v Thomas [1990] 1 SCR 713.  In adopting this principle, the courts recognize the practical necessity for finality in the criminal process.

25.     However, overseas jurisprudence does not exclude the possibility that there could be exceptional circumstances in a particular case which would justify the court in extending time for appeal against conviction on the ground that a subsequent judgment has held the previous understanding of the law to be incorrect.  Especially as the Court does not have before it an appeal raising a question relating to extension of time, it is not feasible for the Court on this occasion to attempt to define what constitute exceptional circumstances except to say that the circumstances must be so exceptional that the occasions when they would be held to exist would be very rare.  Cases where the defendant had pleaded guilty would not fall within this exception.  No opinion is expressed about the correctness of the decision in R v Kwok Hing Man [1994] 2 HKCLR 160 in relation to the extension of time for an appeal against conviction for a non-existent offence.”

8.Cheung JA was of the view that exceptional circumstances existed in the present case since the change in law was fundamental (see paragraph 5 above).  On analysis, I would respectfully disagree with this approach because inherent in it is a requirement that the court would have to assess, in any given case, the nature and importance of the change in law.  In my judgment, while the court will no doubt refuse an extension where the nature and importance of the change in law are insignificant, the fact that the change is fundamental and important will not by itself be sufficient to justify an extension.  Afterall, it will be inherent in most applications for an extension of time on the basis of a change in law that the change was fundamental.  This, I believe, to be the effect of those passages in Hung Chan Wa I have just referred to (I also note that at paragraph 23 of that judgment, reference is made specifically to changes in the law relating to the burden of proof) and of the decision of this court in Tsang Yiu Kai, both of which are binding.

9.I agree with Mr Gerard McCoy SC (for the Appellant) that the court must look at the circumstances of each case when called on to exercise its discretion.  However, there is nothing in the facts of the present case to suggest that it falls within one of those very rare situations that would merit an extension following a change in the law.  Indeed, the facts of the present case support, if anything, the opposite conclusion.  I note from the Appellant’s affirmation in support of the application for extension it is clear that he (and his legal advisers) were very much alive to the point determined in Koon Wing Yee (namely, the criminal standard of proof in Insider Dealing Tribunal inquiries) and even considered this in the context of a possible appeal.  The Appellant says this in his affirmation : -

“After the Tribunal had identified me to be an insider dealer and had imposed a penalty on me, I sought and received advice from my legal advisers (including Senior Counsel), amongst other things, on the prospect of an appeal against the finding that I was an insider dealer.  I was advised that based on the evidence before the Tribunal it would have been unlikely that I could have been found to be an insider dealer if the criminal standard of proof had been applied by the Tribunal.  I was also advised that an appeal on that particular point alone, although viable, was more unlikely than likely to succeed especially given the fact that successive Chairmen of the Tribunal had for the past 15 years ruled that the applicable standard was the civil standard of proof not the criminal standard.  I was told that in this regard the Tribunal appeared to have some support for its approach from the Court of Appeal in analogous situations, although the point had not been ruled on by that Court.  It was also pointed out to me that the Tribunal was very soon to go out of existence and that this may mean that there was less incentive for the Court to overrule longstanding law on the issue.”

10.As Mr Ronny Tong SC (for the 2nd Respondent) points out, the Appellant had deliberately chosen not to run the point even though he was cognizant of it.  The fact that the point has become a better one than he had originally thought, can hardly constitute an exceptional circumstance.  This morning, Mr McCoy has in addition submitted that another exceptional circumstance was the fact that the Appellant had effectively been convicted of a non-existent offence (a direct reference to the final sentence of paragraph  25 of the judgment in Hung Chan Wa where the Chief Justice left open the question of whether a conviction on a non-existent offence might constitute an exceptional circumstance).  The present case is not within this situation at all.

11.For these reasons, I would set aside the Order of Cheung JA.  In doing so, I am conscious that this court is interfering with the exercise of discretion, but this is justified.  In my view, the learned judge took too relaxed a view of the applicable law and in any event, we are bound by the decisions in Hung Chan Wa and Tsang Yiu Kai.

Hon Stock JA :

12.I agree that the type of exceptional circumstance envisaged in Hung Chan Wa and in judgments to the same effect in other jurisdictions, particularly R v Unger in New South Wales and in R v Ballinger in the United Kingdom (to both of which reference was made in Hung Chan Wa),has not in this particular case been established.

13.Mr McCoy relies on the fact that the change in the law is fundamental.  So it was in Hung Chan Wa and so it would be in most ‘new law’ cases.  Otherwise, there would not be an application in such cases for leave to appeal out of time.  What in effect is being relied upon is no more than a change in the law and it is established that that of itself is not usually regarded as a good reason.  Accordingly, I agree with the result proposed.

Mr Gerard McCoy SC & Mr Kevin Patterson, instructed by Messrs Sit, Fung, Kwong & Shum for the Appellant

Mr Ronny Tong SC & Mr Abraham Chan of the Department of Justice for the 2nd Respondent