Lam Hon Nam v. Insider Dealing Tribunal and Another

FAMV No. 36 of 2010

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 36 OF 2010 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL
FROM CACV NO. 109 OF 2007)

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Between:

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DETERMINATION

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Mr Justice Ribeiro PJ:

1.The applicant was found to have engaged in insider dealing contrary to section 9(1)(c) of the subsequently repealed Securities (Insider Dealing) Ordinance.[1] The Insider Dealing Tribunal found that while a connected person, he disclosed relevant price sensitive information to one Silvia Chan Yuk (“Silvia Chan”) knowing or having reasonable cause for believing that she would use it to deal in the relevant securities.  He was disqualified as a director of a listed company for two years and ordered to pay a penalty of $1.2 million as well as a share of the expenses of the inquiry.

2.The applicant was chairman and a major shareholder of a listed company called Vanda Systems and Communications Holdings Limited (“Vanda”), a computer software and systems company. Between 12 and 17 February 2000, negotiations took place between Vanda and Hutchison Whampoa Ltd (“Hutchison”) which resulted in the latter acquiring a 28% stake in Vanda and in a joint venture being set up between them.  Vanda announced “meaningful discussions” with Hutchison on 17 February; trading in its shares was suspended on 18 February; and the agreement with Hutchison was announced on 22 February, when trading resumed.  The price and turnover of Vanda’s shares rose sharply during the period of the negotiations.

3.Between 14 and 17 February, Silvia Chan bought 710,000 Vanda shares for a total of about $2.95 million, the largest share purchase she had ever made.  She had a close connection with the applicant, being married to his brother and also being the sister of the applicant’s wife’s.  She had previously worked for some 13 years under the applicant in Vanda.  The Tribunal found that the applicant had the relevant information and concluded, after a detailed examination of the applicant’s phone records, that he had conveyed that information to Silvia Chan knowing or having reasonable cause for believing that she would use it to buy the shares, as she in fact did.  The Tribunal stated:

“... in our judgment the nature of Silvia Chan’s Vanda share buying combined with Lam Hon Nam’s telephone contacts with her, or a number which she had given as her contact number and was used by her broker to contact her, and the timing of Lam Hon Nam’s contacts was sufficient to satisfy us that it was highly probable he had provided her with relevant information knowing she would use it to purchase Vanda shares. We are satisfied he provided that information to her before she commenced buying Vanda on the 14th February and continued to provide it to her as it was updated prior to her purchases on the 15th and 16th February. She still possessed that information when she purchased her last 70,000 Vanda shares on the 17th February.”[2]

4.On appeal to the Court of Appeal, [3] the penalty was set aside as a result of this Court’s decision in Koon Wing Yee v Insider Dealing Tribunal,[4] but the appeal was otherwise dismissed.  Leave to appeal is now sought on the “or otherwise” basis under section 22(1)(b) of the Court’s statute. 

5.The first of the two grounds put forward is:

“... the fact that before the Tribunal, he was not given the opportunity (which he had sought) to explain the telephone calls based on which fact alone he was found to have been in breach of Cap 395.”

6.Mr Clive Grossman SC, appearing for the applicant, rightly did not press this ground as it is wholly without merit. 

7.The second ground is that:

“... the inference drawn by the Tribunal was not... the only reasonable inference given (i) that there was no evidence that the telephone calls were in fact between the [applicant] and Chan; and (ii) the tenuous connection between the timing of the telephone calls and Chan’s orders to buy Vanda shares”.

8.We do not think there is anything in this ground either.  There was evidence, indeed, admissions of the applicant, that he had made calls to Silvia Chan on her mobile and via the Kowloon City landline, as indicated above.  The Tribunal laid out an ample foundation for inferring that the relevant information was thereby conveyed to her by the applicant.  The Court of Appeal held, in our view correctly, that the Tribunal was entitled so to find.

9.This application must accordingly be dismissed with costs.

Mr Clive Grossman SC and Ms Chyvette Ip (instructed by Messrs Ko & Chow) for the applicant

Mr Peter Duncan SC and Mr Jonathan Kwan (instructed by the Department of Justice) for the 2^nd respondent