Re Easy Concepts International Holdings Ltd

HCMP327/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 327 OF 2006

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Before : Deputy High Court Judge Cheng, SC in Chambers (Open to public)

Date of Hearing : 11 April 2011

Date of Judgment : 18 October 2011

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JUDGMENT

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1.This case flows from an order registered under HCMP327/2006 based on the orders and decisions set out in a Report of the Insider Dealing Tribunal (the “Tribunal”) published on 19 January 2006, under the now repealed statute, the Securities (Insider Dealing) Ordinance, Cap 395 (the “Ordinance”).

2.By a notice in writing dated 26 May 2003 and as amended on 17 January 2005, the Financial Secretary instituted an inquiry under section 16 of the Ordinance and required the Tribunal to inquire into and determine:

(1) whether there has been insider dealing in relation to Easy Concepts International Holdings Limited (subsequently named as 21CN CyberNet Corporation Limited and now known as CITIC 21CN Company Limited) (“Easy Concepts”) and Easyknit International Holdings Limited (“Easyknit”) connected with or arising out of dealings in the listed securities of Easy Concepts and Easyknit by or on behalf of : Chung Ki To, Sonny Chan Kin Shing and Lam Ping Wan on 31 January 2000;

(2) in the event of there having been insider dealing as described above, the identity of each and every insider dealer; and

(3) the amount of any profit gained or loss avoided as a result of such insider dealing.

3.The Tribunal published its orders and decisions in its Report dated 19 January 2006.  The tribunal comprised McMahon J, Chairman, and Professor Lui Yu-hon and Mr Phil Chan Kin-fung. 

4.On 10 February 2006, an order under HCMP327/2006 (the “Order”) in the terms of the decisions and orders of the Tribunal was sealed.

5.The facts surrounding the transaction and the procedures involved in the inquiry have been set out in the judgments in the Court of Appeal in CACV358/2005 and the judgment of the Court of Final Appeal in FACV19/2007.  The issues to be dealt with in this case do not turn on these matters and they are therefore not repeated here.

6.By a summons dated 30 June 2010, some 3½ years after the order was sealed, the Applicants sought an order that the proceedings under HCMP327/2006 be stayed and that the registration of the Order of the Tribunal dated 10 February 2006 be struck out with costs to the Applicants.

7.The grounds set out in the summons are :

(1) the registration of the order amounted to the purported exercise of judicial power, which the Tribunal was not and is not entitled to exercise.

(2) the Tribunal was not empowered to adjudicate upon the matter of the inquiry or to make the orders that it did consequent thereon, in that the tribunal purported in those connections to function in a judicial capacity acting as a court.

8.The Applicants in the summons relied on Articles 80, 19, 83, 88 and 92 of the Basic Law which are said to have prevented the Tribunal from exercising any judicial power.  These articles in summary provide that the judicial power of the Hong Kong SAR is vested in the court of judicature and judges shall be chosen on the basis of their judicial and professional qualities and are to be appointed by the Chief Executive. 

9.The Applicants relied also on the fact that two of the three members of the Tribunal were appointed by the Financial Secretary pursuant to section 15(2) of the Ordinance and was therefore not in accordance with Article 88 of the Basic Law. 

10.Further the Applicants argued that these two members were not chosen on the basis of their judicial qualities as required by Article 92 of the Basic Law. 

11.These latter two grounds must necessarily be premised upon the Tribunal was indeed exercising judicial power.  They will be unsustainable otherwise.

12.It was further contended that section 15(3) of the Ordinance did not require the Chairman of the Tribunal to be a judge of the Hong Kong SAR and insofar as judicial power was purported to be vested in the Chairman that purported vesting was unconstitutional and of no legal effect.  This too must stand or fall with the question of judicial power.

13.In essence, the Applicants contended that the Tribunal was unconstitutional by reason of the fact that it was exercising judicial power when such power is expressly vested with the judiciary under the Basic Law. The Applicants contended that the Tribunal was unconstitutional and the whole of its decision and orders is therefore of no legal effect.  During the oral submissions emphasis was placed on the enforcing power of the Tribunal.  The Applicants relied in particular on the provisions dealing with how the orders of the Tribunal would be enforced under section 29 of the Ordinance. 

14.Section 29 of Ordinance provides :

“(1) An order of the Tribunal may be registered by the Tribunal, in such manner as may be prescribed, in the Court of First Instance and shall, on such registration, become for all purposes an order of the Court of First Instance made within the jurisdiction of the Court of First Instance.

(2) An order of the Tribunal under section 23(1)(a) or 24(1) shall be filed by the Tribunal-

(a) with the Registrar within the meaning of section 2 of the Companies Ordinance ( Cap 32); and

(b) as soon as is reasonably practicable after the order is made. (Replaced 46 of 2000 s. 40)”

15.Rule 2 of the Securities (Insider Dealing) (Registration of Orders) Rules (the “Registration of Orders Rules”) prescribes the manner in which an order may be registered :

“Registration of orders in Court of First Instance

(1) To effect registration of an order in the Court of First Instance, the Tribunal shall cause the order and a copy thereof to be produced to the Registrar.

(2) The Registrar shall, on production of an order and a copy thereof -

(a) register the order in the Miscellaneous Proceedings Register kept in the High Court; and

(b) seal and date the copy of the order and return it to the person producing it own behalf of the Tribunal.”

16.The Applicants submitted that this is a mandatory provision which does not give any discretion to the Registrar nor the Court of First Instance to refuse to register the order of the Tribunal.  The Tribunal, the Applicants contended, was therefore exercising judicial power by enforcing its own orders.

Jurisdiction - Applications for Stay and/or Strike Out

17.The Secretary for Justice contended that this court has no jurisdiction to grant the reliefs sought by the Applicants.  These threshold issues are dealt with first. 

18.On the application for a stay of proceedings, I agree with the Secretary for Justice’s arguments: the order of the Tribunal has been registered and converted into a court order; there is nothing in these proceedings to be stayed.  The Applicants are not contending for a stay of execution, the proceedings of which has not been commenced.  Given that the registration proceedings have been completed, an application for stay is misconceived.  I dismiss the application to stay.

19.I note however that had a challenge or judicial review been made timeously after the making of the orders by the Tribunal, when the Tribunal sought to register its orders, this Court would have had the power to stay the registration procedure pending the outcome of the challenge or judicial review.

20.As to the application to strike out the registration of the order of the Tribunal, the Secretary for Justice contended that the basis of the inherent jurisdiction of the court relied upon by the Applicants would not empower this court to strike out the Order. 

21.The Applicants relied on section 16(3) of the High Court Ordinance which provides :

“Nothing in this Ordinance shall affect the power of the Court of Appeal or the Court of First Instance to stay any proceedings before it, where it thinks fit to do so, either of its own motion or on the application of any person, whether or not a party to the proceedings.”

22.Section 16(3) of the High Court Ordinance plainly does not confer any power on the court to strike out.  It confers power on the court to stay any proceedings before it.  Neither the Applicants nor the Secretary for Justice have drawn my attention to any other authorities or legislations by which the Court has jurisdiction to strike out the Order in such circumstances. Once a registration is made, the Order attains the legal effect of a court order and I know of no power of a division of the same court to strike out such an order.  It is not a question of taking the strike out application to a higher court but the lack of authority for such a power per se.  Had there been such authorities, given the clear position taken by the Secretary for Justice in contending my lack of jurisdiction to deal with such applications, it would no doubt be drawn to the Court’s attention by the Applicants.  As a result, a strike out application, based on what was before me, is not the proper procedure by which to challenge the registration or to remove the legal effect of the Order. 

23.The absence of jurisdiction to consider the two applications is adequate to dispose of this summons.  On request of both parties, I proceed to deal with the substantive issue.

Timing of the Application

24.The Report of the Tribunal was published on 19 January 2006.  The registration took place and the Order was sealed on 10 February 2006.  The application to stay and/or to strike out currently before me was taken out on 30 June 2010.  There were previous steps taken to challenge the decisions and orders of the Tribunal and they have been dealt with by the courts, the judgments of which have been referred to above. 

25.Why this constitutional ground was not taken earlier is not satisfactorily explained.  The issue was raised in the hearing before the Court of Appeal.  The Court of Appeal rightly refused to deal with this constitutional ground as it was not raised in the courts below.  Then, explained Counsel for the Applicants, the summons was issued.  That does not justify the delay in taking this issue earlier when other grounds were raised.  That a party can always challenge the constitutionality of an instrument or decision would not, in my view, justify leaving these very important constitutional grounds to be raised on separate procedures or proceedings at a time an applicant chooses. 

26.There are sound reasons why an aggrieved party should act promptly on any challenge against a decision or administrative act whether the grounds be constitutional or otherwise.  The need to take such challenges promptly is not only just a requirement under the rules of this court, it is also pertinent to one important aspect of the rule of law, namely that of certainty.  Tribunals and citizens alike must know under what rules they are to conduct their businesses, transactions and hearings.  The retrospective effect of judgments of the court in declaring what the law is and has been is an important feature of case law.  A late application may have implications on others conducting their affairs in accordance with law, as it then was. 

27.The timing of the applications in this case is unfortunate as it is in my view extremely late from any perspective.  The issue of timing was a point raised but not pressed by the Secretary of Justice.  The Applicants primarily explained the delay by relying on the fact that a challenge was raised as soon as the registration of the orders of the Tribunal took place.  The facts simply do not bear this out.  Some other grounds have been raised in previous proceedings but not the constitutional grounds now before me.  Further, the attack now is not just on the constitutionality of the registration or enforcement provisions, but the whole constitution, decision and orders of the Tribunal.  There appears to me no or no justifiable reasons for not raising the ground earlier. 

28.As will be seen below, the constitutionality of the enforcement provisions by registration of the orders of the Tribunal, eventually became the main ground in the Applicants’ submissions. 

29.The relevant legislation governing the Tribunal has been repealed.  However, both the Applicants and the Secretary for Justice requested that my opinion on the substantive constitutional point be provided irrespective of the decision on the jurisdictional points.

Standard of Proof

30.It is important to start first with the standard of proof that an applicant has to meet when challenging the constitutionality of a legislation. The Privy Council in The Shell Company of Australia Limited v Federal Commissioner of Taxation (1930) 44 CLR 530considered, inter alia, the question whether the Board of Review of the Australian Income Tax Assessment Act was exercising judicial power and therefore was in contravention of section 71 of the Australian Constitution, The headnote of the judgment reads, “An Act of the Commonwealth Parliament should not be held to infringe the Constitution of Australia unless it is beyond reasonable doubt that it does so.”  The Privy Council held on page 298 :

“They (the Privy Council) agree with him (Isaacs J) also when he says that ‘unless … it becomes clear beyond reasonable doubt that the legislation in question transgresses the limits laid down by the organic law of the Constitution, it must be allowed to stand as the true expression of the national will.’ ” (emphasis added)

31.This unequivocally sets the standard of proof the Applicants have to meet in this case.

The Basic Law

32.From the parties’ submissions, it appears that for the years after the passing of the Ordinance, prior to and after the resumption of sovereignty by PRC over Hong Kong SAR, this is the first challenge on the constitutionality of the Tribunal and its orders.  This fact is highlighted not necessarily as an indication of the relative legal strengths of the Applicants’ arguments, but a statement of the objective fact pertaining to the existence and continued operation of this piece of legislation throughout these years.

33.The explanation offered by the Applicants for the fact observed above was that under the Basic Law, the principle of “separation of powers” was enshrined whereby the constitutional duty and power to adjudicate disputes was conferred on the court of judicature, and not the executive arm of the government and certainly not any administrative body.  This is the crux of the Applicants’ case.  But is it implicitly suggested that the position was different prior to the promulgation of the Basic Law?

34.It is necessary to first avoid any possible misunderstanding or misconception arising from different connotations or understanding of the ambit of terms generally used but which may tend to be interpreted differently in different contexts.  It is never the labels that matters but the substance.  The constitutional basis of how the political structure of the Hong Kong SAR was set up under the Basic Law should be the focus and basis of these discussions and not the broad labels used. 

35.The People’s Republic of China (“PRC”) is a unitary state and the powers of the Hong Kong SAR are delegated from the Central People’s Government. This is encapsulated in the Chinese Constitution Law and the Basic Law, for instance Basic Law Articles 1, 2 and 12.  The Political Structure of the HKSAR is set out in Chapter IV of the Basic Law.  There are four sections, dealing with the Chief Executive (“the CE”), the Executive Authorities, the Legislature and the Judiciary, each with specific provisions setting out their respective functions, powers and duties. 

(1) The Chief Executive is the head of the HKSAR (see Article 43) and his powers and functions include that of leading the Government of the HKSAR (see Article 48(1)).

(2) The Executive Authorities is the Government of the HKSAR and the head of the Government of the HKSAR is the Chief Executive (see Articles 59 and 60). Its powers and functions include, for instance, formulating and implementing policies, conducting external affairs as authorized by the Central People’s Government under the Basic Law (see Articles 62(1), (3)). Under Article 65 of Section 2 of Chapter IV, the previous system of establishing advisory bodies by the executive authorities shall be maintained.

(3) As to the Legislature, their powers and functions include, enacting, amending and repealing laws, raising questions on the work of the Government, endorsing the appointment and removal of the judges of the Court of Final Appeal and the Chief Judge of the High Court (see Articles 73(1), (5), (7)).

(4) Section 4 of Chapter IV deals with the Judiciary. Article 80 provides that courts of the HKSAR shall be the judiciary, “exercising the judicial power of the Region”. Article 83 provides that the “structure, powers and functions of the courts of the Hong Kong Special Administrative Region at all levels shall be prescribed by law.” Article 85 further provides that the courts of the HKSAR “shall exercise judicial power independently, free from interference”.

36.There is no definition of the term “judicial power” in the Basic Law. The Applicants have not drawn my attention to any provisions of the Basic Law that suggests that the powers of the courts after the promulgation of the Basic Law have been changed.  On the contrary, the Court of Final Appeal in Stock Exchange of Hong Kong Ltd v New World Development Co. Ltd (2006) 9 HKCFAR 234 held that the continuity between the pre-existing and the present Courts and judicial system is preserved by the Basic Law.  The laws that the courts are to apply are prescribed in other provisions of the Basic Law such as Articles 8 and 160.  The courts are to give effect to the laws previously in force in Hong Kong except for any that contravene the Basic Law.

37.For the Applicants to succeed, the relevant provisions of the Ordinance have to be such as to confer “judicial power” on the Tribunal and that it would be beyond reasonable doubt that such previsions in question contravenes the Basic Law.

38.It is therefore necessary to look at the definition of “judicial power” by reference to the case law referred to by the parties and compare that with the provisions of the Ordinance that the Applicants contend as being in contravention of the Basic Law.

Judicial Power

39.What then is the meaning of “judicial power of the Region” under the Basic Law?

40.The Applicants contended that it was the assumption of “judicial power” by the Tribunal which was exclusively conferred on the judiciary that rendered the decisions and orders of the Tribunal and/or the registration of those orders unconstitutional. 

41.Through the years of the history of common law in various jurisdictions, no courts have attempted to provide an exhaustive definition of the term “judicial power”.  From the authorities relied on by both parties, and for the reasons set out below, the following points can nonetheless be discerned :

(1) There are a number of attributes and indicators of the exercise of judicial power. No one factor is conclusive.

(2) The legal, constitutional and social context and background to the decisions where a definition of judicial power was pronounced is relevant. As submitted by the Secretary of Justice, cases pronounced in times when the use of administrative tribunals were not yet introduced should be viewed with caution in present day society.

(3) Judicial power must be viewed and defined in the context of the constitution of the relevant state or jurisdiction. Definitions in judgments in other common law or civil law jurisdictions may not be directly applicable.

42.The Privy Council in the Shell case considered the question of what was “judicial power”.  At pages 295-296 it referred to the oft-quoted definition given by Griffith CJ in Huddart, Parker & Co. v Moorehead :

“I am of opinion that the words ‘judicial power’ as used in s.71 of the Constitution mean the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.”

43.In the decision of the High Court of Australia in Brandy v Human Rights and Equal Opportunity Commission (1994-1995) 183 CLR 245, Deane, Dawson, Gaudron and MaHugh JJ,after referring to the pronouncement of the concept of judicial power by Griffith CJ in Huddert, Parker & Co. Pty Ltd. v Moorehead, held at page 268 :

“However, it is not every binding and authoritative decision made in the determination of a dispute which constitutes the exercise of judicial power. A legislative or administrative decision may answer that description. Another important element which distinguishes a judicial decision is that it determines existing rights and duties and does so according to law. That is to say, it does so by the application of a pre-existing standard rather than by the formulation of policy or the exercise of an administrative discretion. Thus Kitto J in R vGallagher; Ex parte Aberdare Collieries Pty Ltd (1963) 37 ALJR 40 at 43, said that judicial power consists of the “giving of decisions in the nature of adjudications upon disputes as to rights or obligations arising from the operation of the law upon past events or conduct”. But again, as was pointed out in Re Cram; Ex parte Newcastle Wallsend Coal Co. Pty Ltd (1987) 163 CLR 140 at 149, the exercise of non-judicial functions, for example, arbitral powers, may also involve the determination of existing rights and obligations if only as the basis for prescribing future rights and obligations.

However, there is one aspect of judicial power which may serve to characterise a function as judicial when it is otherwise equivocal. That is the enforceability of decisions given in the exercise of judicial power.”

44.The decision in Brandy shows that the one of the important elements of judicial power is the power to enforce its own orders, and that the power to hold an inquiry and to make a decision does not inevitably on its own tantamount to an exercise of judicial power. 

45.It is necessary, therefore, in the light of the arguments of the Applicants to consider as a matter of principle how the two powers, decision-making and enforcing powers, relate to each other and whether they are separable.

46.In the decision of the High Court of Australia in Waterside Workers’ Federation of Australia v Alexander Ltd. (1925) 25 CLR 434, an award of the Commonwealth Court of Conciliation and Arbitration (“the Court of Arbitration”) was made under the Commonwealth Conciliation and Arbitration Act.  A summons was taken out before the Court of Arbitration contending that there was a breach of the award by Alexander Ltd.  By way of case stated, 3 questions were referred to the High Court and the first and last are relevant here:

“(1) Is the constitution of the Commonwealth Court of Conciliation and Arbitration beyond the powers of the Parliament of the Commonwealth, and in particular as to (a) the arbitral provisions; (b) the enforcing provisions?

(2) Is the award invalid by reason of the appointment of the President for seven years only?

(3) Is the award enforceable by the said Court?”

47.In dealing with these 3 issues, the High Court of Australia considered, inter alia, what are the nature and attributes of judicial power, the differences between a court of law and the Court of Arbitration created by statute, the object of the Commonwealth Conciliation and Arbitration Act and whether the arbitral provisions and the enforcing provisions in that Act were valid and separable.

48.As can be seen from the judgment of Powers J at page 479, no members of the High Court considered that the constitution of the Court of Arbitration to be presided over by a Judge as prescribed by the Act was beyond the powers of the Parliament of the Commonwealth.  The question was whether the Court of Arbitration with a president appointed for seven years only was beyond the powers of the Parliament when the Constitution provided for the tenure of the office of a justice to be freehold.  By agreement of the parties in that case, the power to enforce awards by penalties was also admitted as an exercise of judicial power. Further in that case, there was no dispute that convictions for offences and the imposition of penalties and punishments are matters appertaining exclusively to judicial power.  The enforcement measures were sought from the Court of Arbitration by way of a summons before it.  This was the context in which the High Court considered the arguments.

49.To focus only on the reasons of the judgment relevant to the issue before this court, the ratio of that case, culminating from the various judgments are that:

(1) By a majority (Griffith, Barton, Isaacs, Powers and Rich JJ) (Higgins doubting), albeit for different reasoning :

“the power conferred by the Commonwealth Conciliation and Arbitration Act 1904-1915 upon the Commonwealth Court of Conciliation and Arbitration to enforce awards made by it is part of ‘the judicial power of the Commonwealth’ within the meaning of sec. 71 of the Constitution, and can only be vested in the Courts mentioned in that section.”

(2) By a majority (Isaacs, Higgins, Powers and Rich JJ) (Griffith and Barton JJ dissenting) :

“the provisions in the Commonwealth Conciliation and Arbitration Act, conferring upon the Commonwealth Court of Conciliation and Arbitration power to enforce its awards are severable, and, therefore, that the rest of the Act is valid.”

(3) By a majority (Isaacs, Higgins, Powers and Rich JJ) :

“under sec. 44 of the Commonwealth Conciliation and Arbitration Act the penalties mentioned in sec. 38(d) of the Commonwealth Conciliation and Arbitration Act may be imposed by a Court of summary jurisdiction, notwithstanding that the Commonwealth Court of Conciliation and Arbitration has no power to impose them.”

50.In considering what amounted to judicial power, Griffith CJ and Barton J held the following :

(1) “The judicial power is a well known attribute of sovereignty” (per Griffith CJ page 441).

(2) “it may be said that it (judicial power) includes the power to compel the appearance of persons before the tribunal in which it is vested, to adjudicate between adverse parties as to legal claims, rights, and obligations, whatever their origin, and to order a right to be done in the matter.” (per Griffith CJ page 442).

(3) At page 443 that Griffith CJ further held that if the only powers conferred had been in the nature of calculation or ascertainment of facts and not declaration of or giving effect to a controverted matter of legal right, those powers might not appertain to the judicial power. He also relied heavily on the expressed wordings of the Act which stated expressly that it was establishing a “court of record”.

(4) “After examining the nature of ‘judicial power’ he [Mr. Justice Miller of the Supreme Court of the United States when giving a lecture to law students] gives it the following definition (p.314): ‘It is the power of a Court to decide and pronounce a judgment and carry it into effect between persons and parties who bring a case before it for decision.’ I respectfully adopt these words. They were written of judicial power in the United States, but they are equally true of the same power in this Commonwealth. In Osborn v Bank of the United States the Court in its judgment said: ‘Judicial power is never exercised for the purpose of giving effect to the will of the Judge; always for the purpose of giving effect to the will of the Legislature; or, in other words, to the will of the law.” (per Barton J at page 451)

(5) “The judicial power is conferred and exercised by law and coercively; the parties have not power to agree upon the deciding authority, and its decisions are made against the will of at least one side, and are enforced upon that side in invitum. An authority of that kind is not invoked by mutual agreement, but exists to be resorted to by any party considering himself aggrieved, whether he be called a claimant, a plaintiff, a petitioner, or the like. In all instances he is in fact a claimant. If a law allows anything to be claimed by one person against another and grants it to him as a right against that other, the legislature means by its law that that right exists, whether it existed as a right declared by law before the claim, or whether, on the other hand, the claim of it when substantiated is recognized by law as a right. If the legislature sets up a tribunal to summon one side at the call of the other, to adjudicate between them, and to enforce its adjudication, by a determination which may be in favour of either side, then the tribunal is exercising judicial power, and may be a Court in the strict meaning of the term. It is a Court, if the legislature gives it the attributes of one, from the institution down to the determination, and if necessary the enforcement of the claim. When such intention and attributes are clear it must be also clear that the Court (the court of arbitration) is granted the exercise of judicial power.” (per Barton J at pages 452-453)

51.In the judgment of Isaacs and Rich JJ, they distinguished the difference between the powers conferred by that legislation to use conciliation and arbitration to resolve and settle the disputes between the parties under the Act and the judicial power.  They recognized that judicial power involves the making of a decision or declaration and enforcement.  However they highlighted, in the context of the Act, the difference between the former functions, being decision-making powers given to the Court of Arbitration under the Act to ascertain and declare the rights of the disputants, by what was described as the “arbitral provisions” and the latter being laid down in the “enforcing provisions” of the Act.  They further find that these two sets of provisions are separable and the invalidity of the “enforcing provisions” does not affect the validity of the “arbitral provisions”. 

52.After reviewing the cases that dealt with a Court of Arbitration and a court of law, Issacs and Rich JJ continued at pages 464‑465 :

“A court of law has no power to give effect to any but right recognized by law… The two functions [ie arbitral function and judicial function] therefore are quite distinct. The arbitral function is ancillary to the legislative function, and provides the factum upon which the law operates to create the right or duty. The judicial function is an entirely separate branch, and first ascertains whether the alleged right or duty exists in law, and, if it binds it, then proceeds if necessary to enforce the law. Not only are they different powers, but they spring from different sources in the Constitution. The arbitral power arises under sec. 51(XXXV.); the judicial power under sec. 71… The two powers being distinct and separate in nature and origin, it follows that, when an award is once made, the dispute is settled and the arbitral function is at an end… And when the award is made and the right established, the law presumes the parties will obey it. Enforcement by a Court is an entirely separate matter. It arises on breach or threatened breach. But that is the case with every right. A right of property or contractual right may exist and if violated, the law provides for its enforcement. But breach is not presumed. It follows that enforcement is in its nature an entirely separate process from the creation of the right.”

53.Isaac and Rich JJ proceeded to construe the statute by reference to the cardinal rule of construction that all documents are to be construed ut res magis valeat quam pereat and to give effect to the intention of the Legislature.  After considering the object of the Act, they concluded that “(enforcement of awards) is included in the Act, but in a separate and distinct part.”

54.There being no dispute between the parties that the enforcing jurisdiction given to the arbitration Court is an attribute of the judicial power, and having held that the arbitral provisions are not invalidated, Isaacs and Rich JJ then considered whether the arbitral and the enforcing provisions are separable.  They concluded they are separable stating at page 470 :

“On the principle already referred to of preserving as much of the will of Parliament as is possible, we feel no hesitation in upholding the arbitral clauses. The enforcement clauses are not put in as a condition of or compensation for the arbitral power. The arbitral power is not made dependent on the enforcement clauses… The main object of the Act is to obtain an award and settle the dispute. The force of public opinion is very strong in itself as a means of inducing persons whose dispute has been passed upon to adhere to the decision.”

55.The holdings and statements of the Privy Council in the Shell case adopted are instructive in considering what amounted to judicial power.

(1) “In that connection it may be useful to enumerate some negative propositions on the subject: 1. A tribunal is not necessarily a Court in this strict sense because it gives a final decision. 2. Nor because it hears witnesses on oath. 3. Nor because two or more contending parties appear before it between whom it has to decide. 4. Nor because it gives decisions which affect the rights of subjects. 5. Nor because there is an appeal to a Court. 6. Nor because it is a body to which a matter is referred by another body. See Rex v Electricity Commissioners [1924 1 KB 171]” (page 297)

(2) “An administrative tribunal may act judicially, but still remain an administrative tribunal as distinguished from a Court, strictly so-called. Mere externals do not make a direction to an administrative officer by an ad hoc tribunal an exercise by a Court of judicial power.

Their Lordships find themselves in agreement with Issacs J., where he says: ‘There are many functions which are either inconsistent with strict judicial action…. or are consistent with either strict judicial or executive action…. If consistent with either the strictly judicial or executive action, the matter must be examined further….. The decisions of the Board of Review may very appropriately be designated…‘administrative awards,’ but they are by no means of the character of decisions of the Judicature of the Commonwealth’.” (page 298).

56.In Stock Exchange of Hong Kong Ltd v New World Development Co. Ltd (2006) 9 HKCFAR 234, Ribeiro PJ considered at the meaning of “the courts” under the Basic Law.  In looking at the principal purposes of the Basic Law, underpinning the articles relating to the judiciary and the meaning of the courts, he emphasized the “continuity between the pre-existing and the present courts and judicial systems” referring to Articles 81 and 87 of the Basic Law as examples.

57.In Luk Ka Cheung v Market Misconduct Tribunal (2009) 1 HKLRD 114, the court considered whether the Market Misconduct Tribunal was exercising judicial power of the Region.  After analyzing the Australian cases on the meaning of judicial power quoting in particular passages in Brandy, the court then proceeded to further consider the Basic Law in the context of Hong Kong.  It cited Sir Anthony Mason’s article “The place of comparative law in developing jurisprudence on the Rule of Law and Human Rights in Hong Kong” (2007)37 HKLJ 299 pp 305 to 306, and I would quote in particular the following: “The consequence (of the different extent of incorporation of separation powers in USA, Australia, United Kingdom and Canada) is that judicial decisions on the separation of powers need to be treated with great care before they can be imported from one jurisdiction to another”.

58.I would add that the federal system in USA and Australian differs from the unitary system in UK and PRC and direct incorporation of the meaning of judicial powers in the Australian decisions may not be entirely appropriate and apt.  In particular when the cases cited are at times when the use of administrative tribunals are not that prevalent.  I respectfully adopt the reasoning of Andrew Cheung J in paragraph 36 in Luk Ka Chueng :

“It is plain that in a modern society like Hong Kong, administrative tribunals and bodies have an important role to play. This is not a new phenomenon. It was already the case before the Basic Law was promulgated. Given the theme of continuity, it would be very surprising if the effect of the Basic Law, upon its proper interpretation, were to outlaw these administrative tribunals and bodies for ousting the jurisdiction or usurping the judicial functions of the courts of judicature of the HKSAR. Or put another way, the Basic Law should be interpreted in such a way as to enable, so far as violence is not done to the principle of separation of powers as understood in the tradition of English common law, the continued existence and development of administrative tribunals and bodies. This calls for a flexible and realistic, as opposed to an idealistic, approach to the doctrine of separation of powers, and a purposive and contextualised interpretation of the scope and meaning of ‘judicial power’ in the Basic Law, rather than following indiscriminately the strict interpretation adopted by the Australian courts towards their own Constitution, which was written under very different circumstances in order to serve its own unique purposes.”

59.This holding accords with the approach of the Privy Council in the Shell case in the passage cited above wherein the negative prospects on the issue of judicial power was set out.

Conclusion – decision-making power

60.From the cases cited, it can be concluded that there is no exhaustive definition that can be given to the meaning of judicial power in the context of the Basic Law or indeed as a matter of common law. 

61.As held in Stock Exchange of Hong Kong Ltd v New World Development Co. Ltd, the continuity between the pre-existing and the present courts and judicial systems is preserved in the Basic Law. 

62.These cases also illustrate that no one factor is determinative. However, the power to enforce one’s own decision is a strong indication of the exercise of judicial power by that body.  In the case of Waterside Wrokers’ Federation, it was the Court of Arbitration that was invited to enforce its own decision and that was held as an exercise of judicial power.  The provisions dealing with enforcement under the Ordinance here is not the same as that under the Commonwealth Conciliation and Arbitration Act of Australia and will have to be analysed according to its own terms.

63.The Ordinance empowers the tribunal to make orders and decisions.  It also provides by way of section 29 how the orders of the Tribunal can be enforced, namely by registration with the judiciary.  The provisions dealing with the decision making powers of the tribunal are not dependent or contingent upon the enforcing provisions.  The Tribunal was asked by the Financial Secretary to inquire into and make determinations on the issues set out in the notice dated 26 May 2003 as amended on 17 January 2005.  This is the main objective of the Ordinance.  The enforcing provisions, section 29 of the Ordinance and Rule 2 of the Registration of Orders Rules do not impinge, undermine or affect the powers of the Tribunal to pronounce its determination under the Ordinance.  The separability of these two sets of provisions is therefore established as in the case of Waterside Workers’ Federation. It follows that even if the enforcing provisions were to be in contravention of the Basic Law, the decision-making provisions will not necessarily and consequently be unconstitutional.

64.It is right, in my view, that the concept of separabiltiy be applied to the Ordinance so that such part as are not violating the Basic Law be preserved and the laws passed by the legislature be given effect, subject to the constitutional safeguard. 

65.The two powers, the decision-making power and the enforcing powers, must therefore be viewed and considered separately.

66.The decision-making power of the Tribunal conferred upon it by the Ordinance is not an exercise of the judicial power conferred on the court of judicature under the Basic Law.  The passages cited above from the Privy Council decision in the Shell case and Cheung J in Luk Ka Cheung are clear authorities which I respectfully adopt.

67.Given the separability of the powers of decision-making and enforcement under the Ordinance, the unconstitutionality of the enforcing provisions under section 29, if established, would not render the decision-making power of the tribunal unconstitutional or the decision or orders of the Tribunal invalid, or null and void.

68.The orders of the Tribunal stand irrespective of the position of the enforcing provisions. 

The enforcing provision – Section 29

69.It is necessary to next look at whether section 29 violates the Basic Law in that it conferred enforcing power on the Tribunal when such enforcing power should be vested solely in the courts of judicature as contended by the Applicants.  It must not be forgotten that the standard of proof is one of beyond reasonable doubt as held in the Shell case.

70.The Applicants contended that by reason of the mandatory wordings in section 29 of the Ordinance and Rule 2 of the Registration of Orders Rules, the Tribunal can enforce its own decision by seeking to register its own orders and upon registration.  The order of the Tribunal “shall, on such registration, become for all purposes an order of the Court of First Instance made within the jurisdiction of the Court of First Instance”.  The Applicants contended that the fact that the Registrar has no discretion to refuse to register in the light of the mandatory wordings in Rule 2(2) showed that is was an exercise of judicial power by the Tribunal in contravention of the Basic Law.

71.In the decision of Lee Yee Shing Jacky and another v Board of Review and another, Lam J, HCAL40/2008, 22 February 2011, the constitutionality of the Board of Review is challenged on the ground of a violation of the right to access to the courts contrary to Articles 10 and 35 of the Basic Law. 

72.Lam J held at paragraphs 73 and 74:

“Under our legal system the judicial power of the state can be exercised in two different capacities: (1) original; and (2) supervisory. In the exercise of its original jurisdiction, the courts (meaning the courts of law) adjudicate upon disputes between parties and such disputes can be disputes of facts or laws.

In the exercise of its supervisory jurisdiction, the High Court through the mechanism of judicial review ensures all administrative bodies and inferior tribunals observe the rule of law. Legality, rationality and fairness are the touchstones of this jurisdiction. It is described as ‘one of the great historic artefacts of the common law’ and it stems from ‘the constitutional role of the High Court as the guardian of standards of legality and due process’.”

73.Later, in considering the constitutional right of access to the courts, Lam J explained how the two different jurisdictions the courts of law would be applied at paragraph 79 :

“… the first question to be asked is in what manner the exercise of the judicial power of the state should be involved regarding the subject matter at hand. If the primary decision is, upon proper analysis, in substance an exercise of original judicial power of the state, an exercise of such power by a body other than the courts of law is prima facie a curtailment of the constitutional right. Such curtailment would then have to be justified under the proportionality test laid down in Solicitor v Law Society of Hong Kong (2003) 6 HKCFAR 570 and recently applied in Charles Mok v Tam Wai Ho FACV 8 of 2010, 13 December 2010. On the other hand, if the primary decision is an administrative one, the constitutional right of access to the courts manifests itself in the form of the exercise by the court of its supervisory jurisdiction to rule judicial review. It is then for the court to decide on the facts and circumstances in each case to which the court could intervene (including intervention on the basis of errors of material facts).”

74.In Luk Ka Cheung, the enforcing provisions considered there was section 264(1) of the Securities and Futures Ordinance whereby the permissive word “may” was used and that is distinguishable, according to the Applicants, to section 29 of the Ordinance where the mandatory word “shall” is used. 

75.In my view the argument of the Applicants based solely on the mandatory wordings of the provisions overlook the supervisory jurisdiction of the courts exercised under the rubric of judicial review as explained by Lam J in Lee Yee Shing Jacky.  After a decision is made by the Tribunal, the aggrieved party has the right to seek a judicial review of the decision.  If the Chairman of the Tribunal seeks to register the orders of the Tribunal, then by reason of the provision that the Applicants prayed in aid of here, namely section 16 of the High Court Ordinance, a stay of the registration may be ordered pending the disposal of the judicial review.  The mandatory wording of the enforcing provisions is not determinative as there are other procedures and powers of the court that will be invoked or engaged had a judicial review on these constitutional grounds been lodged timeously.

76.However, the practicality of the above is not adequate to dispose of the legal contentions of the Applicants.  There could be instances where the registration took place without notice to the parties for them to protect their rights and to object to the legality or constitutionality of the orders and decisions of the Tribunal.  I am not made aware of any provisions that obliged the Tribunal to notify the Applicants before or at the time the Tribunal sought registration of its orders. 

77.The parties informed me that they are not aware of any decisions on the meaning of section 29 of the Ordinance and Rule 2 of the Registration of Orders Rules. 

78.Section 29 on its face plainly shows that it is not the Tribunal that has the power to enforce. This is to be contrasted with the situation that was considered in the Waterside Workers’ Federation case.  Under the Ordinance, the Tribunal has the power to file its orders to the Registrar for its orders to be registered and converted into a court order.  The power rests with the judiciary to convert the orders into a court order.  The Tribunal’s power to seek and perhaps even to expect its orders to be converted into a court order does not amount to a right or power on the part of the Tribunal to enforce its own orders.  Once the Tribunal filed its orders with the Registrar, the adjudicative function of the courts would be invoked.  How that adjudicative power of the court to recognise and convert the order into a court order is to be exercised is not a matter within the jurisdiction of the Tribunal nor something which they can dictate. I am not of the view that section 29 amounts to giving the Tribunal an enforcing power.  In the premises, the grounds that the Applicants relied on, namely that the Tribunal was exercising judicial power vested with the courts of judicature is not made out.  The Applicants have failed to discharge its burden of proof on a balance of probabilities, let alone the requisite standard of proof of beyond reasonable doubt.

79.Given that the decision-making power and the enforcing power is separable, even if I were wrong in relation to section 29, the decision-making power of the Tribunal will not be affected and the orders of the Tribunal stand. 

80.In the event that my decision is not correct and that section 29 contravenes the Basic Law, the enforceability of the decisions and orders of the Tribunal may have to be considered through other means of the courts and judiciary system.  In that regard, I note the observations of Issacs and Rich JJ in Waterside Workers Federation at pages 470 and 471 :

“The main object of the Act is to obtain an award and settle the dispute. The force of public opinion is very strong in itself as a means of inducing persons whose dispute has been passed upon to adhere to the decision. That, in many countries, is still the only sanction…

Again, even if no specific enforcement were provided, it seems the common law would probably supply the defect. Disregard of the command of the Statute would be a wrongful act, and any member of the class for whose especial benefit the right is created has a right to enforce it.”

81.The judicial sentiment and the rationale expressed above are, in my view, applicable to the context of the order of the Tribunal here in the light of the purpose and intent of the Ordinance and the society’s views on the seriousness of insider dealing.  This discussion, however, is a matter for another day.

82.In summary, my findings are :

(1) I have no jurisdiction to stay the proceedings nor to strike out the Order made.

(2) The Tribunal in exercising its decision making power under the Ordinance was not exercising judicial power.

(3) Section 29 of Ordinance, the enforcing provision, does not give the Tribunal the power to enforce. The power is given to the Registrar to register the orders of the Tribunal.

(4) Section 29 does not render the Tribunal as a body that exercises judicial power.

(5) Even if I am wrong on the interpretation of section 29, the enforcing power is separable from the decision-making power, the orders of the Tribunal therefore remains valid.

83.In the light of the above, I make an order nisi that the Applicants do bear and pay the costs of the Secretary for Justice, to be taxed if not agreed.

Mr Peter Duncan, SC, instructed by Department of Justice, for Financial Secretary, for the Respondent

Mr Philip Dykes, SC & Mr John J.E. Swaine, instructed by Messrs Philip K.H. Wong, Kennedy Y.H. Wong & Co., for the Applicant, Koon Wing Yee

Please refer to CACV245/2011 for the relevant appeal(s) to the Court of Appeal.