Securities and Futures Commission v. Hontex International Holdings Co Ltd and Others

HCMP 630/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 630 OF 2010

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BETWEEN

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Before: Hon Harris J in Chambers

Date of Hearing: 28 September 2011

Date of Judgment: 28 September 2011

Date of Reasons for Judgment: 7 October 2011

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REASONS FOR JUDGMENT

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Leave to appeal decision

1.On 22 July 2011 I heard the Securities and Futures Commission’s (“Commission”) application pursuant to RHC O14A for the determination of issues which go to the jurisdiction of the court to grant the relief sought by the Commission in these proceedings.

2.I declined to determine the issues for reasons set out in the reasons for decision dated 2 August 2011.  Instead I told the parties that I wished the matter to proceed swiftly to trial, made appropriate directions and reserved 3 weeks commencing 4 June 2012 for the trial, which was as early as the Commission thought it would be practical for the matter to be brought to trial.

3.The Commission now seeks leave to appeal my decision.  The Commission wishes not only to appeal my decision to determine the O14A application, but also to ask the Court of Appeal to determine that application itself rather than send it back to me for re-consideration.  The Defendants contest the application.  Their position before me at the hearing on 22 July 2011 was that they disputed the court’s jurisdiction to make the orders sought.  After hearing my initial indications that I had doubts about the suitability of the issue for determination under O14A they indicated that they were content for the issue to be left to trial.

4.It is common ground that leave to appeal should not be granted unless the court is satisfied that either the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  What the Commission wishes to appeal is the exercise of my discretion pursuant to RHC O14A.  Therefore, in order to succeed it is necessary to show that I was plainly wrong in the exercise of that discretion: PCCW-HKT International Ltd v New World Telephone Ltd [2001] 2 HKLRD 141.  In other words the Commission has to show that there is a reasonable prospect of it establishing that I was plainly wrong in refusing to determine the issue. 

5.The Commission does not point to any misapprehension by me about any aspect of the evidence or some clear oversight in construing the law.  I was not satisfied that it was safe to assume that I could decide the issue posed by the Commission’s application entirely independently of the facts of the case as the Commission invited me to do.  The course I chose was to direct that the Action proceed to trial as soon as possible.  The Commission has not suggested in my view any reason for concluding that this was a clearly wrong view to take.

6.The Commission also argues that there is another reason for granting leave and I quote from paragraphs 13 and 14 of its submissions.

“13. The Appellant is a public authority seeking an authoritative decision on a point of general application and importance. The very fact that the same point has arisen herein so soon after the decision in Tiger Asia indicates the general importance of the point. It is further reinforced by other pending cases where the same or a similar issue arises.

14. Moreover, it will be submitted in the appeal in Tiger Asia that the court should have, and failed to, consider what the outcome would be on other facts such as those in the present case. The Court of Appeal will thus be invited to re-consider these matters in any event. Whilst it would have been helpful for the Court of Appeal to have had the advantage of a judgment on the point in the present case, the point can still be fully argued if the court grants this leave application as the two appeals would almost certainly be consolidated into a single hearing.”

7.This issue is not the same as that decided in the Securities and Futures Commission v Tiger Asia Management LLC HCMP 1502/2009 (unrep. 21 June 2011).  Put very shortly Tiger Asia concerned whether or not the court had jurisdiction to determine a contravention of a provision within Part XIII of the Securities and Futures Ordinance, Cap. 571 (“Ordinance”). Part XIII concerns market misconduct and provides for the Market Misconduct Tribunal to determine whether or not there has been a contravention of the provisions of Part XIII.  In Tiger Asia the issue was purely a matter of statutory construction and could be determined on a strike out application.

8.The present O14A application concerned whether or not the court has jurisdiction to determine a contravention of provisions in Part XIV of Ordinance, which make certain matters criminal offences and liable to prosecution summarily or on indictment.  I stated in paragraph 34 of my judgment in Tiger Asia, to which I refer in paragraph 8 of my reasons for decision of 2 August 2011 that “I accept that there is no absolute prohibition against the Court making a declaration of criminality”.  What for all practical purposes the Commission seeks in the present case is a declaration of criminality.

9.Issues of jurisdiction can arise in 2 ways. They were described as follows by Diplock LJ in Garthwaite v Garthwaite [1964] 2 WLR 1108 at 1120:

“In its narrow and strict sense, the “jurisdiction” of a validly constituted court connotes the limits which are imposed upon its power to hear and determine issues between persons seeking to avail themselves of its process by reference (1) to the subject-matter of the issue or (2) to the persons between whom the issue is joined or (3) to the kind of relief sought, or to any combination of these factors. In its wider sense it embraces also the settled practice of the court as to the way in which it will exercise its power to hear and determine issues which fall within its “jurisdiction” (in the strict sense) or as to the circumstances in which it will grant a particular kind of relief which it has “jurisdiction” (in the strict sense) to grant, including its settled practice to refuse to exercise such powers, or to grant such relief in particular circumstances.”

10.Given the fact that there appears to be no absolute prohibition against the court making a declaration of criminality, it did not seem to me to be safe, or as a matter of case management sensible, to proceed on the assumption made by the Commission that the substantive issue of jurisdiction in the present case can be treated as going to jurisdiction in its narrow or strict sense rather than jurisdiction in its wider sense, which would require, to borrow the language of Bokhary PJ in Re Chime Corp Ltd (2004) 7 HKCFAR 546, at §9, an investigation of “the circumstances in which it is proper for the [court or tribunal] to entertain a case or to make a particular order”.

11.The Commission has not in my view demonstrated that it has a reasonable prospect of establishing that I was clearly wrong to take this view or that, even if there is some force in my view, it is reasonably arguable that I was clearly wrong not to have found that such considerations were overridden by the desirability of helping the Commission formulate a test case in which the Court of Appeal could consider the various issues of jurisdiction which the Commission argues Tiger Asia, the present case and Mr Westbrook tells me other cases, which the Commission considers similar, give rise to.  The reason why these issues arise is because the Commission has decided not to proceed in accordance with the procedures, which the Ordinance expressly provides for establishing contravention of its provisions.  In the case of Tiger Asia this would have been an inquiry before the Market Misconduct Tribunal.  In the case of the present case it would be a prosecution of, most obviously, the 1^st Defendant.  The existence of an alternative route might be a reason why the court in the present case would find that even if jurisdiction in its narrow sense exists (i.e. to find whether or not criminality had taken place) it was not proper to exercise such jurisdiction.

12.I dismiss this application with costs.

Mr Simon Westbrook, SC leading Mr Roger Beresford, instructed by Securities and Futures Commission, for the Applicant

Mr Charles Manzoni & Mr Norman Nip, instructed by Messrs Li & Partners, for the 1^st to 5^th Defendants

Please refer to CACV128/2012 for the relevant appeal(s) to the Court of Appeal.