William Fung Wai Kwong v. The Insider Dealing Tribunal

CACV000154/2000

CACV 154/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 154 OF 2000

(ON APPEAL FROM THE FINDINGS OF
THE INSIDER DEALING TRIBUNAL PUBLISHED ON 20 JUNE
2000 AND THE ORDER OF THE INSIDER DEALING TRIBUNAL
DATED 26 JUNE 2000, OF MP3114/2000)

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Coram: Hon Wong and Woo JJA in Court

Date of Hearing: 17 October 2000

Date of Decision: 17 October 2000

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D E C I S I O N

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Hon Woo JA (giving the decision of the Court):

1. Upon an inquiry by the Insider Dealing Tribunal ("the Tribunal"), which took altogether 77 days, the Tribunal published the first part of a written report on 13 April 2000 and the second and last part on 20 June 2000. The Tribunal determined that insider dealing took place between 11 July 1994 and 2 August 1995, inclusive, arising out of the dealings in the listed securities of Hanny Holdings Limited (formerly known as Hanny Magnetics (Holdings) Limited) by William FUNG Wai Kwong (the appellant) and two other persons. On 26 June 2000, in respect of the appellant, the Tribunal made the following Order:

(a) He shall not for a period of 3 years from 1 June 2000 without leave of the High Court, be a director or a liquidator or a receiver or manager of the property of any listed company or in any way, whether directly or indirectly, be concerned in, or take part in the management of a listed company;

(b) He shall pay a sum of $8,000,000 to the Government being approximate to the losses avoided as a result of his insider dealing;

(c) He shall pay a penalty of $8,000,000 to the Government;

(d) He shall pay to the Government $1,800,000 being approximately 15% of the expenses of and incidental to the inquiry; and

(e) The moneys due in terms of paragraphs (b) to (d) shall be payable on or before 15 September 2000.

2. The appellant took out a Notice of Appeal on 4 May 2000 to challenge the determination of the Tribunal, and filed a Supplemental Notice of Appeal on 11 July 2000 to challenge the determination and also the Order made on 26 June 2000.

3. By a summons dated 7 September 2000, the appellant applied for a stay of execution of the Order and for leave to file an application to fix a date for hearing of the appeal and to serve a notice of setting down of the appeal out of time. In the Affirmation of Tsui Ka Kui of 7 September 2000 filed in support of the application before Leong JA, it was affirmed that the appellant was no longer a director or any relevant person of any listed company and therefore paragraph (a) of the Order was of no relevance. The application for stay of execution only related to the remaining paragraphs of the Order that are monetary in nature and has remained so.

4. By his ruling dated 15 September 2000, Leong JA granted leave to fix a date of hearing of the appeal and to file the notice of setting down but dismissed the application for stay of execution. By a Notice of Appeal dated 18 September 2000, the appellant applies to this Court to reverse Leong JA's refusal to grant a stay of execution.

5. In Leong JA's ruling of 15 September 2000, the Judge dealt with all the relevant grounds in support of the appellant's applications. He was of the view that although the appellant's reasons for delay did not provide sufficient excuse for the delay, nothing had been shown that the respondent had been thereby prejudiced and he thought it just to grant leave to allow the appeal to proceed. Regarding the stay of execution, the Judge said:

"In his affidavit in support of the application, the appellant said that the penalty and costs were substantial and his reputation and social status would be greatly impaired and damaged if the order was executed pending his appeal. ...

...

...

The starting point on stay of execution according to the authorities relied on by the respondent is that 'there had to be good reasons for depriving a plaintiff from obtaining the fruits of a judgment' (per Gibson LJ in R v Mid Warwickshire Licensing Justices, ex parte Patel, (sic) The Times Law Reports December 15, 1993) and 'the appellant had to show some special circumstances which took the case out of the ordinary' (per Hobhouse LJ in the same case). Staughton LJ in Linotype-Hell Finance Ltd v Baker [1992] 4 All ER 887 said this in relation to the current practice in considering whether to grant such application: 'It seems to me that, if a defendant can say that without a stay of execution he will be ruined and that he has an Appeal which has some prospect of success, this is a legitimate ground from granting a stay of execution'.

The appellant had not relied on inability to satisfy the order to support his application to stay and indeed, at the inquiry, it was specifically made clear to the Tribunal of Inquiry that the appellant did not rely on ability to pay the costs and penalty as a mitigating factor. The appellant had not shown what prospect of success he could have in his attempt to challenge the Tribunal's finding of facts, although the respondent agrees that there may be some prospect of success in the appeal. In my opinion, the grounds advanced by the appellant do not demonstrate a case out of the ordinary that a stay of execution should be granted."

6. The reference to Mid-Warwickshire Licensing Justices, ex p Patel is wrong and should have been Winchester Cigarette Machinery Ltd v Payne & Anr (No 2) that appears on the same page of the report. Though Gibson LJ in that case mentioned that "the court had moved on from the principle that the only ground for a stay was the reasonable probability that damages and costs paid would not be repaid if the appeal succeeded", he stated:

"... full and proper weight had to be given by the court to the starting principle that there had to be a good reason for depriving a plaintiff from obtaining the fruits of a judgment."

7. Mr Allan on behalf of the appellant submits that Leong JA had exercised his discretion wrongly because the Judge had placed excessive reliance upon the fact that the appellant would not be financially "ruined" and the Judge had failed to take sufficient account of the following:

(i) The appellant has some prospect of success, as conceded by the respondent;

(ii) The appellant would be ruined in his reputation and status within the business community and would be so greatly affected, that for a man of his old age and poor health he would be put in such an onerous position, and that he would never be able to recover; and

(iii) The amounts ordered to be paid are huge having regard to the unusual circumstances of the case.

8. Item (i) does not quite represent the facts. Leong JA did not say nor did the respondent concede that the appellant had some prospect of success, as opposed to that the appellant might have some prospect of success. We shall revert to this point later.

9. Mr Allan tells us that the appellant is 72 years old. The illness from which the appellant has been suffering is described as a problem of concern. "He underwent an operation of cancer treatment at his urinary system early this year and have (sic) been undergoing constant medicine treatment up to now." However, these matters were raised as an excuse for not having prosecuted the appeal in good time, and have little bearing on the application for stay of execution. The adverse effect of the Tribunal's finding of insider dealing against the appellant on his reputation and social or business status is not a matter that can be cured by a stay of execution; the stigma has attached since the determination of the Tribunal and only a success on the appeal would provide vindication. We consider that item (ii) is not a sound basis for ordering a stay in the circumstances of this case.

10. There is little to support item (iii) either. The sums that the appellant have been ordered to pay are large, but there is no evidence that the appellant is unable to pay them nor that he would be ruined by having to pay them. On the contrary, it is pointed out by Miss Tang for the respondent in her skeleton submissions that counsel for the appellant confirmed both before the Tribunal and before Leong JA that the appellant was able to satisfy the monetary part of the Order. Indeed, Mr Allan confirms that he is not instructed that the appellant is unable to pay.

11. Leong JA referred to the relevant English authorities in his ruling for considering whether stay should properly be granted. The law and practice in Hong Kong are not dissimilar. In Word Trade Centre Group Ltd & Anr v Resourceful River Ltd & Anr (1993) Civ App No 70 of 1993 (12 May 1993, unreported), Litton JA, as he then was, referred to Order 59, rule 13(1) of the RSC (equivalent to the present RHC) that an appeal shall not operate as a stay of execution and commented that the jurisdiction to order a stay under that rule was a flexible one. He went on:

"Plainly the intention is that a party should not be deprived of the fruits of a judgment in his favour except on good grounds being shown. Obviously if an applicant were able to demonstrate that he has very strong grounds of appeal, that something has grievously gone wrong with the process of law in the court below, then this court would be inclined to make such order as to ensure that the appeal would not be rendered nugatory in the meanwhile. In those circumstances perhaps the court may not examine very closely the financial situation of the appellant. On the other hand if the grounds of appeal appear weak then the court would look more closely into the alleged impecuniosity and prospective financial ruin."

12. Mr Allan argues that the prosecution has conceded that there is some prospect of the appeal being successful. However, he has not suggested that the prospect is so strong as to satisfy the test adopted by Litton JA.

13. There is nothing that would render the fruits of this appeal, if it were successful, nugatory. The sums ordered, when paid, will be with the Government, and the appellant would have no risk to recover the same should he succeed in his appeal. Moreover, as he is financially capable of paying the sums, paying them pursuant to the Order subject to his appeal does not seem to us to affect his prosecution of the appeal in any adverse manner. Nor, for that matter, will the payment affect his reputation and status in life, for it must be known, as is the fact, that he is appealing. Despite the submissions of counsel for the appellant, we are not persuaded that Leong JA had exercised his discretion wrongly or against principle and we are not inclined to exercise our discretion in any different way.

14. Before us today, Mr Allan changes his position to apply for a stay of execution till 25 November 2000 instead of pending the appeal. He tells us that that was what counsel for the appellant applied for before the Tribunal, namely, 6 months for the appellant to pay the penalty. However, that application was not acceded to by the Tribunal. When we specifically asked Mr Allan whether the appellant was to file an affidavit of means in support, he informed us that the appellant was not willing to do so. Without such an affidavit, we do not see any basis for delaying the execution for another six weeks.

15. The application to stay execution must therefore be dismissed with costs.

Representation:

Mr William Allan, instructed by Messrs Eli K K Tsui & Co, for the appellant

Miss Cynthia Tang of the Department of Justice, for the respondent