1. Yiu Hoi Ying Charles (“Charles”) and Wong Nam Marian (“Marian”) were respectively the Director of Finance and Company Secretary of a listed company - Asia TeleMedia Limited (“ATML”). In July 2002, ATML owed Madam Liu Lien Lien (“Madam Liu”) sums totalling $83.39 million and was insolvent. ATML defaulted in repayment which led Madam Liu to serve five statutory demands on ATML between October 2002 and April 2006. On each occasion, she had been willing to negotiate and did not follow up the statutory demands by serving any winding-up petitions. ATML remained listed and was regarded as having value only as a potential listing-shell. 2. In February 2007, Madam Liu assigned the balance of ATML’s debt in the sum of $58.08 million plus accrued interest to Goodpine Limited (“Goodpine”). Goodpine demanded payment of the debt and served a statutory demand on 26 April 2007, stating that it would petition to wind-up ATML if ATML failed to pay the full amount within 21 days. The public was never informed of the assignment and statutory demand. In the meantime, there was a surge of speculative interest in ATML shares which sharply drove up their price and trading volumes. 3. Between 28 February and 5 June 2007, both Charles and Marian exercised share options and sold their shares, netting substantial profits. On 6 June 2007, Goodpine presented a winding-up petition and the share price of ATML fell very substantially. 4. A Market Misconduct Tribunal (the “MMT”) was constituted to determine whether any insider dealing had taken place. The MMT found that the assignment of the debt to Goodpine and the consequent statutory demand constituted inside information. It was also found that both Charles and Marian knew that the information, if it fell into the public domain, would be likely to have a material effect on the price of ATML shares. Accordingly, the MMT found that Charles and Marian were culpable of insider dealing under section 270(1) of the Securities and Futures Ordinance (the “SFO”), unless a defence could be established. 5. The MMT, however, acquitted Charles and Marian on the basis of the defence under section 271(3) of the SFO, which provided that a person should be acquitted if he did not have a purpose of making profit by using inside information. This was because the MMT found that (1) the sole motivation of Charles and Marian in selling the ATML shares was to seize the opportunity to sell at the surge prices, and that (2) they did not use the inside information since they believed that whatever threatened the share price would be resolved “behind closed doors” and would not influence the market price of the shares. The decision was upheld by the Court of Appeal. 6. The central question in this appeal was whether, on the findings of the MMT, it was correct as a matter of law to hold that Charles and Marian were entitled to rely on the section 271(3) defence. 7. It was agreed that the questions of whether insider dealing took place and also whether the defence applies should be determined at the time when the insider traded the shares. 8. Charles and Marian asserted that their sole purpose was to secure an unexpectedly high profit. This meant that they could only rely on the section 271(3) defence if they could prove that they did not use inside information to secure such profits. 9. The majority held that Charles and Marian failed to establish that defence. In selling the shares, they did take advantage of their knowledge that the prices they were securing would not have been achievable if the information was disclosed to the market. By doing so, they were using inside information and so were excluded from the section 271(3) defence. 10. In the majority’s view, MMT made an error in law since Charles and Marian’s subjective belief that the threat of liquidation would be sorted out in due course and that negative news about the company would remain “behind closed doors” was legally irrelevant. When they traded their shares for profit, they were using the information at that very time and a belief as to what might happen in the future to resolve ATML’s problems was beside the point. The majority therefore held that Charles and Marian were guilty of market misconduct by insider dealing. Dissenting judgment of Mr Justice Tang PJ: 11. In Tang PJ’s view, whether the insider can show that he had not in any way been motivated by the inside information is a question of fact on a subjective issue. 12. Tang PJ held that the section 271(3) defence should be interpreted to provide a defence for a defendant who can show that he would have done what he did even if he had not had the information. 13. On the facts, Tang PJ held that the MMT did not make an error in fact or in law, and did not believe that the Court was entitled to interfere with the MMT’s findings. The MMT was entitled to hold that, like the other employees of ATML, Charles and Marian sold because of the speculative bubble in the shares and the relevant information was not a factor. CONCLUSION: 14. Accordingly, the appeal was allowed by a 4:1 majority.