Source: http://www.ipsofactoj.com/DecidedCases/international/2008/part05/int2008(05)-004.htm
Timestamp: 2017-09-19 13:38:35
Document Index: 6849624

Matched Legal Cases: ['art 5', 'arts 10', 'arts 10', 'arts 10', 'arts 10', 'art.14', 'art.39', 'art.6', 'art.10', 'art.11', 'art.11', 'art.6', 'art.6', 'art.6', 'art.6', 'art.6', 'art.6', 'art.6', 'arts 10', 'art.6', 'arts 10', 'art.6', 'art.6', 'art.6', 'art.6', 'arts 10', 'arts 10', 'art.6', 'arts 10', 'arts 10', 'arts 10', 'art.14', 'arts 10', 'art.6', 'art.6', 'art.6', 'arts 10', 'arts 10', 'art.10', 'art.6', 'art.11', 'art.6', 'art.10', 'art.10', 'art.6', 'art.10', 'art.10', 'art.10', 'art.6', 'art.10', 'art.10', 'arts 10', 'art.6', 'art.3', 'art.6', 'art.14', 'art.14', 'arts 10', 'art.40', 'art.14', 'art.11', 'art.14', 'art.11', 'art.11', 'arts 10', 'Art.39', 'Art.10', 'Art.11', 'Art.14', 'Art.6']

W.Y. Koon v Insider Dealing Tribunal [CFA]
IpsofactoJ.com: International Cases [2008] Part 5 Case 4 [CFA]
W.Y. Koon
Insider Dealing Tribunal
CHIEF JUSTICE ANDREW LI
JUSTICE BOKHARY PJ
JUSTICE CHAN PJ
JUSTICE RIBEIRO PJ
Chief Justice Li
I agree with the judgment of Sir Anthony Mason NPJ.
I am in entire agreement with the judgment of Sir Anthony Mason NPJ.
These appeals raise important and interesting questions concerning an inquiry by the Insider Dealing Tribunal (“the Tribunal”) conducted under the Securities (Insider Dealing) Ordinance, Cap.395 (“SIDO”) which has now been repealed and replaced by the Securities and Futures Ordinance, Cap.571 (“SFO”). The principal questions are whether arts 10 and 11 of the Hong Kong Bill of Rights (“BOR”) applied to the proceedings and, if so, whether the use by the Tribunal of incriminating answers compulsorily given to incriminating questions and the standard of proof applied by the Tribunal complied with these provisions.
The appeals are brought by the Financial Secretary from a decision of the Court of Appeal (Ma CJHC, Tang VP and Stone J), pursuant to leave granted by that Court. The appeals to the Court of Appeal arose out of the inquiry by the Tribunal under SIDO. The history of the matter was succinctly stated in the judgment of the Court of Appeal delivered by Tang VP. The statement of facts which follows is taken from that judgment.
On 28 January 2000, the shares in Easy Concepts International Holdings Ltd (“Easy Concepts”) closed at $0.34 with a turnover of 50,000 shares. On 31 January 2000, by the time trading was suspended at 10:47 am, it closed at $2.10. The turnover was 4,228,000 shares.
On 18 February 2000, an announcement was made that the Pollon Group had taken a 75% interest in Easy Concepts. When trading resumed on 18 February 2000, the shares traded between $12.40 and $8 and closed at $10.05. The turnover was 14,378,000 shares. The shares in Easyknit International Holdings Ltd (“Easyknit”), which owned 75% of Easy Concepts prior to the Pollon Group transaction, rose by 30.91% on 31 January 2000 before its suspension at 10:48 am. On resumption of trading on 18 February 2000, it rose a further 239%.
The Securities and Futures Commission (“SFC”) launched an investigation under s.33 of the Securities and Futures Commission Ordinance, Cap.24 (“SFCO”) (now repealed) into possible insider dealing in the shares of Easy Concepts and Easyknit.
The respondent, Koon Wing-yee (“Koon”), was the chairman of Easy Concepts as well as the chairman of Easyknit.
The respondent, Sonny Chan Kin-shing (“Sonny Chan”), was a business acquaintance of long standing of Koon.
In 2001, both Koon and Sonny Chan were required by SFC to answer questions pursuant to s.33(4)(c) of SFCO. During the investigation, they had claimed that answers to certain questions might tend to incriminate them; however, they were required to answer those questions under s.33(4) and (6) of SFCO which provided that:
The person under investigation or any person who is reasonably believed or suspected by the investigator to have in his possession or under his control any record or other document which contains, or which is likely to contain, information relevant to an investigation under this section, or who is so believed or suspected of otherwise having such information in his possession or under his control, shall –
attend before the investigator at such time and place as he may require in writing, and answer truthfully and to the best of his ability such questions relating to the matters under investigation as the investigator may put to him; and
A person shall be obliged to answer questions put to him under this section by the investigator, but if the answers might tend to incriminate him, and he so claims before answering the question, neither the question nor the answer shall be admissible in evidence against him in criminal proceedings other than proceedings for an offence under subsection (12) or section 36 of the Crimes Ordinance (Cap. 200), or for perjury, in respect of the answer but shall be admissible for all the purposes of the Securities (Insider Dealing) Ordinance (Cap. 395); the investigator shall, before asking any question under this section, inform the person concerned of the limitation imposed by this subsection in respect of the admissibility in evidence of the question and any answer given.
Following the s.33 investigation, the Financial Secretary, on 26 May 2003, required the Tribunal to inquire into and determine:
whether there has been insider dealing in relation to the companies connected with or arising out of the dealings in the listed securities of the companies by or on behalf of:
Chung Ki To, Sonny Chan Kin Shing and Lam Ping Wan on 31 January 2000;
in the event of there having been insider dealing as described in paragraph (a) above, the identity of each and every insider dealer; and
the amount of any profit gained or loss avoided as a result of such insider dealing.
The Tribunal was empowered by s.17 of SIDO to:
.... require any person to attend .... and to give evidence ....
.... require such person to answer all questions put by or with the consent of the Tribunal;
Type “A” Salmon letters were served on Koon and Sonny Chan, requiring them to attend before the Tribunal and give evidence under s.17 of SIDO. The letters informed them that:
The Tribunal has determined that your conduct will be the subject of the Inquiry and that you are potentially implicated or concerned in the subject matter of the Inquiry.
Koon and Sonny Chan appeared before the Tribunal and gave evidence. The Tribunal admitted into evidence and took account of the questions and answers given by them under s.33(4) of SFCO, including those which they had claimed might incriminate them. A question which arises in this appeal is whether the Tribunal was right to do so.
The Tribunal was authorized by SIDO to make, in relation to a person who has been identified by the Tribunal as an insider dealer, any or all of the following orders:
an order that that person shall not, without the leave of the Court of First Instance, be a director or a liquidator or a receiver or manager of the property of a listed company or any other specified company or in any way, whether directly or indirectly, be concerned or take part in the management of a listed company or any other specified company for such period (not exceeding 5 years) as may be specified in the order;
an order that that person pay to the Government an amount not exceeding the amount of any profit gained or loss avoided by that person as a result of the insider dealing;
an order imposing on that person a penalty of an amount not exceeding three times the amount of any profit gained or loss avoided by any person as a result of the insider dealing.
Section 27 of SIDO allowed the Tribunal to make an order against the insider dealer to pay the expenses of the inquiry.
By its Interim Report, the Tribunal (consisting of McMahon J (Chairman), Professor Lui Yu-hon and Mr. Phil Chan Kin-fung) found Koon and Sonny Chan to be insider dealers. The relevant findings were expressed as follows:
Koon Wing Yee
We find Koon Wing Yee to have been an insider dealer in respect of Sonny Chan’s purchase of 568,000 Easy Concepts shares on 31st January 2000 in breach of the provisions of section 9(1)(a) and 9(1)(c) of the Ordinance. Koon also counselled or procured Lam Ping Wan’s purchase of 3.2 million Easy Concepts shares on 31st January 2000 and is again in breach of the provisions of section 9(1)(a) in this regard.
We find Sonny Chan to have been an insider dealer in respect of his purchase of 568,000 Easy Concepts shares and 100,000 Easyknit shares on 31st January 2000 in breach of the provisions of section 9(1)(e) of the Ordinance.
In making its findings, the Tribunal, regarded itself as bound by R v Securities and Futures Commission, ex parte Lee Kwok-hung (1993) 3 HKPLR 1[1], in which Jones J treated the proceedings as not criminal, and applied the civil standard of proof according to “a high degree of probability”. Again, the correctness of this approach is a question which arises in this appeal.
The Court of Appeal concluded that the respondents were entitled to the protection of arts 10 and 11 of the BOR in the insider dealing proceedings and that the evidence obtained under s.33(4) of SFCO, in relation to which the respondents had claimed the privilege against self-incrimination, was inadmissible in those proceedings. The Court also concluded that the respondents should not have been compelled to give evidence under s.17 of SIDO in the insider dealing inquiry and that, in the inquiry, the standard of proof to be applied was proof beyond reasonable doubt.
Subsequently, the Court of Appeal made the following orders:
allowing the appeals, quashing and setting aside the adverse findings of insider dealing made against each respondent by the Tribunal;
quashing and setting aside the consequential orders under ss 23 and 27 of SIDO made by the Tribunal against the respondents;
that the costs of the appeals be paid by the appellant to the respondents, costs to be taxed if not agreed; and
that the question of each respondent’s costs of the Inquiry before the Tribunal be deferred until after the decision of the Court of Final Appeal from the appellant’s appeal, with liberty to restore.
THE APPEAL TO THIS COURT
The appeal to this Court raises important issues of constitutional law:
Did the insider dealing proceedings heard by the Tribunal involve the determination of a criminal charge within the meaning of arts 10 and 11 of the BOR either by reason of the Tribunal’s power (a) to impose a fine or (b) to order disqualification?
Was there a breach of the right to protection against self-incrimination or the right to silence?
Was the Tribunal obliged to apply the criminal standard of proof beyond a reasonable doubt?
Even if the insider dealing proceedings did not involve the determination of a criminal charge, should the Court of Appeal have found for the respondents?
Did the Court of Appeal err by not confining the remedy to an order that the statutory power to impose a fine was a breach of the BOR and so invalid?
THE CONSTITUTIONAL PROVISIONS
Article 10 of the BOR relevantly provides:
In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.
Article 11 of the BOR provides:
Everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty according to law.
In the determination of any criminal charge against him, everyone shall be entitled to the following minimum guarantees, in full equality–
The provisions of arts 10 and 11 set out above are in the same terms as the corresponding provisions in art.14(1), (2) and (3)(g) of the International Covenant on Civil and Political Rights (“the ICCPR”).
Because the Hong Kong Bill of Rights Ordinance, Cap.383, by enacting the BOR, implemented the ICCPR as applied to Hong Kong, the BOR has constitutional force pursuant to art.39 of the Basic Law.
In considering the question whether the proceedings in the Tribunal involved the determination of a criminal charge, the Court of Appeal took account of the principles enunciated by the European Court of Human Rights (“the Strasbourg Court”) in relation to art.6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) and applied by English Courts in the interpretation and application of the Human Rights Act 1998 (UK).
The Court of Appeal was correct in doing so. The decisions of the Strasbourg Court on provisions of the Convention which are in the same, or substantially the same terms, as the relevant provisions of the BOR, though not binding on the courts of Hong Kong, are of high persuasive authority and have been so regarded by this Court. Indeed, this proposition is common ground between the parties.
It is necessary, however, to acknowledge that the Strasbourg Court’s jurisprudence is fact-sensitive so that it is hazardous to apply the decisions of that Court to facts which are different – R (Gillan) v Commissioner of Police of the Metropolis [2006] 2 WLR 537 at 549, para.23, per Lord Bingham of Cornhill. And there is no decision of the Strasbourg Court which approximates the legislation and the facts of this case.
Article 6(1) of the Convention is in terms relevantly similar to art.10 of the BOR. Article 6(1) provides:
In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
Article 6(2) provides:
This provision corresponds with art.11(1) of the BOR.
There is, however, no express provision in the Convention which corresponds with art.11(2)(g) of the BOR protecting a person from being compelled to testify against himself or to confess guilt. It is, however, recognized that the right to a fair hearing under art.6(1) of the Convention protects a person from being compelled to testify against himself.
The decisions of the Strasbourg Court (see, for example, Engel v The Netherlands (No.1) (1976) 1 EHRR 647 at 678, para.81; Ozturk v Germany (1984) 6 EHRR 409; Ravnsborg v Sweden (1994) 18 EHRR 38; AP, MP and TP v Switzerland (1998) 26 EHRR 541 at 558, para.39) and the English decisions (Han v Customs and Excise Commissioners [2001] 1 WLR 2253 at 2260G-H, per Potter LJ; R (McCann) v Manchester Crown Court [2003] 1 AC 787 at 810E-F, 819B-C, 830H) relating to art.6 of the Convention, which the Court of Appeal applied, establish that the three criteria to be taken into account for the purpose of determining whether there is a “criminal charge” within the meaning of art.6 are:
the classification of the offence under domestic law;
the nature of the offence; and
the nature and severity of the potential sanction.
These decisions recognize that the concept of “criminal charge” in art.6 has an autonomous meaning, that is, the concept does not coincide with, and is not satisfied by, the classification of a proceeding as criminal or non-criminal under the law of a State and that the concept is a matter of substance rather than form. If it were otherwise, a State would be at liberty to avoid the application of art.6 by transferring the decision in relation to what is, in essence, a criminal offence to administrative authorities.
In the application of the three criteria, the Strasbourg Court has recognized that the classification of the proceedings under domestic law is no more than a starting point (Engel v The Netherlands (No.1) (1976) 1 EHRR at 678, para.81) and that factors (2) and (3) carry substantially greater weight than factor (1) (Ozturk v Germany (1984) 6 EHRR at 422, para.52; see also Ravnsborg v Sweden (1994) 18 EHRR 38 at 52, para.35). The principle was echoed by Potter LJ in Han v Customs and Excise Commissioners [2001] 1 WLR at 2260G-H and again by the House of Lords in R (McCann) v Manchester Crown Court [2003] 1 AC at 810F where Lord Steyn said that the third factor is the most important. The Court of Appeal picked up and applied the principle enunciated in the two cases and derived other assistance from them. Later, in these reasons, I shall return to the two cases.
The Court of Appeal went on to hold that, although the legislature clearly regarded insider dealing proceedings under SIDO as civil proceedings, the s.23(1)(c) penalty was punitive and deterrent in nature, not compensatory, and that it was severe. Because the Court thought factors (2) and (3) should carry substantially greater weight than factor (1) and that factor (3) was the most important, the Court concluded that, in the light of the severity of the penalty, the proceedings involved the determination of a criminal charge. On the other hand, the Court was of opinion that the power of disqualification was not to punish but to protect the investing public and therefore did not of itself transform the proceedings into criminal proceedings.
In the course of reasoning to its conclusion that, in the light of the severity of the penalty, the proceedings involved the determination of a criminal charge, the Court of Appeal considered that R v Securities and Futures Commission ex parte Lee Kwok-hung was incorrect. Their Lordships were of the view that Jones J attached inadequate weight to the penalty, thinking that it was merely disciplinary in nature and giving excessive weight to the fact that the legislature had classified the proceedings as civil. The Court of Appeal rejected the view that insider dealing proceedings were disciplinary in nature and considered that the legislative classification of the proceedings carried less weight than Jones J gave it.
QUESTION (1)(a)
(Was there a criminal charge by reason of the power to impose a penalty?)
Mr. David Pannick, QC, for the appellant, submits that the Court of Appeal was wrong to give such weight to the European and English decisions, particularly Han and McCann, noting that in Han, Potter LJ expressed reluctance about reaching the decision (Han v Customs and Excise Commissioners [2001] 1 WLR at 2276H-2277B) and Mance LJ expressed his reservations (Ibid at 2281A), while Sir Martin Nourse dissented. Instead, Mr. Pannick QC argues that more weight should be given to the domestic legislative classification of the proceedings as civil. The authorities do not support this submission. According to established principle, if the proceedings are classified as civil in domestic law, that, though important, is by no means conclusive because the second and third criteria are more significant – Secretary of State for the Home Department v MB [2007] 3 WLR 681 at 692G, per Lord Bingham of Cornhill. Han and McCann accord with this statement of principle.
There are many statements in the authorities which seek to elucidate the elements in the concept of “criminal charge” within the meaning of art.6(1) of the Convention. Of these statements, the statement which, though it is directed to art.6, most clearly explains the concept in the context of arts 10 and 11 of the BOR and is best adapted for application in Hong Kong, was that made by Lord Hope of Craighead in McCann [2003] 1 AC at 819D-F[2]. His Lordship said:
The words ‘criminal charge’ themselves suggest that the proceedings which they have in mind are not just proceedings where a ‘charge’ is made. The question is whether they are proceedings which may result in the imposition of a penalty. This point emerges clearly from the French text of article 6(1), as Lord President Rodger pointed out in S v Miller 2001 SC 977, 988, para 21. It states that the matter which is to be determined must be either a dispute ‘sur ses droits et obligations de caractère civil’ or an “accusation en matière pénale’. The words ‘en matière pénale’ indicate it is envisaged that there will be a penal element. The court seems to have had this point in mind when, in Engel v The Netherlands (No 1), at p 678, para 82, it asked itself when it was setting out the first criterion ‘whether the provision(s) defining the offence charged belong, according to the legal system of the respondent state, to criminal law, disciplinary law or both concurrently.’ In other words, proceedings involving a charge which is merely disciplinary in character will not fall within the ambit of article 6.
It follows that proceedings which may result in the imposition of a penalty for wrongful conduct will involve the determination of a criminal charge unless they have a character which is neither criminal nor penal. Disciplinary proceedings, which do not concern the public at large, usually have such a non-criminal, non-penal character. Proceedings under regulatory legislation whose purpose is essentially protective rather than punitive and deterrent may also have such a character, a matter to be discussed at greater length later in these reasons (see paras 59 and 60). So also with proceedings that have a preventative rather than a punitive or deterrent purpose. Likewise, proceedings for a penalty which is compensatory in nature have a non-criminal and non-penal character.
The passage quoted from the speech of Lord Hope of Craighead in McCann needs to be read in the light of the principle established by the Strasbourg jurisprudence that “a fine which is punitive and deterrent rather than compensatory may suggest that the matter is ‘criminal’ in nature if the penalty is sufficiently substantial” – Brown v United Kingdom (1998) 28 EHRRCD CD 233 at CD 236. In Napp Pharmaceutical Holdings Ltd v Director General of Fair Trading, Competition Commission Appeal Tribunal, unreported, (15 Jan 2002 at p.23, para.98), it was accepted that proceedings were properly classified as criminal for the purpose of art.6 where the penalties were intended to be severe and to have a deterrent effect. When so understood, it follows that, generally speaking, proceedings which are not expressed to be criminal proceedings will not be classified as criminal for the purposes of the BOR unless the penalty for wrongful conduct, which may be imposed, is substantial. Otherwise the passage in McCann accurately expresses a broad principle whose application will depend upon the three factors already mentioned.
The classification of the insider dealing proceedings according to domestic law is not in doubt. It was civil. So much is also common ground between the parties. Indeed, the legislature deliberately decided that insider dealing should be more appropriately addressed by means of civil proceedings than by the application of the criminal law. SIDO was designed to arm the Tribunal with increased sanctions in order to provide a more effective deterrent against insider dealing. Before SIDO, the only sanction to support a decision of the Tribunal was public censure, the Government having then taken the view that criminal or civil sanctions would not be effective in preventing insider dealing in Hong Kong by reason of the difficulty of obtaining evidence.
The enactment of SIDO followed the detailed consideration over a period of thirteen months of the Bill by an ad hoc group set up by the Legislative Council to study the Bill. In moving the second reading of the Bill, the Financial Secretary, after referring to the recommendations of the ad hoc group and other submissions, said:
.... As I made clear when introducing the Bill to this Council, our view remains that insider dealing should not for the present be made a criminal offence but that the position should be reviewed in the light of experience of the effect of increased Tribunal sanctions and the effectiveness of enforcement action. Criminal sanctions have in fact proved ineffective elsewhere because of the difficulties of prosecution and of securing convictions. We firmly believe that at the present time the tribunal approach represents the most flexible and effective way to tackle the problem in Hong Kong.
Next, it is necessary to consider the nature of the misconduct which is the subject of the proceedings and the nature and severity of the penalty. The definition of “insider dealing” which is contained in s.9 of SIDO, sets out six forms of insider dealing of which three only are relevant to this case. Central to each form of insider dealing is the use of “information”. This word is defined by s.8 in these terms:
‘Relevant Information’
In this Ordinance ‘relevant information’ (有關消息) in relation to a corporation means specific information about that corporation which is not generally known to those persons who are accustomed or would be likely to deal in the listed securities of that corporation but which would if it were generally known to them be likely materially to affect the price of those securities.
Each of the three forms of insider dealing has at its core knowledge of relevant information in relation to a listed corporation. The first form of insider dealing is when a person, having such information, deals in the listed securities of such a corporation, or procures or counsels another person to deal in such listed securities, knowing or having reasonable cause to believe that such person would deal with them.
The second form of insider dealing is when a person connected with the corporation discloses to another person information known to the first person to be relevant information in relation to the corporation and the first person knows or has reasonable cause to believe that the other person will make use of the information for the purpose of dealing, or counselling or procuring another to deal in the listed securities of the corporation.
The third form is in a sense the counterpart of the second. It relates to a person who has information which he knows to be relevant information in relation to the corporation which he received from a person:
whom he knows to be connected with the corporation; and
whom he knows or has reasonable cause to believe held that information by virtue of being so connected.
and deals in the listed securities of the corporation or counsels or procures another person to deal in those securities.
Insider dealing is an “insidious mischief” (Insider Dealing Tribunal v Shek Mei Ling (1999) 2 HKCFAR 205 at 207I, per Lord Nicholls of Birkenhead NPJ) which threatens the integrity of financial markets and public and investor confidence in the markets. The object of SIDO was to eliminate insider dealing and to reinforce the transparency of the markets, thereby enhancing and preserving Hong Kong’s position as an international financial centre. The importance of attaining this object led to the decision to arm the Tribunal with the additional powers of imposing a penalty and ordering disqualification.
That insider dealing amounts to very serious misconduct admits of no doubt. It is a species of dishonest misconduct. It consists of using price-sensitive information (which is not in the public realm) about a public company for private gain in circumstances where the wrongdoer’s misconduct is based on knowledge of, or his having reason to believe, critical prescribed elements of the misconduct described by s.9 of SIDO. That public censure was thought earlier to be an adequate sanction is indicative that insider dealing is considered to be very serious misconduct and that severe injury to reputation may flow from such a finding.
Moreover, insider dealing is a form of conduct which can be readily characterized as criminal conduct. Indeed, the SFO, which enacted the present legislation governing insider dealing, provides for dual civil and criminal regimes to deal with six types of market misconduct. The purpose of the SFO was to enhance the deterrent and punitive effect of the available sanctions for insider dealing on the basis that the regime under SIDO was insufficient to combat effectively acts of market misconduct. Similar dual regimes had by then been adopted in the United Kingdom, the United States and Australia.
As an element in the new civil regime, the SFO set up the Market Misconduct Tribunal (“the MMT”) to hear cases of suspected market misconduct. The MMT was given power to impose civil sanctions, including surrender of any profit made or increased by market misconduct, but without power to impose a fine or penalty. The decision to leave the MMT without power to impose a fine was influenced by legal advice received by the Government to the effect that the existence of such a power might lead to a breach of the BOR.
Not only does insider dealing amount to very serious misconduct, the penalty imposed under s.23(1)(c) is comparable to a fine (ibid at 209J) and its purpose is punitive and deterrent. The penalty provision seeks to deter insider dealing by leaving a person who engages in such dealing substantially out of pocket (ibid at 210A). The Tribunal noted that when the Bill was originally presented to the Legislature, the provision which became s.23(1)(c) called what is now a penalty a “fine”. In its context, this seems to be a classic example of a distinction without a difference. Because the amount of the penalty can be up to treble the amount, not of the benefit gained by the insider dealer himself, but of the benefit gained by the insider dealer and anyone else as a result of the insider dealing, the amount of the penalty is “potentially swingeing” (ibid at 208C). An insider dealer who has made no profit himself may nevertheless be subjected to a substantial fine. That the amount of the penalty is limited by reference to the amount of profit gained does not, in my view, detract from its punitive and deterrent character and endow it with a compensatory character. The imposition of the penalty amounts to punishment for very serious misconduct.
The very serious and dishonest nature of the misconduct and the severity of the penalty are considerations which argue powerfully in favour of classifying both the proceedings and the misconduct as criminal. On the other hand, the proceedings have some characteristics which have been regarded as indications of the civil character of proceedings. These characteristics are the absence of a formal charge, the absence of a conviction constituting a criminal record and no provision for imprisonment – see, for example, R (West) v Parole Board [2005] 1 WLR 350 at 365, per Lord Bingham of Cornhill.
The appellant’s emphasis on the absence of a formal charge and the fact that an adverse finding does not result in the recording of a conviction must be viewed in the light of the important principle that guarantees of human rights and fundamental freedoms are matters of substance, not of form. This principle, which has been consistently applied by the Strasbourg Court to ensure that Convention rights are effectively protected (Secretary of State for Home Department v MB [2007] 3 WLR 681 at 692H, per Lord Bingham of Cornhill), has equal force in the interpretation of the ICCPR and the BOR. It is necessary to look beyond the absence of a formal charge and to ascertain whether a person is being called upon to answer an allegation of serious misconduct which, if determined against him, will result in punishment. To hold that the absence of a formal charge and the absence of a provision for the recording of a conviction in such circumstances take the proceedings outside the protection conferred by arts 10 and 11 of the BOR would reduce substantially the protection conferred by these articles and facilitate the triumph of form over substance.
The absence of a provision for imprisonment is to be seen in light of the fact that failure to pay a penalty ordered under s.23(1)(c) of SIDO and registered under s.29 was punishable as a contempt of court with the result that non-payment of the penalty could result in a deprivation of liberty. The significance of the absence of a provision for imprisonment is also lessened by the circumstance, already mentioned, that the power to impose a penalty is comparable to the power to impose a fine and its purpose is punitive and deterrent. In any event, there is no justification for classifying proceedings which may result in a finding of serious misconduct and a substantial penalty as civil simply because imprisonment is not prescribed as a penalty.
The existence of the power to impose a severe penalty (for very serious misconduct), which has a deterrent purpose, is consistent with the principle, recognized by the Strasbourg Court, that proceedings do not involve the determination of a criminal charge within the meaning of art.6 unless they are capable of resulting in the imposition of a penalty by way of punishment – B v Chief Constable of Avon & Somerset Constabulary [2001] 1 WLR 340, 353, para.28, per Lord Bingham of Cornhill; McCann [2003] 1 AC at 820C-D, per Lord Hope of Craighead. And the same factors constitute an answer to the appellant’s submission that the imposition of substantial penalties do not necessarily lead to a conclusion that there is a criminal charge.
Unlike Brown v United Kingdom (1998) 28 EHRRCD CD233, a case relied on by the appellant, the proceedings here are not disciplinary as the legislative provisions apply to the public generally, not to a limited group of persons such as a profession. Because the insider dealing provisions were not disciplinary, no assistance is to be derived from the Strasbourg decisions in other disciplinary cases on which the appellant also relies, see
Ravnsborg v Sweden (1994) 18 EHRR 38 at 52-53, paras 34-35,
Putz v Austria (2001) 32 EHRR 271 at 287-289, paras 32-38, and
R v Securities and Futures Authority ex parte Fleurose [2001] IRLR 764; affd. on appeal [2002] IRLR 297.
Air Canada v United Kingdom (1995) 20 EHRR 150, on which the appellant also relies strongly, was very different from the present case. In Air Canada, an aircraft was seized and forfeited by the British customs authority under a statutory power on the ground that a large quantity of cannabis, a prohibited drug, was found on the aircraft. The aircraft was handed back on the payment by the owner operator of the aircraft of a fine of ₤50,000 imposed administratively. The Strasbourg Court held that what happened did not involve the determination of a criminal charge and was civil. The administrative procedure was civil in character, being a process in rem against any vehicle used in smuggling. The assertion that the aircraft carried cannabis into the United Kingdom was not contested.
Other cases cited by the appellant are of no assistance in the present context. In R (West) v Parole Board [2005] 1 WLR 350, the revocation of a parole licence, thereby depriving the individual of liberty, was held by the House of Lords not to involve a criminal penalty for the purpose of art.6 of the Convention because the purpose of the revocation of the licence was to protect the public not to punish the offender. There was no punishment because revocation of the licence simply restored the sentence previously imposed.
Secretary of State for Home Department v MB [2007] 3 WLR 681, which concerned a control order made by the Secretary of State under the Prevention of Terrorism Act 2005 (UK), held that the legislation and the order itself had a preventative as distinct from a punitive and deterrent or retributive purpose and therefore did not involve the determination of a criminal charge for the purpose of art.6. The decision does not establish the proposition that, where the principal purpose of the legislation is preventative or regulatory, that legislative purpose necessarily endows proceedings, which can culminate in the imposition of punishment for serious misconduct in the form of a heavy penalty, with a civil rather than a criminal character.
In McCann [2003] 1 AC 787, a case concerning an anti-social behaviour order, the preventative purpose of the order and the absence of a penalty were crucial to the decision that the case did not come within art.6.
There remains for consideration the appellant’s submission that the regulatory character of SIDO invests the proceedings with a civil character. The authorities provide instances where offences or misconduct punishable under regulatory statutes, generally involving non-substantial penalties, have been classified as civil for the purposes of provisions similar to arts 10 and 11 of the BOR – see, for example,
DC, HS & AD v United Kingdom [2000] BCC 710;
Brown v Stott [2003] 1 AC 681;
O’Halloran & Francis v United Kingdom, ECHR Grand Chamber, 29 June 2007.
It would not, however, be legitimate to deduce from the classification made in those cases that all punishable offences or misconduct under regulatory statutes are to be classified as civil. If, for example, a regulatory statute were to provide for imprisonment or a very heavy fine for an offence or serious misconduct, it is scarcely to be supposed that the relevant proceedings should be classified as civil. While the regulatory character of the statute tends to support a conclusion that the proceedings are civil, it is the nature and character of the offence or misconduct and the penalty that are the critical considerations.
To describe SIDO as “regulatory” is an imprecise use of that expression. SIDO is not regulatory in the sense that a licensing scheme or a comprehensive road traffic statute (containing detailed licensing and registration provisions) is regulatory. To say that SIDO regulates insider dealing is to misdescribe it and to disguise or colour its true nature and purpose which is, in substance, to stamp out insider dealing by punishing those who engage in it. Insider dealing is certainly not a regulatory offence.
This comment, however, does not dispose entirely of the point which the appellant seeks to make by suggesting that the legislation is regulatory. The appellant draws attention to the desirability of allowing governments and legislatures some degree of freedom in selecting the means by which an “insidious mischief”, such as insider dealing is to be dealt with. As the materials to which reference has already been made so clearly show, there is a real question whether civil or criminal proceedings are the most effective means of combating the mischief. This, so the argument runs, is a persuasive ground for recognizing that arts 10 and 11 of the BOR should not be so broadly construed as to override the legislative classification of the proceedings as civil and, in particular, to preclude the decriminalization of offences.
Granted the need for the courts to give weight to the decisions of a legislature and the need for a fair balance between the general interest of the community and the personal rights of the individual (Sporrong & Lonnroth v Sweden (1982) 5 EHRR 35; Brown v Stott at 703C-D, 704F), there are two answers to this argument. First, it seeks to recognize the force of the dissenting opinions in Ozturk v Germany (1984) 6 EHRR 409 that decriminalization, at least of minor offences, may not bring a case within the meaning of “determination of a criminal charge” in art.6 of the Convention and that regulatory offences lie outside that conception. As Potter LJ pointed out in Han [2001] 1 WLR at 2274G-H, the Strasbourg Court has disregarded these dissenting opinions and I am not persuaded that this Court should adopt them, even if some of the comments in the judgment of the majority in Ozturk may require qualification by reason of later decisions of the Strasbourg Court. It is enough that the domestic legislative classification is an important consideration which will be given appropriate weight by the courts. It has not been demonstrated that the Court of Appeal misunderstood or misapplied this principle by giving inadequate weight to the judgment of the legislature.
Secondly, the argument seeks to reduce the protection given by arts 10 and 11 of the BOR by subjecting the protection of human rights to an ill – defined area of legislative discretionary judgment. To interpret arts 10 and 11 in this way would run counter to the generous interpretation traditionally given to provisions protecting human rights and fundamental freedoms and would weaken the valuable protection given by arts 10 and 11 to individuals who are charged with serious misconduct which may result in punishment. There is no justification for weakening this valuable protection in order to expand the area in which the important domestic legislative classification of provisions is recognized by the courts as having more weight than, or equal weight with, factors (2) and (3). To do so would disturb the fine balance between the interests of the community and the personal rights of the individual, which has been carefully achieved by the courts, and tilt the balance significantly against the rights of the individual.
In my view, the matters relied upon by the appellant neither individually nor collectively warrant classifying the proceeding as civil.
I note that para.15 of General Comment No.32, published by the United Nations Human Rights Committee (“the Committee”) at its 90th session in July 2007, relating to art.14 of the ICCPR (arts 10 and 11 of the BOR), stated:
.... Criminal charges relate in principle to acts declared to be punishable under domestic criminal law. The notion may also extend to acts that are criminal in nature with sanctions that, regardless of their qualification in domestic law, must be regarded as penal because of their purpose, character or severity.
The conclusion that the proceedings in the present case involve the determination of a criminal charge is consistent with the Committee’s General Comment No.32.
Accordingly, I conclude that the proceedings involved the determination of a criminal charge by reason of the power to impose a penalty under s.23(1)(c) of SIDO.
Before leaving this question, it is desirable to refer to a suggestion made in the course of argument that legislation, which provides for a dual regime of civil and criminal sanctions to deal with insider dealing, may infringe the BOR. As at present advised, I would not regard that suggestion as soundly based.
QUESTION (1)(b)
(Was there a criminal charge by reason of the power to order disqualification?)
Although, in the light of the conclusion just reached, it is unnecessary to consider this question, I shall deal with it as the parties have presented full argument on the question and the answer may have some value for the future.
The Strasbourg Court has held unequivocally that a power to disqualify directors, in terms similar to the power conferred by s.23(1)(a) of SIDO is a matter which is regulatory rather than criminal. In DC, HS and AD v United Kingdom [2000] BCC 710, the question was whether proceedings involving the exercise of such a power against three directors of a company on the ground of unfitness attracted art.6(1) of the Convention on the footing that the proceedings determined both “civil rights and obligations” and a “criminal charge”. The Strasbourg Court answered the question in the negative.
As to the “criminal charge” aspect of the case, the Court said, ibid, at 716C:
.... In the present case, the proceedings were classified as civil in domestic law, the disqualification of directors is a matter which is regulatory rather than criminal, and the ‘penalty’ is neither a fine nor a prison sentence, but rather a prohibition on acting as a company director without the leave of the court. Whilst a great deal was undoubtedly at stake for the applicants, it cannot be said that what is inherently a regulatory matter can thereby become a ‘criminal charge’ within the meaning of art.6(1) of the Convention.
In Porter v Magill [2002] 2 AC 357, Lord Hope of Craighead (with whose speech Lord Hobhouse of Woodborough agreed) referred (ibid at 488) to DC, HS and AD v United Kingdom with evident approval.
Inherent in this approach to the classification of a power to disqualify company directors on the ground of unfitness or misconduct is the view that the power is protective rather than punitive in character, namely that the primary purpose of the power is to protect investors and the public. This view is soundly based. Lord Lester of Herne Hill, QC for the first respondent submits, however, that the power also has a deterrent and punitive purpose and that the existence of this purpose warrants its classification as a criminal sanction. He relies on the decision of the High Court of Australia in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 (see also Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 at 206-207) to support the view that, in the present context, the distinction between “punitive” and “protective” is elusive because they are not mutually exclusive categories and an order for disqualification has, in some respects, the characteristics of a penalty. For that reason, the Court concluded in Rich that the consequences of a disqualification order made on account of a defendant’s wrongdoing are penalties.
Granted the strength of the criticisms made in Rich of the distinction between what is protective and what is punitive, a disqualification order in the context of SIDO, according to the Strasbourg jurisprudence, is to be classified as protective for the purpose of art.6(1) of the Convention. The decision in DC, HS and AD has high persuasive value in the interpretation of arts 10 and 11 of the BOR. In so far as the making of such an order has a deterrent effect, that effect is incidental and subservient to the purpose of protecting shareholders, investors and the public from corporate officers who are unfit to hold office. Rich, it will be noted, concerned not the application of a Bill of Rights provision but the availability of the privilege against penalties and forfeiture. Nor was the Strasbourg jurisprudence called to the High Court’s attention.
Accordingly, in my view, the power to order disqualification under s.23(1)(a) of SIDO does not have the consequence that the insider dealer provisions involved the determination of a criminal charge within the meaning of arts 10 and 11 of the BOR.
QUESTION (2)(a)
(Was there a breach of the right to protection against self-incrimination or the right to silence?)
The question here is whether the evidence obtained under s.33(4) of SFCO was admissible before the Tribunal and whether the Tribunal was right in compelling the respondents to give evidence under s.17 of SIDO. The first issue is whether the direct use of the evidence by the Tribunal by virtue of s.33(6) of SFCO was a breach of the right to a fair trial guaranteed by art.10 of the BOR.
In O’Halloran & Francis v United Kingdom ECHR Grand Chamber, 29 June 2007, the Grand Chamber of the Strasbourg Court said at p.16, para.53:
While the right to a fair trial under Article 6 is an unqualified right, what constitutes a fair trial cannot be the subject of a single unvarying rule but must depend on the circumstances of the particular case.
In that case, pursuant to s.172 of the Road Traffic Act 1988 (UK), the applicant O’Halloran was asked to supply the full name and address of the relevant vehicle or to supply other information that was in his power to give and would lead to the driver’s identification. The Grand Chamber concluded that there had been no violation of art.6(1) of the Convention, saying (ibid at p.18, para.62):
Having regard to all the circumstances of the case, including the special nature of the regulatory regime at issue and the limited nature of the information sought ...., the Court considers that the essence of the applicants’ right to remain silent and their privilege against self-incrimination has not been destroyed.
The Grand Chamber noted that, although both the compulsion and the underlying offences were “criminal” in nature, the compulsion flowed from the fact, as Lord Bingham expressed it in Brown v Stott [2003] 1 AC 681 at 705G-H (which was a similar case) that:
All who own or drive motor cars know that by doing so they subject themselves to a regulatory regime .... This regime is imposed not because owning or driving cars is a privilege or indulgence granted by the state but because the possession and use of cars .... are recognized to have the potential to cause grave injury.
The Grand Chamber added that those who keep and drive cars can be taken to have accepted certain responsibilities and obligations as part of the regulatory regime relating to motor vehicles and those responsibilities include the obligation to inform the authorities of the identity of the driver.
Neither O’Halloran nor Brown v Stott are truly analogous to the present case where the misconduct is not minor and is attended with severe penalties. And, in both cases, the compulsion related to a “single, simple question”, as Lord Bingham noted in Brown v Stott ibid at 705C in relation to the facts of that case. Further, as pointed out earlier in these reasons, SIDO seeks to stamp out insider dealing, not to regulate it.
In this case, the questions and answers were not so limited. They constituted a substantial intrusion into the privilege against self-incrimination and they formed an important element in the evidence relied upon by the Tribunal in the findings which it made against the respondents. Consequently, the assessment in O’Halloran and Brown v Stott that the legislation struck a fair balance between protection of an individual’s rights and the public interest in the investigation and punishment of the relevant office is of no assistance in the present case.
More to the point is the judgment of Ribeiro PJ in HKSAR v Lee Ming-tee (2001) 4 HKCFAR 133, with which other members of the Court agreed. His Lordship said, ibid at 171H, that the protection given by art.11(2)(g) of the BOR:
.... is only a testimonial immunity, namely, the right ‘not to be compelled to testify against himself or to confess guilt’. It is therefore of a much narrower scope than the common law privilege against self-incrimination and had no application at the time of the company inspection since neither respondent had been charged at that time.
Ribeiro PJ went on to say, ibid at 173J, that the Strasbourg Court has deduced from the right to a fair trial in criminal proceedings in accordance with art.6 (art.10 of the BOR), the existence of the privilege against self-incrimination as an integral part of the right to a fair trial which is closely linked to the presumption of innocence. This privilege (the art.10 privilege) extends to answers to questions compulsorily obtained before the commencement of criminal proceedings. The judgment of Ribeiro PJ in Lee Ming-tee supports this view because, in accordance with Saunders v United Kingdom (1996) 23 EHRR 313 (where a statutory abrogation of the common law privilege coupled with statutory permission to use the questions and answers against the accused at his trial was held to result in a violation of art.6(1)), it bases the art.10 protection on respecting the will of an accused person to remain silent – ibid at 337-338, para.69; HKSAR v Lee Ming-tee (2001) 4 HKCFAR at 175A-C. Thus the protection does not extend to evidence compulsorily obtained which exists independently of the will of the accused. But it does cover compulsorily obtained answers, if objected to, because the answers are obtained against the will of the accused.
So the use of the questions and answers obtained compulsorily violated art.10 of the BOR, even though the answers were obtained before the issue of the Type “A” Salmon letters which may be regarded as commencement of the insider dealing proceedings, subject to the question of proportionality which remains to be considered.
The protection given by art.10 of the BOR to the privilege against self-incrimination is not absolute: Brown v Stott [2003] 1 AC 681 at 693F-695C, 709A-C, 719-722B. A derogation from it can be justified, in accordance with the principles enunciated by this Court in cases culminating in Lam Yuk Fai v HKSAR (2006) 9 HKCFAR 281. In Lee Ming-tee, Ribeiro PJ pointed out at 175G (citing Brown v Stott [2003] 1 AC 681) that the direct use of compulsorily obtained self-incriminating materials could be justified if it was not a disproportionate response to a serious social problem and “did not undermine the accused’s right to a fair trial viewed in the round”.
Although the appellant contends that s.33(6) is a proportionate response, in accordance with the principles referred to in the preceding paragraph, because insider dealing is an insidious mischief which is difficult to prove and in other respects a defendant has protections afforded by a fair trial, the submission cannot be accepted. Section 33 authorizes the obtaining of compulsory answers to questions which go to the very core of a case of insider dealing. In this respect, it constitutes, as the Court of Appeal said in para.66 (Judgment),
.... the complete abrogation of the right of silence.
How can such a complete abrogation of the right be justified as proportionate or striking a fair balance between the rights of the accused and the public interest in combating insider dealing? One only has to contrast s.33(4) and (6) with
Brown v Stott and O’Halloran where the courts held that compelling the answer to a single, simple question in the context of a regulatory statute was a proportionate response;
Lee Ming-tee where there was a direct use prohibition on the answers obtained; and
Saunders where statutory abrogation of the common law privilege coupled with statutory permission to use the questions and answers against the accused at his trial was held to result in a violation of art.6(1).
In the present case, the direct use prohibition was limited to criminal proceedings but with permission expressly given by the statute for the questions and answers to be used directly for all the purposes of the Ordinance, including use in proceedings before the Tribunal. There was nothing to show that a direct use prohibition which excluded use in the Tribunal as well would not have been enough to achieve the legislature’s rational and legitimate aim to eliminate insider dealing. Such a prohibition may well have achieved a balance between the public interest and the private rights of the individual.
It follows that s.33(6) violates art.10 of the BOR. For the same reasons, s.33(4) also violates art.10. Likewise, again for the same reasons, s.17 of SIDO is an infringement of the privilege against self-incrimination. In the case of s.17, however, the violation is of both arts 10 and 11(2)(g) of the BOR because s.17 applies after the issue of the Type “A” Salmon letters.
QUESTION (2)(b)
(Was the Tribunal obliged to apply the criminal standard of proof beyond reasonable doubt?)
The Tribunal stated:
In the Chairman’s opening statement it was said that, subject to any submission to the contrary, the applicable standard of proof would be that of a ‘high degree of probability’. In our view that was the appropriate standard of proof for the purposes of this inquiry.
In arriving at that conclusion we bore in mind the nature of the allegations the implicated parties faced and the potential consequences of our finding that an implicated party had dealt as an insider.
We bore in mind that a standard of proof to a high degree of probability is at the top end of the civil scale and is one which in our view was proportionate to the serious nature of the subject matter of this inquiry. It is a standard which has been adopted in all inquiries such as this since the Success Holdings inquiry.
While we considered the submissions of counsel that a higher standard of proof be adopted in the present case, we did not consider that the issues in the present case were such as to warrant a departure from the standard of a high degree of probability.
On this point, the Court of Appeal said:
Since common law requires proof beyond reasonable doubt for crime, we do not believe this court can, and we certainly decline to adopt, a lower standard absent clear statutory sanction so to do. There is nothing arising from the history of this legislation to suggest that had the legislature realized that insider dealing proceedings in fact were criminal in nature, that they would not have required the matter to be proved beyond reasonable doubt.
The use of the expression “standard of proof to a high degree of probability” must now be understood in the light of this Court’s recent judgment in A Solicitor v The Law Society of Hong Kong FACV No.24 of 2007, 13 March 2008 where Bokhary PJ (with whom the other members of the Court agreed) said – ibid para.63:
.... it is misleading to speak of ‘a high degree of probability’.
In that case, this Court accepted the correctness of the approach to the civil standard of proof expressed by Lord Nicholls of Birkenhead in Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 where his Lordship said at 586B-G:
The balance of probability standard means that a court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability ....
In A Solicitor, this Court held that nothing turned on the Solicitors Disciplinary Tribunal having spoken in terms of “the higher degree of probability commensurate with the gravity of the allegations” because, on a fair reading, its Statement of Findings did not suggest any misunderstanding of the civil standard of proof on the Tribunal’s part. The same comment applies here, particularly in the light of the second and third paragraphs quoted above from the Tribunal’s decision.
Neither the Convention nor the ICCPR explicitly mandates a specific standard of proof. Neither instrument contains any reference to the standard of proof as such. In Steel v United Kingdom (1998) 28 EHRR 603, the Strasbourg Court stated at 616 in para.70:
Article 6(2) of the Convention does not, however, lay down any specific rights in relation to the standard or burden of proof.
And in Napp Pharmaceutical Holdings at para.96 (citing Sir Richard Buxton “The Human Rights Act and the Substantive Criminal Law” [2000] Crim. LR 331), the Competition Commission Appeal Tribunal expressed the view that the Convention did not require proof beyond reasonable doubt. On the other hand, there are some statements by the Strasbourg Court which are capable of being read as supporting a standard of proof beyond reasonable doubt. In Barbera, Messegue & Jabardo v Spain (1989) 11 EHRR 360, the Strasbourg Court, with reference to the presumption of innocence under art.6(2) said at 387, para.77:
Paragraph 2 embodies the principle of the presumption of innocence. It requires, inter alia, that when carrying out their duties, the members of a court should not start with the preconceived idea that the accused has committed the offence charged; the burden of proof is on the prosecution, and any doubt should benefit the accused.
This statement was approved in Janosevic v Sweden (2004) 38 EHRR 473 at 505.
As a matter of logic, in the context of laying the burden of proof on the prosecution, the statement that any doubt should benefit the accused would seem to carry with it the implication that proof beyond reasonable doubt rests with the prosecution.
Further, in Ireland v United Kingdom (1978) 2 EHRR 25, the Strasbourg Court adopted the standard of proof beyond reasonable doubt in determining whether States had violated art.3 (the prohibition against torture), although it added at 79, para.161:
.... such proof may follow from the co-existence of sufficiently strong, clear and concordant or inferences or of similar unrebutted presumptions of fact.
A similar approach was taken by the Commission in Hardy v Ireland Application 23456 of 1994 which concerned a reverse onus provision where the Commission considered that the burden of proof beyond reasonable doubt remained with the prosecution.
It is, however, possible that these statements are no more than a reflection of the standard of proof applicable in the national jurisdiction. Sir Richard Buxton has suggested that:
it is possible that the ECHR requires no more than ‘conviction’, otherwise undefined, of guilt on the part of the national court.
See “The Human Rights Act and the Substantive Criminal Law” [2000] Crim. LR. 331 at 338; see also Human Rights and Criminal Justice, 2nd ed. paras 9-78.
In my view, on these materials, this Court would not be justified in concluding that art.6(2) of the Convention mandates the standard of proof beyond reasonable doubt. As the position is clearer under art.14 of the ICCPR, it is unnecessary to decide what the Convention position is.
In the case of the ICCPR, Mr. Pannick QC calls attention to the travaux preparatoires. They indicate that a decision was taken by 8 votes to 2, with 3 abstentions, to omit the criterion “beyond reasonable doubt” which had been contained in the draft – Marc J Bossuyt, Guide to the “Travaux Preparatoires” of the International Covenant on Civil and Political Rights”, Martinus Nijhoff Publishers, 1987, pp 277, 291-292.
On the other hand, the respondent relies on General Comment No.13 on art.14 of the ICCPR, published by the Committee at its 21st session in 1984. Paragraph 7 of the General Comment states:
.... By reason of the presumption of innocence, the burden of proof of the charge is on the prosecution and the accused has the benefit of doubt. No guilt can be presumed until the charge has been proved beyond reasonable doubt. Further, the presumption of innocence implies a right to be treated in accordance with this principle ...
General Comment No.13 has been replaced by General Comment No.32 to which reference has been made earlier. The following paragraphs of the new General Comment are relevant to the question under consideration:
Article 14 contains guarantees that States parties must respect, regardless of their legal traditions and their domestic law ....
.... Deviating from fundamental principles of fair trial, including the presumption of innocence, is prohibited at all times.
According to article 14, paragraph 2 everyone charged with a criminal offence shall have the right to be presumed innocent until proven guilty according to law. The presumption of innocence, which is fundamental to the protection of human rights, imposes on the prosecution the burden of proving the charge, guarantees that no guilt can be presumed until the charge has been proved beyond reasonable doubt, ensures that the accused has the benefit of doubt, and requires that persons accused of a criminal act must be treated in accordance with this principle ....
Mr. Pannick, QC submits that the Committee is not a judicial body and that, on that account, the General Comments should not be followed or applied by this Court in the interpretation of arts 10 and 11 of the BOR. The Committee has, however, been described as “in substance a judicial body of high standing” – see Tavita v Minister of Immigration [1994] 2 NZLR 257 at 260, per Cooke P; cited in Lester & Pannick, Human Rights Law and Practice 2nd ed. p.621. Nevertheless, Mr. Pannick, QC is right in the sense that, in issuing its General Comments, the Committee is not acting as a judicial body exercising judicial power in determining disputes.
The power to make general comments is conferred on the Committee by art.40(4) of the ICCPR which provides:
The Committee shall study the reports submitted by the States Parties to the present Covenant. It shall transmit its reports, and such general comments as it may consider appropriate, to the States Parties.
The General Comments are a valuable jurisprudential resource which is availed of by the Committee in its adjudicative role. While the General Comments are not binding on this Court, they provide influential guidance as to how the ICCPR is applied and will be applied by the Committee when sitting as a judicial body in making determinations.
In Attorney-General of Hong Kong v Lee Kwong-kut [1993] AC 951, the Privy Council regarded General Comment No.13 as indicating that the standard of proof beyond reasonable doubt was the general standard applicable for the purposes of art.14 of the ICCPR and art.11(1) of the BOR. The judgment of the Privy Council delivered by Lord Woolf makes it plain that art.14 of the ICCPR and art.11(1) of the BOR permit a degree of flexibility which allows a balance to be drawn between the interest of the person charged and the state so that sensible and reasonable deviations in certain situations are not proscribed – ibid at 968B-C, 969D-F. Lord Woolf is not to be understood, however, as suggesting that the substitution of the civil standard of proof for the criminal standard of proof in a proceeding classified as criminal would be a sensible or reasonable deviation.
In my view, this Court should regard General Comment No.13, in so far as it prescribed the standard of proof beyond reasonable doubt, as the appropriate standard to be applied for the purposes of art.11 of the BOR before it was replaced by General Comment No.32 (which then reinforced the application of that standard). In this respect, my view is strongly fortified by the fact that in our criminal jurisprudence proof beyond reasonable doubt is the standard to be applied once proceedings have been classified as involving the determination of a criminal charge.
DID THE TRIBUNAL APPLY THE REQUISITE STANDARD OF PROOF?
Earlier in these reasons (paras 87 to 90), reference was made to the standard of proof applied by the Tribunal. It was the civil standard as applied to the gravity of the misconduct charged. Can it be said that this standard is to be equated to proof beyond reasonable doubt?
As the judgment of Bokhary PJ in A Solicitor v The Law Society of Hong Kong at paras 82-84 reveals, there are statements of high authority which support the view that in a serious case the difference between the civil and the criminal standards “is, in truth, largely illusory [B v Chief Constable of Avon and Somerset Constabulary [2001] 1 WLR 340 at 354A]” or virtually indistinguishable [R (McCann) v Manchester Crown Court [2003] 1 AC at 812D-F] or that “it is largely a matter of words [R v Home Secretary, ex parte Khawaja [1984] AC 74 at 112E]” or that in such cases the exacting standard of proof “will, in practice, be hard to distinguish from the criminal standard” [Gough v Chief Constable of Derbyshire Constabulary [2002] QB 1213 at 1243A]. In A Solicitor, Bokhary PJ made it very clear at para.84, following Rejfek v McElroy (1965) 112 CLR 517 that the difference between the two standards is “no mere matter of words” and that a criminal charge has to be established by the prosecution beyond reasonable doubt and that the tribunal of fact should understand this. The Tribunal’s reference in this case to a “high degree of probability” illustrates the point. There is no means of knowing whether, in the minds of the members of the Tribunal, they equated that standard with proof beyond reasonable doubt.
It follows that the Tribunal’s findings were impaired by the use of inadmissible evidence and by the failure to apply the criminal standard of proof.
CONCLUSION ON SUBSTANTIVE QUESTIONS
In the result, subject to the consideration of the appropriate remedy, my answers to the questions identified as arising in these appeals, coincide with the conclusions reached by the Court of Appeal.
(Even if the insider dealing proceedings did not involve a criminal charge, should the Court of Appeal have found for the respondents?)
In the light of the answers to Questions 2(a) and (b), this question does not arise.
(Did the Court of Appeal err by not confining the remedy to an order that the statutory power to impose a fine was a breach of the BOR and so invalid?)
The appellant contends, as it did in the Court of Appeal, that a remedial approach should be adopted, which will, as far as possible, make the legislation BOR consistent. To this end, the submission is that the Court should simply excise s.23(1)(c), the penalty provision. The Court of Appeal rejected this submission and read down s.33(6) and s.17. This represented a traditional approach to the question.
The appellant’s argument takes as its foundation s.6 of the BORO headed “Remedies for contravention of Bill of Rights”. Section 6(1) provides:
A court or tribunal –
in proceedings within its jurisdiction in an action for breach of this Ordinance; and
in other proceedings within its jurisdiction in which a violation or threatened violation of the Bill of Rights is relevant,
may grant such remedy or relief, or make such order, in respect of such a breach, violation or threatened violation as it has power to grant or make in those proceedings and as it considers appropriate and just in the circumstances.
The declaration sought is novel because, if made, it would result in the striking down of a legislative provision which does not itself infringe the BOR. And no case has been cited in which a court has held a non-infringing statutory provision to be invalid, thereby leaving on foot the statutory provisions which violate Bill of Rights provisions, as a means of rendering the statute compliant with Bill of Rights requirements. Perhaps this is not surprising as the circumstances which would justify a court striking down a non-infringing statutory provision must be rare indeed, assuming for the moment that they exist at all.
The appellant’s response is to point to the great width of s.6(1) of the BORO and to this Court’s judgment in Lam Kwong Wai At 610-611 para.78 where I referred to the Court’s obligation to adopt a remedial interpretation of a legislative provision to make it Basic Law-consistent. The width of s.6(1) is not in doubt; it authorizes the court to grant such remedy or relief, or make such order, in respect of such breach or violation as it has power to make or grant in the proceedings as it considers appropriate and just. Section 6(1) is directed not only to the case of reading down a statute in order to avoid a breach or violation of the BOR but also to invalidating a statutory provision when an interpretive remedy is not possible. There is no relevant limit on this Court’s power under s.6(1) unless such a limit is to be found in the sub-section itself.
The first possible limit is the absence of any specific inclusion in the grant of a power to strike down a non-infringing statutory provision. It can be said against the appellant’s argument that, in its context, the interpretation of the power is to be approached on the basis that it assumes that infringing provisions only will be struck down. In the case of infringing provisions, there was no need to confer specific authority because the power to strike down obviously extended to such provisions; infringement generally results in invalidity. But non-infringing provisions stand in such a very different position that it might naturally be expected that specific authority to invalidate them would be conferred. This argument is not without force.
Nonetheless, it seems to me that s.6(1) should be interpreted in accordance with its wide language as conferring power to strike down a non-infringing provision where to do so best conforms with the legislative intention. To exercise the power in that way is not to thwart the will of the legislature but rather to respect its will and give effect to its intention by giving the legislation as effective an operation as it can be given consistently with the BOR. Section 6(1) should be construed, in accordance with its terms, as conferring a power which will enable the courts to resolve the tension which exists between the legislative will and the protection given by the BOR by striking down only that part of the statute that causes the violation or breach, even if it does not itself infringe the BOR, when to do so best gives effect to the legislative intention.
The only express limitation imposed by s.6(1) which has relevance for this case is that the remedy, relief or order must be “in respect of such a violation”. These words contemplate a relationship or connection between the remedy, relief or order and the violation. Such a relationship clearly exists when an infringing provision is read down or struck down. Does the relationship also exist when a non-infringing provision is read down or struck down in order to make the legislation BOR-compliant?
This question does not admit of an unqualified answer. “In respect of” is an expression of wide import signifying a relationship or connection. There is a need for a relationship or connection between the provision to be read or struck down and the violation. In this case, which is quite exceptional, there is such relationship or connection. Section 23(1)(c) conferring the power to impose a penalty is the reason for and the cause of the violations which have been identified. Had it not been for the existence of the power, the proceedings would not have acquired a substantially criminal character and there would have been no violation of the BOR. The fact that the relationship or connection is indirect rather than direct is not a matter of any consequence.
Accepting that there is power to make the order sought, the remaining question is whether it is appropriate and just to do so. In answering this question, Lam Kwong Wai is of no assistance except in so far as it indicates that the Court has an obligation, at least by means of remedial interpretation to make statutory provisions Basic Law-consistent. The appellant’s argument asks us to take a further step.
The question is whether it is a step too far, bearing in mind that a declaration of invalidity operates retrospectively to the date of enactment of the relevant provision. I do not think it is. The first and perhaps the foremost consideration is that the result would certainly conform with the legislative intention. The history of the matter demonstrates that the legislature would have preferred to sacrifice the power to impose a penalty and retain the other provisions in SIDO rather than lose the investigatory powers which have resulted in violations of the BOR. The remedy brings about a situation which is entirely consistent with what the legislative intention would be in the circumstances which now prevail. From the perspective of the legislature, the remedy is appropriate. From the perspective of the appellant, the remedy is both appropriate and just because it has the effect of preserving the findings made by the Tribunal and the orders which it made other than the imposition of penalties, including the orders for disgorgement of gain and disqualification.
Whether the remedy is appropriate and just from the perspective of the respondents is a more difficult question. The remedy is less satisfactory to them than the relief granted by the Court of Appeal because it preserves the findings made by the Tribunal and the orders for disqualification. The Tribunal made its findings by applying the civil standard of proof not the criminal standard of proof which was the relevant standard in the light of the criminal character of the proceedings which flowed from the presence of the power to impose the penalty. If, however, the correct outcome of the proceedings is that s.23(1)(c) is declared to be invalid, then the reason for characterizing the proceedings as criminal is eliminated. It then follows that the true character of the proceedings in the light of the relief granted is civil and the Tribunal was correct in applying the civil standard of proof.
Another matter to be considered is that the proceedings below were, in all likelihood, conducted on the basis that, if the respondents were successful, the remedy would be that granted by the Court of Appeal. In that respect, it may be that the first indication that the appellant would seek the order now sought was when Mr. Duncan, SC sought the order near the conclusion of proceedings in the Court of Appeal. Accepting this, the making of a declaration of invalidity is nonetheless the correct outcome of the proceedings. The fact that it is or was unexpected is beside the point. The fact that the appellant did not foreshadow, or may not have foreshadowed, at an earlier stage of the proceedings that this order would be sought is a different matter. But, after all, the respondents do not and cannot assert that they suffered any prejudice as a result of learning, near the conclusion of proceedings in the Court of Appeal, the nature of the order which the appellant was pursuing. It was not as if the appellant was presenting a new case which involved further evidence or additional findings of fact. It was simply a matter of determining what was the appropriate order to be made in the light of violations of the BOR upheld at the instance of the respondents.
I, therefore, conclude in accordance with the respondents’ submission, that it is appropriate and just to hold that the power under s.23(1)(c) to impose a penalty is invalid on the ground that it has resulted in violations of arts 10 and 11 of the BOR.
For the foregoing reasons, I would make the following orders:
Appeals allowed so far as it relates to the issues of remedy, the orders made under s.23 of SIDO and as to costs of the proceedings in the Court of Appeal;
Set aside the orders made by the Court of Appeal allowing the appeals, quashing and setting aside the adverse findings made by the Tribunal against the respondents and the consequential orders made under s.23 of SIDO and the costs of the proceedings in the Court of Appeal;
In lieu thereof allow the appeals to the Court of Appeal in part and –
declare that s.23(1)(c) of SIDO is invalid;
restore the adverse findings made by the Tribunal against the respondents; and
restore the orders made by the Tribunal under ss 23(1)(a), 23(1)(b) and 27 of SIDO.
An order nisi that each party should bear his own costs of these appeals. Any party wishing to seek a different order should lodge written submissions within 21 days.
The Court unanimously makes the orders set out in the concluding paragraph of the judgment of Sir Anthony Mason NPJ.
[1] On appeal, Jones J’s conclusion that the proceedings were not criminal was not challenged. The appeal, which concerned other grounds, was dismissed by the Court of Appeal (1993) 3 HKPLR 39.
[2] With Lord Hobhouse of Woodborough and Lord Scott of Foscote concurring. See also R (West) v Parole Board [2005] 1 WLR 350 at 364F, per Lord Bingham of Cornhill (“The distinguishing feature of a criminal charge is that it may lead to punishment”).
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David Pannick, QC, Peter Duncan, SC and Nicholas Cooney (instructed by the Department of Justice) for the appellant
Lord Lester of Herne Hill, QC, Sir John Swaine, SC and Bernard Mak (instructed by Messrs William Sin & So) for the respondent in FACV No. 19 of 2007
John J.E. Swaine (instructed by Messrs Y.T. Chan & Co.) for the respondent in FACV No.20 of 2007