CACV 265/2009
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 265 OF 2009
(ON APPEAL FROM THE DECISIONS OF THE
DISCIPLINARY COMMITTEE OF THE HONG KONG INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS DATED
20 OCTOBER 2009 AND 13 MARCH 2010)
________________________
BETWEEN
| | LIE HAN JI | Appellant |
| | And | |
| | THE REGISTRAR OF THE HONG KONG INSTITUTE OF THE CERTIFED PUBLIC ACCOUNTANTS | Respondent |
________________________
Before: Hon Cheung CJHC, Cheung and Chu JJA in Court
Date of Hearing: 1 November 2011
Date of Judgment: 9 March 2012
________________________
J U D G M E N T
________________________
Hon Cheung CJHC:
1. I agree with the judgment of Chu JA and the order she proposes.
Hon Cheung JA:
2. I agree with the judgment of Chu JA.
Hon Chu JA:
Introduction
3. The appellant, Mr Lie Han Ji, brings this appeal under section 41 of the Professional Accountants Ordinance, Cap.50 (“PAO”) against the findings, sanctions and costs order made by the Disciplinary Committee (“the Committee”) of the Hong Kong Institute of Certified Public Accountants (“the Institute”) upon a disciplinary enquiry held on 17 and 31 March 2009. The respondent was the complainant and Mr Yeung Wah Chou Charles (“Mr Yeung”) and the appellant were the 1st and 2nd respondents in the disciplinary proceedings.
The background
4. The events leading to the disciplinary proceedings are as follows.
5. Mr Yeung has been the sole proprietor of Charles Yeung & Co (“the Firm”) since 20 February 1990.
6. The Firm was a “Group B” firm under the Official Receiver’s open tender scheme for the outsourcing of smaller court-ordered insolvency liquidation under section 194(1A) of the Companies Ordinance, Cap.32. The estimated realizable assets of companies in liquidation under the Panel B Scheme are no more than HK$200,000 in value.
7. On 26 March 2003, the Firm was awarded a tender contract (“the Contract”) by the Official Receiver (“OR”) to take up appointment as provisional liquidator under section 194(1A) of the Companies Ordinance. In the tender submission, the appellant was stated to be an employee of the Firm and both Mr Yeung and the appellant were named as the Appointment Takers and Recognized Professionals.
8. It is a term of the tender that the Firm must have at least two persons who are Recognized Professionals and also a minimum of two Appointment Takers[1] and that the Appointment Takers shall take up the appointment as joint and several provisional liquidators in the cases allocated to the Firm by the OR.[2]
9. Between 7 April 2003 and 31 March 2004, Mr Yeung and the appellant were appointed the joint and several provisional liquidators of a total of 28 companies (“the 28 Companies”) that were ordered by the court to be wound up. The appointments were made under section 194(1A) of the Companies Ordinance. Mr Yeung and the appellant were appointed to carry out all the work and duties as provisional liquidators as specified in the Contract and the Companies Ordinance.
The OR’s formal complaint
10. By letter dated 11 January 2006, the OR referred to various unsatisfactory aspects in the liquidation of the 28 Companies and required Mr Yeung and the appellant to provide substantive written reply within 10 days. No reply was received by the OR.
11. On 21 January 2006, the OR wrote to the Institute to lodge a formal complaint about the professional conducts of Mr Yeung and the appellant in their capacity as the provisional liquidators of the 28 Companies. The complaint relates to the following five areas:
(1) Failure to complete the 28 cases
(2) Failure to submit accounts under section 203 of the Companies Ordinance
(3) Failure to cooperate with the OR in field audit
(4) Failure to keep sufficient staff resources to carry out the liquidation work properly; and
(5) Complaint against the Firm by a petitioning creditor
Kwan J’s decision
12. Thereafter by 28 identical summonses, the OR applied to the Court under section 196(1) of the Companies Ordinance to remove Mr Yeung and the appellant as the provisional liquidators of the 28 Companies. The hearing took place before Kwan J (as she then was) on 21 March 2006, at which neither Mr Yeung nor the appellant was present. Kwan J found the performance and conducts of Mr Yeung and the appellant as provisional liquidators in the summary liquidation of the 28 Companies to be “so unsatisfactory as to justify their removal” and ordered their removal accordingly.
13. In the Reasons for Decision handed down on 27 March 2006, Kwan J made the following findings (paragraphs 10 to 27 of the Reasons for Decision):
“(1) Yeung and Lie have failed to carry out work in accordance with clauses 3 and 4 of the Work Specification in the schedule to the Contract
10. Clause 3 provides, inter alia, that the appointment takers of the firm shall perform with professionally acceptable standards all such tasks as are necessary or may be required of a provisional liquidator under section 194(1A) and all other tasks or duties as may be imposed on them by the Official Receiver under the Contract. Clause 4 provides that the appointment takers when appointed provisional liquidators shall apply to court within 3 months of the date of the winding-up order for a summary procedure order under section 227F, unless there is evidence the value of the asset of the company will exceed $200,000.00, in which case they shall forthwith and in any event not later than 8 weeks after the date of the winding-up order notify the Official Receiver of the same, and shall arrange to convene meetings of creditors and contributors under section 194(1)(b).
11. Up to the date of the Official Receiver’s report on 17 February 2006, the Official Receiver has not been informed that the summary procedure order had been obtained in any of the 28 cases. The Official Receiver made a search of the document index of the files in the High Court of each of the 28 cases on 24 January 2006. This revealed there had not been any filing of a sealed summary procedure order in any of the cases. Another search on 15 March 2006 yielded the same result. The companies are still in provisional liquidation.
12. The search also revealed these matters:
- in 3 cases only, applications for summary procedure were filed within 3 months after the date of the winding-up order, in accordance with requirements under the Contract;
- in 4 cases, no application for summary procedure had been filed;
- for the other 21 cases, applications for summary procedure order were filed more than 3 months from the date of the winding-up order, in breach of the requirements under clause 4 of the Work Specification in the schedule to the Contract, and the particulars are as follows:
(1) in 6 cases, applications were filed within 4 to 6 months after the date of the winding-up order;
(2) in 3 cases, applications were filed within 7 to 12 months after the date of the winding-up order;
(3) in 12 cases, applications were filed more than one year after the date of the winding-up order.
13. For the 4 cases where no application was filed, the Official Receiver has never been notified by Yeung or Lie if the value of the assets exceeds $200,000.00 or of any reason why an application has not been filed.
(2) Yeung and Lie have failed to comply with clauses 7(b) and (c) of the Special Conditions of the Contract
14. Clause 7(b) provides that the appointment takers are excepted to complete the case by obtaining a release order from the court under section 205 in an expeditious and professional manner; if the case cannot be completed within one year of appointment, a report is required to be submitted by them to the Official Receiver before the expiration of the first year of appointment giving an explanation why the case cannot be so completed. By clause 7(c), the appointment takers are required to submit accounts to the Official Receiver under section 203 of Cap. 32 and to submit with the first accounts under section 203 a progress report giving details on what has been done, what needs to be done, and an indication with reasons on whether or not the case can be completed within one year of appointment.
15. The Official Receiver had sent numerous reminders to Yeung and Lie asking for submission of a progress report in respect of each of the 28 cases. Except in HCCW No. 766 of 2003 where the reminder was met with the submission of a progress report on 3 March 2004, the Official Receiver did not receive any reply from Yeung or Lie.
16. For 18 cases where an application for the summary procedure order had been filed, it does not appear from the search of the court files by the Official Receiver there had been any progress of the applications since the filing. In HCCW No. 94 of 2003, the search showed there had been some follow-up actions but the last follow-up action stopped at 18 August 2004 until 20 January 2006 when an application for the summary procedure order was again filed. In HCCW Nos. 258 of 2003 and 348 of 2003, there was only one follow-up action in July 2003 shortly after the first filing, and it does not appear there was any further progress. In HCCW Nos. 410 of 2003, 724 of 2003 and 1194 of 2003, there had not been any follow-up action since the first filing in 2003 and early 2005 until mid January 2006 when an application for the summary procedure order was again filed.
17. A progress report was submitted in only 12 cases. In HCCW No. 766 of 2003, the progress report was submitted 11 months after the date of appointment. For the other 11 cases, the progress reports were submitted within 3 months after the date of appointment. However, the progress reports were not submitted with accounts required by section 203 in accordance with the requirement under the Contract, but were submitted with a premature request for payment of subsidy under the Contract. In 11 cases, Yeung and Lie confirmed in the progress report that the cases could be completed within one year of the date of their appointment. According to clause 7(d) of the Special Condition to the Contract, completion of a case means obtaining a release order from the court under section 205, but a sealed summary procedure order had not even been obtained for these cases.
18. The liquidation of none of the 28 cases was completed within one year of appointment. The Official Receiver did not receive a report explaining why not, as required under clause 7(b) of the Special Condition to the Contract.
(3) Yeung and Lie have failed to comply with the statutory duties of a provisional liquidator
19. Under section 203(1), every liquidator (other than the Official Receiver) of a company wound up by the court shall, at such times as may be prescribed but not less than twice in each year during the tenure of office, send to the Official Receiver an account of receipts and payments as liquidator.
20. In all the 28 cases, Yeung and Lie had failed to submit accounts to the Official Receiver at least twice in each year during the tenure of their office in accordance with section 203(1).
21. In 9 cases, only one account was submitted since their appointment. The accounts submitted were incomplete, the Official Receiver had raised comments and Yeung and Lie had made no reply.
22. In all the other cases, no accounts under section 203 were submitted. The Official Receiver sent periodic reminders asking for the submission of accounts and did not receive any response.
(4) Yeung and Lie have failed to allow the Official Receiver to audit the accounts under section 203(3A)
23. In view of the lack of progress and unsatisfactory conduct in the liquidation of the companies, the Official Receiver decided to exercise his power under section 203(3A) to audit the accounts of the 28 cases. 4 cases were initially identified for a field audit. Since September 2005, the Official Receiver had liaised with Yeung in an attempt to arrange a field audit. The date was postponed several times to accommodate the Firm but to no avail. Eventually, the Official Receiver informed the Firm on 4 January 2006 that a field audit would be conducted on 6 January 2006. When the case officers of the Official Receiver attended the office of the Firm on that day, they found the main entrance closed. Another visit was made on 13 January 2006. An employee of the Firm declined to provide the books to the Official Receiver for audit.
(5) There has been lack of response from Yeung and Lie to reminders and enquiries from the Official Receiver
24. Apart from the incidents mentioned above of the failure to respond to the enquiries of the Official Receiver, there are these further incidents.
25. In mid September 2005, the Official Receiver received a letter dated 14 September 2005 from Messrs Deacons, the solicitors for the petitioning creditor in HCCW No. 302 of 2003, complaining that they had written many letters to the Firm asking for an update of the progress of the liquidation of Karting Mall (Hong Kong) Limited since November 2004 and had received no reply. On 21 September 2005, the Official Receiver asked Yeung and Lie to give a reply to Messrs Deacons within 14 days. A reminder was sent by the Official Receiver on 25 October 2005. On 6 November 2005, Yeung replied to the Official Receiver stating that the Official Receiver should reply to Deacons instead of asking the provisional liquidators to handle this, as the Official Receiver had not paid any remuneration to the provisional liquidators.
26. On 11 January 2006, the Official Receiver asked Yeung and Lie to give an answer regarding their failure to complete the liquidation of the 28 cases, their failure to submit accounts under section 203, their failure to allow the Official Receiver to conduct a field audit, and the details of the staff of the Firm. No reply was received.
27. On the basis of the above findings, I agree with the Official Receiver that the performance and conduct of Yeung and Lie as provisional liquidators in the 28 summary liquidations are so unsatisfactory as to justify their removal.”
The 1st disciplinary committee
14. By separate letters dated 11 April and 30 June 2006, the Assistant Director of Compliance of the Institute wrote to Mr Yeung and the appellant informing them of the OR’s complaint and invited comments within 21 days. Mr Yeung responded with explanations by letter dated 25 April 2006. The letter to the appellant was sent by registered post to the office of his own firm, HJ Lie & Co. The certificate of posting indicated that it was delivered on 3 July 2006. The appellant did not respond. A reminder dated 5 August 2006 was sent by registered post, but it was returned by the post office and marked “unclaimed”. A second chaser dated 20 September 2006 was sent to a post box, to which there was no reply. Thereafter, a number of telephone calls were made by a staff of the Institute to a telephone number that the appellant registered with the Institute, but the calls were not answered.
15. On 27 November 2006, the respondent submitted separate complaints against Mr Yeung and the appellant to the Council of the Institute and requested for referrals to the Disciplinary Panels under section 34(1A) of the PAO.
16. Subsequently, a disciplinary committee (“the 1st disciplinary committee”) was formed. On 23 March 2007, Messrs JSM Solicitors wrote to the clerk to the 1st disciplinary committee giving notice that they act for the Institute as the complainant in the disciplinary proceedings.
17. By letter dated 28 March 2007, the clerk to the 1st disciplinary committee wrote to Mr Yeung and the appellant and also the OR informing them that the 1st disciplinary committee decided there was a prima facie case against Mr Yeung and the appellant on the two complaints and considered it would be suitable to dispose of the two complaints by way of a consent order, under which Mr Yeung and the appellant would be reprimanded and fined $10,000 and also ordered to pay the costs and expenses of the disciplinary proceedings. Mr Yeung and the appellant were asked whether they would admit to the two complaints and agree to the proposed order. The consent order procedure is a procedure provided by section 35B of the PAO.
18. It would appear that in sending a copy of this letter to the OR, the clerk to the 1st disciplinary committee was under the belief that the OR was the complainant in the proceedings. This was clearly wrong in light of Messrs JSM’s letter dated 23 March 2007. By letter dated 30 March 2007[3] to Messrs JSM, Mr Yeung and the appellant, the clerk to the 1st disciplinary committee clarified that the complainant was the Registrar (i.e. the respondent) and not the OR.
19. By letter dated 24 April 2007, Messrs JSM informed the clerk to the 1st disciplinary committee that the Council of the Institute had resolved to object to the proposal to deal with the complaints by way of the consent order procedure due to the seriousness of the charges. Pursuant to section 35B(4) of the PAO, the 1st disciplinary committee became dissolved. The Committee was formed in its place.
The Complaints before the Committee
20. On 11 June 2007, the Clerk to the Committee issued the Notice of Commencement of Proceedings.
21. Two Complaints were brought against Mr Yeung and the appellant jointly. They are that:
(1) Mr Yeung and the appellant failed or neglected to observe, maintain or otherwise apply the fundamental principles set out in paragraphs 1 to 4 of Statement 1.200 “Professional Ethics – Explanatory Foreword” (“Statement 1.200”) and were thereby in breach of section 34(1)(a)(vi) of the PAO; and
(2) Mr Yeung and the appellant were guilty of dishonourable conduct in breach of section 34(1)(a)(x) of the PAO in that their acts brought discredit upon themselves, the Institute or the accountancy profession.
Section 34(1)(a)(vi) and (x) of the PAO
22. Section 34(1)(a)(vi) and (x) of PAO, pursuant to which the two Complaints were brought provide as follows:
“(1) A complaint that-
(a) a certified public accountant-
…
(vi) failed or neglected to observe, maintain or otherwise apply a professional standard;
…
(x) was guilty of dishonourable conduct;
…
shall be made to the Registrar who shall submit the complaint to the Council which may, in its discretion but subject to section 32D(7), refer the complaint to the Disciplinary Panels.”
23. Section 34(2) defines “dishonourable conduct” as meaning:
“an act or omission of a certified public accountant, whether or not in the course of carrying out professional work or as a certified public accountant, which would reasonably be regarded as bringing or likely to bring discredit upon the certified public accountant himself, the Institute or the accountancy profession.”
Statement 1.200
24. Paragraphs 1 to 4 of Statement 1.200, with which the 1st Complaint is concerned, state as follows:
“1. In accepting or continuing a professional assignment or occupation a member should always have regard to any factors which might reflect adversely upon his integrity and objectivity in relation to that assignment or occupation.
2. A member should carry out his professional work with a proper regard for the technical and professional standards expected of him as a member and should not undertake or continue professional work which he is not himself competent to perform unless he obtains such advice and assistance as will enable him competently to carry out his task.
3. A member should conduct himself with courtesy and consideration towards all with whom he comes into contact in the course of his professional work.
4. A member should follow the ethnical guidance of the HKICPA and in circumstances not provided for by that guidance should conduct himself in a manner consistent with the good reputation of the profession and the HKICPA.”
The case against the appellant
25. The respondent’s case on the two Complaints is predicated upon the failures of Mr Yeung and the appellant to discharge their duties under the Companies Ordinance and also their breaches of the terms of the Contract as set out in the OR’s formal complaint and as found by Kwan J. The respondent relied on the Reasons for Decision of Kwan J and the reports of the OR as evidence in support of the Complaints.
26. Specifically, in respect of the 1st Complaint[4], the respondent’s case is that:
(1) Mr Yeung and the appellant’s failures to comply with the statutory and contractual obligations indicate that either they did not carry out their professional work with proper regard for the technical and professional standards expected of them, or they undertook professional work which they were not themselves competent to perform. In either case, it amounts to a breach of paragraph 2 of Statement 1.200.
(2) Their negative response and uncooperative conducts towards the OR’s requests for field audit, their refusal to provide the relevant books and records to the OR for examination and the failure to respond to the petitioning creditor’s enquiries fell short of what was expected of them and the standard required under paragraph 3 of Statement 1.200.
(3) Their serious failure of duties as provisional liquidators in the liquidation of the 28 Companies is inconsistent with the good reputation of the profession and the Institute and amounts to breach of paragraph 4 of Statement 1.200
27. As for the 2nd Complaint, the respondent’s case is that by reason of the very critical view that the OR took of their conduct, and the public endorsement of it by Kwan J in the Reasons for Decision handed down in open court, Mr Yeung and the appellant had brought discredit upon themselves, the Institute and the accountancy profession in Hong Kong and this constitutes dishonourable conduct within the meaning of section 34(2) of PAO.
The appellant’s response
28. The appellant made the following main points in defence to the disciplinary proceedings:
(1) The Contract was personal to Mr Yeung and the Firm and the appellant was under no obligation to comply with its terms. The appellant only agreed to be named as one of the Appointment Takers and a senior staff of the Firm so that the Firm could obtain the work tendered for. In fact, the appellant took no part in the liquidation work and received no benefit from the Contract.
(2) The summonses for the OR’s applications were not served on the appellant and he was not heard before Kwan J made her decision.
(3) The OR abused its power and behaved improperly and unfairly towards Mr Yeung and the appellant in: (i) conducting field audit which was not provided for in the Contract or the Companies Ordinance; (ii) insisting on conducting the field audit on 6 January 2006 in spite of Mr Yeung’s indication of unavailability; and (iii) acting in breach of the Contract by not paying fees to Mr Yeung and the appellant.
(4) The inability of Mr Yeung and the appellant to complete the liquidation work was due to their removal as liquidators.
(5) The disciplinary proceedings amounted to double jeopardy given that Kwan J had already ordered their removal as provisional liquidators. Under section 205(3) of the Companies Ordinance, upon being released from the office of liquidator, the appellant would be discharged from all liabilities in respect of acts done or default committed during his office as liquidator.
(6) Given there was the removal application and the first set of disciplinary proceedings resulting in the proposal to dispose of the matter by way of the consent order procedure, it was unfair, inappropriate and an abuse of process for the respondent to pursue the Complaints again.
The decision of the Committee
29. The Committee considered that the findings of fact made by Kwan J constituted strong prima facie evidence in support of the two Complaints. Having considered the materials and submissions put forward by Mr Yeung and the appellant, the Committee did not accept there was any error in Kwan J’s findings.
30. The Committee rejected the argument that the order removing them as provisional liquidators was unjust because they were unable to attend and make submissions, observing that they had been invited by the court to make an application to set aside the order but opted not to do so. The Committee also rejected, as being misconceived, the argument on section 205(3) of the Companies Ordinance and held that the removal orders did not release them from their liabilities as professional accountants.
31. On the basis of Kwan J’s findings of fact and her decision to remove Mr Yeung and the appellant as provisional liquidators, the Committee held that the two Complaints had been proved. The Committee was however of the view that as the integrity and objectivity of Mr Yeung and the appellant had not been called into question, paragraph 1 of Statement 1.200 which concerned matters that may reflect adversely upon an accountant’s integrity and objectivity was therefore not engaged.
32. The Committee ordered Mr Yeung and the appellant be reprimanded. Considering that no dishonest conduct was involved, the Committee was of the view that a financial penalty would be sufficient. Having regard to the different positions occupied by Mr Yeung and the appellant in the Firm and their different roles in the liquidation of the 28 Companies, the Committee imposed for each of the two Complaints a fine of $25,000 on Mr Yeung and that of $10,000 on the appellant.
33. The Committee further ordered Mr Yeung and the appellant to pay the costs and expenses of the disciplinary proceedings but only up to the dissolution of the 1st disciplinary committee. Having considered the Revised Statement of Costs, which was in the total sum of HK$62,638.60, the Committee decided not to assess the costs and expenses on indemnity basis and ordered Mr Yeung and the appellant to pay HK$30,000, which it considered to be proportionate to the penalties imposed.
This appeal
34. In this appeal, the appellant challenges the Committee’s findings on the two Complaints, the order of reprimand as well as the costs order. A wide range of grounds were included in the Notice of Appeal and the Supplementary Notice of Appeal, some of which are rather difficult to follow. In summary, the appellant raised the following arguments:
(1) There were procedural irregularities in the disciplinary proceedings in that he had been deprived of the right to cross-examine witnesses of the respondent and there was a breach of Rule 5 of the Disciplinary Committee Proceedings Rules (“DCPR”) (Grounds 1 and 4 of Notice of Appeal).
(2) The Committee erred in law and in fact in finding he had committed the failures and breaches complained of and in concluding that the two Complaints had been proved (Grounds 3 and 5 of Notice of Appeal, Grounds 4, 5, 8 and 9 of Supplementary Notice of Appeal).
(3) The disciplinary proceedings were abusive and vexatious in that the Institute unjustifiably intervened and objected to the consent order proposed by the 1st disciplinary committee and changed what was originally the OR’s complaint into complaints of the respondent (Grounds 2, 6 and 10 of Notice of Appeal, Grounds 10 and 11 of Supplementary Notice of Appeal).
(4) The Contract was personal to Mr Yeung and his firm and the appellant derived no benefit from it. The appellant only agreed to be named in the tender as a principal of the Firm and to be one of the Appointment Takers and this was to fulfill the tender requirement and to help Mr Yeung and his friend (Grounds 7 and 8 of Notice of Appeal).
(5) The decision of Kwan J was in the nature of a default judgment in that the appellant had not been served with the OR’s summonses (Ground 9 of Notice of Appeal and Ground 8 of Supplementary Notice of Appeal).
(6) The order of reprimand was wrong in that it failed to reflect the different role of Mr Yeung and the appellant (Grounds 6 and 7 of Supplementary Notice of Appeal).
(7) The Committee erred in assessing the costs and expenses of the respondent at $30,000 in that: (a) there was no proof of the correctness of the figures stated in the respondent’s statement of costs; (b) the amount claimed was grossly excessive; (c) the complainant in the 1st disciplinary proceedings was the OR and not the Institute or the respondent; (d) the Committee was wrong to conclude that $30,000 was proportionate to the penalties imposed when no misconduct was found by Kwan J, the 28 Companies had suffered no loss and the OR did not pay the Firm (Grounds 1- 3 of Supplementary Notice of Appeal).
Appeals under section 41 of PAO
35. It is important at the outset to point out that this Court’s jurisdiction under section 41 of the PAO is appellate and not supervisory. Section 41(1)(b)(iii) of the PAO, which is relevant to this appeal, provides:
“(1)An appeal shall lie to the Court of Appeal by –
…
(b) a certified public accountant –
…
(iii) who is aggrieved by an order made in respect of him under section 35(1);
and the Court of Appeal may confirm, vary or reverse the order or decision appealed against.”
It is therefore incumbent upon the appellant to demonstrate that some error has occurred in the proceedings before the Committee or in its decision: Ghosh v. General Medical Council [2001] 1 WLR 1915, 1923 at para.33.
36. Further, having regard to the clear wordings of the section, this appeal should only be concerned with grievance caused by the order made by the Committee under section 35 of the PAO. It is neither the purpose of this appeal nor the function of this court to deal with grievances or complaints that the appellant may have over matters that fall outside the ambit of section 41(1)(b)(iii) of the PAO. Accordingly, the appellant’s complaints about his appointments as the provisional liquidator of the 28 Companies (paragraph 34(4) above), the OR’s applications for his removal as provisional liquidator and the hearing before Kwan J (paragraph 34(5) above) and the consent order proposal and the dissolution of the 1st disciplinary committee (paragraph 34(3) above) are not directly relevant to this appeal. It is only necessary to deal briefly with the appellant’s arguments on them.
The appellant’s role in the liquidation of the 28 Companies
37. Central to the appellant’s many complaints about the disciplinary proceedings is his contention that he played no role in the liquidation work of the 28 Companies and derived no benefit out of it and that he was not aware of the OR’s dissatisfaction and the subsequent complaint over the liquidation work carried out by the Firm. The appellant had repeatedly said in his submissions that he had his own accountancy practice, that he was not a member of the Firm and that in agreeing to be named as an employee of the Firm and an Appointment Taker in the tender submission, he was just helping Mr Yeung to obtain the tender. This line of argument is entirely irrelevant and cannot afford a defence to the Complaints.
38. First, upon being appointed as the provisional liquidators of the 28 Companies, the appellant assumed all the duties and responsibilities of a provisional liquidator. It therefore matters not that the Contract was awarded to the Firm. Second, the OR awarded the Contract to the Firm on the basis of the tender submission, which stated that the appellant was one of the Appointment Takers to be appointed as the provisional liquidator, and no doubt in the belief that the appellant would carry out the work of a provisional liquidator. If indeed the appellant was only prepared to lend his name to the tender submission but never intended to assume the duties and work of an Appointment Take or a provisional liquidator, then this would be a case of knowingly making a false representation to the OR. This only serves to aggravate the seriousness of the Complaints. Third, as provisional liquidator, it is incumbent upon the appellant to ensure he was made aware of the progress of the liquidations and of enquiries from the OR and/or the creditors. If, as he contended, the correspondence and enquiries from the OR and the petitioning creditor that were sent to the Firm were not brought to the appellant’s attention, that only serves to highlight his failures in duties as a provisional liquidator.
The hearing before Kwan J
39. As to the hearing before Kwan J, the appellant’s complaint is that he had not been served with the summonses and therefore did not attend the hearing. However, after receiving the Reasons for Decision on 27 March 2006, the appellant jointly with Mr Yeung had written to the court asking for a review or rehearing of the applications. In the court’s reply to them, they were informed that they should do so by filing summons and supporting affidavit. Despite writing to the court on 12 April 2006 intimating they would issue summons to set aside or vary the removal orders, no step was taken to set aside or appeal the decision and order of Kwan J. Further, having regard to the appellant’s submissions in the disciplinary proceedings and in this appeal, there is no basis for believing that the Judge would have come to different decision had the appellant been present at the hearing.
The first disciplinary proceedings
40. As regard his complaint associated with the first set of disciplinary proceedings and the consent order proposal, much of the appellant’s discontent stems from his misapprehension that the complainant in the first disciplinary proceedings was the OR. The confusion may in part be caused by the clerk to the 1st disciplinary committee in sending a copy of the 28 March 2007 letter to the OR. The position was however clarified by the clerk’s letter of 30 March 2007. In any case, it is clear from Messrs JSM’s letter dated 23 March 2007 that the OR was not the complainant.
41. The appellant also makes the point that the Registrar and the Council and the Institute are different entities. He has however overlooked that under section 21(2) of the PAO, the Registrar is the secretary to the Institute and to the Council and also under section 17(1) of the PAO, the powers and acts of the Institute are exercised and done by the Council. There is accordingly no basis for the appellant’s complaint that the Institute, the Council and/or the respondent had acted abusively in intervening in the first disciplinary proceedings to object to the consent order proposal.
Irregularities in the proceeding before the Committee
42. I turn next to deal with the grounds that fall within the ambit of section 41 of the PAO, the first of which complains of irregularities in the proceedings before the Committee. It is argued by the appellant that he had been deprived of a fair hearing before the Committee because he was not allowed to examine or cross-examine witnesses. In his checklist for the hearing, the appellant requested to call three witnesses and to cross-examine the complainant, namely, the respondent. The proposed witnesses were the OR, Miss Brenda Leung, a staff of the Institute who made unsuccessful attempts to telephone the appellant (see paragraph 14 above), and Mr Peter Nip, the Assistant Director of Compliance of The institute who had corresponded with the appellant (see paragraph 14 above). After hearing the submissions of the appellant and the respondent, the Chairman of the Committee delivered the Decision on 18 August 2008 refusing the application.
43. The procedures regarding the calling of witnesses and cross-examination of the parties to the disciplinary proceedings are governed by Rule 29 of the DCPR(1). It provides that:
“The parties shall be permitted by way of the checklist procedure to express their views as to whether witnesses should attend the hearing and give evidence and whether particular parties should be subject to cross-examination by other parties, however witnesses shall only attend and give evidence at the hearing and parties shall only be subject to cross-examination by other parties if the Chairman or the Disciplinary Committee so direct.”
44. In refusing the appellant’s application, the Chairman considered that witnesses should only be called and parties should only be subject to cross-examination if the evidence is necessary to resolve a material dispute of fact in relation to a relevant issue. He was not satisfied that the evidence of the proposed witnesses and the cross-examination of the respondent is necessary for resolving a material dispute of fact in relation to a relevant issue.
45. In my view, the approach of the Chairman is correct. The appellant has not been able in his submissions to point to any error in the Chairman’s conclusion. Nor has he identified how and in what way the evidence of the proposed witnesses and/or the cross-examination of the complainant is related to the issues that were relevant to the Complaints before the Committee.
46. The appellant also complains of a breach of Rule 5 of the DCPR, which requires the Council, before deciding to refer the complaint to the Disciplinary Panels, to invite comments from the respondent to the complaint. The appellant says he only became aware of the OR’s complaint upon receipt of the letter dated 28 March 2007 concerning the consent order proposed by the 1st disciplinary committee. There is no substance in this complaint because the Assistant Director of Compliance had by letter dated 30 June 2006 informed the appellant of the complaint and invited his comments on it. This was delivered by registered post to the address that the appellant registered with the Institute, the same address to which the letter dated 28 March 2007 was sent. There were also attempts to contact the appellant at the telephone number he registered with the Institute.
Errors in the findings of the Committee
47. Another main argument of the appellant is that the Committee commits errors of law in finding that the Complaints were proved. Firstly, the appellant says that the respondent had failed to discharge the burden of proof and the evidence was scanty. The Committee held that the findings of fact made by Kwan J in the Reasons for Decision provide strong prima facie evidence of the matters complained of and that the appellant had failed to show there was error in the Judge’s findings. In my view, the Committee is correct. The appellant suggests in his submissions that one of the members of the Committee (Mr Roger Best) also commented that there was no proof of the Complaints. However, the Committee was unanimous in its finding that the two Complaints were proved and the Reasons for Decision was signed by all the members, including Mr Best.
48. Secondly, the appellant submits that the PAO has no application to Mr Yeung and him, relying on section 44 of the PAO. The section provides that the PAO “shall not apply to the Director of Audit or to any other public officer in connexion with his duties as such”. Although Mr Yeung and the appellant were appointed provisional liquidators, they were not public officers within the meaning of section 44.
49. Thirdly, the appellant argues that the Committee erred in rejecting his argument on section 205(3) of the Companies Ordinance, namely, upon his being removed as the provisional liquidator of the 28 Companies, he became absolved from all liabilities. Section 205(3) of the Companies Ordinance provides, inter alia, that:
“An order of the court releasing the liquidator shall discharge him from all liability in respect of any act done or default made by him in the administration of the affairs of the company, or otherwise in relation to his conduct as liquidator”.
50. The Committee was of the view that under the subsection, an order releasing a liquidator only discharged him from all liability as a liquidator, but would not absolve him from his liability as a professional accountant under the PAO.
51. In my view, section 205(3) has no application to the appellant at all. Kwan J only ordered that the appellant be removed from the office of liquidator, but had not granted him a release. Section 205(1) provides, inter alia, that:
“When the liquidator of a company which is being wound up by the court …, or has been removed from his office, the court shall, on his application, cause a report on his accounts to be prepared, and, on his complying with all the requirements of the court, shall take into consideration the report, and any objection which may be urged by any creditor or contributory, or person interested against the release of the liquidator, and shall either grant or withhold the release accordingly.”
It is clear from section 205(1) that an order of removal does not operate as an order of discharge, which is the subject matter of section 205(3). I am further in agreement with the Committee in its construction of section 205(3). Reading the subsection in the context of section 205, it is clear that it is dealing only with the discharge from the liability as a liquidator and not otherwise. It cannot be the intention of the legislature that section 205(3) has the effect of governing the application of the PAO.
52. Fourthly, the appellant argues that the finding of the Committee that he was guilty of dishonourable conduct was inconsistent with its finding that no misconduct was revealed such that paragraph 1 of Statement 1.200 was not engaged. This argument has no merit because “dishonourable conduct” refers to act or omission that would reasonably be regarded as bringing or likely to bring discredit upon the accountant himself, the Institute or the accountancy profession (section 34(2) of the PAO). It does not have to be an instance of misconduct.
53. The appellant also complains that there are errors of fact in the Committee’s findings concerning his failures as a provisional liquidator. Firstly, he says it is incorrect to find that they had failed to complete the liquidation of all the 28 Companies. It is said that in one of the cases (i.e. HCCW94/2003), the summary procedure order had been granted on 19 October 2004. This however misses the point. Notwithstanding that the court had granted the order, Mr Yeung and the appellant had taken no step to perfect the order viz to have it drawn up and sealed, and to file a sealed copy with the court. Accordingly, as found by Kwan J (at paragraph 11 of the Reasons for Decision), up to February 2006, this company as well as the other 27 companies remained in provisional liquidation.
54. Secondly, the appellant says it is incorrect to say that they failed to complete the liquidation work because it was as a result of their removal that they could not finish the liquidation of the 28 Companies. This argument has ignored the fact that by the time of their removal, they had been in the office of liquidators for no less than 2 years, during which there was minimal progress in almost all of the cases (paragraphs 12 and 16 of Kwan J’s Reasons for Decision). It cannot be doubted that Mr Yeung and the appellant had failed to proceed diligently with the liquidation work and to complete the liquidation of the 28 Companies.
55. Thirdly, the appellant challenges the Committee’s finding that by reason of their failures, they had failed or neglected to observe, maintain or otherwise apply the professional standard stated in paragraphs 2 to 4 of Statement 1.200 and had therefore breached section 34(1)(a)(vi) of the PAO. In this regard, the modern approach of an appellate court when reviewing the findings of a disciplinary tribunal is that it will not defer to the disciplinary tribunal’s judgment more than it is warranted by the circumstances: Ghosh v. General Medical Council, op cit, 1923F-H and A Solicitor v. Law Society of Hong Kong (2008) 11 HKCFAR 117, at paras 119-120. In Dr Fong Ka Yeung v. Medical Council of Hong Kong (unreported) CACV159/2007, 15 March 2011, at para 24(2), this Court pointed out that despite the modern approach, the appellate court’s restrained approach in relation to finding of facts by the trial court or tribunal has not changed. The court will continue to accord an appropriate measure of respect to the findings of the disciplinary tribunal and would be slow to interfere with the findings of fact made by a disciplinary tribunal. The appellant’s submissions have not demonstrated in what way the Committee erred in finding a case of breach of section 34(1)(a)(vi) of the PAO. There is no basis for this court to disturb the findings of fact made by the Committee.
The order of reprimand
56. On the sanctions imposed by the Committee, the appellant contends that the order of reprimand was wrong because it did not reflect the different role that Mr Yeung and the appellant played in the liquidation. In dealing with a complaint on the propriety of sanctions passed by a disciplinary tribunal, the court has always accord great weight to the decision of the tribunal whose members possess the expertise and know the appropriate standards that are expected of members of the profession and will only interfere with the tribunal’s decision when it is clearly wrong: MacLeod v. The Royal College of Veterinary Surgeons [2006] UKPC 39 at para 23.
57. In the present case, the Committee was aware that Mr Yeung and the appellant occupied different positions in the Firm and played different roles in the liquidation of the 28 Companies and had imposed a lighter financial penalty on the appellant (paragraph 17 of the Committee’s Reasons for Decision). Nevertheless the Committee considered that both Mr Yeung and the appellant should be reprimanded for their failings. In coming to this decision, the Committee, was exercising its professional judgment and expertise. The Committee, comprising members of the profession, no doubt has the required expertise and knowledge of the appropriate standards expected of members of the profession. The order of reprimand is within the reasonable ambit of sanctions that the Committee may impose on the appellant having regard to the nature and contents of the Complaints. There is no basis for this court to disturb the decision of the Committee.
The costs order
58. Finally, the appellant contends that the Committee was wrong in law to order him to pay costs and expenses of the disciplinary proceedings up to the dissolution of the 1st disciplinary committee. One of his reasons is that the respondent was not the complainant in the first set of disciplinary proceedings. As explained above, the appellant was mistaken as to the identity of the complainant in the first disciplinary proceedings. The appellant also questions the figures stated in the revised statement of costs and also complains that the amount was grossly excessive. In assessing the costs to be paid by Mr Yeung and the appellant at HK$30,000, the Committee had considered the revised statement of costs and had regard to what would be proportionate to the level of penalties imposed on them. The appellant has not put forward any concrete basis for challenging the genuineness of the contents of the revised statement of costs. Looking at the revised statement of costs, the Committee’s assessment is a very reasonable one and has clearly given due weight to the element of proportionality.
Conclusion
59. For the reasons set out above, I am of the view that the appeal has no merits and should be dismissed with an order nisi that the appellant pays the respondent the costs of the appeal to be taxed if not agreed.
(Andrew Cheung)
Chief Judge of the
High Court | (Peter Cheung)
Justice of Appeal | (Carlye Chu)
Justice of Appeal |
The appellant, unrepresented, appeared in person
Mr Eugene Fung, instructed by Mayer Brown JSM, for the respondent
[1] Schedule, Part II – Pre Qualification Criteria, paras 1(i) and 2.
[2] Schedule, Part I – Work Specifications, para 1.
[3] A reference to this letter was made in Messrs JSM’s letter dated 29 August 2008 [Appeal Bundle p.414].
[4] Given that the Committee found that paragraph 1 of Statement 1.200 was not engaged, it is not necessary to set out the respondent’s case on this aspect of the 1st Complaint.