Case Detail

DCCC 718/2017

[2019] HKDC 1566

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 718 OF 2017

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	HKSAR
	v
	CHEUNG CHUN YUEN, BARRY

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Before:

HH Judge C P Pang in Court

Date of Hearing:	14-16 October 2019
Date of Ruling:	21 November 2019

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RULING

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Introduction

1. This is an application by the defendant for disclosure of certain emails in the prosecution’s list of unused materials. The police had obtained during its investigation these emails from the Securities and Futures Commission (“SFC”), which had been partly redacted by the SFC on the grounds of public interest immunity (“PII”) and/or legal professional privilege (“LPP”). The defendant is now asking for disclosure of these emails in their full and unredacted form. The application is resisted by the SFC.

The allegation of the prosecution

2. The defendant faces a charge of conspiring to defraud the SFC, contrary to Common Law and punishable under s.159C(6) of the Crimes Ordinance (Charge 1). It is alleged in the charge sheet that the defendant:

“between May 2012 and May 2013, in Hong Kong, conspired together with CHOI Tat-ying, Jacky to defraud the Securities and Futures Commission (the ‘SFC’) by dishonestly: -
(a) concealing from or failing to disclose to the SFC material information in relation to the financial position of the Hong Kong Mercantile Exchange (‘the HKMEx’);
(b) causing and/or permitting false or misleading information in relation to the financial position of the HKMEx to be supplied to the SFC; and
(c) causing and/or permitting the HKMEx's reports to the Commission to be prepared in such a way as to show a false or misleading financial position of the HKMEx,
and thereby causing the SFC not to withdraw the authorization it had granted to the HKMEx for providing automated trading services in Hong Kong.”

3. The authorization referred to in the charge was provided pursuant to s. 95(2) of the Securities and Futures Ordinance, Cap 571 (“SFO”), for the HKMEx to operate a commodities futures market in Hong Kong. Conditions were imposed by the SFC, including, inter alia, that the HKMEx would at all times (i) have financial resources sufficient for the proper performance of its functions and obligations and (ii) disclose to the SFC, within the time and in the manner specified, information and documents relating to its business and operations that the SFC might reasonably request (“the Conditions”).

4. It is the prosecution’s case that the defendant (Chairman of HKMEx) conspired with Jacky Choi (Chief Financial Officer of HKMEx) to defraud the SFC in the terms particularized in the conspiracy charge. The effect of this unlawful agreement was that the true financial position of the HKMEx would be concealed from the SFC or the SFC would be misled about it – namely that the HKMEx (at times between May 2012 and May 2013) did not have sufficient financial resources and was thus in flagrant disregard of the Conditions – thereby causing responsible officers of the SFC not to withdraw the authorization.

5. The prosecution alleges that the defendant, being the chairman in ultimate control over HKMEx, was aware of the dishonest means used in the unlawful agreement. Jacky Choi will be called as a prosecution witness to prove the complicity of the defendant, notwithstanding that most of the false representations in communications with the SFC were made by Jacky Choi and Ann Cresce (then General Counsel and Head of Compliance of HKMEx).

6. The defendant has also been charged with fraud, contrary to s. 16A of the Theft Ordinance (Charge 2) but that charge does not directly relate to this application.

7. The charges in the present case were laid by the Secretary for Justice after a criminal investigation conducted by Commercial Crime Bureau (“CCB”) of the Police. The SFC is not the prosecuting authority. It is the named victim in the conspiracy charge. Three senior officers of the SFC will be called to testify for the prosecution at the trial. The case is to be heard in the District Court commencing on 7 January 2020.

The procedural history

8. On 24 June 2019, the defence raised the issue about disclosure of redacted parts of the emails obtained by the police from the SFC. A hearing was fixed before His Honour Judge Dufton on 5 July 2019 for discussion of the application. Judge Dufton set down 3 days (14-16 October 2019) for the hearing of the application, with directions that the defendant, the prosecution and the SFC were to file written submissions before the hearing. This Court subsequently gave further directions for written submissions to be filed. The directions have been duly complied with.

9. Before the hearing of the application on 14 October 2019, the SFC had conducted a review of the redacted emails and the scope of redactions in the redacted emails was narrowed down significantly. The SFC now only maintains its PII and LPP claims over 79 emails (37 and 42 items respectively). On 24 September 2019, at the request of the prosecution, counsel on fiat were allowed by the SFC to inspect (but not taking copies or notes) the unredacted copies of the emails of which PII was claimed.

10. After the inspection, the prosecution was, and still is, of the view that all the PII portion of the redacted emails are relevant or possibly relevant to the issues in the case. They are said to be relevant for “at least the following reasons”: (a) they were authorized by or copied to some or all of the SFC officers who are expected to be called as prosecution witnesses, (2) they contained accounts of representations made by HKMEx’s personnel to the SFC. They are therefore disclosable materials.

The hearing on 14 -16 October 2019

11. Mr John Reading SC, counsel on fiat, says the prosecution’s position regarding the SFC’s claim of PII is “neutral”. As the SFC is ultimately in the best position to represent its interests in discharging their functions, it is impracticable for the prosecution to convey those interests in the SFC’s place. The prosecution therefore is not claiming PII and the SFC would have to make out its own claim. Mr Reading says he is not even in the position to say whether the prosecution supports the claim.

12. The SFC is represented by Mr Derek Chan SC in this hearing. In support of the SFC’s PII and LPP claims, the SFC has prepared (i) a Certificate signed by Mr Ashley Ian Alder, Chief Executive Officer of the SFC dated 12 August 2019 certifying the SFC’s PII claim (“the Certificate”), and (ii)an Affirmation of Mr Andrew John Young, Chief Counsel of the SFC dated 9 August 2019 in respect of the SFC’s LPP claim.

13. Both Mr Reading and Mr Chan submit that the SFC has the right to make the claim for PII and the standing to be heard in this application.

14. The defendant’s position is that the SFC, having no locus standi in the hearing of the application insofar as PII is concerned, should not be a party to the application for disclosure. Mr Eric Kwok SC, counsel for the defendant, submits that the prosecution should assess the relevance, and advance the claim of PII for the SFC if the claim is justified. It is submitted that the PII claim is not justified on the face of its claim. Insofar as the LPP claim is concerned, the Court is invited to examine the emails to find if LPP attaches to them. Mr Kwok also mentioned about the appointment of a “special advocate” as an option for the Court.

15. Having heard submissions of all parties in an inter partes hearing, I inspected all the disputed emails in their unredacted form in chambers in the absence of all parties. I held that the appointment of special advocate was unnecessary. I also ruled that the SFC had locus to claim both PII and LPP in its own rights and there would be an ex parte hearing to hear their representations in the presence of prosecuting counsel.

16. At the suggestion of the Court, the SFC agreed to give a limited waiver to the prosecution for Mr Reading, with his junior Mr Kwan, to be present in the ex parte hearing for the LPP claim. In my view, the engagement of the prosecution throughout the ex parte hearing would be in the interests of justice to ensure that there will be a fair trial of the defendant.

17. What happened in the ex parte hearing was that Mr Chan simply took me through the chain of emails demonstrating their connections with each other. His assistance did not add much to the PII rationales as disclosed in his written submissions and Mr Alder’s Certificate.

18. Before the inter partes hearing resumed, Mr Kwok had submitted a Statement by Defence and Written Submission of the Defence for PII, setting out the defences (for my eyes only) for the court to consider the relevance of the redacted emails and whether the claim of PII should be overruled. In the inter partes hearing, all parties were further heard in open court.

19. I also directed the SFC to provide a table setting out concise description of each redacted email for the benefit of the Court. Another table which contained only the broad category of the emails, but not the actual contents, was also supplied to the defence.

20. Counsel also assisted the Court as to whether it would be desirable to prepare two separate judgments for this application (one for the parties and another for higher courts). The benefit of a separate judgment for higher courts is that it can give more detailed information about the disputed emails and the issues as disclosed by the defence (which should not be disclosed in the judgment for the parties). Mr Chan submitted that such a course was not known in the authorities he is aware of, while Mr Reading found it unnecessary as the higher court could view the emails should there be an appeal from my ruling.

21. Having inspected all the emails and found the relatively simple and straight forward nature of the redacted material, I agree with the prosecution that it is unnecessary to prepare two separate judgments.

Discussion

The legal principles

22. There is a general agreement amongst the parties on the disclosure obligation in criminal proceedings and the general principles on PII and LPP.

23. The prosecution’s duty of disclosure has its foundation in the common law right of the defendant to a fair trial. It is also protected by the Basic Law enshrined in Article 87. However, an accused does not have an absolute right to the disclosure of all relevant evidence. The disclosure to be made to the defence is subject to limitations including PII and LPP.

24. Insofar as the claim of PII is concerned, the trial judge has to balance on the one hand the public interest in non-disclosure against, on the other hand, the interest of justice in protecting an accused from wrongful conviction. It is a balancing exercise to resolve the conflicting interests in each individual case. The approach in R v H [2004] 2 AC 134 at paragraph 36 should be adopted.

25. As regards LPP, all parties agree that unless waived by the client, the privilege is absolute. It does not involve a balancing exercise of the court to weigh against the competing interests of the parties. Such privilege, if established, is absolute no matter how compelling any competing public interest factor may be: HKSAR v Wong Chi Wai (2013) 16 HKCFAR 539 at per Ribeiro PJ §§34 & 37.

The appointment of “Special Advocate”

26. While Mr Kwok refers to the appointment of a special advocate, he confirms that the defence is not asking the Court to adopt this procedure, which is only suggested as an option that may be considered.

27. In my view, the appointment of a special advocate should only be considered in cases of exceptional difficulty. The appointment may cause unnecessary delay in the proceedings. Having inspected the disputed materials, I was of the view that the nature and volume of the disputed materials do not justify the appointment of a special advocate. I therefore decided that such appointment was not necessary.

Whether the SFC has locus standi?

28. Mr Kwok emphasizes that the prosecution bears the duty (a continuing one) to ascertain and disclose to the defence relevant materials in its possession or control. On the other hand, the SFC is not the prosecuting authority nor the investigatory agency, and hence not under a direct duty of disclosure. Therefore, the SFC cannot be a party to the application for disclosure at all and does not have a role to play in this exercise, save that it has a right to convey its claims to the prosecution. It would then be for the prosecution to assess the relevance and raise with the Court if the PII claim by the SFC is justified in their assessment. The prosecution cannot take a “neutral” stance.

29. In my view the SFC, being the owner of confidential materials asked to be disclosed, has a right to be heard in the application for disclosure. Whether it is heard technically as an applicant, a respondent or an interested third party is entirely academic. If the claim of PII overrides the interest of justice in disclosure, the materials will have to be withheld.

30. I find the stance taken by the prosecution quite unusual. The charges are preferred by the Secretary of Justice, who is the legal adviser of the government and also the guardian of public interests. Indeed, when a government department or public body claims PII, the Secretary for Justice is normally expected to be the applicant to observe the duty to protect the public interests in withholding sensitive and confidential materials. It also seems to me that the English and local authorities provided to the Court would suggest that, in a criminal case the prosecution should be the party asserting PII. I do not think that the public interest of non-disclosure can be better protected by the SFC asserting the claim and explaining its rationales in its own capacity.

31. That said, the position taken by the prosecution should not prevent the SFC from exercising its own right to make the claim. While the SFC is not a governmental department, it is a public body set up by statute (the SFO) to regulate the securities and futures markets in Hong Kong. It has its statutory duties to observe. In my view, the Commission has its own right to insist on asserting its claim for PII, even if the prosecution is prepared to waive the privilege.

32. The SFC initially requested for an ex parte hearing (in the absence of both the prosecution and the defence). I have concern that if such course is to be adopted, justice may not be seen to be done as the SFC is the named victim in Charge 1 and its officers will be called as prosecution witnesses. In my view, hearing the victim in the absence of both the prosecution and the defendant should be avoided, unless it is necessary. As counsel of the Department of Justice and counsel on fiat had previously inspected the emails which involve PII, I believed that hearing the submission of the SFC in the presence of the prosecution would not do injustice to the Commission or the defendant. The presence of the prosecutor as minister of justice, can ensure fairness of trial to be received by the defendant. I therefore directed that the ex parte hearing to hear the SFC’s submission should be conducted in the presence of counsel on fiat.

33. The SFC, at the request of the Court, reasonably provided a limited waiver of the LPP so that counsel on fiat could also sit in the ex parte hearing for the part of emails to which LPP attaches. I would expect that counsel on fiat, having known the redacted emails under LPP, will ensure that the non-disclosure is not to deprive the defendant of a fair trial. The ex parte hearing was therefore conducted in the presence of counsel for the prosecution and the SFC.

PII portion

34. There is no dispute between the parties that the House of Lord’s approach in R v H should be adopted. The House of Lords stated at paragraph 36 of the judgment:-

“36. When any issue of derogation from the golden rule of full disclosure comes before it, the court must address a series of questions:
(1) What is the material which the prosecution seek to withhold? This must be considered by the court in detail.
(2) Is the material such as may weaken the prosecution case or strengthen that of the defence? If No, disclosure should not be ordered. If Yes, full disclosure should (subject to (3), (4) and (5) below be ordered.
(3) Is there a real risk of serious prejudice to an important public interest (and, if so, what) if full disclosure of the material is ordered? If No, full disclosure should be ordered.
(4) If the answer to (2) and (3) is Yes, can the defendant's interest be protected without disclosure or disclosure be ordered to an extent or in a way which will give adequate protection to the public interest in question and also afford adequate protection to the interests of the defence?
This question requires the court to consider, with specific reference to the material which the prosecution seek to withhold and the facts of the case and the defence as disclosed, whether the prosecution should formally admit what the defence seek to establish or whether disclosure short of full disclosure may be ordered. This may be done in appropriate cases by the preparation of summaries or extracts of evidence, or the provision of documents in an edited or anonymised form, provided the documents supplied are in each instance approved by the judge. In appropriate cases the appointment of special counsel may be a necessary step to ensure that the contentions of the prosecution are tested and the interests of the defendant protected (see paragraph 22 above). In cases of exceptional difficulty the court may require the appointment of special counsel to ensure a correct answer to questions (2) and (3) as well as (4).
(5) Do the measures proposed in answer to (4) represent the minimum derogation necessary to protect the public interest in question? If No, the court should order such greater disclosure as will represent the minimum derogation from the golden rule of full disclosure.
(6) If limited disclosure is ordered pursuant to (4) or (5), may the effect be to render the trial process, viewed as a whole, unfair to the defendant? If Yes, then fuller disclosure should be ordered even if this leads or may lead the prosecution to discontinue the proceedings so as to avoid having to make disclosure.
(7) If the answer to (6) when first given is No, does that remain the correct answer as the trial unfolds, evidence is adduced and the defence advanced?
It is important that the answer to (6) should not be treated as a final, once-and-for-all, answer but as a provisional answer which the court must keep under review.”

35. I shall adopt the same approach.

SFC’s rationales in the claim of PII

36. The SFC’s PII claim is largely based on the public interest in preserving the confidentiality of communications within governmental or regulatory bodies on the decision-making process concerning matters of public policy. Mr Chan, counsel for the SFC, submits that the policy in maintaining the confidentiality is underpinned by 4 public interest rationales:

(1)   Proper decisions can only be made if there is complete freedom and candour in the exchange of views and opinions.
(2)   Disclosure of documents of discussion would “create or fan ill-informed or captious public or political criticism”.
(3)   It may undermine the principle of joint/collective responsibility for the decisions of the government.
(4)   Efficiency of government (or regulatory body) would be seriously compromised.

37. A certificate signed by Mr Ashley Ian Alder, Chief Executive Officer of the SFC dated 12 August 2019 certifying the SFC’s PII claim (“the Certificate”) has been filed. In the Certificate, Mr Alder certified that the emails to which PII attaches fall within one or more of the 3 categories of documents:

“(1)    Confidential email communications between the Chairman, Chief Executive Officer and Executive Director, Senior Director and/or Director(s) of the Supervision of Markets Division of the SFC (“SOM”), that refer to board meetings and/or the discussions at board meetings and/or the contents of board papers circulated to the members of the executive committee of the SFC concerning HKMEx;
(2)    Confidential email communications that refer to confidential communications and/or notes of meetings between the Chairman, Chief Executive Officer, Executive Director and/or Senior Director of SOM of the SFC and senior personnel of the Financial Services and Treasury Bureau (“FSTB”) concerning HKMEx; and
(3)    Confidential email communications between the Chairman, Chief Executive Officer, Executive Director of SOM and/or Director of the Chief Executive Officer’s Office of the SFC, that refer to internal discussions, analyses or expression of opinions concerning the handling of media inquiries, the information to be disseminated to the press/public and/or matters in respect of public relations concerning HKMEx.”

38. In the Certificate, Mr Alder held the view that the materials covered by these 3 categories should not be disclosed as their disclosure would be injurious to the public interest on the following grounds:

“(1) Internal communications regarding the inner workings of the Commission
The proper functioning of the regulatory process requires that key members involved in the decision making process of the Commission should be able to express themselves frankly and freely concerning matters it regulates. They must be able to do so in internal communications without fear that documents recording their views and discussions will be disclosed and scrutinized by the public. Board papers and minutes are high level documents, prepared for consideration by and discussion of key members of the Commission in the decision-making process. Consistent with this principle, references, to such documents, information or materials falling within this category in email communications ought to be protected from disclosure in order to enable the proper discharge of the Commission’s regulatory functions. The prospect of disclosure of these confidential documents or materials would inhibit and prejudice the discharge of the Commission’s regulatory functions, as it would inhibit the expression of individual views which could be deliberated upon at the board meetings, a process necessary to the formation of policy and/or the carrying out of its regulatory functions.
(2) Correspondence with the FSTB
The Commission is not part of the Government of the HKSAR; it is an independent statutory body. The Commission is the primary regulator of the securities and futures markets and industry, whilst the Government is separately involved in the formulation of policies in this area in accordance with articles 109 and 110 of the Basic Law. The proper functioning of the regulatory and policy formation process requires that discussions between the Commission and those responsible for formulation of policy should be able to express themselves frankly and freely concerning such matters. They must be able to do so in internal communications without fear that documents recording their views and discussions will be disclosed and scrutinized by the public. Disclosure of confidential communications between the Commission and the FSTB on policy issues, concerns, views and opinions about HKMEx would inhibit and prejudice the discharge of the Commission’s regulatory functions and the effective functioning of the Commission and the Government would be compromised. Consistent with this principle, references to such documents or materials falling within this category in confidential email communications ought to be protected from disclosure in order to enable the proper discharge of the Commission’s regulatory functions.
(3) Internal communications regarding public relations
The proper functioning of the regulatory process requires that officers of the Commission should be able to express themselves frankly and freely concerning matters its regulates, including the handling of disclosures to the public of its policies, the handling of media inquiries, and public relations matters in general. These officers must be able to do so in internal communications without fear that documents recording their views and discussions will be disclosed and scrutinized by the public. The prospect of disclosure of confidential communications and/or materials covered in this category would inhibit and prejudice the discharge of the Commission’s regulatory functions, of which its relationship with the public through the media forms part.”

39. In a gist, it is said that the documents in all three categories fall within a recognized class of documents which should be protected by public interest immunity. The disclosure of such documents would injure the proper functioning of the Commission and the government and their communication/relationship.

40. In the tables prepared by Mr Chan, the 3 categories of documents are referred to as Categories A, B and C. The claim was asserted on the basis of “Class Claim” (a claim based on the class of documents regardless of its contents), and “Contents Claim” (a claim based on the sensitivity of contents of a given document).

41. While a class claim has been recognized by the courts, such kind of claim in my view should be confined to information of highest sensitivity. In this application which involves a criminal case, I am of the view that consideration must be given to the contents of each email to balance whether they should be protected from disclosure.

42. Mr Kwok for the defendant submits that the SFC’s PII claim lays in maintaining the candour of discussion by officers. However, such candour does not only live on non-disclosure alone. There are many other positive ways of promoting and maintaining candour in the officers’ discussions and communications. It defies logic that officers would be inhibited from expressing their views in their communications relating to such matters in board meetings or board discussions should they know that such communications are disclosable.

The balancing exercise

43. Applying the test of materiality set out in R v Keane [1994] 1 WLR 746 at 752A-C (adopted by Sir Anthony Mason NPJ in HKSAR v Lee Ming Tee (2003) 6 HKCFAR 336 at §145),documents are disclosable if they:

(1)   Are relevant or possibly relevant to an issue in the case;
(2)   Raise or possibly raise a new issue whose existence is not apparent from the evidence the prosecution proposes to use; or
(3)   Hold out a real (as opposed to fanciful) prospect of providing a lead on evidence which goes to (1) or (2).

44. In criminal cases, the court has to balance between the public interest in non-disclosure of relevant material and the interests of justice in protecting an accused from wrongful conviction. In my view, greater weight may have to be attached in favour of disclosure and the scales in the balancing exercise should tend to swing in favour of an accused person whose liberty is at stake (see Sankey v Whitlam (1978) 142 CLR 42,62).

45. Materials and information that might be protected under PII are wide ranging. It has been held to include matters such as national security, prevention of terrorism, prevention of organized crime and matters concerning the proper operation of the public service, etc (see Criminal Evidence in Hong Kong, Division VII para 451).

46. Due weight has to be attached to the Certificate of Mr Alder.

47. In the present case, I agree with Mr Chan that there is a public interest in preserving the confidentiality of high-level communications within the SFC on decision making and formulation of policy, and its communications with other government departments (the FSTB in the present case). Such confidentiality is essential to the proper functioning of the Commission and its operation in the regulation of the local securities and futures markets, as the discussion and communication may involve highly sensitive information that affects the stability of markets and capability of the Commission to regulate the markets.

48. Having examined the disputed emails, I am satisfied that they all fall within one or more of the 3 categories of communications either amongst senior officers within the SFC or between SFC and FSTB. There is a public interest in not disclosing the material withheld by the SFC.

49. However, such interest does not necessarily protect the materials or information from disclosure. The sensitivity of the material or information, the possible injury to the government or public body and the interest of the defendant in receiving a fair trial must all be weighed in the balance of each of the documents.

50. The emails under Categories A and B may relate to the representations made by HKMEx’s personnel to the SFC. I agree with the prosecution that these emails are relevant and disclosable.

51. Special attention should be given to Category B emails which are related to the communication between the SFC and the FSTB. It would appear that the FSTB or the government should have concern about the disclosure. I have specifically asked Mr Reading about Category B materials which the Secretary for Justice as legal adviser of the government may have interest in it. Mr Reading confirms again that the prosecution is not claiming PII for this portion of emails. That is undoubtedly a decision within the discretion of the prosecution. It seems to me that the Department of Justice has no keen interest in withholding the communication between SFC and FSTB in this case.

52. I have considered the defences disclosed to the Court and the submissions made by Mr Kwok. The defences were only disclosed for the eyes of the court only. Mindful of the fairness of the trial and that the SFC or the prosecution should not be forewarned of the defences, I should refrain from explaining what the issues and defences disclosed are. It is, I believe, sufficient to say that the emails falling within Categories A and B may relate to the representations made by HKMEx’ personnel to the SFC. They may be possibly relevant to the issues in the case and may probably further assist the defence. In fairness to the defendant who is facing criminal allegation, these emails should be disclosed to the defence.

53. However, the emails falling within Category C concerning SFC’s officers’ individual views on how to handle media inquiries and public relations matters relating to HKMEx are in my view wholly irrelevant to the issues in the case. They do not weaken the prosecution case or strength that of the defendant.

54. Importantly, the nature and degree of the sensitivity of the materials sought to be withheld must be carefully evaluated. It is my view that none of the emails falling within Categories A and B touched on or disclosed highly sensitive political or financial policy of the SFC or the government. I do not think that the disclosure of any of these emails would be prejudicial to the proper functioning of the SFC or the government. It appears to me that any possible injury to the SFC would not be a significant one. Put simply, I do not think there is a real risk of serious prejudice to the public interest if full disclosure of these materials is ordered.

55. Given the stance taken by the prosecution, I also do not believe that the relationship between the SFC and the government will be harmed by the disclosure.

56. Gravity of the charges faced by the defendant, in my view, is one very important consideration in the balancing exercise. Conspiracy to defraud (Charge 1) is undoubtedly a very serious charge which carries a maximum penalty of 14 years’ imprisonment.

57. With all the relevant factors weighed on the scale, I am of the view that the balance comes down resoundingly in favour of disclosure of the emails falling within Categories A and B.

58. Emails under Category C are irrelevant to issues of the case and should therefore be withheld from disclosure. The decision in relation to Category C materials will be reviewed as the trial progresses.

LPP portion

59. In Hong Kong, LPP is constitutionally guaranteed by Article 35 of the Basic Law. LPP is absolute in the sense that once it is established, the court is not required to undertake a balancing act of the competing interests of the parties. See judgments of the Court of Final Appeal in HKSAR v Wong Chi Wai (2013) 16 HKCFAR 539 and Secretary for Justice v Florence Tsang Chiu Wing (2014) 17 HKCFAR 739.

60. The LPP claim in the instant case concerns about the confidential email communications involving the Chief Counsel of the SFC for the purposes of legal advice concerning HKMEx. Evidence has been provided by an affirmation of Mr Young dated 9 August 2019 in support of the LPP claim. Mr Young affirmed that the emails were confidential communications for the purpose of obtaining or discussing legal advice in respect of the HKMEx.

61. Having examined all the emails under LPP portion, I have no doubt that they are all covered by LPP (either as legal advice privilege and/or litigation privilege) and therefore protected from disclosure.

Disposition

62. In the result, I order that the emails falling within Categories A and B be disclosed in full and unredacted form to the prosecution and the defence. Emails under Category C are to be withheld from disclosure. The disclosed emails are subject to the condition that they will not be disclosed, retained or used except for the purpose of the criminal proceedings the defendant is now facing.

63. I should make it clear that the order of disclosure is not to be viewed as a criticism of the SFC, which is observing a duty in ensuring the proper discharge of its regulatory function.

64. Lastly, I thank all senior counsel and their legal teams for their helpful submissions and legal research.

	( C P Pang )
	District Judge

Mr John Reading SC leading Mr Jonathan Kwan and Ms Tania Tse, counsel on fiat, for HKSAR

Mr Kwok Tung Ming Eric SC leading Mr Kim Joseph McCoy, instructed by Leung & Lau, Solicitors LLP, assigned by the Director of Legal Aid, for the defendant

Mr Derek Chan SC leading Ms Tinny Chan, for the Securities and Futures Commission

DCCC 718/2017

[2019] HKDC 889

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 718 OF 2017

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	HKSAR
	v
	CHEUNG CHUN YUEN BARRY 張震遠 (D1)

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Before:

HH Judge Stanley Chan

Date:

24 June 2019

Present:	Mr John Reading SC, leading Mr Jonathan Kwan and Ms Tania Tse, counsel on fiat, for HKSAR
	Mr Eric Kwok Tung Ming SC, leading Mr Kim Joseph McCoy, instructed by Leung & Lau, Solicitors LLP, assigned by DLA, for the 1^st defendant

Offence:	(1) Conspiracy to defraud (串謀詐騙)
	(2) Fraud (欺詐罪)

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Ruling on

Application for Recusal

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1. First of all, before I deliver my ruling, I would like to mention one thing. It is for the purpose of court record.

2. On the last occasion when this application was heard on 19 June (and actually also today), I allowed the defendant not to sit inside the dock, even though defence counsel did not ask for leave. It is because I considered the nature of the application proceedings and the fact that the defendant has been granted bail until 2 July.

3. But it is important to bear in mind that everyone is equal before the law. Different consideration will apply when this case goes to the trial proper. It is the duty of counsel to make sure the usual practices are followed unless leave is granted.

Background and history

4. I think it is desirable for me to spell out the background of this case in detail so that the present application can be understood fairly and without any misunderstanding or misquote.

5. D1 Barry Cheung and D2 Jacky Choi were jointly charged with one count of conspiracy to defraud, and D1 was additionally charged with one count of fraud.

Chronology of events

6. The case was first brought to the District Court on 24 August 2017. At that time, D1 was privately represented. The case was adjourned five times, from 28 November 2017 to 5 July 2018. On 5 July 2018, D2’s case was adjourned to 6 November 2018 for plea and sentence while D1’s case was adjourned to 21 August 2018.

7. On 21 August 2018, D1 appeared in person and applied to have the case further adjourned to 18 September 2018. On 18 September 2018, Director of Legal Aid (DLA) assigned Mr Kim McCoy of Counsel to represent D1 and the case was further adjourned to 23 October 2018. On 23 October 2018, the case against D1 was set down for trial on 2 July 2019 with 30 days reserved.

8. I have to stress that the estimate of the trial and the scheduled dates were agreed by all parties concerned.

D2’s plea proceedings on 6 November 2018

9. Now, Counsel for D1, Mr Kwok SC, with Mr Kim McCoy as his junior, has extensively quoted what I said on 6 November 2018 when D2’s plea was taken. They had asked the transcript of the proceedings be prepared. As such, it is prudent for me to detail what happened on the day so that there would not be any misunderstanding of my position and/or misquote of what I said out of context.

10. I have to emphasise that it is the usual practice that defendant or co-defendant should be encouraged to cooperate with the law enforcement agencies (LEA) after his or her plea. The reasons are obvious.

11. On 6 November 2018, I handled the plea and sentence proceedings of D2. On that occasion, D2 was not legally aided and he instructed Mr Graham Harris SC as the leading counsel of his legal team. D1 did not appear on that occasion, but DLA assigned Mr Kim McCoy to appear on watching brief.

12. D2 has indicated his plea since May 2018 but did not indicate any signs that he was to cooperate with the police in any form. In fact, on the very day the plea was taken, both the Prosecution and the Defence took a different approach as to when D2 should be sentenced.

13. Mr Harris SC, counsel for D2, prepared a bundle titled “Timing of D2’s sentence” with various authorities to support their stance that “the court is invited to proceed with the sentencing of D2 without delaying it indefinitely until the end of D1’s trial”, so that D2 can make a fresh start in life.

14. On the other hand, the Prosecution took a contrary view and invited the court to adjourn D2’s sentence to the conclusion of D1’s trial. On that occasion, presumably I was asked to make a ruling on the timing of D2’s sentence, that is, whether I should sentence D2 on the day or adjourn the sentence of D2 until the conclusion of D1’s trial.

15. After plea was taken and the lengthy summary of facts read, I made enquiries relating to three areas.

16. I asked the prosecutor as to the status and the role of Ms Ann Cresce, who was the general counsel and head of Compliance of the Hong Kong Mercantile Exchange (HKMEx) at the material time. Ms Cresce was also implicated by D2 in the summary of facts that he admitted to, and might well be regarded as one of the conspirators. I asked why the licence was granted to HKMEx in June 2008. I also queried why the regulatory authority can be deceived for such a long period of time.

17. All these questions obviously have a bearing on the sentence that D2 is about to face as the first charge of conspiracy to defraud might involve more than just two persons. Also, it is obvious that all these enquiries can or might lead to further investigations, implicating other persons, other than D1, I repeat, other than D1.

18. It was shortly after Mr Harris SC started the mitigation that I made an enquiry about the possibility of having D2 cooperating with the authority. I asked,

“Would he ever consider to implicate or cooperate with the police in respect of D1’s case?” (page 8 at K of the transcript of the proceedings on 6 November 2018)

I have to stress I deliberately used the words “in respect of D1’s case”. I did not ask D2 to cooperate with the police to implicate D1 whatsoever.

19. On that occasion, Defence Counsel replied,

“His position until now has been that he did not wish to implicate D1. However, there were discussions this morning, which I will not go into, which suggest that he may consider or reconsider that position.” (page 8 at M of the transcript)

That means obviously the possibility of D2 cooperating with the police was explored by his Defence team even before I mentioned about such a possibility.

20. I granted leave for the case be stood down for 30 minutes. Even at this stage, D2’s counsel reiterated that “his present position is he doesn’t think he will.” (page 9 at F of the transcript) even though D2 had indicated his plea long time ago, back in May 2018.

21. It is obvious and understandable that D2 was and is under tremendous pressure to figure out the way forward - to cooperate or not to cooperate. I am of the view that any defendant who pleads guilty to the charge or charges he faces; he should be encouraged to cooperate with the authorities. The reasons are obvious. It is not just to do justice to the defendant himself, but also to bring other culprits, be they co-defendant in the same charge or other masterminds not even named in the charge, into justice.

22. Courts in Hong Kong encourage this kind of cooperation and, quite often, generous discount to sentence, some even up to 50% discount, is granted. That is why I said,

“Everybody knows that there is a self-interest to serve for this purpose.” (page 9 at N of the transcript)

23. After a short adjournment, Mr Harris SC, replied,

“...there’s been a significant development in the last half an hour. D2 has now agreed that he is prepared to cooperate, he is prepared to give statements, and if necessary, he is prepared to testify in the case of his co-accused.” (page 10 at J of the transcript)

At this point in time, I said that is “a cheerful development” (at page 10 at L of the transcript).

24. Pause here. I need to say something more about this phrase - “cheerful development”.

25. When D2 said he would cooperate with the police, this Court, of course, has no idea about the content of the non-prejudicial statement (NPS), if any. I also have no idea whether D2’s NPS will be accepted by the Prosecution. I have no idea if D2 would even be called to give evidence in the trial. All these variables are accepted by Mr Kwok SC, counsel for D1.

26. By “cheerful development”, it carries a few features. I list seven features hereunder so that a fair-minded and also informed observer knows what is going on. Otherwise, it is easy for an ordinary, but not informed, observer to misunderstand the position or even get misled.

27. The seven features are:

(1) By cooperating with the authority, D2 demonstrates another gesture of remorsefulness, on top of his guilty plea;
(2) it means there will be no argument on the timing of D2’s sentence, hence no need for me to make a ruling on the day;
(3) it can lead to more evidence, hence logically the truth of the case;
(4) it allows the court to exercise discretion to give a generous discount on D2’s sentence, even though a promise to cooperate cannot be taken as a substantial mitigating factor until that person really testifies in court;
(5) it might well shorten the length of the trial;
(6) it can generate a sense of social justice as more culprits might be implicated and brought to justice;

(7) it would not be fair for D2 to be a single ‘unsung hero’ in this incident.

28. It was through the dialogue between the court and Mr Harris SC that D2 reconsidered his position. I think D2 needs to be encouraged.

29. D2’s case was further adjourned to 1 March 2019. By now, it goes without saying that both parties agreed to adjourn D2’s sentence to the end of D1’s trial.

30. Incidentally, the court was also concerned with the security of D2 and at one stage I did consider the possibility of revoking D2’s bail. I mentioned that,

“...it brings me to another question: security. I would have to ensure D2 would not be interfered with by anybody.” (page 11 at H of the transcript)
(Note: I have to stress that these words are the exact words that I said as shown in the transcript. I now repeat here in verbatim.)

31. I further said,

“Security, in my mind, is also to make sure his current wishes or intention would not be tampered with.” (page 12 at E of the transcript)

32. It is not uncommon that accomplices who had been granted immunity from Prosecution, co-defendant who agreed to give evidence in court, or even victims of certain offences, changed their mind to further cooperate with the authority. Even if they appear in court, they may become hostile or forgetful; some even disappeared from the territory for whatever reasons.

33. The fact that D1 used to be an influential person, in my view, is a kind of public knowledge in Hong Kong. The fact that I encouraged D2 to cooperate with the LEA or the police is another matter, which concerns about doing justice.

34. In my view, it is irresponsible and misleading to suggest that there is some sort of direct link between these two facts. One obvious example is this. A person called A, who is a good friend or even a follower of the main culprit B, got aggrieved by the fact that another person C, who was to implicate B or has provided damaging evidence against B in any kind of litigation. It is possible that without the knowledge of B, A approached C in order to pervert the course of public justice. That is what I meant by saying “to ensure D2 would not be interfered with by anybody” (page 11 at H of the transcript).

Pre-trial Review relating to D1 on 30 April 2019

35. At the PTR on 30 April 2019, Mr Kwok SC, had indicated twice that the Defence might ask for an adjournment of the trial as the defence team needs time to prepare the case. I had made it abundantly clear that unless there are special reasons or justifications, the trial against D1 will proceed as scheduled without further adjournment.

36. The PTR questionnaire filed by D1’s legal team made no mention about any anticipated points of law likely to arise at trial. The question is - “Are there any preliminary points to be argued before trial?” The answer is - “None at this stage.” When asked in the questionnaire - “Are there any other significant matters which might affect the proper and efficient trial of the case?”, the answers so provided by D1’s legal team are “the availability of defence witnesses and the time necessary for the Defence to peruse all the unused materials.”

37. It is to be noted that D2’s plea was taken place in November 2018 and the PTR was held in April 2019.

38. Before the conclusion of the PTR, when I confirmed that I would be the trial judge of the case, Defence counsel made the remark, saying that originally the Defence team thought that this case had been assigned to an expatriate Judge who was to hear this case. At no time during the PTR was there any indication of bias or any kind of potential legal applications.

The Application for Recusal

39. Defence counsel Mr Kwok SC, filed a five-page long skeleton submission on 10 June 2019, together with three cases, two of which are civil cases and one 1994 Australian case.

40. I have to stress that there is no allegation of actual bias.

41. Defence counsel relied on the Australian case Webb v R [1994] 181 CLR 41 which related to the impartiality of a juror in a murder trial. In that case, it was said,

“...the area covered by the doctrine of disqualification by reason of the appearance of bias encompasses at least four distinct, though sometimes overlapping, main categories”.

42. The four areas or categories are:-

Disqualification –
(1) by interest;
(2) by conduct including published statements;
(3) by association; and
(4) by extraneous information.

43. It was submitted that in the present application, category 2 and 4 applied.

44. Defence counsel also referred to the Hong Kong case, Superb Quo Limited (the proper name of this authority should read Superb Quo Limited v Lee Yuen Cheung Company Limited & Ors) HCMP 29/2011, a case concerning the impartiality of a member of the Lands Tribunal. Mrs Justice Le Pichon JA (as she then was) adopted a statement in an English case, saying that,

“the test for apparent bias… is that, having ascertained all the circumstances bearing on the suggestion that the judge was (or would be) biased, the court must ask ‘whether those circumstances would lead to a fair-minded and informed observer to conclude that there was a real possibility… that the tribunal was biased.’”

45. When counsel in that case mentioned about certain superficial relationship between the member of the Tribunal and a party of the litigation, the Judge said,

“Rather, the focus should be on whether, viewed objectively, the nature and circumstances of their acquaintance could or would lead to some form of subconscious bias” (page 6 at R of the judgment).

46. Mr Kwok SC, agrees that the concept of ‘subconscious bias’ is a relatively new concept vis-à-vis actual and/or apparent bias. At paragraph 13 of the Defence submission, it says, “The defendant is concerned that subconscious bias may operate” in the Judge’s mind. As the trial has not commenced, Defence counsel adopted what was said in Superb Quo Limited that “prudence naturally leans on the side of being safe rather than sorry”.

Original response from the Prosecution

47. Mr Reading SC, counsel for the Prosecution, in his letter dated 17 June 2019, stated that,

“In relation to the Defence application, I have been instructed to take a neutral position.”

Together with this letter, the prosecution submitted four cases for my consideration: Hon Ming Kong & Anor v Secretary of Justice HCAL 47/2008, HKSAR v Md Emran Hossain (2016) 19 HKCFAR 679, HKSAR v Cheung Man Choi CACC 43/2016, and Lai Yiu Mun v Tsang Kai Choy [2019] 2 HKLRD 359. There is no reply or any kind of written submission from the Prosecution in response to the Defence’s skeleton submission.

48. At the PTR, it was confirmed that the Prosecution is ready to proceed with the trial.

The Relevant Test

49. In the present case, my concern is the issue of apparent bias, even though Defence counsel said they would stick to the concept of ‘subconscious bias’ which, as they suggested, will trigger apparent bias in the end.

50. It is accepted by parties concerned that the proper test for apparent bias is that the court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a reasonable, fair-minded and well-informed observer to conclude that there is a real possibility that the judge would be biased in dealing with the matter (see Ng Yat Chi v Max Share Limited & Anor (2005) 8 HKCFAR 1 at 45-J).

51. In Deacons v White & Case Limited Liability Partnership & Ors (2003) 6 HKCFAR 322 at 330-F, the Court of Final Appeal stated that,

“the view of the fair-minded and informed observer as to whether a reasonable apprehension of bias arises may differ from the reviewing court’s own view, and that it is through the prism of such an observation’s perception that the court should consider whether the case is one of apparent bias.”

52. In Davidson v Scottish Ministers [2004] UKHL 34, the House of Lords in the UK at paragraph 7 held that,

“In maintaining the confidence of the parties and the public in the integrity of the judicial process it is necessary that judicial tribunals should be independent and impartial and also that they should appear to be so. The judge must be free of any influence which could prevent the bringing of an objective judgment to bear or which could distort the Judge’s judgment, and must appear to be so… The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”

Discussion

53. First of all, I think the proper test of apparent bias has been promulgated quite clearly in the above-said authorities that I mentioned. The concept of ‘subconscious bias’ in my view does not come to play in these cases.

54. In my view, I do have reservation about the applicability of ‘subconscious bias’ in criminal trials. It was said subconscious bias is something that “operates subtly and imperceptibly” (see paragraph 14 of the judgment in the case of Superb Quo Limited). If something is being operated subtly, I have reservation whether a fair-minded and informed observer can notice or detect such bias at all.

55. For example, in a trial involving say, ten defendants, five defendants plead guilty to the charges and the remaining five continue their fight. It would be easy to say the trial judge who took the plea and then convicted the five defendants who pleaded guilty, could have some sort of ‘subconscious bias’ when the trial of the remaining five continues.

56. In my judgment, when counsel suggests the possibility of apparent bias, it is prudent for the court to use the traditional test, namely the fair-minded and informed observer test. I have to stress that when we describe the observer ‘informed’, it must mean the observer knows what is going on and is not being misled.

57. Hence, it is important that what happened on 6 November 2018 and 1 March 2019 when D2 took the plea and eventually offered to assist the police be looked at in the context of the development of the case.

58. As I said, it is reasonable and understandable to see that D2 was and is subject to tremendous pressure when he was arrested in May 2013. When being cautioned, apart from confirming his personal background, he remained silent.

59. Even when D2 had indicated his plea on 5 July 2018, D2 did not show his willingness to cooperate with the police, not even on the very day (6 November 2018) when he was about to be sentenced. He even asked the court to sentence him right away without waiting until the end of D1’s trial.

60. As said by Hartmann J (as he then was) in Hon Ming Kong v Secretary for Justice HCAL 47/2008, of which I was the trial judge, the court said,

“It must itself consider the relevant circumstances and then determine whether those circumstances would, or would not, lead a reasonable, fair-minded and informed observer to conclude that there is a real possibility of bias. A perception of bias is not a discretionary matter, one to be weighed in the scale of convenience. In this regard, I can do no better than cite the headnote of AWG Group Limited v Morrison [2006] 1 All ER 967: ‘There was either a real possibility of bias, in which case the judge was disqualified by the principle of judicial impartiality, or there was not, in which case there was no valid objection to trial by him. Inconvenience, costs and delay did not count in a case where the principle of judicial impartiality was properly invoked…’” (paragraph 28 and 29 of the judgment).

61. In that case, the Judge further said (at paragraph 39 of the judgment),

“As the trial judge recognised, there is ample authority to the effect that courts must always view applications for recusal with care and caution. The judge must therefore be satisfied not that there is simply some possibility of an appearance of bias but that there is a real possibility of it. That possibility, it has been recognised, must be firmly established.”

62. I have to stress that the hurdle has to be firmly established. Three messages so elicited in the above-said case are loud and clear:

(1) some possibility of an apparent bias is not enough;
(2) there must be a real possibility of bias; and
(3) that possibility must be firmly established.

63. I am a professional judge, acting both as a tribunal of fact and law in District Court. Naturally and professionally I am duty bound to assess evidence and credibility of all witnesses, be they Prosecution or Defence witnesses, strictly in accordance with the law.

64. Mr Justice Stock JA (as he then was) in the case of HKSAR v Ewan Launder CACC 147/2000, said rightly that,

“the courts must always view applications of this kind with care and caution. As has on a number of occasions been pointed out, there is a duty upon judges to sit… and should not too readily accede to suggestions of appearance of bias.” (page 500 at H of the judgment).

65. The High Court in Australia has said in Re JRL ex parte CJL [1986] 161 CLR 342 at 352,

“It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. … In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of pre-judgment and this must be ‘firmly established’. … Although it is important that justices must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.”

66. Also, as stated by Mr Justice Hartmann J (as he then was) in Secretary for Justice v Li Chau Wing, HCAL 143/2004,

“The test is therefore an objective one. It is important, however, to note that the hypothetical observer is not only fair-minded but is also informed, that is acquainted with the relevant facts” (page 6 of the judgment).

“A fair-minded and informed observer will well know that the judge will be obliged, whatever his philosophical views on the matter, to apply the law” (page 7 of the judgment).

67. In my judgment, through the prism of a reasonable, fair-minded and well-informed observer who is acquainted with the facts of this case, I find that the reasonable apprehension of bias or even subconscious bias, if any, cannot be firmly established.

68. In my judgment, the grounds of the present recusal application are flimsy. But this is not the end of the story.

Change of stance of the Prosecution

69. The Prosecution maintained their neutral position even up to the stage when this Court invited Mr Reading SC, to make a reply to the submission made by the Defence counsel.

70. However, when specifically asked to state their position unequivocally, the Prosecution said they now support the recusal application made by the Defence.

71. That effectively means the recusal application now becomes a joint application which inevitably adds ‘weight’ to the Defence’s position.

72. It is to be noted that both counsel for the Prosecution and Defence are funded by public coffers. D1’s legal team is now led by Mr Kwok SC, an experienced criminal silk.

73. The Court has a duty to ensure the trial be proceeded with without further delay. I am also of the view that the trial should not be side-tracked to further litigations like what had happened in the case of Hon Ming Kwong, HCAL 47/2008, when the party sought leave to apply for judicial review seeking an order of certiorari to quash my ruling and an order of prohibition.

74. I will not speculate whether this application is an attempt to secure an adjournment of the trial. Also, I will not speculate whether this application is an attempt to recuse a judge for some other reasons.

75. The estimate of the length of the trial is 30 days. As such, if this case is to be refixed, the new trial dates will be in 2020.

76. Be that as it may, both counsel now make a joint application for recusal before me. In order to avoid the chance of joint application to take the case further, and as said by Mr Justice Rogers VP (as he then was) in the case of Superb Quo Limited, to be “err on the side of caution”, I reluctantly have to grant leave to the application to recuse myself from hearing D1’s trial so that the main trial can be proceeded with without further delay and/or without incurring further legal costs.

Conclusion

77. I grant leave to the joint application by both parties, and order that the original trial dates be vacated. I have checked with my listing staff and was informed that the earliest dates for trial are from 7 January 2020 to 19 February 2020, with 30 days reserved. I will allow time for counsel to check their diary, but as I said, this case should be proceeded with without further delay. Unless counsel from both sides have a special reason for not adhering to these trial dates, I would order that the trial be commenced on 7 January 2020 at 9:30 am.

78. As such, I would extend D1’s bail on the same terms.

79. D2 will be sentenced after the conclusion of D1’s trial. I would let the Prosecution to liaise with counsel for D2 as to the feasibility and desirability of D2 to be sentenced by the trial judge who is to handle D1’s trial.

	(Stanley Chan)
	District Judge

HKSAR v. CHEUNG CHUN YUEN, BARRY

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