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HCMP 241/2015
IN THE HIGH COURT OF THE

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HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO 241 OF 2015
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IN THE MATTER of Inno-Tech

Holdings Limited

and

IN THE MATTER of Sections 214

of the Securities and Futures
Ordinance, Cap 571
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BETWEEN
SECURITIES AND FUTURES COMMISSION

Petitioner

and
WONG YUEN YEE

1st Respondent

WONG YAO WING, ROBERT

2nd Respondent

WONG KWOK SING

3rd Respondent

LAM SHIU SAN

4th Respondent

INNO-TECH HOLDINGS LIMITED

5th Respondent

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Before: Hon G Lam J in Chambers
Date of Hearing: 23 June 2016

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Date of Decision: 30 December 2016

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DECISION
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I. Introduction

1.

This application for discovery raises the question of the

scope of the obligation to disclose documents on the part of the Securities

and Futures Commission as petitioner in proceedings brought under s 214
of the Securities and Futures Ordinance (Cap 571) (Ordinance) for

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disqualification orders. In broad terms, the documents in issue are the

requests issued to third parties by the Commission under s 179 or s 183 of
the Ordinance as part of its investigation and the responses and materials

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provided by those third parties to the Commission, other than those

already disclosed to the respondents.
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2.

The petition was presented by the Commission to seek relief

under s 214 of the Ordinance in relation to the affairs of a company

whose shares are listed on the Growth Enterprise Market of The Stock

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Exchange of Hong Kong Limited, namely, Inno-Tech Holdings Limited

(the Company), and of its subsidiaries (together the Group).

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3.

The 1st to 4th respondents to the petition are 4 individuals

who were all directors of the Company, which is the 5 th respondent, from
before its listing until either 2010 or 2011. The 1st respondent was the

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founder of the Company.

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4.

The Company had principally been engaged in the

development of home intelligent automated systems, but in around 2006

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and 2007 it decided to expand into the business of providing hotel

management services and of owning and managing hotel properties in

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Mainland China. It was thought that the Companys technological assets

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and expertise had synergy with the new line of business.

5.

The petition complains about the conduct of the 1

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to

4th respondents in connection with the Groups acquisition of interests in

3 hotels and in a gold mine during the years 2007 to 2010. It is alleged

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that each of them was negligent and acted in breach of his or her duty as
director to exercise reasonable care, skill and diligence in relation to the
Company and in supervising the affairs of its subsidiaries, and that their

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conduct as such involved misfeasance or other misconduct or was

unfairly prejudicial to the members within the meaning of s 214.
6.

By the petition the Commission seeks orders under s 214(2)

(d) for disqualification of the 1st to 4th respondents from acting as

directors or in the management of companies in Hong Kong. The petition

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also includes a claim for an order under s 214(2)(b) for an action to be

brought in the name of the Company against the 1 st to 4th respondents for
damages for loss suffered, or an order under s 214(2)(e) that each of them

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pay compensation or damages to the Company for loss caused by their

breach of duty.

I was informed by counsel, however, that these

two alternative claims would be removed since separate proceedings had

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been commenced by the Company itself against the 1 st to 4th respondents.

The petition herein will therefore presently consist solely of claims for
disqualification orders against the 1st to 4th respondents. I shall refer to

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the 1st to 4th respondents collectively below simply as the respondents.

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II. The Commissions allegations

7.

To put the arguments in context it is necessary to summarise

in broad terms the parties respective cases on the petition.

The acquisition of 3 hotels

8. On 5 November 2007, a subsidiary of the Company, called Inno Hotel,

entered into two agreements to acquire from a third party two companies
(called Sunny Team and China Earn), which held Xingdu Hotel and
Changlin

Hotel,

for

consideration

of

RMB13.5 million

and

RMB14 million respectively. On 4 February 2008, Inno Hotel entered

into a third agreement with another third party to acquire a company
(called Homesmart), which held Kaiping Hotel, for a consideration of

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RMB20 million. All 3 hotels were located in cities in the Mainland.

9. The acquisition of Changlin Hotel was not completed and was
cancelled by a termination agreement dated 29 May 2009. The deposit of
RMB3.3 million paid by Inno Hotel was forfeited. The acquisitions of
Xingdu Hotel and Kaiping Hotel were completed, but within less than
two years, in June 2009, Inno Hotel agreed to dispose of them for

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RMB2 million each to third parties.

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10.The Commission alleges that the respondents, who were also directors
of Inno Hotel at the time, breached their duties to the Company in that:
(1)

They failed to carry out adequate investigation into or due

diligence in respect of the 3 hotels before the acquisitions.

(2)

The so-called Hotel Management Team allegedly set up

within the Company, which the respondents suggested was

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responsible for selecting and assessing the 3 hotels for

acquisition, did not in fact exist. The respondents failed to

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set up any system or take steps to ensure that proper due

(3)

diligence was carried out.

If the Hotel Management Team existed and was delegated

the decision to acquire the hotels, then the respondents failed

adequately or properly to supervise them or the staff team in
the Mainland.
(4)

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They failed adequately to consider the value of the buildings

which formed the hotels and the land on which the hotels
were built. They failed to consider at all any liabilities and
debts that might be associated with the hotels or the
companies holding them, and the profitability and prospects

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of business at the hotels.

(5)

They failed to negotiate the consideration for acquiring any

of the 3 companies holding the hotels.

11.As a result, it is said that the acquisitions were made in a wrongful and
negligent manner and that the respondents culpably neglected their

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duties, which was made all the more reprehensible because they knew the
acquisitions were subject to due diligence.

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The acquisition of interests in the gold mine

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12.

On 6 May 2009, another wholly-owned subsidiary of the

Company, called Inno Gold, entered into an agreement with

two individuals (Christopher Wong and Ou Yang Ying) to acquire a

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company, called Dragon Emperor, which held a 13.6% interest in another

company called Gaofeng Holding Co. Limited (HK Gaofeng) which

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indirectly held an 81.5% interest in a gold mine in Jiangxi Province, at a

consideration of HK$21,636,364. On the same date, Inno Gold acquired

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from Christopher Wong an additional 1.8% shareholding in HK Gaofeng

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for the consideration of HK$2,863,636.

13.

On 9 June 2009, Inno Gold, via Dragon Emperor, agreed to

acquire from Christopher Wong another 47.2% shareholding in HK

Gaofeng at the price of HK$75 million. At a meeting on that date, the

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board took the view the consideration was determined after arms length
negotiation with reference to a valuation report dated 5 May 2009
prepared by a valuers firm called Greater China Appraisal. It was also

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noted that completion of the agreement was subject to due diligence

though the condition could be waived by the Group. The total interest

acquired by the Group in HK Gaofeng was therefore 62.6% (13.6% +

1.8% + 47.2%) and the total consideration paid was HK$99.5 million.
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14.

On 11 September 2009 the Company issued a circular about

the acquisition of the 47.2% interest in HK Gaofeng.

The circular

annexed and relied on another valuation report dated 11 September 2009

also prepared by Greater China Appraisal.
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Like the digression to hotel management business, the

venture into gold mining also proved to be a failure.

After about

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16 months, in October 2010, the Company entered into an agreement,

supplemented by various agreements in the following months, to dispose
of Inno Gold to a third party at a consideration of HK$15 million.

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16.

The Commission alleges that the respondents, who were also

directors of Inno Gold at the material times (the 3 rd and 4th respondents

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having ceased to be directors of Inno Gold on 23 March 2010 and 1 June

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2010 respectively), breached their duties to the Company in that:

(1)

Despite their knowledge that the acquisition was subject to

due diligence, they failed to carry out adequate investigation
into or due diligence in respect of the gold mine before the
acquisition. This was all the more reprehensible given they

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knew that the acquisition was subject to due diligence.

(2)

They failed to assess or obtain any independent assessment

from qualified persons of whether an investment in the gold

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mine was a commercially suitable or appropriate one for the

Company. They failed to obtain advice from persons with

due qualifications.
(3)

They failed to negotiate the consideration for the acquisition,

even though in a number of minutes and announcements it
was stated that the consideration for the acquisitions was

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determined after arms length negotiation.

(4)

They failed properly, adequately or competently to assess the

purchase price of the interest in the gold mine.

They

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uncritically relied on two valuation reports prepared by

Greater China Appraisal (mentioned in 13 and 14 above),
and failed to give any independent consideration as to
whether the consideration was fair and in the interests of
shareholders as a whole.
(5)

They failed to appreciate or take into account the question of

capital expenditure, which was mentioned in an email from
Andrew Wong of Greater China Appraisal and in the

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valuation report of 11 September 2009, and which was

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needed in order to achieve the estimated production capacity

and the estimated EBITDA.
(6)

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Without any proper basis, they adopted the production

capacity figure of 1,200 ton/day mentioned in one feasibility
study report issued by Ha Er Bin Gold Design Institute dated

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February 2009 rather than the figure of 150 ton/day

mentioned in another feasibility study prepared by the same
Institute.

They failed to obtain an explanation of the

different figures or any verification of those figures.

(7)

They failed adequately to consider whom to appoint as

directors of Inno Gold or to put in charge of gold mining
matters.

(8)

They failed properly to supervise the running of the gold

mine.

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They retained Christopher Wong as the Chief

Operating Officer of the gold mine without considering any

other candidate. They left him to run it without supervising

him properly or at all. They relied upon his advice to carry

out a drilling programme instead of pursuing an expansion
plan and failed to conduct any further evaluation or obtain

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independent advice.
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The respondents defence

17.

The respondents filed an affirmation made by the

2nd respondent in opposition to the petition on 30 July 2015. They stated

that prior to the acquisition of the 3 hotels in question, the Group had
secured a number of joint venture agreements with various parties
including the China Railway Group.

The Company had conducted

extensive due diligence with professionals including business consultants

Cushman & Wakefield Capital Asia Ltd and obtained proper valuations.

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18.

As summarised in broad terms in the affirmation, in relation

to the Companys acquisition and disposal of the 3 hotels, the principal

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points made in defence are that:

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(1) The Directors had reasonably and honestly entrusted

third parties to which specific independent and professional
advice was sought and had reasonably relied on the advice;

(2)
Each and every of the acquisitions and disposals [was]
executed in good faith and in the interests of the Company;

(3)
The acquisitions were executed after extensive due
diligence work carried out by the Directors, including but not
limiting to conducting site visits and legal due diligence;

(4)
The Directors reasonably relied on the independent and
objective valuation reports compiled by reputable international
surveying and consulting firms from which the consideration of
the acquisitions were derived; and

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(5)
The managerial decisions to acquire and dispose of the
Hotels had been approved by all Directors upon their full and
prior understanding of the potential risks and benefits of the
transactions.
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19.

In relation to the Companys acquisition and disposal of HK

Gaofeng, the respondents explained that after the global financial crisis in
2008, resource companies and stocks gained popularity. Having regard to
the increasing demand for gold in Mainland China, the Group planned to

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expand into the gold mining industry in 2008. The respondents decided
to make the investment after careful consideration and analysis and
extensive due diligence.

They engaged Ascent Partners Transaction

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Service Ltd to undertake feasibility studies and Greater China Appraisal

to conduct the necessary valuation. In summary, the affirmation stated:
(1) The acquisition and disposal were executed in good
faith and in the interests of the Company;
(2)
The acquisition was executed after extensive due
diligence work carried out by the Directors upon the Board

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instructions, including but not limiting to conducting site visits

and seeking independent PRC legal opinions on the issues of
due diligence;
(3)
The Directors reasonably and honestly entrusted
Christopher Wong by appointing him as the Chief Operating
Officer of the Gold Mine to assist the Company in managing
the Gold Mine and had continuously supervised his manner in
running the Gold Mine;
(4)
The Directors reasonably appointed Mr Sean Webster
and Dr Yang Kaihui as the directors of Inno Gold to assist the
Company in managing the Gold Mine;
(5)
The Directors reasonably relied on the independent and
objective valuation reports compiled by reputable international
surveying and consulting firms from which the consideration of
the acquisition [was] derived; and
(6)
The managerial decisions to acquire and dispose of HK
Gaofeng had been approved by all Directors upon their full and
prior understanding of the potential risks and benefits of the
transactions.

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III. The position on disclosure of documents

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20.

On 30 January 2015, at the same time as the filing of the

petition, the Commission filed the 1st affidavit of Margaret Tse in support,
exhibiting various documents referred to in the petition. These exhibits,

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which comprise 12 lever arch files of 87 documents running to

5,103 pages, were provided to the respondents on 12 March 2015.

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21.

On 3 March 2015 the respondents by letter asked the

Commission for copies of all records of interviews conducted and all

documents supplied to the Commission under s 183 of the Ordinance

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during the investigation of the matter. On 20 April 2015 they also sought
specifically the records of interview and documents in connection with
Ascent Partners Transaction Service Ltd, Greater China Appraisal and

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Roma Oil and Mining Associates Limited. The requests relating to these
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3 specific firms were acceded to by the Commission (without admitting

relevance) who stated it wished to adopt a constructive rather than

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argumentative approach. The documents provided under cover of letters

of 25 June and 2 July 2015 included 4 lever arch files of documents and
5 compact discs.
22.

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On 9 July 2015, the respondents asked the Commission to

provide, without conceding relevance, a list of the materials it had

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obtained pursuant to the authority and direction issued under ss 179 and
182 of the Ordinance. This was refused by the Commission.

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23.

On 30 July 2015 the respondents filed an affirmation made

by the 2nd respondent containing their evidence in opposition to the

petition. On 17 September 2015, the Commission filed the 2nd affidavit

of Tse in reply on the petition. This affidavit referred to documents not
disclosed to the respondents before, namely, exhibit TKY-10, being
selected emails between the Company and Greater China Appraisal.
24.

On 20 October 2015, the respondents issued the present

summons for discovery, supported by an affirmation of the 1 st respondent,

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seeking discovery of all authorisations issued under s 179, all directions

issued under s 182, all search warrants obtained and two further
categories of documents described below.

The Commission has

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confirmed that there was only one authorisation issued under s 179 and
one direction under s 182 (described below) and no search warrant
obtained. The two categories of documents that remain in issue between

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the parties are set out in paragraphs (c) and (d) of the schedule to the
summons, which are broadly:

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(1)

all directions issued under the s 179 authority together with

the records and documents and explanations or statements

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produced pursuant thereto;

(2)

all notices issued pursuant to s 183 under the s 182 direction

together with the records and documents produced pursuant

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thereto, and explanations or particulars given in respect

thereof, and answers in writing and records of interviews
conducted including documents produced during such
interviews.

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25.

On 11 December 2015, the Commission filed Ms Tses

3rd affidavit, setting out its grounds of opposition to the application and
asserting that all documents and materials relevant to the pleaded issues

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in the petition or to the points raised in the respondents affirmation had

already been disclosed.
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26.

However, less than a week before the hearing, on 17 June

2016, the Commission submitted Ms Tses 4th affidavit which explained

that, in the course of preparing for the hearing of the summons, the

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Commissions solicitors had conducted a further review of the documents

obtained by the Commission during the investigation and had identified a
number of documents not previously supplied to the respondents which

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the Commission has been advised by its solicitors to disclose. Copies of

these materials had not yet been provided to the respondents as at the
time of the hearing.

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27.

The net position is that, of the materials gathered by the

Commission during its investigation, about 50 lever arch files1 of

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materials have not been disclosed by the Commission to the respondents.

It is these materials which may be affected by the outcome of this
application.

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IV. The summons for discovery and the parties contentions

28.

These proceedings for disqualification orders are brought in

the Court of First Instance by petition. The provision in Order 24 rule 2

for automatic discovery does not apply. The summons is issued under
Order 24 rules 7 and 11,2 which empower the court to order any party to
a cause or matter to make an affidavit of discovery and to order the

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production of the documents in question. There is no dispute that a cause

or matter includes any cause or matter before the court whether begun by
writ, originating summons, or petition as in the present case. As an

alternative basis the respondents rely on Order 29 rules 1 and 2. Rule 1

concerns interlocutory injunction and rule 2 orders for preservation and
inspection of property which is the subject-matter of the cause of matter.

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Neither rule in Order 29 seems to me to be apposite here.

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29.

On behalf of the respondents Mr Bernard Mak and

Mr Issac Chan submitted that in the present case and, more generally, in
all disqualification proceedings brought under s 214 of the Ordinance, the
Commissions discovery obligations extend to all relevant unused

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materials obtained by it during the investigation, and that the documents

to be reduced to some extent after discovery is given as indicated in Ms Tses
4th affidavit.
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The summons refers to rules 7 and 13, but it seems to me the relevant rules are rules 7
and 11, rule 13 being the rule that sets out the conditions for an order for production under
rule 11.

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sought here are such relevant materials and should be disclosed, in the
same way as they would be disclosed by the prosecution if these were

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criminal proceedings. For this submission they relied on the requirement

of equality of arms, the law and practice in relation to disciplinary
proceedings and disqualification proceedings, s 6 of the Ordinance, as

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well as the Commissions duty to act fairly.

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30.

For their part, Mr Victor Joffe and Ms Queenie Lau, who

appeared for the Commission, submitted that disqualification proceedings

are civil proceedings, the purpose being primarily protective rather than
punitive. The test for discovery, if required, is therefore not to be found

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in the practice applicable in criminal cases, but is based on relevance in

the Peruvian Guano sense3.

The Commission, they submitted, had

disclosed all documents relevant under that test.

There is no wider

principle applicable here that the Commission must disclose all unused
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materials.

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31.

I shall discuss the Commissions obligation to give discovery

under the following headings: (1) the nature of disqualification

proceedings; (2) the investigative powers of the Commission; (3) the right

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to fair trial and the principle of equality of arms in non-criminal cases;

(4) jurisprudence of other jurisdictions on disclosure in disciplinary
proceedings; (5) the duty of disclosure in criminal cases; and (6) the

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applicable approach.
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Compagnie Financire et Commerciale du Pacifique v The Peruvian Guano Co

(1882) 11 QBD 55, 6263
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(1) Nature of disqualification proceedings

31.

As Counsel for the respondents acknowledge, these

proceedings seeking disqualification orders under s 214 of the Ordinance

do not give rise to a criminal charge within the meaning of Art 11 of the
Hong Kong Bill of Rights: Koon Wing Yee v Insider Dealing Tribunal
(2008) 11 HKCFAR 170 at 7273; Securities and Futures Commission

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v Wang Jian Hua (HCMP 745/2013; 29 October 2015), 48.

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32.

Disqualification proceedings such as this petition, while

classified as civil rather than criminal for certain purposes including the
standard of proof, are nevertheless different from ordinary civil litigation
in that they are brought by organs of the state for the benefit of the public

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against private individuals for orders restraining them from involvement

in the management of companies.
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33.

The special character of such proceedings has been

recognised in the authorities to give rise to a duty to act fairly on the part
of the prosecuting authority.

In Secretary of State for Trade and

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Industry v Hickling [1996] BCC 678, where an application was made by

the (UK) Secretary of State for Trade and Industry for a disqualification
order under s 6 of the Company Directors Disqualification Act 1986 4,

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Judge Weeks QC said:

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It is accepted that these are not ordinary adversarial

proceedings but have an element of public interest and may
entail penal consequences. It follows that there is a duty on the
applicant to present the case against each respondent fairly.
In my judgment [the applicants] affidavit should not omit
significant available evidence in favour of any respondent. It
equivalent in Hong Kong to s 168H of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance (Cap 32).

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should attempt to deal with any explanation already proffered

by any of the respondents. It should endeavour to apportion
responsibility as between the respondents and it should avoid
sweeping statements for which there is no evidence.

34.

The reference to penal consequences in the above passage

must in Hong Kong be read subject to Koon Wing Yee, where the Court of
Final Appeal said disqualification orders should be characterised as

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regulatory and protective rather than punitive. Subject to this, I accept, as

did Mr Joffe on behalf of the Commission, that it has a duty to act fairly.
35.

It is also to be borne in mind that, despite not being a penalty

as such, a disqualification order involves a substantial interference with

the freedom of the individual so that in the conduct of such proceedings,

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the rights of the individual must be fully protected: In re Lo-Line

Electric Motors Ltd [1988] Ch 477, 486, per Browne-Wilkinson VC; see
also Re Rex Williams Leisure plc [1994] Ch 1, 14H, per Nicholls VC;

accepted by the Hong Kong Court of Appeal in Official Receiver v Chan

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Hing To [2008] 5 HKLRD 279 at 18.

36.

In

Re

Barings

plc

[1998]

BCC 888,

904,

Sir Richard Scott VC also alluded to the fact that disqualification

proceedings do not involve litigation about private rights and have, in

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many respects, much more in common with criminal proceedings than

with civil litigation about private rights.

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37.

In Re Finelist Ltd [2004] BCC 877 at 11, after emphasising

that a disqualification order can have grave consequences and is a

serious interference with the freedom of the individual, Laddie J said:

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It is the seriousness of these consequences and the fact that

such orders are sought by the SoS on behalf of the public which
should inform the way in which the proceedings are
commenced and how the SoS carries out her functions.

38.

In ascertaining the disclosure obligation of the Commission,

it is in my view necessary not simply to stop at the binary classification

of such proceedings as civil as opposed to criminal, but to bear in mind

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the special character of disqualification proceedings. As accepted by the

English Court of Appeal in Official Receiver v Stern [2000] 1 WLR 2230,
2254E and 2255A, in assessing the requirements of a fair trial, there is a

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hierarchy of types of proceedings, with civil cases between private

parties at one end and prosecution of criminal offence by the state at the
other end. Between these fringes, there seems to me to be scope for

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recognising in these disqualification proceedings, despite their civil form,

a heightened need for disclosure having regard to their special character.
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(2) Investigative powers of the Commission

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39.

The Commission has under Part VIII of the Ordinance a

range of coercive powers for investigation, including the power to compel

wide categories of persons to produce records and documents and provide

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explanation and information, and to attend before an investigator to

answer questions. Failure to comply with the Commissions requirement
without reasonable excuse is an offence.5
self-incrimination is abrogated.

The privilege against

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Ss 179(13), 181(7), 184(1)(3).

Ss 179(16), 184(4) & 187.
S 191.

The Commission may also apply to a

magistrate for a warrant to enter into premises and search and seize
records and documents.7

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40.

The documents discovery of which is sought in the present

case are materials gathered by the Commission through the exercise of

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these coercive powers. Three points flow from this. First, these powers
are not generally a facility enjoyed by a respondent to disqualification
proceedings. To suggest that a respondent could find and approach the

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same interviewees long after the relevant events and obtain from them the
same assistance given to the Commission will in my view often be
unrealistic. Nor would the respondent have enjoyed the lead that the

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Commission had derived from the materials in pursuing its investigation.

In this case the respondents were under a particular handicap in that the
matters complained of in the petition occurred between 2007 and 2009.

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The respondents resigned from their positions in the Group between 2010
and 2011. They were interviewed by the Commission in 2012 and the

petition was issued in January 2015. In other words, long before the
petition was issued, and even before the Commission interviewed them,
the respondents had left the Group and lost any access to its documents in
their capacity as directors.
41.

Secondly, the investigative powers are invested in the

Commission not for private ends but for a public purpose. After court

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proceedings are begun this purpose extends to the attainment of a just

result which includes not only disqualifying those guilty of misfeasance
but also dismissing the case against those who are not.
42.

Thirdly, that the Commission was an ex post facto

investigator and not a party to any contemporaneous transaction with the

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respondents means that it does not have the same circumstantial

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Ss 179 and 183.

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knowledge related to the transactions impugned. Conversely, inasmuch

as the details of the Commissions investigation are not disclosed to the

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respondents, they have no means of knowing or inferring what persons

had been interviewed and what documents and materials are in the
possession of the Commission.

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(3) Right to fair trial and equality of arms

43.

In the context of criminal proceedings, Art 11(2)(b) of the

Hong Kong Bill of Rights9, provides for the right in full equality to

have adequate facilities for the preparation of his defence . This

principle of equality of arms provides a foundation, in parallel with the
common law, for the entitlement of the accused to disclosure of relevant
material: HKSAR v Lee Ming Tee (2003) 6 HKCFAR 336, 156.

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In

Jespers v Belgium (1983) 5 EHRR CD 305 at 58, the Committee of

Ministers agreed with the opinion of the European Commission of

Human Rights that the equivalent provision (Art 6(3)(b)) in the European
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Convention on Human Rights recognises

the right of the accused to have at his disposal, for the
purposes of exonerating himself or of obtaining a reduction in
his sentence, all relevant elements that have been or could be
collected by the competent authorities.

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44.

While it has been developed in the criminal field, the

respondents are correct in submitting that the principle of equality of

arms has applicability also in civil proceedings: see Dombo v The
Netherlands

(1993) 18

EHRR 213;

Yves

Morael

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France

(Communication No 207/1986, Human Rights Committee of the United

Nations).
which reflects the language of Art 14.3(b) of the International Covenant on Civil and
Political Rights.

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45.

In particular, in Albert and Le Compte v Belgium (1983) 5

EHRR 533 at 39, the European Court of Human Rights stated that the

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principles set out in Art 6(3)(b), among others, are applicable, mutatis
mutandis, to disciplinary proceedings subject to Art 6(1)10 in the same
way as in the case of a person charged with a criminal offence. In a broad

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sense, it may be said that the Court considered that the principle of
having in equal measure adequate facilities for preparing a defence
applies also via Art 6(1) to disciplinary proceedings, though it did not

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decide that the right conferred by Art 6(1) as regards access to documents
is exactly the same as in a criminal case.11

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46.

The principle has also been accepted as applicable to

directors disqualification proceedings: Official Receiver v Stern [2000] 1

WLR 2230, 2251G. This is hardly surprising given that a disqualification

order directly restricts the defendants right to work as a company
director and, as stated in Lam Siu Po v Commissioner of Police (2009) 12
HKCFAR 237 at 94, a persons rights and obligations in a suit at law

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within the meaning of Art 10 of the Bill of Rights include the right to
practise ones profession.

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47.

The disclosure obligation of the Commission in a case such

as the present is therefore not just governed by common law but is also a
function of the requirements of the Bill of Rights. As stated in Dombo at

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32, however, the requirements inherent in the concept of fair hearing

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The Hong Kong equivalent of Art 6(1) of the ECHR is Art 10 of the Bill of Rights.
That case was not concerned with access to evidence or materials or discovery of
documents. As far as Art 6(3) of the European Convention was concerned, the complaints of
the applicant were that he had not been informed in detail of the accusations against him,
that he had not had adequate time for the preparation of his defence and that he had not had
the benefit of the right to obtain the attendance and examination of witnesses on his behalf
(see 41).
10
11

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- 21 A

are not necessarily the same in civil and criminal cases. The question
remains what a fair hearing in Art 10 of the Hong Kong Bill of Rights

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requires, so far as disqualification proceedings under s 214 are concerned,

in terms of access to documents in the possession of the Commission.

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48.

In Secretary of State for Business, Innovation and Skills v

Doffman [2011] BusLR 457, the Secretary of State had brought

proceedings under s 6 of the Company Directors Disqualification Act

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1986 seeking disqualification orders against the defendants on the basis

of unfit conduct. The defendants applied to strike out the proceedings on
the ground that the Secretary of State had breached their Convention

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rights and his duty to act fairly by failing to ensure that a thorough and
unbiased investigation was carried out and that there was full disclosure
of documents associated with the investigation.

Newey J held that

neither the European Convention on Human Rights nor the Secretary of

States duty to act fairly would normally extend to requiring the Secretary
of State to obtain evidence not already available.
49.

This immediate result is not relevant for present purposes. It

is however notable that in the course of his judgment, having referred to

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the hierarchy of civil proceedings (in terms of the penal element or

stigma that may be involved) and that disqualification proceedings
often involve serious allegations and almost always carry a degree of

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stigma for anyone who is disqualified, Newey J said (at 9) that Art 6(3)
of the European Convention is not necessarily irrelevant in a
disqualification context. He said further (at 11) that there was scope

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for argument as to the extent of the Secretary of States obligations to

disclose documents in his possession though he found it unnecessary to

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- 22 A

resolve the question in that case. It is also notable that the Secretary of
State had in fact offered to allow the defendants to inspect the documents

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he held (apart from those that were privileged) (see p 463G).

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(4) Disclosure in disciplinary proceedings

50.

It is in this context instructive to see how the courts in

different jurisdictions have approached the question of disclosure of

material to the defence in proceedings of a non-criminal, disciplinary
nature.

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(a) United Kingdom

51.

In Rajan v General Medical Council [2000] UKPC 1; [2000]

Lloyds Rep Med 153, there was a complaint that a doctor had
inappropriately examined a female patient on a specific date. A copy of
the diary of the patient for that date, showing an entry of consultation
with the doctor at 3:40pm, was only disclosed to the doctor on the day of
the hearing.

The doctor was found by the Professional Conduct

Committee of the General Medical Council to have been guilty of serious

professional misconduct. On appeal to the Privy Council, the doctor

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produced evidence that his surgery did not open until 4:30 pm and argued
that had the diary been disclosed to him earlier, he would have run the
case that the alleged consultation had never taken place and that the acts

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complained of were a fantasy.

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52.

Allowing the appeal, the Privy Council stated at 17:

Their Lordships consider that, for the reasons already referred
to, the entry in Ms Bs diary was clearly relevant and material
and that under the principle established in cases such as Reg v

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- 23 A

Maguire 94 Cr App R 133 and Reg v Ward 96 Cr App R 1 it

should have been disclosed to the appellants legal advisers on
a date well before the date of the hearing, and that the failure to
disclose in proper time rendered the finding of the Professional
Conduct Committee in respect of Ms Bs complaint unsafe

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53.

The reference to R v Maguire (1992) 94 Cr App R 133 and R

v Ward (1992) 96 Cr App R 1 is significant, for they are leading cases in

the UK on the prosecutions duty of disclosure in criminal cases. The
passage suggests that in the UK, in disciplinary proceedings of the kind in

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question, there is a duty on the part of the prosecuting authority to

disclose materials in accordance with the principle established in those
cases.
54.

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Mr Joffe submitted that the case was not helpful because it is

not known why the Privy Council considered there was such a duty. But
as stated by Lord Hobhouse in Subramanian v General Medical Council
[2002] UKPC 64 at 23, the duty arose from the common law right to a
fair trial. The Privy Council there accepted that that right placed on the

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General Medical Council, as the prosecuting authority, the duty of timely

disclosure of relevant and material evidence.

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55.

In Kirk v Royal College of Veterinary Surgeons [2003]

UKPC 3, the Privy Council affirmed the entitlement of a veterinary

surgeon, against whom disciplinary proceedings were brought, to the

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disclosure of any document which was relevant, though the Privy Council
did not elaborate upon the basis other than saying he had the entitlement
under general principles (see 3). In a subsequent application in the

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same case [2003] UKPC 47, Lord Hoffmann stated (at 3):
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- 24 A
B

He was entitled in the ordinary way to any documents which

might support his case or tend to undermine the case of the
College. Under that heading there have been disclosed to him
certain unused materials from witnesses who were not called at
the disciplinary hearing.

C
D

It is to be noted that the description of the scope of disclosure (any

documents which might support his case or tend to undermine the case of
the College) is redolent of the duty of disclosure in criminal cases; see R
v Brown (Winston);12 Lee Ming Tee.13 That formulation has also been
adopted in certain rules for disciplinary proceedings in the UK.

14

Likewise the phrase unused material is typically used in the context of

disclosure in criminal proceedings.15
56.

In R (on the application of Johnson and Maggs) v

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Professional Conduct Committee of the Nursing and Midwifery Council

[2008] EWHC 885 (Admin), the disciplinary charges brought against
two employees of a nursing home were challenged on, inter alia, the
ground that those in the professional body responsible for bringing the

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complaints were under a duty to gather evidence in favour of the

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[1998] AC 367 at 374G: material which might undermine [the prosecutions] case
against [the defendant] or which might assist his defence.
13
at 155: material in the possession or control of the prosecution which may
undermine its case or advance the defence case; and at 170: The prosecutions duty is to
disclose to the defence relevant material (including information) which may undermine its
case or advance the defence case.
14
See 2.3 of Disclosure of documents in disciplinary proceedings issued by the Bar
Standard Board of the English Bar.
The English Solicitors Disciplinary Tribunals Practice Direction No 2 (27 November
2002 edition) states that where directions are sought as to disclosure or discovery of
documents, the Tribunal will adopt the view that material should be disclosed which could be
seen on a sensible appraisal by the applicant to be relevant in the sense described in R v
Melvin: see 71 below.
The Guidance on disclosure of unused material issued by the UK Financial
Reporting Council (dated July 2013) expressly adopted the rules of disclosure as summarized
in R v Brown.
15
For an early example, see the UKs Practice Note (Criminal Evidence: Unused
Material) [1982] 1 All ER 734.
12

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- 25 A

two workers. It was held that there was no free-standing right under
Art 6(3)(b) of the European Convention on Human Rights for a defendant

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to have a prosecutor gather evidence for him. Nevertheless, at 6263,

Beatson J held that the right to having the facilities for preparing a
defence applies to a person facing disciplinary proceedings, that whether

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a person has adequate facilities and whether there is equality of arms

are fact-specific questions, and that the overall basic approach to the
concept of equality of arms does not differ as between civil and criminal

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proceedings.
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57.

In McCarthy v Visitors to the Inns of Court [2013]

EWHC 3253 (Admin), the Bar Standards Board, which played the role of
prosecutor of certain disciplinary charges against a barrister, failed to

disclose an earlier draft statement of a witness which was somewhat

different from the statement eventually signed. The barrister was found
guilty of the professional charges and the decision was upheld by a
majority of the Visitors to the Inns of Court. On an application for

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judicial review on the ground that the draft statement should have been
disclosed, the Bar Standards Board argued that it was under no greater
duty than any other civil litigant to serve a draft statement of a witness

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(15). Rejecting this argument, Moses LJ held:

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17. In any event, it seems to me beyond question that in

disciplinary proceedings with the potential for such grave
consequences, draft statements capable of being used to
discredit a witness should be disclosed. After all, the Visitors
themselves had recognised that Rule 7(1)(a)16 is consistent
with the criminal process. The criminal process, as the
Visitors described it, had for nearly 80 years recognised the
obligation to disclose statements which were potentially of use
Regulation 7(1)(a) of the Disciplinary Tribunals Regulations 2009, which provides:
The defendant shall, as soon as practicable, be supplied with: (a) a copy of the evidence of
each witness intended to be called in support of the charge or charges
16

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- 26 A

for the purpose of cross-examining witnesses. It is now, and

has been for many years, well understood that, in criminal
courts, draft statements of witnesses which might reasonably be
considered capable of undermining the case for the prosecution
or of assisting the case for the accused, are disclosable
18.
I can see no basis why the position should be any
different in relation to disciplinary proceedings brought on
behalf of the Bar Standards Board and I find it hard to
understand why there was any difficulty in recognising this
obligation The demands of elementary fairness impose such
an obligation.17

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D
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(b) New Zealand

58.

In New Zealand, as in Hong Kong, professional disciplinary

proceedings are generally regarded as civil proceedings rather than

criminal proceedings. Nevertheless, following the decision of the Full

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Court of the High Court in Gurusinghe v Medical Council of New

Zealand [1989] 1 NZLR 139, the criminal practice of disclosure has been
applicable by analogy in disciplinary proceedings.

Davidson CJ said

there (at pp 155156):

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It would seem that, whilst medical profession disciplinary

proceedings are strictly civil rather than criminal, they are
sufficiently analogous in some respects to criminal proceedings
for assistance to be derived from the criminal rules of
procedure. As Cooke P said in Duncan,18 delivering the
majority judgment of the Court of Appeal, at p 548:
These observations [on the need for separate findings for
separate charges and for comprehensive charges, and the
need for reasons] are meant to indicate principles rather
than hard-and-fast rules. It is a field in which the spirit of
justice is more important than the letter.
In addition to deriving assistance from the common law
requirements for disclosure by the prosecution in criminal
cases, it could be said that those same requirements are

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17
18

These views are not affected by the decision on appeal: [2015] EWCA Civ 12.
Duncan v Medical Practitioners Disciplinary Committee [1986] 1 NZLR 513.

- 27 A

imported into the procedure of the Council by virtue of the

obligation to observe the rules of natural justice.

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59.

There, the Full Court considered the duty of disclosure to

cover in particular two categories of records: statements made by persons

whom the prosecutor does not intend to call, and previous inconsistent

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statements of persons called as prosecution witnesses.19

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60.

Applying

Gurusinghe,

in

Health

and

Disability

Commissioner v Medical Practitioners Disciplinary Tribunal [1999] 2

NZLR 616, 622, Ellis J said that the principle does not require the
prosecutor necessarily to disclose all documents in her file or available to

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her, but rather make a selection. She is, however, urged in the interests of
justice to disclose unless there is good reason not to. The learned judge

said (at 627628):

It is now beyond argument that, in general, proceedings
should be conducted openly and that in criminal prosecutions
all information both favourable and unfavourable should be
disclosed to a defendant. Added to that, he or she is entitled to
obtain personal information held by the prosecutor. The Courts
recognise some limitations to complete disclosure. By analogy,
the same approach is taken to disciplinary proceedings such as
those in the present case. While Gurusinghe deals precisely
with statements made by persons whom the prosecution does
not intend to call, and previous inconsistent statements of
persons to be called, the general emphasis on disclosure unless
there is good reason for refusal, is an important principle
recognised in all types of litigation. Obviously fishing
expeditions and pointless requests should be discouraged, but
the best way of doing this is frank and full disclosure.

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See Complaints Assessment Committee v Medical Practitioners Disciplinary Tribunal

[2005] 3 NZLR 447 at 48; not affected on this point by the decision of the New Zealand
Supreme Court: [2006] 3 NZLR 577
19

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B

(c) Canada
61.

The Supreme Court of Canada had held in R v Stinchcombe

[1991] 3 SCR 326 that the prosecution in a criminal case is under a

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D

general duty to disclose all information, whether inculpatory or

exculpatory, except evidence that is beyond the control of the
prosecution, clearly irrelevant, privileged or subject to a right of
privacy.

20

The Supreme Court subsequently held in May v Ferndate

Institution [2005] 3 SCR 809 that the Stinchcombe principles do not

apply in administrative proceedings.
62.

Nevertheless, the courts in Canada have increasingly

required the criminal standard of disclosure to be adhered to in

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disciplinary proceedings. In Hammami v. College of Physicians and

Surgeons of British Columbia (1997) 36 BCLR (3d) 17, Williams CJSC
summarised the principles he derived from the authorities and stated (at

75), inter alia, that:

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in cases arising from the administrative law context where the

decision of an administrative tribunal might terminate or
restrict the accuseds right to practice or pursue that career or
seriously impact on a professional reputation then the principles
in Stinchcombe, in respect of disclosure may well apply.
In appropriate cases the courts approach should be as outlined
by the Court of Appeal in JPG. et al v Superintendent of
Family and Child Services (BC) and that is where the
disclosure might have been useful then disclosure should be
made by the Crown (or tribunal) unless there is any special
reason why such material should not be disclosed and in those
circumstances the special reason should be brought to the
attention of the judge or tribunal.
In Lee Ming Tee at 153, Sir Anthony Mason NPJ described the Canadian position
under R v Stinchcombe as follows: The duty of disclosure has proceeded along somewhat
similar lines in Canada, though it appears to be more extensive in scope than in England. The
general rule is that all relevant information must be disclosed, subject to the Crowns
discretion to withhold information which may be subject to privilege and to delay disclosure
so as not to impede an investigation.
20

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63.

In Milner v Registered Nurses Association of British

Columbia (1999) 71 BCLR (3d) 372, Boyd J noted (at 11) a passage in

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Casey, The Regulation of Professions in Canada at 823:

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A finding of professional misconduct can have grave and

permanent consequences for a professional. In some cases, the
consequences are more severe than a criminal conviction.
Therefore, the policy reasons for full disclosure of all
material should apply equally to professional discipline
hearings.

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Her Honour went on to state (at 13):

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The Courts have repeatedly and properly acknowledged that in

disciplinary proceedings, the individual professionals ability to
pursue her livelihood, as well as her professional and personal
reputation are often at stake. In these circumstances, a high
standard of proof must apply to the charges alleged, with a
concomitant standard of disclosure.

64.

In Deloitte & Touche LLP v Ontario Securities Commission

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[2003] 2 SCR 713, the Ontario Securities Commission had compulsorily

collected information and documents from Deloitte & Touche LLP as
auditors of a company. In the proceedings brought by the commission for

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sanctions against the company itself, the commission described the scope
of its disclosure obligation in terms of the concept of relevance as
developed in R v Stinchcombe and proposed to disclose the material

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obtained from the auditors to the company. On a challenge by auditors,

the Supreme Court of Canada held the commissions decision to adopt the
approach in Stinchcombe to be reasonable and therefore could not be

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impugned applying the correct standard of review.

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65.

In Sheriff v Canada (Attorney General) [2007] 1 FCR 3, the

question before the Federal Court of Appeal was the scope of the duty of
U

- 30 A

a senior disciplinary analyst in the Office of the Superintendent of

Bankruptcy to disclose all relevant evidence gathered during the

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disciplinary investigation to a trustee in bankruptcy facing disciplinary

proceedings. The Court held that the Stinchcombe principles apply in
that case since a loss of livelihood and damage to professional reputation

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were at stake. Malone JA stated the crux of the courts reasons at 32

F

33:
32. The requirement for increased disclosure is justified by
the significant consequences for the professional persons
career and status in the community. Some Courts have noted
that a finding of professional misconduct may be more serious
than a criminal conviction (see Howe v. Institute of Chartered
Accountants of Ontario (1994), 19 OR (3d) 483 (CA), per
Laskin JA in dissent, at pages 495496; Re Emerson and Law
Society of Upper Canada (1983), 44 OR (2d) 729 (HCJ),
at page 744).
33.
The scope of disclosure in professional hearings
continues to be expanded by provincial courts, which have
applied the Stinchcombe principles in cases where the
administrative body might terminate or restrict the right to
practice or seriously impact on a professional reputation (see
Hammami v College of Physicians and Surgeons of British
Columbia, [1977] 9 WWR 301 (BCSC), at paragraph 75;
Milner v Registered Nurses Assn of British Columbia (1999),
71 BCLR (3d) 372 (SC)). In Stinchcombe, the Supreme
Court of Canada held that there is a general duty on Crown
prosecutors to disclose all evidence that may assist the accused,
even if the prosecution did not plan to adduce it. While these
principles originally only applied in the criminal law context,
the similarities between a criminal prosecution and a
disciplinary hearing are such that the objectives are, in my
analysis, the same, ie the search for truth and finding the
correct result.

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(d) General
66.

It can be seen that at least where serious disciplinary charges

are concerned, the courts in various jurisdictions, while accepting

disciplinary proceedings are non-criminal in nature, have been prepared

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- 31 A

to recognise a duty of disclosure on the prosecuting authority that

approaches the duty on the prosecution in criminal proceedings.
67.

Arguing against any analogy with criminal proceedings,

Mr Joffe referred me to the case of Li Kwok Keung Asser v Securities and

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Futures Commission. In that case, a registered dealers representative

was interviewed by the Commission under s 183 of the Ordinance and
later found to have given misleading information. Disciplinary action

F
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was instituted against him under s 194 for misleading the Commission
and for failing to honour an undertaking given to cooperate with the
Commission in its prosecution of some other persons.

On appeal

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(Application No 2 of 2009; 19 March 2010), the Securities and Futures

Appeal Tribunal reduced the sanction but in the course of its decision (at

25) it drew certain analogy with a person facing criminal investigation

who wishes to give evidence and seek immunity in exchange.
L

68.

On further appeal (CACV 85/2010; 26 November 2010), the

Court of Appeal (at 6166) warned against importing criminal law

principles by a side-wind into the disciplinary functions of the
Commission. At 1, Kwan JA said that in the context of disciplinary

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proceedings under the Ordinance, it is inappropriate to import by

analogy criminal procedure and the giving of evidence under immunity in
a criminal prosecution.

At 5260, Stone J also said that such

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analogies are inappropriate.

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69.

The Court of Appeals decision, however, concerned neither

disqualification proceedings nor discovery of documents. The statements

quoted above were directed at the argument concerning immunity. I do

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- 32 A

not read them as laying down categorically that, in the context of any
proceedings under the Ordinance, analogy with criminal proceedings can

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never be helpful.
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70.

Indeed, at 54 of the Tribunals decision, Saunders J, sitting

as the Chairman, expressed a preliminary view that, having regard to the

Court of Final Appeals decision in Lam Siu Po v Commissioner of Police
(2009) 12 HKCFAR 237, the need for fairness under Art 10 of the Bill of

F
G

Rights should lead to a requirement for the disclosure of unused material

in disciplinary proceedings, equivalent to that in criminal proceedings.
The Court of Appeal simply disapproved of the expression of such

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preliminary view by the Chairman when he had heard no argument on the

question which was not before the Tribunal, without expressing its own

view on that question. It follows, in my respectful opinion, that Li Kwok

Keung Asser is not authority against adopting an approach to disclosure
in disqualification proceedings resembling the practice in disciplinary
proceedings in the UK, New Zealand or Canada as described above.

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(5) Duty of disclosure in criminal cases

71.

What then is the scope of the prosecutions duty of

disclosure in criminal cases in Hong Kong?

The question has been

authoritatively dealt with in HKSAR v Lee Ming Tee (2003) 6

HKCFAR 336. As explained by Sir Anthony Mason NPJ in that case,
that duty has its foundation in a defendants common law right to a fair

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trial. What is fair must be determined in the light of the general principle
of open justice.21 The duty of the prosecution is to disclose to the defence
relevant material which may undermine its case or advance the defence
21

Lee Ming Tee, 143, 155157.

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- 33 A

case.22 As Mr Joffe correctly pointed out, even in criminal cases the law
does not require automatic disclosure of all unused materials, but only in
accordance with the test for relevance.

B
C

In Lee Ming Tee, the Court

accepted23 the test suggested by Jowitt J in R v Melvin (unrep,

20 December 1993) as representing a broad statement of what is subject

D
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to disclosure, namely:
F

I would judge to be material in the realm of disclosure that

which can be seen on a sensible appraisal by the prosecution:
(1) to be relevant or possibly relevant to an issue in the case;
(2) to raise or possibly raise a new issue whose existence is not
apparent from the evidence the prosecution proposes to use;
(3) to hold out a real (as opposed to a fanciful) prospect of
providing a lead on evidence which goes to (1) and (2).

72.

In applying this test, the notion of an issue in the case is

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not to be construed in the way in which it is used in a civil case but must
be given a broader interpretation: R v Brown (Winston) [1994] 1
WLR 1599, 1606H, per Steyn LJ. It should be noted that this was said at
a time before the modern reform of civil procedure in England, which
means that when referring to civil cases, Steyn LJ was alluding to the
Peruvian Guano approach rather than the narrower approach under
Part 31.6 of the Civil Procedure Rules.
73.

As the English Court of Appeal said in R v Ward [1993] 2 All

ER 577 at 601j, relevant evidence of help to an accused is:

not limited to evidence which will obviously advance the
accuseds case. It is of help to the accused to have the
opportunity of considering all the material evidence which the
prosecution have gathered, and from which the prosecution
have made their own selection of evidence to be led.

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22
23

Lee Ming Tee, 170.

at 171.

- 34 A

74.

The Court of Final Appeal in Lee Ming Tee took the same

approach, stating that the material subject to disclosure will ordinarily

include materials that have been gathered by the investigating agency.

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24

(6) The applicable approach

75.

In the present type of case the rules of discovery have to be

applied in a manner sensitive to the requirements of Art 10, including the

principle of equality of arms inherent in the concept of a fair trial. As
discussed above, while these are not criminal proceedings as such, it does

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F
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not follow that when it comes to the question of disclosure of material to

the defence, the position has to be exactly the same as in ordinary civil
litigation between private antagonists.
76.

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It has to be borne in mind that these are proceedings in

which the respondents are faced with an adversary in the form of a

governmental regulator which controls the investigatory process. With

powers that rank high in the hierarchy of coercive powers for obtaining
information and of investigating suspected wrongdoing (see Stern,

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supra, at p 2257D), the Commission occupies a position analogous to

criminal law enforcement agencies, with the additional advantage that an
interviewees privilege against self-incrimination is abrogated.
77.

Given the status of the Commission as a statutory body

established for public functions, it seems to me that the observations of

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Sopinka J in R v Stinchcombe, supra, at p 333hi are apposite: the fruits

of the investigation which are in the Commissions possession are not its
own property for use in securing a disqualification order but the property
24

Lee Ming Tee, 148, 161.

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- 35 A

of the public to be used to ensure that justice is done. The proper role of
the Commission is not a prosecutor bent on securing the disqualification

B
C

of a respondent, but a fair-minded regulator willing if not anxious to

make all materials available for potential use in the trial to ensure a just
outcome.
78.

D
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The requirement in civil cases that discovery has to be

necessary for disposing fairly of the cause or matter 25 directs attention

F
G

to the question whether one party enjoys a litigious advantage or

suffers a litigious disadvantage with reference to access to documents:
Taylor v Anderton [1995] 1 WLR 447, 462C. The notion of equal access

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to documents relevant for the preparation of ones case is an important

facet of fairness in this kind of case, where the Commission has taken on

the role of an investigator. The Commission is not in original possession

of any relevant information or documents generated by any transaction to
which it was party. It has acquired the documents only as a result of its
investigation. The respondent is generally not in a position to specify

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what information and documents the Commission has, other than that
which it has chosen to disclose. It is to be questioned whether practical
fairness can be achieved if a respondent is required in this context to

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pinpoint a concrete and specific document or class of documents (so

narrowly defined as to contain no irrelevant documents 26) before he can
obtain discovery.
79.

Granted a disqualification order is not a penalty as such

but has as its primary purpose the protection of the public from persons

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whose conduct shows them to be unfit to be directors, such an order

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26

The wording in Order 24 rule 8.

See eg Molnlycke AB v Procter & Gamble Ltd (No 3) [1990] RPC 498.

- 36 A

nevertheless has a severe effect on the individual subjected to it. It is the

equivalent in the field of corporate management of a lengthy suspension

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of professional licence with the immediate consequence of terminating a

persons right to pursue his career and serious further implications for
reputation and livelihood.
80.

D
E

Overseas jurisprudence suggests that there can be no

absolute theoretical objection to, or insurmountable practical difficulty in,

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demanding a higher standard of disclosure in cases of a disciplinary or

regulatory

nature

that

involve

such

grave

consequences

as

disqualification proceedings.
81.

In considering the present question it is notable that the

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Commission has not relied on any particular feature of the information

obtained under ss 179 and 183 or any special need for confidentiality over
such material, or claimed public interest immunity for the documents as a
class or by content. Given that the information and documents obtained

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by the Commission can be (and have been in this case) used and
disclosed by the Commission in legal proceedings, there can be no
express or implied assurance of confidentiality to the interviewees and no

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compelling reason of public policy to prevent their disclosure to the

respondent to such proceedings. In any event, as Sir Anthony Mason NPJ
said in Lee Ming Tee at 164, once proceedings have been begun, any

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public interest in maintaining confidentiality over the relevant material is

to be achieved not by reducing the scope of disclosure, but by restricting
the collateral use of disclosed material.

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- 37 A

82.

In my opinion, the practice in the present kind of case should

be developed in such a way as to minimise the risk of making a

B
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disqualification order against an innocent director while at the same time

not impeding effective law enforcement: per Glidewell LJ in R v Ward,
supra, at 628. To that end the test of relevance should be applied as

D
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broadly as is consistent with the requirements of justice having regard to

the features of these proceedings, leading to a standard of disclosure
approaching that espoused in Lee Ming Tee.

Thus approached, the

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Commissions disclosure should ordinarily include the information and

documents it has obtained from the investigation of the transactions that
are eventually relied upon and complained of in the disqualification

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proceedings, except those which are obviously irrelevant even on this

generous test.
83.

In any event, on closer examination, the language expressing

the R v Melvin test (see 71 above) is not radically different from the
traditional test of relevance in civil cases as laid down in Peruvian

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Guano: that is to say, a document is relevant if (a) it is reasonable to

suppose that it contains information which may, not must, either directly
or indirectly enable the party requiring the same either to advance his

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own case or to damage the case of his adversary, or (b) it is a document

which may fairly lead the party to a train of inquiry which may have
either of those two consequences. It is the manner in which the tests are

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conventionally applied that may lead to differences in the scope of

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disclosure.

84.

The Commission should in my view take a generous view of

relevance.

The Commission was not a party to the transactions

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- 38 A

complained of.

It did not have the contemporaneous background

knowledge possessed by the respondents. It is not privy to the potential

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arguments, strategies and tactics of the respondents other than those

already stated in their affirmations, or to the material or knowledge in
their possession, which could put a different light on the documents in the

D
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Commissions hands or which when combined with the Commissions

documents may prompt them to pursue further, potentially fruitful lines of
inquiries.
85.

F
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The emphasis is on the notion that a document may fairly

lead the party to further inquiries. The document need not in and of itself

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be directly useful, let alone admissible in evidence. It is enough if there

is a reasonable possibility that the document may provide a lead to a line

of inquiry which may eventually help the party advance his own case or
damage his opponents. Applying the observations in Ward and Lee Ming
Tee referred to in 73-74 above, it would in my view be likely to be of
help to the respondents to have the opportunity of considering the

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materials which the Commission has gathered in the investigation of the

matters now complained of, and from which the Commission has made
its own selection of evidence as set out in its affidavits supporting the

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petition.
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86.

There was indication27 that the Commission had, at least at

one stage, adopted the test of relevance in O Company v M Company

[1996] 2 Lloyds Rep 347, where Colman J stated that to be discoverable,
a document or class of documents must offer a real probability of

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evidential materiality in the sense that it must be a document or class of

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27

See the Commissions letter to the respondents solicitors dated 25 June 2015.

- 39 A

documents which in the ordinary way can be expected to yield

information of substantial evidential materiality to the pleaded claim and

B
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the defence to it in the broad sense which I have explained. Thus the
documents relating to the professional firms of Ascent Partners, Greater
China Appraisal and Roma Oil and Mining, which seem to me to be

D
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highly relevant, were considered by the Commission to be of

questionable relevance28 (albeit disclosed eventually without admission
of relevance).
87.

While O Company v M Company sets out a useful approach

for limiting discovery and production in appropriate cases, I doubt if it

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can be taken as laying down a generally applicable test of relevance

insofar as it appears to depart from Peruvian Guano which is still the

governing test in ordinary civil litigation in Hong Kong: see Melvin

Waxman v Li Fei Yu (unrep, HCA 1973/2012, 30 January 2015), 4954
per Deputy Judge Marlene Ng; Hollander, Documentary Evidence in
Hong Kong 7021.
88.

It is said that the documents sought must be relevant to the

pleaded issues in the petition proceedings. In my view this is too narrow

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a view to take, particularly in this kind of case. Relevance, especially in

the sense of the potential to lead to further inquiries, is not confined to
issues already pleaded; the matters in question cover wider ground:

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Thorpe v Chief Constable of Greater Manchester Police [1989] 2 All

ER 828, 833.

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28

See Ms Tses 3rd affidavit, 42.

- 40 A

VI. The request for discovery in the present case

89.

The first group of documents in question (category (c) of the

schedule to the summons) is the records and documents obtained by the

Commission pursuant to s 179. The s 179 authority in this case was

issued on the basis, as stated in the authority itself, that it appeared to the
Commission there were circumstances suggesting that:
(a) persons involved in the management of the affairs of
[the Company] have engaged in defalcation, fraud, misfeasance
or other misconduct towards it or its members or any part of its
members; and/or
(b)
members of [the Company] or any part of its members
have not been given all the information with respect to its
affairs that they might reasonably expect.

E
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90.

In the context it is probable that the suspected defalcation,

fraud, misfeasance or other misconduct related at least in part to the

two main groups of transactions that the Commission is now complaining

of in the petition, ie the hotels and gold mine (albeit only misfeasance or
other misconduct are now alleged, and not defalcation and fraud). The
notices received by the respondents themselves required them, under

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s 179(2), to provide explanations of the records and documents in

relation to acquisitions and disposals of issued share capitals of Sunny
Team29, China Earn30, Homesmart31 and HK Gaofeng32 by the Company,
that is to say, the companies through which the Group acquired the
3 hotels and the interests in the gold mine.

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29
30
31
32

which held the Xingdu Hotel.

which held the Changlin Hotel.
which held the Kaiping Hotel.
which held an interest in the gold mine.

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91.

Further, by virtue of s 179(5), that authority was not to be

issued unless there was reasonable cause to believe that the record or

B
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document relates to the affairs of the Company or a related corporation.

D

92.

Similarly, the s 182 direction to investigate was issued on the

basis, as stated there, that there was reasonable cause to believe that
during the period from 9 June 2009 to 11 September 2009:

(a) persons may have engaged in disclosure of false or

misleading information inducing transactions in the shares of
[the Company], contrary to section 277 of the Ordinance;
and/or

(b)
offences of disclosure of false or misleading
information inducing transactions in the shares of [the
Company] may have been committed, contrary to section 298
of the Ordinance; and/or

(c)
[the Company] and/or persons connected with it may
have committed offences contrary to section 38433 of the
Ordinance.
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9 June 2009 was the date of the agreement for the acquisition of the

additional 47.2% shareholding in HK Gaofeng (see 13 above).

11 September 2009 was the date of the Companys circular about its
acquisition of interests in HK Gaofeng. It is fair to infer that among the

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target of investigation was whether the above offences were committed in

relation to the gold mine transaction.

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93.

Each of the persons interviewed by the investigators under

s 183 must, necessarily by virtue of s 183(1), be a person that the

investigator has reasonable cause to believe has in his possession any

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ie provision of false or misleading information in purported compliance with a

requirement to provide information under the Ordinance
33

- 42 A

record or document which contains, or which is likely to contain,

information relevant to [the] investigation.
94.

B
C

In these circumstances it is in my view not unreasonable to

think that at least a good part of the materials gathered by the

D
E

Commission will fall within the scope of disclosure suggested above.

F

95.

Further, it is to be noted that at numerous points in the

petition, the Commission asks the court to draw an inference of negligent

failure on the part of the respondents because there is no document found
or the respondents could not produce any supporting evidence or

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documents. Thus, for example, it is alleged that (i) that it is to be inferred

the respondents did not conduct any sufficient due diligence in relation to

the gold mine, because they had not produced any documents or records
(save a few documents) to the Commission to evidence the due diligence
carried out;34 (ii) that it is to be inferred the respondents did not make site
visits or attend meetings and telephone conferences referred to in the

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circular of 11 September 2009, because there is no documentary evidence

and the respondents could not identify any;35 (iii) that it is to be inferred
the respondents did not negotiate the consideration for the acquisition of

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the interests in the gold mine, because neither the Company nor the
respondents had produced any evidence of negotiation;

36

(iv) that it is to

be inferred the respondents did not take advice from persons with due

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qualifications as to who was suitable to be appointed as directors of Inno

Gold, because they could not provide or identify any evidence of taking
advice;37 and (v) that it is to be inferred the respondents did not conduct
34
35
36
37

Petition 7778.
Petition 9192.
Petition 8687.
Petition 105.

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- 43 A

any evaluation or obtain independent advice as to whether to adopt the

drilling plan or the expansion plan first, because there is no record of
them having so considered.

B
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38

96.

It seems to me in order properly to consider whether these

inferences should be drawn, it is pertinent to see at least in broad terms

what the scope of the Commissions investigation was and what
information the Commission has actually been able to obtain.

For

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example, there is a material difference between a situation where an

interviewee had little recollection about the relevant events generally and
a situation where an interviewee remembered the events clearly but said

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he could not recall having had any negotiation with the respondents.
Likewise, it would be pertinent to see what persons were interviewed and

what questions were put to them in order to evaluate the significance of

the allegation that the Commission has not obtained any documentary
evidence of telephone conferences or site visits about the gold mine.

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97.

The application as framed is one for specific discovery, but

the reality is that the Commission has not been required to give general
discovery in accordance with the principles and standards I have

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endeavoured to outline above. There is reason to suppose that there are

documents that fall within the scope of discovery as discussed which
have as yet been undisclosed. On the other hand the Commission must

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be given the opportunity to contest that even on the basis of this decision
there are documents within the class that are not at all relevant, for
example because they relate to investigation of some wholly different

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transactions. In these circumstances I think the more appropriate course

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Petition 110.

- 44 A

is for the court to require the Commission to file a list of documents in

the light of this decision. Any further dispute can be dealt with if and

B
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when it arises at a subsequent stage.

D

VII. Disposition and orders

98.

In the result I order that the Commission do within 28 days

(or such further time as may be agreed with the respondents) make and
serve on the respondents a list of the documents which are or have been
in its possession, custody or power relating to any matter in question in

F
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H

these proceedings. I give the parties liberty to apply.

I

99.

There will be an order nisi that the Commission do pay the

respondents the costs of the application with a certificate for two counsel.

(Godfrey Lam)
Judge of the Court of First Instance
High Court
Mr Victor Joffe and Ms Queenie Lau, instructed by Securities and Futures
Commission, for the Petitioner
Mr Bernard Mak and Mr Issac Chan, instructed by Tso Au Yim & Yeung,
for the 1st to 4th Respondents
Lam & Co. for the 5th Respondent was excused from attendance

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