FACV No. 8 of 2012

IpsofactoJ.com: International Cases [2013] Part 7 Case 12 [CFA]


COURT OF FINAL APPEAL, HKSAR

Coram

HLB Hodgson Impey Cheng

- vs -

The Hong Kong Institute of

Certified Public Accountants

CHIEF JUSTICE GEOFFREY MA

JUSTICE R.A.V. RIBEIRO PJ

JUSTICE HENRY LITTON NPJ

JUSTICE KEMAL BOKHARY NPJ

JUSTICE MURRAY GLEESON NPJ

17 JUNE 2013


Judgment

Chief Justice Ma

  1. I agree with the reasons given by Mr Justice Gleeson NPJ for dismissing the appeal.

    Justice Ribeiro PJ

  2. I agree with the reasons given by Mr Justice Gleeson NPJ for dismissing the appeal.

    Justice Litton NPJ

  3. The application for judicial review in this case focusses on two “decisions” of the Council, as expressed in two letters from the Institute’s solicitors: (i) one dated 12 December 2009 (comprising six pages of close print) “the first decision” and (ii) the other dated 8 January 2010 (comprising two pages of close print) “the second decision”: A curious way of impeaching the decisions of a public body by way of judicial review. If a decision of such a body is capable of being reviewed by the courts, it would normally be capable of being expressed in a few words. And, being thus expressed, the judge dealing with the application for leave under Ord 53 r 3 of the Rules of the High Court, Cap 4, would readily see which of the recognized grounds formulated by Lord Diplock in CCSU v Minister for the Civil Service [1985] AC 374 at 410 might cover the case.

  4. When Mr Gerard McCoy SC, counsel for the appellants, was asked at the hearing which of the three grounds articulated in CCSU v Minister for the Civil Service he invoked in support of his case, he said the first and the third: that is to say “illegality”[1] and “procedural impropriety”[2]. And then later, in the course of his submissions to this Court, Mr McCoy said he relied also on the second ground: “irrationality”[3]. When an application for judicial review is cast over such a wide field, it calls into question the very foundation of the application.

  5. The impugned decision-maker in this case is the Council: The body which, in its discretion, might initiate disciplinary proceedings against certified public accountants under s 34(1) of the Professional Accountants Ordinance, Cap 50.

    The “first decision”

  6. The first impugned decision as set out in the application for leave under Ord 53 r 3 is the solicitors’ letter of 12 December 2009. This is summarized in the application for leave dated 15 January 2010 as a decision of the Institute (the respondent to the proceedings) “rejecting all the Applicants’ complaints including inter alia the constitution of the Investigation Committee”. But the Council had no function under the statute to resolve complaints. Its function was to consider the Investigation Committee’s report and to decide whether to proceed further by initiating the disciplinary process as laid down in the statute: see para 5 above. The appellants’ complaints related solely to the investigation process. Those complaints might at most affect the weight of the Investigation Committee’s report and its conclusion that a prima facie case had been made out against the appellants: But, at the end of the day, what the Council had to decide was simply whether it should refer the case to the Disciplinary Panels, thereby initiating the disciplinary process, having regard to the seriousness of the matters disclosed in the report as a whole and all relevant matters.

  7. The appellants had been told (by letter dated 8 January 2010) that the Council would next meet on 19 January 2010 and that if they had further submissions to make they should do so by 12 January.

  8. The appellants pre-empted the Council’s meeting and launched their application for judicial review on 15 January. It is therefore plain that there was no ground whatever to impugn the first decision.

    The “second decision”

  9. As regards the second decision (set out in the lawyers’ letter of 8 January 2010), it is summarized thus in the application for judicial review: “The Decision of the Respondent .... refusing to consider re-constitution of a new Investigation Committee with different membership so that the statutory task of determining whether a prima facie case for disciplinary proceedings exists be conducted afresh by the new Investigation Committee”. No statutory duty falling upon the Council has been identified. And yet the relief sought in the application for judicial review was an order of mandamus:

    requiring the Respondent to re-constitute an Investigation Committee .... etc.

    Conclusion

  10. The application for judicial review was hopelessly flawed from the outset. It ought never to have been made.

  11. I agree with Mr Justice Gleeson NPJ’s judgment.

    Justice Bokhary NPJ

  12. This appeal was ably argued but had to be dismissed. As to why, I agree with the reasons which Mr Justice Gleeson NPJ gives.

    Justice Gleeson NPJ

  13. This is an appeal from a decision of the Court of Appeal (Hon Tang VP, Chu JA and Lam J), which dismissed an appeal to that court from Reyes J. Reyes J dismissed an application for judicial review brought in respect of an enquiry into the professional conduct of a firm of accountants. At the conclusion of argument in this Court, the Court made orders that the appeal be dismissed and that the appellants pay the costs of the respondents, and said that it would publish its reasons at a later date. What follows is a statement of my reasons for joining in those orders.

  14. The second and third appellants, Mr Cheng and Mr Lai, are partners in Messrs HLB Hodgson Impey Cheng (“HLB”), a firm of Certified Public Accountants, which is the first appellant. The respondent, The Hong Kong Institute of Certified Public Accountants (“the Institute”) is a body corporate with a membership comprising all registered certified public accountants. As at February 2010, there were 29,933 members of the Institute, and 1,507 registered firms and corporate practices.

  15. The Institute was established by the Professional Accountants Ordinance, Cap 50 (“the PAO”), as the profession’s principal regulator. The affairs of the Institute are governed by a Council. The members of the Council are 14 certified public accountants elected at the Annual General Meeting of the Institute and four lay persons appointed by the Chief Executive of the Hong Kong Special Administrative Region. The Institute maintains a permanent staff including a Compliance Department which assists in investigations and disciplinary proceedings resulting from complaints about the conduct of members of the Institute or registered firms or corporate practices.

  16. This matter arose out of a reference to the Institute by the Securities and Futures Commission (“SFC”) in September 2006 of certain concerns over the standard of HLB’s work as auditors of Tiffit Securities (Hong Kong) Ltd (“Tiffit”), a corporation licensed to carry on the business of dealing in securities. In July 2006, the SFC discovered a material shortfall in the securities held by Tiffit on behalf of its clients, and suspected misappropriation. On 24 July 2006, administrators were appointed, and, in May 2007, Tiffit was wound up. HLB had issued clean audit reports for Tiffit for the years ended 31 March 2004 and 31 March 2005, and had completed the 2006 audit. The decisions the subject of the judicial review application were made by the Council of the Institute in the course of dealing with the reference.

    The PAO

  17. The starting point for a consideration of a challenge to the lawfulness of an exercise of statutory power is the statute. It is therefore necessary to begin with an examination of the scheme of the PAO in relation to complaints and disciplinary proceedings.

  18. Part V of the PAO deals with Disciplinary Proceedings. It comprises ss 33 to 41B.

  19. Section 34(1) lists a series of complaints that may be made about a certified public accountant, and provides that such complaints shall be made to the Registrar, appointed under s 21, who shall submit the complaint to the Council which may, in its discretion, refer the complaint to the Disciplinary Panels. If the Council decides not to refer the complaint to the Disciplinary Panels, the complainant may request it to make the reference and the Council is obliged to do so unless it is of opinion that no prima facie case has been made out or that the complaint is frivolous or vexatious. One of the grounds of complaint is failure to observe a professional standard.

  20. Section 33 establishes the Disciplinary Panels, one (Panel A) consisting of lay persons appointed by the Chief Executive and one (Panel B) consisting of certified public accountants appointed by the Council. Where a complaint is referred to the Disciplinary Panels, the Council is required to constitute a Disciplinary Committee consisting of three persons from Panel A and two persons from Panel B.

  21. Sections 36 and 37 deal with the proceedings of a Disciplinary Committee. Hearings, subject to certain exceptions, are in public. A Committee may take evidence on oath and compel the attendance of witnesses. The complainant and the person whose conduct is the subject of the proceedings may be legally represented. The case against that person is presented either by the complainant or the complainant’s lawyer, or the Registrar or the Registrar’s lawyer, or a member of an Investigation Committee or the member’s lawyer, or some other person appointed by the Investigation Committee to represent it.

  22. The powers of a Disciplinary Committee, if satisfied that a complaint referred to it is proved, are set out in s 35. They include a power to order that the name of an accountant be removed from the register, either permanently or for a period, or to impose a fine or administer a reprimand. An appeal lies to the Court of Appeal which may confirm, vary or reverse the order appealed against.

  23. In brief, a complaint under s 34 is made to the Registrar who is obliged to submit it to the Council. The Council assesses complaints and decides whether they should go further. If the Council decides a complaint should go further then the complaint is dealt with after a full hearing on its merits by a Disciplinary Committee which is empowered to make orders against the accountant the subject of the complaint. If such an order is made, the accountant has a right of appeal to the Court of Appeal.

  24. Part VA of the PAO deals with investigations made on the initiative of the Council, which, after certain procedures have been followed, may result in the conduct of an accountant being referred to the Disciplinary Panels and dealt with under s 34, as if the matter were a complaint made to the Registrar by an Investigation Committee. Part VA comprises ss 42A to 42H.

  25. Section 42C(2) provides that where the Council reasonably suspects or believes that an accountant, or firm, has acted in a manner described in certain of the provisions of s 34, the Council may, in its discretion, constitute an Investigation Committee and direct the Committee, having considered the matter, to inform the Council as to whether in its opinion, were a complaint made against him or it, the accountant or firm would have a case to answer. Section 42C(1) provides that where an Investigation Committee so informs the Council, the Council may in its discretion refer the matter to the Disciplinary Panels and constitute a Disciplinary Committee pursuant to s 33 and the Disciplinary Committee shall deal with it as if it were a complaint under s 34, as mentioned above.

  26. An Investigation Committee is constituted as follows. Section 42B establishes two Investigation Panels, one (Panel A) comprising lay persons appointed by the Chief Executive and one (Panel B) comprising accountants appointed by the Council. An Investigation Committee is made up of three persons from Panel A and two persons from Panel B.

  27. An Investigation Committee is given certain investigative powers (s 42D), which include a power to compel production of documents and otherwise obtain information, including information from an accountant or firm.

  28. An Investigation Committee may delegate all or any of the powers given to it by s 42D.

  29. An Investigation Committee does not conduct hearings. Its task is to consider the matter and inform the Council whether in its opinion, were a complaint made against an accountant or firm, there would be a case to answer (s 42C(2)). If it so informs the Council, the Council may in its discretion refer the matter to the Disciplinary Panels and constitute a Disciplinary Committee (s 42C(1)).

  30. It is not open to doubt that, on the true construction of the PAO, an Investigation Committee, in exercising its statutory function of considering the matter, reaching an opinion about the conduct of an accountant or firm, and informing the Council of its opinion, is obliged to act fairly and to be, and appear to be, independent and impartial. At the same time, having regard to the nature of the case which the appellants seek to make, it is necessary to keep in mind the following features of the statutory scheme which bear upon the practical content of those obligations. First, neither the Investigation Committee nor the Council is required or empowered to make a decision on the merits of a case, or potential case, against an accountant or a firm, or to make orders against an accountant or firm. That is the role of the Disciplinary Committee. Secondly, the Investigation Committee is to form an opinion about whether there is a case to answer, and the Council, having been informed of that opinion, is to decide whether in its discretion it should refer the matter to the Disciplinary Panels and constitute a Disciplinary Committee. An opinion adverse to an accountant or a firm formed by the Investigation Committee does not necessarily result in such a reference by the Council, which has its own statutory discretion to exercise. The Council may not necessarily agree with the opinion of the Investigation Committee. An unfavourable opinion of an Investigation Committee is neither a necessary nor a sufficient condition for a referral. The range of discretionary considerations that might lead the Council to decide not to refer a matter to the Disciplinary Panels is bounded by the purposes of the Ordinance, but it is clear that under the statute it does not automatically make a reference on being informed of an adverse opinion. Thirdly, the nature and scope of the investigative work undertaken by an Investigation Committee, and the method of investigation adopted, is left largely in its own discretion. It has a capacity to delegate certain of its investigative powers. There is nothing to prevent it from seeking administrative assistance. In any case of substance, it is very likely to require such assistance, especially in view of the fact that a majority of its members are not themselves accountants.

  31. Section 51 of the PAO empowers the Council to make rules regulating the conduct of inquiries by the Disciplinary Committee and for other matters relating to such inquiries. Rule 5(b) of the Disciplinary Committee Proceedings Rules provides:

    5.

    The Council, before deciding whether or not to refer a complaint to the Disciplinary Panels:

    ....

    (b)

    shall invite the Respondent to submit to the Council in writing any explanation of his conduct or of any other matter alleged in the complaint which he may have to offer.

  32. In that regulatory context, what was said by Lord Denning MR in R v Race Relations Board, ex parte Selvarajan [1975] 1 WLR 1686 is in point:

    In recent years we have had to consider the procedure of many bodies who are required to make an investigation and form an opinion. ....In all these cases it has been held that the investigating body is under a duty to act fairly: but that which fairness requires depends upon the nature of the investigation and the consequences which it may have on persons affected by it. The fundamental rule is that, if a person may be subjected to pains or penalties, or be exposed to prosecution or proceedings, or deprived of remedies or redress, or in some such way adversely afflicted by the investigation and report, then he should be told the case made against him and be afforded a fair opportunity of answering it. The investigating body is, however, the master of its own procedure. It need not hold a hearing. It can do everything in writing. It need not allow lawyers. It need not put every detail of the case against a man. Suffice it if the broad grounds are given. It need not name its informants. It can give the substance only. Moreover, it need not do everything itself. It can employ secretaries and assistants to do all the preliminary work and leave much to them. But, in the end, the investigating body itself must come to its own decision and make its own report.

    The investigation and report

  33. The facts summarized below were established by the evidence of Nip Ting Ming, Peter (“Mr Nip”), the Institute’s Deputy Director, Compliance, and K P Morrison, a member of the Investigation Committee. That evidence was accepted by the primary judge. There was a challenge to the relevance of part of Mr Morrison’s evidence. It will be necessary to return to that.

  34. The conduct of HLB in respect of the audit was first raised with the Registrar of the Institute, and the President of the Council, by the SFC. The subject of concern was said by the SFC to be the steps taken by HLB for the purpose of verifying the reported stock holdings and account balances of Tiffit’s clients. More than 400 such clients were thought by the SFC to have been victims of misappropriation. The SFC provided the Council with a written statement of its own findings and observations. The Compliance Department of the Institute examined the SFC’s report and observations and recommended to the Council that an Investigation Committee be constituted. The Council so resolved. On 2 April 2007, the Investigation Committee was constituted. Its Chairman was a partner of a major law firm. Its two other lay (non-accountant) members were businessmen. There were also two accountant members, one of whom was Mr Morrison. Each member was required to declare that he had no conflict of interests.

  35. The Council appointed Ms Lee, of Elite International Consulting Limited, to act as a consultant to the Investigation Committee. The investigation proceeded from July 2007 until August 2009. Over that period, there were a number of meetings of the Investigation Committee and there was extensive correspondence between the Committee, HLB, HLB’s lawyers and the Council. Meetings of the Committee were attended both by Ms Lee and by officers of the Compliance Department. The Committee sought and obtained from HLB and its lawyers a substantial amount of information about the audits in question.

  36. In July 2008, Ms Lee furnished the Investigation Committee with a Discussion Draft headed “Preliminary Findings”. It began by saying that its purpose was to set out for the Committee’s consideration preliminary findings of the review of HLB’s audit working papers and their responses to inquiries made of them. It was a document of some 62 pages. Its conclusions were expressed in such terms as: “The Committee may wish to consider ....” The document identified a number of Statements of Auditing Standards (“SAS”) against which it said the conduct of HLB was to be measured. It went into detail about what were said to be deficiencies revealed by the investigation, and by HLB’s responses to questions about their audit.

  37. On 8 July 2008, at a meeting of the Investigation Committee, the Committee directed that the Compliance Department draft for its consideration a report to the Council based on the proposed findings suggested by Ms Lee.

  38. On 28 November 2008, the Investigation Committee met to consider a draft report prepared by the Compliance Department. Also present at the meeting were three officers of the Compliance Department. The draft report was of some 30 pages. It referred to the same SAS standards as had been referred to in Ms Lee’s Discussion Draft. The Investigation Committee directed that a number of amendments be made to the draft, and that the draft as amended should be sent to HLB for comment. Before that was done, however, certain further information was requested from HLB about some administrative details.

  39. On 28 April 2009, the draft report was sent to HLB by the Chairman of the Investigation Committee, inviting comments by way of written submission.

  40. After various extensions of time granted at the request of HLB’s lawyers, the Investigation Committee, on 30 July 2009, decided that it would not give HLB further time, and resolved to make a report to the Council in terms of the draft sent to HLB. A copy of the report was sent to HLB.

  41. The report was dated 27 August 2009. It consisted of 38 pages to which were attached a series of annexures extending over some 300 pages. Its conclusion was that the audit procedures evidenced in HLB’s working papers did not adequately support the opinions in the compliance reports it furnished in respect of Tiffit for the years ended 31 March 2004 and 31 March 2005 and that, were a complaint to be made against the appellants under s 34(1)(a)(vi) of the PAO, for failing or neglecting to observe, maintain or otherwise apply a professional standard, they would have a case to answer.

  42. On 2 September 2009, the appellants sent a letter, marked “Strictly Private and Confidential”, addressed to the Council of the Institute. The letter was accompanied by what was described as a report to the Council, of some 40 pages, which included allegations of procedural unfairness and apparent bias on the part of the Investigation Committee and certain of its members, a justification of the audit procedures undertaken in respect of Tiffit, and an independent expert report by a securities industry practitioner engaged by HLB to comment on the audit. The HLB report also made the point that the wrong accounting standards had been applied by the Investigation Committee. It said that the relevant standard was the Standard on Assurance Engagements (“SAE”), not the SAS.

  43. On 8 September 2009, Mr Hilliard of the Compliance Department wrote to HLB:

    In view of the volume of the submissions and the issues raised therein, it was decided that the submissions be referred to the Investigation Committee for its consideration, and that the presentation to the Council of the Investigation Committee’s report dated 27th August 2009 be deferred to allow adequate time for the Committee to properly consider the submissions.

  44. On 12 October 2009, the Investigation Committee met to consider the appellants’ submissions. In the meantime, the Compliance Department had drafted a revised report on the basis that the appellants were correct to say that the relevant standards were the SAE, not the SAS, but that the conduct that was earlier seen as a breach of certain SAS standards would equally be a breach of certain SAE standards. The meeting of the Investigation Committee was also attended by three officers of the Compliance Department. The Investigation Committee reviewed and discussed the revisions to the report of 27 August 2009 proposed by the Compliance Department. The Investigation Committee directed the Compliance Department to prepare a revised report. On 16 October 2009, the Compliance Department sent a draft revised report to the Chairman of the Investigation Committee. On 19 October 2009, the Chairman made comments, proposing certain alterations to the wording of the draft. This resulted in an amended draft report dated 20 October 2009.

  45. On 20 October 2009, the Chairman of the Investigation Committee wrote to the appellants:

    The Investigation Committee has considered the submissions and has further considered the findings set out in the Report of the Investigation Committee dated 27 August 2009 .... [T]he Investigation Committee agrees that the professional standards applicable .... are [the SAE]. Accordingly, the Investigation Committee has amended certain sections of the Report. A copy of the amended Report dated 20th October 2009 .... and a copy of the amended complaint letter are enclosed.

  46. On 6 November 2009, a new set of lawyers acting for the appellants wrote to the Registrar, copying their letter to each member of the Council. The letter complained that:

    1. The Registrar should not have disclosed to the Investigation Committee the appellants’ submissions of 2 September 2009.

    2. Two members of the Investigation Committee were associated with the SFC and therefore biased.

    The letter demanded that the Council “disallow” the Investigation Committee’s (draft) report of 20 October 2009 and refrain from referring the matter to Disciplinary Panels.

  47. On 9 November 2009, the appellants’ lawyers lodged disciplinary complaints under s 34 of the PAO against the Registrar, the Director of Compliance, and certain members of the Investigation Committee.

  48. On 16 November 2009, the Investigation Committee signed a report in the form of the draft report of 20 October 2009.

  49. On 12 December 2009, the lawyers for the Institute sent a detailed response to the appellants’ complaints, in which it was made clear that the Council had not yet dealt with the matter but that it proposed to do so, and inviting the appellants to make any submissions they wished to make “on the substance of the report dated 16 November 2009”.

  50. On 5 January 2010, the lawyers for the appellants wrote to the lawyers for the Institute repeating their complaints of bias and making a further complaint (which was later to become the focus of the present proceedings) of “an appearance that the Investigation Committee was simply rubber stamping a draft report which was wholly or substantially prepared by the staff”. The letter also addressed the substance of the allegations of deficiencies in HLB’s audit. The letter concluded by urging the Council:

    1. to dissolve the Investigation Committee and decline to accept its Reports;

    2. to find that the appellants have no case to answer; and

    3. to decline to refer the matter to Disciplinary Panels.

  51. On 8 January 2010, the lawyers for the Institute wrote to the lawyers for the appellants saying the Council would next meet on 19 January 2010 and that if the appellants had any further submissions to make they should make them by 12 January 2010. The letter said that the Institute did not intend to give any undertaking that it would not refer the matter to Disciplinary Panels.

  52. The appellants thereupon made an application for judicial review and obtained leave from Reyes J on 18 January 2010. The Council of the Institute has never made a decision as to the exercise of its discretionary power under s 42C of the PAO.

    The Proceedings for Judicial Review

  53. The respondent to the application for judicial review is the Institute. The decisions in respect of which relief is sought are identified as follows:

    (1)

    The Decision of the Respondent contained in its letter dated 12 December 2009 (‘the 1st Decision’) rejecting all the applicants’ complaints including inter alia the constitution of the Investigation Committee.

    (2)

    The Decision of the Respondent in its letter dated 8 January 2010 (‘the 2nd Decision’) refusing to consider re-constitution of a new Investigation Committee with different membership so that the statutory task of determining whether a prima facie case for disciplinary proceedings exists be conducted afresh by a new Investigation Committee.

  54. The application was amended in certain presently immaterial respects.

  55. The substantive relief sought is:

    1. An order of certiorari to bring up and quash the 1st and/or 2nd Decisions; and

    2. An order of mandamus requiring the respondent to re-constitute an Investigation Committee with different membership so that the statutory task of determining whether a prima facie case exists be conducted afresh by the new Investigation Committee without reference to the earlier reports produced by the existing Investigation Committee.

  56. The allegations of actual or apparent bias on the part of some members of the Investigation Committee were not pursued before Reyes J. The focal point of the appellants’ case became the allegation of lack of independence and impartiality on the part of the Investigation Committee said to have been manifested in an appearance of having “rubber stamped” the work of others.

  57. The following comments may be made:

    1. The decisions the subject of the application for judicial review are two decisions of the Council, each reflected in a letter from the Institute’s lawyers.

    2. Neither is a decision under s 42C(1) of the PAO. The Council had not reached the point of considering whether to exercise its power to refer the matter to Disciplinary Panels when these proceedings intervened. In December 2009 and January 2010, the Council had received, from the Investigation Committee and from the appellants, a substantial body of information and commentary on HLB’s audit work in respect of Tiffit. The appellants have not set out to demonstrate that, on that material, it would not have been reasonably open to the Council to decide that a referral was justified.

    3. It is difficult to relate either of the impugned decisions to any exercise of statutory power by the Council. The first impugned decision is said to be a decision rejecting the appellants’ complaints about the Investigation Committee. The Council does not have a statutory function of resolving complaints about an Investigation Committee, although in a given case such complaints could be relevant to a decision whether to proceed under s 42C(1). The second impugned decision is in substance a decision not to dissolve the Investigation Committee, re-constitute it and start the investigation afresh. It may be accepted that such a course would have been open to the Council, but it is another thing to say that it had a duty to follow that course before dealing with the question of whether to exercise its discretionary power under s42C(1).

    4. It is also difficult to relate the challenges to the decisions to the recognized grounds of judicial review of administrative action. In responding as it did to the demands of the appellants to “disallow” the reports of the Investigation Committee and re-constitute the Committee, the Council was acting within the bounds of its statutory authority. It did nothing illegal. It did not itself act in any way that was unfair. It did not act on irrelevant considerations, or fail to take relevant considerations into account. Its decisions were not affected by fraud. They were not unreasonable. What the Council decided, in substance, was that at a future meeting it would consider whether to exercise its discretionary power to refer the matter to Disciplinary Panels.

    The decision of Reyes J

  58. Reyes J summarized the arguments for the appellants as follows. (It will be noted that, as before the Court of Appeal, and as in this Court, they are substantially framed as arguments about the way in which the Investigation Committee acted, not as arguments going to acts or omissions of the maker of the impugned decisions, the Council). The Investigation Committee, it was argued, considered reports prepared by Ms Lee and the Compliance Department before reaching its own conclusion; it did not exercise its own independent judgment; it “rubber-stamped” the work of Ms Lee and the Compliance Department. In particular, the appellants pointed to the error about the applicable standard as evidence of an uncritical acceptance by the Investigation Committee of the work and opinions of Ms Lee and the Compliance Department.

  59. Reyes J rejected to appellants’ arguments on the facts. He pointed to what he described as the practicalities of the operations of an Investigation Committee. It is a part-time body. A majority of its members are not accountants. It is almost inevitable that they will require assistance to evaluate voluminous audit working papers. He also pointed to its function. It is not a decision-making tribunal. There is no formal process it is required to follow. It does not conduct hearings. It forms an opinion and informs the Council of its opinion. The Council is not obliged to accept that opinion. He rejected the suggestion that there was anything untoward or inappropriate in the Investigation Committee’s reliance on extensive assistance from outside. As to the original application of the wrong standard, Reyes J said he did not think a fair-minded observer would conclude from that, or any other of the circumstances, that the Investigation Committee took any of the drafts at face value and blindly copied them without making an independent assessment of the contents.

  60. Furthermore, Reyes J referred to the evidence of Mr Morrison and Mr Nip. Both of those witnesses gave detailed evidence of the chronology, of the meetings of the Investigation Committee, and of the communications between the Committee and others, including HLB. In introducing his account of the work done by the Committee, Mr Morrison said:

    I attended all meetings of the Investigation Committee in connection with the investigation. Contrary to the assertions made by the Applicants, the reports which were issued by the Investigation Committee on 27th August 2009 and 16th November 2009 reflected the independent judgment of the Investigation Committee, reached after careful consideration of the evidence by the Committee.

    He did not rest upon that assertion, but went on, over several paragraphs of evidence, to explain what the Committee did by way of considering reports, asking further questions, identifying issues for further enquiry, and discussing the merits of the matter. It may be added that one of the draft reports before the Committee bears handwritten notes and comments that appear inconsistent with an uncritical acceptance of the draft. When this Court asked whose handwriting it was, the Court was informed that it was that of the Chairman of the Committee. Reyes J said that the Institute’s evidence could not be ignored as self-serving. Weight should be given to it.

  61. Reyes J, accepting that the Investigation Committee was required to be independent and impartial, said the real question was what was the “requisite degree” that must be shown. He said:

    There is a whole spectrum of independence and impartiality. The more formal the nature of the decision-maker and the more significant the consequences of its decision, the more rigorous the degree of independence and impartiality that such entity must show.

    He concluded that there was no basis for the criticisms made by the appellants.

  62. In addition, although saying it was strictly unnecessary to his decision, Reyes J expressed the view that the judicial review proceedings were premature. The matter, he said, had a way to go before any binding decision was reached. The work of the Investigation Committee was part of a more extensive process that gave adequate protection to the rights of the appellants.

    The Court of Appeal

  63. In the Court of Appeal, Mr Justice Tang VP, with whom Chu JA and Lam J agreed, examined, and substantially agreed with, the decision of Reyes J on the argument as to the appearance of independence and impartiality of the Investigation Committee. He did not find it necessary to go into the question of prematurity.

  64. The Vice-President said that, in the Court of Appeal, the lynchpin of the appellants’ submission was the decision of the Court of Final Appeal in Medical Council of Hong Kong v Helen Chan (2010) 13 HKCFAR 248. That case concerned the procedures of the Medical Council of Hong Kong, which exercised disciplinary powers in respect of doctors. The Council was a deliberative body that decided issues of alleged professional misconduct. It used the services of a legal adviser, who was present at the Council’s deliberations, and produced a draft of the Council’s decision. Mr Justice Bokhary PJ, with whom the other members of the court agreed, found that the practice was not unlawful, noting that it was regulated by the Regulations under which the Council operated. However, he cautioned against participation in the deliberative process of a tribunal by a non-member. He went on to examine a number of authorities dealing with the circumstances in which inappropriate involvement of a non-member will compromise the independence and impartiality of a tribunal, and made certain recommendations for the assistance of bodies such as the Medical Council.

  65. The Vice-President referred to the passage in the judgment of Reyes J set out at para 61 above, with which he agreed, and said that, on the evidence which he set out and discussed, it was clear that the Investigation Committee had not acted as a rubber stamp and that he “did not believe the conduct of the Investigation Committee could be described as unfair, lacking in independence or impartiality in any way”.

    The appeal to this Court

  66. In this Court, the appellants advanced three criticisms of the reasoning of the Court of Appeal and the primary judge:

    1. It was said that the passage in para 61 above from the judgment of Reyes J, expressly approved by the Court of Appeal, wrongly sanctioned and applied a variable or flexible standard of independence and impartiality, as though the Investigation Committee was not required to be as independent and impartial as, say, a tribunal that decides rights or liabilities.

    2. That part of the evidence of Mr Morrison which asserted that, in fact, the Investigation Committee gave independent consideration to the work of Ms Lee and the Compliance Department was said to be irrelevant; the question was one of appearances, and reliance on the whole of Mr Morrison’s evidence revealed a misconception as to the true nature of the enquiry.

    3. The Court of Appeal was said to have failed to apply Medical Council of Hong Kong v Helen Chan.

  67. The PAO creates a number of procedures by which the conduct of an accountant may come before a Disciplinary Committee, which will then conduct a hearing, with the possibility of an appeal to the Court of Appeal. For present purposes, it is sufficient to consider two. One is initiated by a complaint to the Council under s 34. The Council has a discretion to refer the complaint to the Disciplinary Panels. The other follows a suspicion or belief by the Council itself of certain conduct of a kind that attracts sanctions. In that event, the Council may institute an investigative process through the mechanism of an Investigation Committee. The result of the information obtained by the investigation may or may not be a referral to Disciplinary Panels and the constitution of a Disciplinary Committee. The constitution and role of an Investigation Committee reflects a statutory purpose that it be, and appear to be, independent and impartial. At the same time, the nature of the Investigation Committee and of its work suggests that, at least in substantial cases, it will need assistance, and the assistance of people such as Ms Lee and the officers of the Compliance Department is clearly within legislative contemplation.

  68. The concept of independence and impartiality does not vary in its meaning as between different kinds of administrative body, but its practical content varies according to circumstances which include the functions assigned to the body, and its place in a wider statutory scheme. Conduct that may compromise the appearance of independence and impartiality of one person or body required to form an opinion for the purposes of one statutory scheme may not have that effect in the case of another. In Clark v Kelly [2004] 1 AC 681 (PC), a case concerning the role of clerks to justices in Scotland, Lord Hoffmann said, at 691:

    Although the position of the clerk attracts requirements of independence under article 6(1), it does not follow that those requirements are identical with those of every other person performing judicial duties. Regard must be had to the nature of the judicial process in which he is engaged, the part he plays in it, the part played by others (including an appellate court) and the institutional and practical safeguards which exist to preserve and to demonstrate the preservation of his independence.

  69. To take a simple example, even when not sequestered, jurors are routinely admonished not to discuss the case with anyone else. There are a number of reasons for this; one is to ensure that their independence and impartiality will not be compromised. No one would suggest, and the appellants did not suggest, that the same requirement of isolation applied to the Investigation Committee. Such a requirement was neither necessary nor appropriate for the work of the Committee.

  70. The function of investigation, even where it is required by statute to be performed independently and impartially, almost always involves contact between the investigator and third parties. The circumstances of the case will determine what is a fair and efficient procedure. In this respect, the PAO, understandably, is not prescriptive. The investigative process will be tailored to the individual case. One investigation may call for extensive outside input and assistance. Another may call for practically none. The work of the Investigation Committee in this case lasted more than two years and involved extensive paperwork. Another investigation might be concluded in weeks or even days. In this case, the Investigation Committee made a formal and lengthy report to the Council. That was appropriate in the particular circumstances, but it was not mandated by the PAO. In this case, the Investigation Committee required, or at least received, extensive administrative support. In other cases, that might not be necessary. In the end, what was essential was that the Investigation Committee made up its own mind, and formed its own opinion, on the question it was directed by the Council to consider, and then informed the Council of its opinion.

  71. No attempt was made to demonstrate, by reference to the substance of the report of 16 November 2009, that a conclusion that there was a case for the appellants to answer was not reasonably open to the Investigation Committee, or that the material contained in the report could not justify a decision by the Council to refer the matter to the Disciplinary Panels.

  72. The complaint that the primary judge and the Court of Appeal wrongly accepted and applied a variable standard of independence and impartiality is puzzling in view of the nature of the factual case that the appellants set out to establish. The central allegation made by the appellants was that the Investigation rubber-stamped, or appeared to have rubber-stamped, the work of outsiders. That allegation was rejected, and correctly rejected, on the evidence. Suppose, however, it had been accepted. What scope would there have been for the application of some supposedly variable standard?

  73. The primary judge and the Court of Appeal were addressing an issue of fact. In the circumstances of the present case, did the conduct of the Investigation Committee and those upon whom it relied for assistance create a reasonable apprehension that the Investigation Committee was not independent and impartial and, in particular, that it did not “come to its own decision and make its own report”? In answering that question of fact in the negative, the primary judge and the Court of Appeal rightly recognized that the kind of conduct that may warrant such an apprehension in the case of one kind of statutory body or tribunal may not do so in the case of another. That is all that was meant by the passage quoted in para 61 above.

  74. The reliance upon the evidence of Mr Morrison was said to reflect a misunderstanding of the appellants’ case; that case was based on appearances, and Mr Morrison’s statement that he made up his own mind was said to be irrelevant.

  75. The reasons for judgment reflect no such misunderstanding. Mr Morrison’s statement in his evidence that he made up his own mind was prefatory to an account of the Investigation Committee’s work and procedure. On any view, that account was relevant and admissible. Where a court, undertaking judicial review, has to deal with an allegation that a decision-making process was such as to create in the mind of a reasonable person an appearance of bias or lack of independence and impartiality, then evidence which gives a full account of the objective facts and circumstances of the process will often be necessary. How otherwise could the likelihood and reasonableness of the supposed apprehension be determined? In Australia, in the application of the reasonable apprehension test in cases of alleged lack of impartiality, it is clearly established that the question is to be asked in terms of a reasonable apprehension on the part of a fair-minded observer with knowledge of all the material facts as they are ultimately found to have been, not merely of such facts as might have appeared at the time to one or other of the parties (Webb v The Queen (1994) 181 CLR 41 per Deane J at 73. See also Johnson v Johnson (2000) 201 CLR 488).

  76. In pursuing an allegation that what occurred in the decision-making process of the Investigation Committee created an appearance that the Committee merely rubber-stamped the work of others, the appellants were not entitled to be selective when it came to evidence of what occurred. The court was entitled, and obliged, to consider all the objective facts concerning that process, regardless of whether they were known to the appellants at the time the allegation was first made. The Investigation Committee did not carry out its work in public, like a court. In fact, it was bound by obligations of secrecy (PAO, s 42G). Inevitably, the appellants would be aware of some aspects of the way in which it worked, but not others. In some respects, the extent of their knowledge might have been a matter of chance. However, the nature of the challenge to the work of the Investigation Committee made by the appellants required examination of all the objective facts referred to in the evidence of Mr Morrison and Mr Nip.

  77. In relation to the matter of the error as to the relevant professional standards and its later correction, the lawyers for the appellants, in their letter to the Council of 5 January 2010, and again in their application for judicial review, referred to a statement that the Committee “accepted that the professional standards referred to .... in [the] report of 27th August were incorrect and amended its report”. The lawyers then said:

    This admission is extremely disturbing because what underlies it is an appearance that the Investigation Committee was simply rubber stamping a draft report which was wholly or substantially prepared by the staff of the secretariat or the Institute without even cross checking the most basic ingredients of the complaints which the Investigation Committee was supposed to be investigating, namely, the relevant ‘professional standards’ which were applicable to the subject matter of the investigation. It is hard to believe that the members as experienced as those sitting on the Investigation Committee would all have taken the care and have exercised their independent assessment and judgment and yet had all failed to detect the basic errors which are now admitted. ....

  78. In the allegation framed in that manner, there is an overlap between an accusation about what in fact occurred, and one about what appeared to have occurred. It was this passage that prompted Mr Morrison’s statement in his affidavit that he had been informed that the appellants alleged that there had been a rubber-stamping, and his denial of that allegation, made, as was said earlier, by way of introduction to an account of the objective facts. Having regard to the way the allegation was put, evidence from Mr Morrison that the Committee in fact formed its own judgment was admissible. It is true that it was, in a sense, self-serving, but that is not a ground of objection to evidence. Many witnesses give evidence that is self-serving. That goes to its weight, not its admissibility. In a case where a ground of complaint is apprehended bias, it is not relevant for a decision-maker to say: “I did not feel biased”. “No attempt need be made to inquire into the actual thought processes of the judge” (Ebner v Official Trustee in Bankruptcy (2001) 205 CLR 337 at 345). In this case, however, the allegation was made in terms that invited the response that was given, and the response was relevant.

  79. The complaint of failure to pay due regard to the decision in Medical Council of Hong Kong v Helen Chan has not been made out. The Court of Appeal described it as the “lynchpin” of the appellants’ argument. That, however, was a case about the procedures of a body that made decisions dealing finally with the merits of charges of professional misconduct. In Clark v Kelly [2004] 1 AC 681 at 692, Lord Hoffmann said:

    [T]here are tribunals in which the person whose independence is called into question is not in name or substance a presiding judge in the paradigm sense and in which it may be necessary to look at the decision-making process as a whole, including the right of appeal.

  80. The kind of outside involvement that might be sufficient to call into question the independence and impartiality of a judge, or juror, or disciplinary tribunal, may be quite different from that which would have the same effect in relation to a body whose role is purely investigatory.

    Conclusion

  81. The challenges to the decision of the Court of Appeal have not been made out.

  82. Furthermore, the reservations expressed by Reyes J as to what he called the premature nature of the application for judicial review were justified. Looked at from a slightly different point of view, the problem for the appellants was that they were forced into an artificial characterization of the decisions the subject of their application, and of the grounds upon which they were seeking judicial review. They made an energetic, but unsuccessful, attack on the process of the Investigation Committee, but sought judicial review of “decisions” of the Council which amounted in substance to no more than an expression of an intention to exercise its statutory functions under s 42C(1) of the PAO. The statutory condition for that exercise (the receipt of information that, in the opinion of the Investigation Committee, there was a prima facie case against the appellants) was satisfied. There was no statutory obligation on the Council to disregard that information and constitute another Investigation Committee. What, if anything, the Council would have made of the criticisms of the Investigation Committee when it came to make a decision under s 42C(1) is unknown. The matter never reached that stage.

  83. The appeal fails.


[1] By “illegality” Lord Diplock meant that the decision-maker had misunderstood the law which regulated its power: see p 410-F; sometimes referred to as ultra vires or want of jurisdiction.

[2] By “procedural impropriety” Lord Diplock meant that the decision-maker had failed to observe procedural rules laid down in the statute which conferred jurisdiction on the decision-maker.

[3] “Irrationality”: A decision so outrageous that no sensible person who had applied his mind to the right question could been made: “Wednesbury unreasonableness.”


Representations

Gerard McCoy SC and Johnny Ma (instructed by Smyth & Co), for the appellants.

Paul Shieh SC and Bernard Man (instructed by Reed Smith Richards Butler), for the respondent.


all rights reserved