Hong Kong – Appeal case reviews adequacy of regulator’s reasons not to proceed with complaint

In Ng Shek Wai v HKICPA, the Court of Appeal reviewed the adequacy of the reasons for a regulator's decision that there was no prima facie case of professional misconduct.

The issue arose in the context of an application for judicial review. The applicant had made a complaint against a certified public accountant and sought to challenge the respondent's decision that no prima facie case of professional misconduct had been shown by claiming that the respondent had failed to give adequate or sufficient reasons for the decision. While there is (as yet) no common law general duty on the part of an administrative body to give reasons for their decisions, this is a developing area of the law in Hong Kong and much depends on the legal framework within which a regulator takes a decision.² Where reasons are given, they need only deal with the relevant and substantial issues before the regulator and explain why the regulator came to the decision. In this case, the respondent had adequately explained the decision that no prima facie case of professional misconduct had been disclosed against the accountant. 

The applicant is the owner of a flat in a residential building in Hong Kong.  He became dissatisfied with renovation works that had taken place at the building in 2012-13. The applicant set out his concerns in a letter, dated 30 June 2015, to the certified public accountant who had been engaged by the building's incorporated owners to audit its accounts for the years during which the renovation works had been carried out. Dissatisfied with the accountant's reply and follow-up action, the applicant made a formal complaint to the Hong Kong Institute of Certified Public Accountants (the respondent) on 10 August 2015. Further correspondence followed between the applicant and the staff of the respondent's compliance department which had also sought representations from the accountant.  

The compliance department submitted a report to the respondent's professional conduct committee (the committee) which concluded that the applicant had not provided sufficient evidence to establish a prima facie case of professional misconduct on the part of the accountant. The respondent had delegated to the committee the task of considering reports from the compliance department with respect to complaints of professional misconduct. It is worth noting that the committee was made up of independent certified public accountants.  The committee agreed with the compliance department's finding and resolved to take no further action.  

The compliance department notified the applicant of the committee's decision by letter on 3 February 2016, explaining that the committee had reviewed the complaint and "Based on the information before it, the Committee considers that no prima facie case was shown". Pursuant to the applicant's request by subsequent emails, the respondent further explained in writing the essential reasons for the committee's decision – in short, confirming that the respondent was satisfied that the information and documents provided by the applicant had not been sufficient to establish the applicant's allegations.  
 
Dissatisfied with the respondent's decision, the applicant applied for judicial review.  In essence, the applicant claimed that the respondent had failed to provide sufficient reasons regarding the committee's decision.  A judge dismissed the application in a fully reasoned decision, dated 11 January 2021.³ The judge found that the reasons given by the respondent for dismissing the applicant's complaint were sufficient to enable him to understand why the committee had come to its decision and what conclusions had been reached on the principal issues that arose.  In the course of arriving at his decision, the judge had regard to several other considerations – including (among others) the impact on the applicant's rights, any alleged prejudice suffered by the applicant and the nature of the committee's role.  

The applicant appealed to the Court of Appeal.  The applicant raised several grounds of appeal.  The main issue for consideration by the Court of Appeal was whether the respondent had given sufficient reasons for the committee's decision. 

Appeal

Adequacy of Reasons

In considering the adequacy of the reasons given for the committee's decision, the Court of Appeal made a number of observations.  These included:

• where a decision-maker gives reasons as part of a regulatory investigation, the reasons may be brief and succinct.⁴
• it is not necessary for a decision-maker to consider and deal with every single issue raised by a complainant.  The decision-maker need only deal with the relevant and substantial issues and explain why they have come to their decision. ⁵
• applying settled case law, whether the reasons given by a decision-maker in a regulatory context are sufficient depends on the legal framework within which the regulator takes a decision and upon the facts of the case – context and common sense should guide the court's approach.⁶
• there is no rule that all of a decision-maker's reasons must be set out in one document or decision letter. The Court of Appeal observed that:

"The reasons for a decision may be gleaned from more than one document in a chain of communications between the decision-maker and the applicant."⁷

Applying these principles, the Court of Appeal noted that the main issue before the judge had been whether the committee's decision and the chain of emails passing between the applicant and the respondent had: (i) sufficiently addressed the substantial issues relevant to whether there was a prima facie case of professional misconduct based on the materials available and (ii) adequately explained to the applicant why the respondent considered that there was no prima facie case.⁸  

In conclusion, as regards the adequacy of reasons, the Court of Appeal stated:

"In considering whether the reasons given by the Institute for the Decision are adequate or sufficient, it is important to bear in mind that the issue is not whether the Decision is reasonable or correct. The present judicial review is not about the rationality, still less the correctness, of the Decision. It is only concerned with the adequacy or sufficiency of the reasons given by Institute. We consider that the Institute has given sufficient reasons for the Decision in the context of the present case."⁹ 

Overall Assessment

As regards the applicant's specific grounds of appeal, the Court of Appeal rejected all of them.

Interestingly, the Court of Appeal specifically addressed the applicant's argument that the judge (at first instance) had taken into account several other considerations in order to, in effect, relieve the respondent of a duty to give sufficient reasons.  The Court of Appeal explained that this was a misreading of the judgment – what the judge had done was to explain why, having regard to these other considerations, the respondent was not under any duty to provide "more detailed reasons".¹⁰   Without deciding the point, the Court of Appeal considered that a preferable approach would have been to take these other considerations into account in an overall assessment of the adequacy of the reasons given.¹¹ 

The Court of Appeal dismissed the applicant's appeal.  

Comment

Both the Court of Appeal's and the lower court's judgments are interesting and useful summaries regarding the adequacy of a regulator's reasons not to proceed with a complaint of professional misconduct – in particular, in the context of a decision made by a professional body that, after an initial investigation, there is no prima facie case to proceed.  

While there is (as yet) in Hong Kong no common law general duty on the part of administrative body to give reasons for their decisions, this is a developing area of the law to which legal practitioners and regulators (and those they regulate) should pay attention.  It is an area that is probably ripe for further appellate court clarification as the demands on regulators and those they regulate increase.  However, the reference in the Court of Appeal's judgment to case law that emphasises the importance of "context" and "common sense" is a good guiding principle.

It is worth emphasising that, in judicial review challenges such as this one, the issue for determination by the courts does not concern whether the regulator's decision is correct – rather, the focus is on the adequacy of the reasons given for the decision.   

Finally, there is an interesting passage in the Court of Appeal's judgment regarding the relevance of any alleged prejudice to the applicant arising from either a failure to give adequate reasons or the decision itself and the distinction between the two.  In addition to showing that a decision-maker has failed to give sufficient reasons, it is for an applicant to show that they have suffered substantial prejudice by that alleged failure.¹² In this case, it is not entirely clear what prejudice the applicant claimed to have suffered.  However, the issue of alleged prejudice was secondary to the main point of the Court of Appeal's judgment – the takeaway point being that, when it comes to the adequacy of the reasons for a regulator's decision, the context is crucial.   

This article was originally published in the Litigation Newsletter of the International Law Office.

RPC acted for the respondent in the proceedings. Please contact Samuel Hung by email (samuel.hung@rpc.com.hk) or by telephone (+852 2216 7138), if you have any queries regarding the general issues raised in this article.  

References

¹ Ng Shek Wai v Hong Kong Institute of Certified Public Accountants [2021] HKCA 1920, 20 December 2021.
² For example, Keung Kin Wah v Law Society of Hong Kong [2021] 5 HKLRD 413, 8 November 2021 and Capital Rich Development Ltd v Town Planning Board [2007] 2 HKLRD 155.
³ [2021] HKCFI 46.
⁴ Supra note 1, at para 22.
⁵ Supra note 1, at para 22.
⁶ Capital Rich Development Ltd v Town Planning Board [2007] 2 HKLRD 155.
⁷ Supra note 1, at para 24.
⁸ Supra note 1, at para 25.
⁹ Supra note 1, at para 30.
¹⁰ Supra note 1, at para 34.
¹¹ Supra note 1, at para 35. Also see Keung Kin Wah v Law Society of Hong Kong [2021] 5 HKLRD 413, at para 42.
¹² Supra note 1, at paras 37-39.