Hong Kong court quashed non-publicity order made by HKICPA

Professionals facing disciplinary actions would be concerned to protect their legal position as much as their reputation.  It is not surprising that a question frequently asked by respondents is whether the disciplinary action they face can stay private.   

In a recent judicial review judgment, the Hong Kong Court of First Instance quashed an order made by a disciplinary committee ("DC") of the Hong Kong Institute of Certified Public Accountants (the "HKICPA") to constrain publication of the sanction imposed on two accountants in a disciplinary proceedings ("Non-Publicity Order"): The Registrar of HKICPA v Disciplinary Committee of HKICPA.

Background

The Non-Publicity Order was made as the DC upheld a complaint that the accountants were in breach of section 34(1)(a)(vi) of the Professional Accountants Ordinance ("PAO") by failing or neglecting to observe, maintain or otherwise apply Hong Kong Accounting Standard 39 ("Disciplinary Order").  In its reasons, the DC spelt out a number of mitigating circumstances, including, that the accountants made a judgement error and came to the wrong conclusion largely due to the lack of an authoritative interpretation and diverse practices relating to HKAS 39; that investors were unlikely to have suffered loss as a result of the non-complying accounting treatment.  The DC decided to make the Non-Publicity Order because of the strong mitigating circumstances relating to the accountant's contravention. 

Section 35 of the PAO does not include any express power to impose a restriction on the publicity of sanctions, but Rule 11 of the Disciplinary Committee Proceedings Rules provides that the Chairman or the DC may, in their discretion and at any stage of the proceedings "dispense with or vary any of the requirements of the [Rules] ... or make such directions for the conduct of the proceedings as they consider appropriate ...".

There was no application by any party to hear the disciplinary complaint in private; the disciplinary hearing was held in public.  During the disciplinary hearing, the accountants submitted, if publication of the details of the case was necessary for the education of members of the profession, it should be on a "no name" basis.  The Committee did not indicate that it might make an order constraining publication and the Registrar's representative did not address the point.

The Non-Publicity Order constrained the publication of the sanction but not the identity of the accountants, and it followed that the Disciplinary Order and part of the DC's written reasons relating to sanction should not be published without the accountants' consent.

The accountants lodged an appeal to the Court of Appeal against the Disciplinary Order and the Registrar filed a cross-appeal in respect of, amongst other things, the Non-Publicity Order.  Both the appeal and the cross-appeal were unsuccessful; as to the latter, the Court of Appeal considered it had no jurisdiction to hear it.  Thereafter the Registrar obtained leave to apply for judicial review of the Non-Publicity Order. 

The judicial review

It was the Registrar's case that the Non-Publicity Order was unlawful, because:

• It ran contrary to the principle of open justice and the legislative intent under the PAO; and
• It was irrational.

By the time the judicial review was heard, the accountants' appeal to the Court of Final Appeal against the Disciplinary Order had failed, and they had consented to the publication of the full and unredacted version of the DC's written reasons.  The Registrar proceeded with the judicial review nonetheless, as the Non-Publicity Order remained valid and binding.  The Registrar was also concerned that it would set a precedent for future applications for non-publication orders.  The Disciplinary Committee took a neutral stance in the judicial review proceedings.

It is worth noting that the Registrar has no right of statutory appeal in respect of a disciplinary order.  Nor can the Registrar challenge a disciplinary order by cross-appeal in an accountant's appeal.  It is accordingly only open to the Registrar to challenge such an order by judicial review. 

The judgment

The court was of the view that the principle of open justice clearly applies to disciplinary proceedings regulating the accountancy profession envisaged under the PAO.  In view of the legislative intent to maintain open justice and transparency, the DC should take into account the principle and give sufficient weight to it. 

The court describes the application of the principle of open justice as "plain", considering:

• Section 36(1A) of the PAO requires disciplinary proceedings generally to be held in public, subject to a DC's discretion to do it otherwise in the interests of justice.  The provision represented a fundamental change from the previous (pre-2004) position that disciplinary proceedings were to be conducted by default in camera unless otherwise directed. 
• The DC is exercising a quasi-judicial function in regulating accountants, who play an important role and function in society and are generally respected and entrusted by the public.  The disciplinary mechanism is in place to hold the profession accountable and subject to public scrutiny, which would in turn protect the reputation and integrity of the profession as a whole.

Therefore:

• The "interests of justice" to be considered by the DC should include the principle of open justice for the benefit of the general public.
• The DC should bear in mind the importance attributed to the principle by the legislature, as proceedings are by default to be held in open hearings to ensure transparency.

The court held that, in making the Non-Publicity Order, the DC had not given any consideration (let alone giving due weight) to the principle of open justice.  The DC had therefore erred in principle as it failed to take into account a relevant consideration and to engage itself in the requisite balancing exercise.  The court found the order to be irrational in any event, as it intended only to prohibit the publication of the sanction made against the accountants but not their identity (which was what the accountants had sought in the first place).  On this basis, the court quashed the Non-Publicity Order. 

What does this mean for professionals facing disciplinary proceedings?

This would appear to be the first court case on the principles that apply in the making of a non-publicity order in HKICPA disciplinary proceedings.  The Court of First Instance has made it clear that there is a heavy tilt in favour of maintaining open justice.  Accountant respondents who wish to suppress publicity of disciplinary findings against them will likely find themselves fighting an uphill battle.  This case also goes to show the extent to which the Registrar would be willing to go to fight an order constraining publication which in its view was incorrect. 

This is not to say that the court will never accede to applications for non-publication.  The Court of Appeal in Registrar of HKICPA v X (cited in Registrar of HKICPA v DC of HKICPA) ordered an interim stay of publication of a disciplinary decision pending the final determination of the accountants' appeal.  In that case, the court found the existence of a statutory policy to protect certified public accountants from the adverse and often irreversible reputational effects of sanctions pending appeal.

It boils down to the "interests of justice". Clearly professional embarrassment and damage to professional reputations are not themselves sufficient reasons to suppress publication.