In each of five actions (the Actions), Ps sued D, a corporation licensed to carry on business in dealing in securities and asset management in Hong Kong, for dishonoured cheques drawn in Ps’ favour. The Securities and Futures Commission (the SFC) applied for leave to intervene in the Actions pursuant to s.385 of the Securities and Futures Ordinance (Cap.571) (the SFO) based on suspicions that Ps and another had engaged in manipulative trading designed to ramp up the share price of a listed company to an artificially high level to facilitate the disposal of their shares in that company and that the sums claimed in the Actions represented the proceeds of such market misconduct. Section 385 of the SFO provides inter alia for the power of the SFC to intervene in any proceedings (other than criminal) which concern a matter provided for in any of the “relevant provisions”, defined in Sch.1 to the SFO, or in which the SFC has an interest by virtue of its functions under any of the relevant provisions.
Held, allowing the applications, that:
There were legal proceedings which “concern” a matter provided for in the relevant provisions as defined in Sch.1 to the SFO. The word “concern” in s.385(1)(a) of the SFO was of wide import. While the Actions did not at present raise the issue whether the alleged market misconduct was committed, they were in substance claims for the sale proceeds of shares which, the SFC claimed, were the subject of market manipulation. Further, the SFC had an interest in ensuring that funds possibly representing the proceeds of market misconduct were not dissipated pending investigation, for they may be a source from which, for example, payments may be required to be made as a result of other proceedings subsequently brought by the SFC. (See para.19.)
It was an appropriate case in which to permit intervention by the SFC. There were grounds to suspect that Ps had committed market misconduct or contravened the provisions of the SFO. The SFC had a legitimate interest in seeking to ensure that there remained substantial funds in Hong Kong to meet such potential liabilities. It also had reasonable grounds to fear that the Actions were collusive litigation or at least that the Actions would not be defended by D with sufficient vigour or thoroughness. It had a legitimate interest to prevent Ps from obtaining and then enforcing any judgment against D. (See para.20.)
These were applications by the Securities and Futures Commission pursuant to s.385 of the Securities and Futures Ordinance (Cap.571) for leave to intervene.