Tiger Asia Management LLC (the 1st Defendant), is a New York-based hedge fund manager specialising in equity investments in China, Japan and Korea with no physical presence in Hong Kong. All of its employees (including Sung Kook Hwang Bill (the 2nd Defendant), Raymond Park (the 3rd Defendant) and William Tomita (the 4th Defendant)) are located in New York.
The SFC alleged that the 1st Defendant to 4th Defendant (together, the Defendants) had committed insider dealing and false trading in two short sales and one long sale of the shares of China Construction Bank Corporation and the Bank of China in December 2008 and January 2009 after receiving price sensitive information from its bankers. Under the SFO, there are civil and criminal regimes for market misconduct offences. If a defendant is prosecuted under one regime, he cannot subsequently be prosecuted for the same offence under the other, i.e. they are mutually exclusive regimes. No formal proceedings in the Market Misconduct Tribunal (MMT) or criminal proceedings had been commenced against the Defendants in relation to these allegations.
In August 2009, the SFC applied to the High Court for injunctive relief against the Defendants, including final orders restraining the disposal of assets and for the account of profits, under section 213 SFO. Section 213 SFO provides the SFC with the authority to apply to and obtain from the High Court, injunctive and other interim relief, and sets out the procedure for the application of such an order.
The SFC sought injunctive relief under section 213 of the SFO by relying on alleged contraventions of Part XIV of the SFO (i.e. the market misconduct offences under the criminal regime). In addition, the SFC sought various declarations from the High Court to the effect that the Defendants had contravened the criminal provisions under sections 291 (insider dealing) and 295 (false trading) of the SFO and, thus, fell within the ambit of section 213 SFO.
The Defendants’ case was that the High Court does not have the jurisdiction to make the declarations sought by the SFC and, therefore, the SFC’s case did not disclose a reasonable cause of action, was an abuse of process and should be struck out.
The SFC referred to various cases in which the High Court had considered applications under section 213 SFO (including cases involving market misconduct offences), but questions of jurisdiction had not been raised in these cases.
The case was heard before Hon Harris J. The issue was how a contravention of a provision in both Parts XIII (the civil regime) and XIV (the criminal regime) of the SFO is established.