Cheung Kong

Lawyers call for SFC to explore criminal probe into Apex deal

Lawyers say there is 'public expectation' probe will continue into Cheung Kong hotel suites sales

PUBLISHED : Sunday, 19 May, 2013, 12:00am
UPDATED : Sunday, 19 May, 2013, 5:55am

Lawyers have urged the securities regulator to continue exploring the potential for a criminal investigation into Cheung Kong's controversial sales of hotel suites in Kwai Chung despite its pact with the developer to cancel the sales.

Their call came as it emerged that the Department of Justice, which has the final say over prosecutions, had not been consulted over the case.

A spokeswoman for the department confirmed that it had not been informed of the matter, while reasserting its authority.

"Save in the limited circumstances where the [commission] can prosecute certain criminal offences … the DoJ has the authority to control criminal prosecution under article 63 of the Basic Law," the spokeswoman said in reply to an inquiry by the Sunday Morning Post.

She said that depending on the nature of a case, there would be communication between the two bodies where circumstances required.

Last week, both the Securities and Futures Commission and Cheung Kong announced they had reached an agreement for the developer to cancel the sales of all 360 hotel rooms in Apex Horizon and refund deposits along with interest and legal expenses.

The SFC said its investigation found the deals could have breached laws relating to unauthorised collective investments. The agreement avoided the need for civil proceedings to seek a court order to undo the sales, the commission said.

It declined to say if it would pursue a criminal investigation.

The February deals used a legal loophole to help buyers avoid paying a residential stamp duty .

Eric Cheung Tat-ming, assistant law professor at the University of Hong Kong, said there was public expectation that the SFC would not give up prosecution in such a high-profile case.

"The SFC can go it alone with its lawyers, should it decide to prosecute. But if it wants to drop it, it must first consult the DoJ, which has the final say under the Basic Law," Cheung said.

Barrister and lawmaker Alan Leong Kah-kit said a criminal investigation was necessary, although he did not think the SFC, which had its own strong legal team, had to consult the Department of Justice at this stage.

Leong would not rule out the possibility that the developer's agreement to cancel the sales was part of a bargain struck in order to escape a criminal charge.

"The SFC may think this agreement would best protect buyers' interest, because if it chooses to prosecute but loses the case, the buyers will get no compensation at all. As the matter is of sufficient public interest, we'd expect certain explanation if … it decides not to prosecute."