The recent Court of Appeal judgment in the Practice Review Committee of the HKICPA v. Ng Kay Lam is yet another line in the sand following a saga spanning 18 years and draws attention to the HKICPA’s sanction guidelines and their relevance to challenges on the appropriateness of sanctions imposed. This has similar applicability to other regulatory bodies, including the AFRC, SFC and HKMA.

First disciplinary proceedings

Mr Ng Kay Lam was the sole proprietor of KL Ng & Company. Disciplinary proceedings were first commenced against Ng by the HKICPA in 2005 following a complaint by a corporate client in relation to work carried out by Ng’s part-time employee who became the company secretary and accountant of the corporation. Ng was fully aware of the part-time employee’s multiple roles.

In 2009, the Disciplinary Committee of the HKICPA found that Ng had failed to maintain independence and objectivity. The DC reprimanded Ng and ordered him to pay the HKICPA’s costs. Ng appealed to the Court of Appeal claiming there was no conflict (Ng Kay Lam v. The Registrar of the HKICPA (CACV 28/2010)). This appeal was dismissed holding that the conflict of interests was “all too obvious to require any elaboration”.

In February 2013, Ng’s firm was selected by the HKICPA for a practice review. Ng refused to cooperate with the practice review. In March 2013, Ng was directed by the HKICPA to cooperate with the practice review. In May 2013, Ng responded that he would not cooperate. As a result, disciplinary proceedings were commenced against him.

The disciplinary proceedings took place in 2015. Ng’s refusal to cooperate with the practice review was found to be a serious breach. It was ordered that Ng pay a penalty of HK$60,000 and the costs of the HKICPA, and that his name be removed from the register for six months if he continued to refuse to cooperate with the practice review. In November 2015, a practice review was finally carried out. 

Second disciplinary proceedings

The practice review resulted in follow-up action being required of Ng, including the conduct of an external monitoring review and submission of a monitoring review report by Ng. In August 2016, Ng wrote to the HKICPA and refused to carry out any follow-up action.

The HKICPA informed Ng, in December 2017, that a follow-up visit would be carried out. Ng refused to allow the follow-up visit to take place. In March 2018, the HKICPA directed Ng to cooperate with the follow-up visit. Ng again refused to cooperate.

As a result, in January 2019, disciplinary proceedings were commenced against Ng for a second time. After a hearing in March 2020, the disciplinary committee decided that Ng, by refusing to allow the follow-up visit and refusing to comply with the HKICPA’s subsequent direction, had breached sections 32E¹ and 32F² of the Professional Accountants’ Ordinance (Cap 50). The disciplinary committee ordered that Ng’s practising certificate be cancelled for two years and that he pay the HKICPA’s costs.

The appeal

Ng appealed to the Court of Appeal against the disciplinary committee’s decision. A hearing took place in March 2023 and judgment was handed down in May 2023 (with a decision on costs handed down in September 2023). This was some 18 years after the first disciplinary proceedings had been commenced against Ng in 2005.

The grounds of appeal included: that the sanction was wrong, excessive or disproportionate; that the disciplinary committee’s decision was contrary to principles of natural justice; that there had been procedural impropriety with the opportunity to call witnesses denied (including various employees of the HKICPA); and various grievances with the conduct of the HKICPA, including delay in handing down decisions and not clarifying its position on past proceedings and policy. All of the grounds of appeal were rejected by the court.

In particular, the court considered the severity of the sanctions imposed with reference to the Guideline to Disciplinary Committee for Determining Disciplinary Orders issued by the HKICPA on 24 October 2017, which expressly provides that it is not binding on disciplinary committees. The guideline provided that practising certificates should only be cancelled for up to one year while Ng’s was cancelled for two years. The disciplinary committee categorised Ng’s conduct as serious (but not very serious). A more serious alternative to cancellation of his practising certificate was to remove him from the register as proposed by the practice review committee. The court considered cancellation of his practising certificate to be middle-of-the-road which the disciplinary committee was entitled to impose.

The court suggested that the disciplinary committee should methodically articulate its reasons for deviating from the guideline to better assist the court in determining whether the sanction imposed was plainly wrong, excessive or disproportionate. However, it was ultimately concluded that a mere deviation from the guideline was not a valid ground of appeal because the legislation did not prescribe scales of seriousness and the guideline did not bind the disciplinary committee.

Conclusion

It is of note that, during the entire 18-year period of this saga, Ng continued to hold a practising certificate and enjoyed full rights to practise as an auditor, which included the right to sign and give audit opinions. Save for the payment of the HKICPA’s costs (which were reduced to HK$142,506 after summary assessment) and a penalty of HK$60,000 in 2015, there were no other significant repercussions that arose from Ng’s conduct and attitude, which can only be described as obstinate and recalcitrant with a clear intention to ignore and flout the jurisdiction of the HKICPA by abusing the appeal process.

Although innocence until proven otherwise is a cornerstone of our legal system, it is also a maxim that justice delayed is justice denied. 18 years is an inordinate period of time for Ng to delay the course of justice and for him to be allowed to do so with little to no consequence can only be described as perverse.

1. Now sections 20ZZC and 21C of the Accounting and Financial Reporting Council Ordinance (AFRCO) (Cap 588). ↩
2. Now a professional irregularity (for non-PIE auditors) or an offence (for PIE auditors) under sections 3B(e) and 21F of the FRCO, respectively.↩