HKSAR v. YU LEUNG CHONG

CACC 601/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 601 OF 1999

(ON APPEAL FROM DCCC 571 OF 1999)

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J U D G M E N T

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Hon Yeung J (giving the judgment of the Court):

1. The applicant was charged with one count of dealing with property known or believed to represent proceeds of an indictable offence, contrary to s. 25(1) and (3) of the Organised and Serious Crime Ordinance, Cap. 455 (the Ordinance). He pleaded not guilty to the charge but was convicted after trial by Judge Line in the District Court and sentenced to 9 months imprisonment.

2. The prosecution's case against the applicant was that he engaged in off-course betting on local horse racing with bets received in Mainland China. The applicant admitted under caution to have used a saving account numbered 221-7-036793 with the Hang Seng Bank for his punters to deposit money that they lost.

3. Over a period of less than two months between 14 April and 3 June 1998, a sum of just over $7 million had passed through the said account.

4. Upon his conviction, the prosecution applied for a confiscation order under s. 8 of the Ordinance. As Counsel for the applicant indicated that the applicant intended to appeal against conviction and sentence, the Judge decided to defer the matter until the conclusion of the appeal.

5. The applicant had initially filed a notice of appeal against conviction. The appeal was however abandoned on 22 March 2000. He completed his sentence on 5 May 2000.

6. On 21 July 2000, the prosecution informed the applicant of the intention to proceed with the confiscation proceedings. No response came from the applicant and a mention hearing was fixed on 27 September 2000. The statement of Police Senior Inspector Ngai Shiu Kei dated 6 September 2000 was served on the applicant under s.10 of the Ordinance. The applicant filed his affirmations dated 29 March and 4 April 2001 in opposition to the confiscation order.

7. Senior Inspector Ngai's statement referred to three properties, namely:

(1) No. 51, 3rd Street, Section H, Fairview Park, Yuen Long, New Territories Hong Kong (The 1st property) registered in the joint names of the applicant and his then wife Madam Chan Ka Man (Madam Chan) with a net value of $3,370,000;

(2) Flat D, 2nd Floor, KanYip Building, No. 225-237, Castle Peak Road, Yuen Long, New Territories, Hong Kong (The 2nd property) registered in the sole name of Madam Chan with a net value of $350,000; and

(3) No. 54, 2nd Street, Section J, Fairview Park, Yuen Long, New Territories, Hong Kong (The 3rd property) also registered in the sole name of Madam Chan with a net value of $2,287,000.

8. Senior Inspector Ngai also set out the financial circumstances of the applicant and Madam Chan; in particular, the following:

(1) Madam Chan reported a monthly income of about $10,000 in 1993/1994 and her monthly income increased to about $15,000 in 1998/1999;

(2) The applicant did not file any tax return but claimed to derive an income of about RMB30,000 per month from a karaoke business in China;

(3) The deposit for the 1st property was paid for by proceeds of the sales of other properties jointly owned by the applicant and Madam Chan:

(4) In his previous statements to the police, the applicant had said that the mortgage repayments of the previous properties and the 1st property were all paid by him.

(5) The 2nd property was acquired in 1997 for $958,000 with a mortgage of $400,000. Madam Chan paid the initial payment as well as the monthly mortgage payments of $5,200:

(6) The 3rd property was purchased in August 1998 for $2,800,000. A mortgage sum of $1,300.000 was obtained and Madam Chan paid the down-payment with a cashier order of $180,000 from her bank account and a fix term deposit of $1,228,500. Madam Chan also paid the monthly repayments of about $19,500 from her account:

(7) In view of Madam Chan's monthly earning, it was not known how Madam Chan was able to pay for the monthly mortgage payments for the 2nd and 3rd properties.

9. In his affirmation dated 29 March 2001, the applicant suggested that the first property was initially financed from the proceeds of sale of earlier properties owned by him and Madam Chan. However he suggested that the money only came from Madam Chan and his mother as his mother "would like her children to have it eventually."

10. The applicant said he did not contribute a single cent. Madam Chan repaid the instalment loan and together with their sons paid the monthly instalments of $13,000 each in respect of the term loan.

11. In his supplemental statement dated 4 April 2001, the applicant gave further details as to circumstances in which the 1st property was financed by proceeds of sale of previous properties and those previous properties were paid for by Madam Chan and his mother alone. He reiterated that the purchase of the 1st property was not related to his criminal activities at all. He also produced tax returns of his two sons to demonstrate their financial capabilities.

12. In neither of his affirmations did the applicant mention anything about the 2nd or the 3rd properties.

13. It is perhaps also worth mentioning that in connection with and in aid of the application for the confiscation order, restraint orders had been granted initially against the 1st, 2nd and 3rd properties. There was also a charging order in respect of the applicant's share in the 1st property.

14. The restraint orders in respect of the 2nd and 3rd properties were subsequently discharged.

15. By an order of Nguyen J dated 21 September 1999, the applicant was restrained from dealing with any of his properties including his share of the 1st property. He was however allowed to use monthly living expenses of $9,500 and pay the monthly mortgage and utilities payments for the 1st property in the monthly sum of $18,000 on top of the legal expenses.

16. It was the applicant's then suggestion that he was responsible for the payment of the monthly mortgage repayments in respect of the 1st property.

17. The application for the confiscation order went before Judge Line on 18 April 2001. The applicant was represented by Mr. Gabriel Ho Tak Leung Jackson-Lipkin (Mr. Leung Jackson-Lipkin) of Messrs. T.C. Lau and Co.

18. Mr. Blanchflower, on behalf of the prosecution, in his lengthy and detailed submission, tried to persuade the Judge that the applicant had benefited from the proceeds of the his crime to the extent of $6 million and that the applicant had substantial realisable assets.

19. In particular, it was emphasised that the purchase money for the 1st, 2nd and 3rd properties could not have come from Madam Chan alone and that the applicant must have significant interest therein or that they were under his effective control.

20. Mr. Leung Jackson-Lipkin, on the other hand had very little to say. He started off by saying that he would only focus on the 1st property and would have nothing to say about the 2nd and 3rd properties. He suggested that the applicant only received the sum of $3.2 million from the crime and he actually suffered a loss of $30,000 for his bookmaking business. Mr Leung Jackson-Lipkin confined himself to the two affirmations of the applicant and conceded that he had no documentary evidence to support what he said.

21. The Judge found that from his criminal activities, the applicant had been benefited to the extent of $4.5 million. The Judge also found that the applicant had realisable assets of $4,322,000. The Judge made a confiscation order against the applicant in the sum of $4,322,000.

22. The applicant was given one year from 18 April 2001 to pay the sum failing which a consecutive term of 21/2 years imprisonment was fixed in accordance with s. 13 of the Ordinance.

23. The finding that the applicant had realisable assets of $4,322,000 was based on the respective values of the 1st, 2nd and 3rd properties at $3,370,000, $350,000 and $2,287,000.

24. The Judge found that the applicant had a 50% share in the 1st property. He also found that the cash used to buy the 2nd and 3rd properties had come from the applicant and were therefore gifts to Madam Chan and caught by s. 12(1) of the Ordinance. The Judge also found that the applicant had effective control of the properties and he thus made the confiscation order as he did.

25. The applicant was given up to 17 April 2002 to pay the said sum of $4,322,000. The applicant had failed to pay by 26 February 2002 when he applied for leave to appeal against the confiscation order out of time.

26. It is the applicant's contention that he did not have any interest in the three properties. The initial purchase price of the 1st property came from proceeds of selling other properties acquired by Madam Chan with her funds and that of his mother. Madam Chan and her two sons discharged the mortgage repayments. The 2nd property was purchased by Madam Chan with her own money and the mortgage repayments were discharged by rent derived from it. The 3rd property was also purchased by Madam Chan with her own money and the mortgage repayments were partly discharged by the rent and partly by her own income.

27. During the confiscation proceedings, Mr. Leung Jackson-Lipkin represented the applicant. Prior to that, Madam Chan had consulted Mr. Dominic Lai of Messrs. Dominic Lai and Co.

28. The suggestion by the applicant is that both Mr. Leung Jackson-Lipkin and Mr. Lai failed to give him proper advice and had in fact given him wrong advice and are therefore guilty of "flagrantly incompetent advocacy".

29. It is alleged that the applicant was advised that he needed only to be concerned with the 1st property and not the 2nd or 3rd properties as they were registered in the sole name of Madam Chan and were therefore not relevant to the confiscation proceedings.

30. It is said that because of such misconception, Mr. Leung Jackson-Lipkin had failed to obtain documents from the former solicitors of the applicant, which documents would have demonstrated that Madam Chan alone paid for the 2nd and 3rd properties. The Judge was deprived of the full financial picture of Madam Chan resulting in his rejection of Madam Chan's ability to pay for the 1st property.

31. It is also suggested that Mr. Leung Jackson-Lipkin had failed to respond to the statement of Senior Inspector Ngai and had made no submission in the confiscation proceedings in respect of the 2nd and 3rd properties and as a result, the Judge was bound to draw an adverse inference against the applicant that he was in effective control of the 2nd and 3rd properties.

32. The delay in seeking leave to appeal was attributed to the advice by Mr. Lai and Mr. Leung Jackson-Lipkin that there was no ground and to the lack of fund to seek alternative legal advice. It was not until September 2001 when the necessary records were obtained to enable the matter to be pursued.

33. Lack of fund is not a valid ground for leave to appeal out of time. The delay in question, 9 months after the order was made, is indeed very substantial. The present application was only made when the time to pay the $4,322,000 was about to expire. We see no good reason to grant indulgence to the applicant. But in deference to counsel's submission, we propose to deal with the merits of the case as well.

34. Because of the allegations made against Mr. Lai and Mr. Leung Jackson-Lipkin by the applicant, they were invited to respond to those allegations. They did so by filing affirmations. Mr. Leung Jackson-Lipkin also gave evidence before us. So did the applicant.

35. The applicant was adamant that Mr. Leung Jackson-Lipkin did not explain to him the statement of Senior Inspector Ngai and wrongly advised him that he need not be concerned with the 2nd and 3rd properties as they were registered in Madam Chan's name.

36. Mr. Lai's position is that he only acted for Madam Chan in connection with the restraint orders against the 2nd and 3rd properties and the charging order in respect of the 1st property. Mr. Lai denied having at any time advised the applicant directly or indirectly although he admitted that he had introduced Mr. Leung Jackson-Lipkin to act for the applicant at the repeated demands and requests of Madam Chan.

37. Mr. Leung Jackson-Lipkin, in his affirmation filed on18 February 2002 suggested that he only took up the applicant's case on 5 March 2001. He interviewed the applicant on 28 March and 4 April 2001. The applicant told him that the 2nd and 3rd properties were legally and beneficially owned by Madam Chan and he asked the applicant to provide him with the documentary proof.

38. Mr. Leung Jackson-Lipkin said the applicant had promised to give him the documents on 28 March 2001 but he did not. When the matter was again raised on 4 April 2001, the applicant simply said, "Since the statement has acknowledged properties in his wife name, I had better leave it." Mr. Leung Jackson-LIpkin then said, "in that case we can only concentrate on the joint named property."

39. Mr. Leung Jackson-Lipkin suggested that as the applicant did not supply him with any further information or documents, he found it not possible to object to the prosecution's case that the 2nd and 3rd properties were realizable assets. Mr. Leung Jackson-Lipkin frankly admitted before us that he had in effect made such concession at the hearing before the Judge.

40. Mr. Lai had never been instructed to act for the applicant at any stage. Madam Chan retained him in connection with the restraint order proceedings. Mr. Lai had successfully discharged the 2nd and the 3rd properties as well as Madam Chan's share in the 1st property from the restraint orders. In fact, as far as the three properties were concerned, there was a clear conflict of interest between the applicant and Madam Chan.

41. Mr. Lai denied giving any advice to the applicant. Clearly he was not obliged to and it would be wrong for him to do so in the light of the conflict of interest aforesaid. The matter was of course reinforced by the fact that throughout the confiscation proceedings, the applicant was represented by Mr. Leung Jackson-Lipkin. The applicant's complaint against Mr. Lai is not justified and it certainly does not affect the issues that we have to resolve in this application.

42. As for the complaint against Mr. Leung Jackson-Lipkin, we can see that he made no submissions at all about properties 2 and 3. We accept his evidence that he specifically asked the applicant for documents to support the assertion that Madam Chan had funded these properties. His attendance votes support what he says, as does the fact that there had to be two meetings with the applicant because of his failure to produce anything the first time. But the absence of documents should not prevent Mr. Leung Jackson-Lipkin to present the applicant's case.

43. Mr. Leung Jackson-Lipkin had clear instructions from the applicant that Madam Chan was the legal and beneficial owner of the 2nd and 3rd properties. Senior Inspector Ngai's statement also stated that Madam Chan paid for the initial payments as well as the mortgage payments of those properties. But Mr. Leung Jackson-Lipkin chose not to make any submission in that regard. He made it clear to the Judge that he had nothing to say about the 2nd and 3rd properties and would only focus on the 1st property. He admitted in his evidence that he had in effect conceded to the application by the prosecution.

44. Mr. Leung Jackson-Lipkin could have informed the Judge of the position of the applicant by referring to the statement of Senior Inspector Ngai and indicated that he did not have any documents to support his contention. He should not have made the concession without clear instruction from the applicant.

45. We are of the view that perhaps Mr. Leung Jackson-Lipson could have presented the applicant's case in the confiscation proceedings in a more assertive manner despite the lack of material upon which he could have made submissions.

46. But would there be any difference if Mr. Leung Jackson-Lipkin were to handle the matter in a more positive way?

47. There were only two relevant issues for the Judge to decide, namely the proceeds of the applicant's offence and his realisable assets at the time of the confiscation proceedings. The Judge found his proceeds to be $4.5 million. The applicant has no complaint about this finding, which clearly was quite a generous one.

48. The only complaint is that if the applicant's case had been properly presented, the Judge would have found that the applicant did not have any realisable assets or at least that such realisable assets would be significantly less than the figure of $4,322,000.

49. We are of course dealing with the applicant and Madam Chan who had been married for over 20 years. The applicant's earning on his own admission was significantly more than that of Madam Chan. The applicant offers no explanation as to what had happened to his own earning.

50. Senior Inspector Ngai's statement had already stated that Madam Chan paid the initial payment as well as the monthly mortgage payments of both the 2nd and 3rd properties although it also commented "in view of her monthly earning, it was not known how Madam Chan was able to do so."

51. The applicant had at some stages indicated that he paid for the mortgage instalments of the properties. Indeed on the basis that he required money to pay for the mortgage instalments of the 1st property, the terms of the restraint orders were relaxed to allow him a monthly sum of $18,000 so that he could pay for the mortgage outgoings and utilities for the 1st property.

52. The 1st property was registered in the joint name of the applicant and Madam Chan. On his admission, at least part of the money used to acquire the 1st property originated from his mother. If a mother pays for a property and the property is registered in her child's name, there is a presumption that a gift is intended. (see Dyer v Dyer (1788) 2 Cox Eq Cas 92 and Re Paradise Motor Co Ltd [1968] 2 All ER 625.)

53. The provisions for the confiscation order under the Ordinance are draconian provisions and are meant to be so. They target at the proceeds of the criminal act and not just the profit (s. 2(6)). The definition of "realisable property" is extremely wide and all embracing (s. 12). The standard of proof required for any question arising under the Ordinance shall be on the balance of probabilities (s. 8B) when a confiscation order can be enforced by a term of imprisonment of up to 10 years' imprisonment (s. 13).

54. Under s.11(1) of the Ordinance, the amount to be recovered under the confiscation order shall be the amount the judge assesses the value of the proceeds of the crime, subject to the provisions of s.11(3).

55. Under s.11(3), the burden is on the defendant to prove, on a balance of probabilities that the amount to be realised is less than the value of the proceeds of the crime before the lesser amount would be recovered.(see R v Comiskey (1991) 93 Cr App R 227 and R V Ilsemann [1991] Crim LR 141.

56. In R v Walbrook & Glasgow [1994] Crim LR 613, it was held that the defendant should produce "clear and cogent" evidence in order to discharge this burden.

57. The assertion of the applicant had been contradicted by his own admissions to the police as well as his affirmation when he asked for release of funds from the restraint orders. There is no logical explanation as to how Madam Chan was able to save enough money from her income to enable her to buy three properties within a period of just over 2 years whereas the applicant, despite his more substantial income, was unable to make any contribution at all.

58. Despite the positive assertion in the statement of Senior Inspector Ngai that it was the applicant who funded the acquisitions of the three properties in question and that they were gifts to Madam Chan and despite a lapse of 11 months, there has not yet been any evidence adduced by either the applicant or Madam Chan to show the funds originated from Madam Chan.

59. We must not ignore that it would be so easy for a defendant to assert that he has no interest over any property under the names of his close family members.

60. Considering the matter in the light of the aforesaid, even if full representation of the applicant's case had been made to the Judge to the effect that he did not have any interest in the properties, beneficially or otherwise and even if documents were submitted to show that it was Madam Chan who paid for those properties and that her children were financially capable of contributing towards costs of the properties, the Judge would not be persuaded that the applicant did not have any interest in the properties which clearly were family assets.

61. On the available evidence, including those submitted by the applicant in support of this application, the findings that the applicant had interest in all the three properties in question are fully justified. There is no question of any miscarriage of justice. The finding that the applicant had a 50% share in the 1st property and that the 2nd and 3rd properties were purchased by cash payments from the applicant cannot be faulted. The properties registered in the name of Madam Chan were gifts from the applicant and he had effective control over them.

62. We see no valid reason for granting leave of appeal out of time against the confiscation order. The application is refused.