SHEN SIGUI v. THE DIRECTOR OF IMMIGRATION

HCAL 1008/2020

[2020] HKCFI 2991

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 1008 OF 2020

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D E C I S I O N

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INTRODUCTION

1.  This is an application for leave to apply for judicial review of the decision of the Director of Immigration refusing “the Applicant’s application dated 7 September 2018 for an extension of stay … in accordance with the Capital Investment Entrant Scheme” (“the Decision”).

BACKGROUND FACTS

(i)      The Capital Investment Entrant Scheme

2.  The Capital Investment Entrant Scheme (“the Scheme”) is an immigration scheme managed by the Director which was first introduced to the Legislative Council in March 2003 and launched in October 2003, at a time when Hong Kong’s economy was in recession.  The Scheme has been suspended with effect from 15 January 2015 until further notice.  The suspension of the Scheme does not, however, affect entrants under the Scheme who have been admitted to Hong Kong before 15 January 2015.

3.  The Scheme enables entry for residence by capital investment entrants who make capital investment in Hong Kong but are not engaged in the running of any business here.  An entrant is allowed to make his choice of investments amongst permissible assets without the need to establish or join in a business.

4.  The details of the Scheme are set out in a document entitled “Rules for the Capital Investment Entrant Scheme” (“the Scheme Rules”).

5.  As stated in §3.1 of the Scheme Rules, the Scheme is applicable to, inter alia, Chinese nationals who have obtained permanent resident status in a foreign country.

6.  §2.1 of the Scheme Rules sets out the eligibility criteria for applicants who wish to be admitted to Hong Kong under the Scheme:

“Subject to the terms of these Scheme Rules, an Applicant who satisfies the following criteria will be eligible for Approval-in-principle or Formal Approval as the case may be:

(a) aged 18 or over when lodging an application for Approval-in-principle or Formal Approval;

(b) subject to sub-paragraph (c) below, has Net assets or Net equity to which he is absolutely entitled with a Market value of not less than HK$6.5 million Net throughout the two years preceding the date he lodged his application for Approval-in-principle or Formal Approval;

(c)     (i) has invested within and thereafter throughout the period beginning six months before lodging his application for Formal Approval; or

(ii) invests within and thereafter throughout the period beginning six months before lodging his application for Approval-on-principle and ending six months after Approval-in-principle has been granted; or

(iii) has invested within and thereafter throughout the period beginning six months after Approval-in-principle has been granted;

not less than HK$6.5 million Net in Permissible investment assets to which he is absolutely beneficially entitled…

(d) can demonstrate to the Director that he is capable of supporting and accommodating himself and his dependants, if any, on his own without relying on any return on the Permissible investment assets, employment, self-employment, office, business or public assistance in or carried on in Hong Kong as the case may be …

(e) has no adverse immigration record and meets normal immigration and security requirements.” [emphasis original]

7.  The expression “Permissible investment assets” is defined in §4.1 of the Scheme Rules to mean “Real estate” and “Specified financial assets”, the details of which it is not necessary to set out in this decision because it is not in dispute that the Applicant’s investments, or apparent investments, in various securities fall within the definition of “Specified financial assets”.  §4.1 requires an entrant to invest and remain invested throughout the period of the Scheme applicable to him in either or both of the two Permissible investment asset classes.  This requirement has been said to be the “core requirement for first and continued eligibility under the Scheme” (see He Wei v Director of Immigration [2020] HKCFI 328, at §10, per Coleman J).

8.  §5 contains provisions which require an entrant to maintain his portfolio of Permissible investment assets in order to qualify and remain qualified under the Scheme:

(1)  §5.1 states that in order to qualify and remain qualified under the Scheme, an entrant will have to “comply with the following requirements in respect of his portfolio of Permissible investment assets AND provide such material information in writing with regard to these assets as the Director may request in order to assess [the entrant]’s eligibility and entitlement (if any) under the Scheme” [emphasis original].

(2)  §5.1(b)(iii) provides that an entrant must be and remain the absolute beneficial owner of the relevant Specified financial assets, and is required to prove to the satisfaction of the Director all relevant details of the material transaction(s) by him or on his behalf on the designated account by providing documentary evidence.

9.  §6 requires the investment that qualifies an entrant’s entry to Hong Kong and continued stay in Hong Kong to be ring-fenced within the Scheme.

10.  §8 of the Scheme Rules relating to “Entry, Stay and Extension” states as follows:

“8.1 … Upon the Entrant furnishing proof to the satisfaction of the Director that the investment in Permissible investment assets has been completed, permission to stay as a non Hong Kong permanent resident will be granted for 2 years subject to the condition that the Entrant must continue to satisfy the requirements of the Scheme throughout this period. Further extensions for 2 years will be granted on the same conditions and on the same basis.

8.4 An Entrant and his dependants may apply to become permanent residents of Hong Kong after a period of continuous ordinary residence in Hong Kong of not less than 7 years and subject to any other relevant requirements under the Immigration Ordinance…

8.7 The Director has absolute discretion to approve or disapprove an application for residence made under the Scheme.  Any investment in Hong Kong is and remains the sole decision and responsibility of the Applicant/Entrant…”

11.  With effect from 14 October 2010, the threshold of investment under §2.1 of the Scheme Rules was raised to HK$10 million.

(ii)     The Applicant’s application under the Scheme

12.  The Applicant is a Chinese national with permanent resident status in the Republic of Guinea-Bissau.  In July 2013, the Applicant made an application under the Scheme.

13.  On or about 5 November 2013, Delta Wealth Securities Limited (“Delta”) provided to the Immigration Department (“ImmD”) various documents in support of the Applicant’s application under the Scheme, including:

(1)  an Account Application by the Applicant in respect of Account No OC00015 (“the CIES Account”) dated 23 October 2013;

(2)  a “Supplemental Agreement - Capital Investment Entrant Scheme” dated 24 October 2013 (“the Supplemental Agreement”), in which the Applicant warranted, represented and undertook to Delta that the CIES Account would only hold, inter alia, “Specified Financial Assets” as defined from time to time in the Scheme Rules;

(3)  a statement of the CIES Account for the period from 1 November 2013 to 5 November 2013 showing that the Applicant held shares in various listed companies worth over HK$10 million, including shares in Century Ginwa (Stock Code 00162);

(4)  a Declaration by the Applicant dated 5 November 2013 that he was the absolute beneficial owner of the Specified Financial Assets in the CIES Account; and

(5)  page 5 of an application in Form ID(C) 967 dated 5 November 2013, in which the Applicant set out his existing investment in financial assets for the purpose of §4 of the Scheme Rules, including the said shares in Century Ginwa.

14.  Approval in principal under the Scheme was granted to the Applicant on 22 July 2014, and formal approval was granted on 17 November 2014.  An entry permit was granted to the Applicant on 9 January 2015.

15.  On 15 January 2015, the Applicant arrived in Hong Kong on the strength of his PRC passport and the entry permit.  His wife and two children (“the Family”), who were also granted entry permits as his dependants, came with him.  They were permitted to remain in Hong Kong for two years until 15 January 2017.

(iii)    The 1^st application for extension of stay

16.  On 14 October 2016, ImmD received applications from the Applicant and the Family for extension of stay in Hong Kong under the Scheme (“the 1^st Application”).

17.  The 1^st Application was approved by the Director.  Due to the validity periods of their passports, on 13 January 2017, extensions of stay were initially granted to the Applicant and his wife until 15 December 2017, while those of his children were granted until 19 November 2017.  On 23 October 2017, the limit of stay granted to the Applicant and the Family was extended until 15 January 2019.

(iv)    Information received from Securities and Futures Commission

18.  Between December 2017 and April 2018, ImmD received information from the Securities and Futures Commission (“SFC”) on a confidential basis that, in the course of SFC’s investigation into suspected market manipulation in relation to, inter alia, shares in Century Ginwa, it had uncovered certain suspicious capital investment arrangements and trading activities of some Scheme entrants, including the Applicant.  SFC provided ImmD with, inter alia, a copy of a “Binding Termsheet - Capital Investment Immigration Project” (“the Termsheet”) entered into between the Applicant and ICG Asia Finance Limited (“ICG”) dated 23 October 2013, which evidenced a loan agreement between the Applicant (purportedly as lender) and ICG (purportedly as borrower).  Under the Termsheet, the Applicant agreed to lend to ICG the sum of HK$10,000,000 secured by certain “Collateral Shares”.  SFC also suggested that the Applicant “appeared to have used the Specified financial assets as collateral for the indebtedness”.  This suggestion is remarkable because, ordinarily, one would have thought that it would be the borrower, not the lender, who has to provide collateral for an indebtedness.  Anyhow, SFC questioned whether “ICG was not merely a borrower of the loans … but was in fact the actual beneficial owners of the collateral shares in the relevant accounts”, and whether the Applicant “might be nominees holding the shares on behalf of ICG”.  For the purpose of this decision, it is not necessary to get to the bottom of the true arrangement between the Applicant and ICG.  What is clear is that there were issues which required further investigation.

(v)     The 2^nd application for extension of stay

19.  On 7 September 2018, ImmD received applications from the Applicant and the Family for extension of stay under the Scheme (“the 2^nd Application”).  In the Applicant’s application in Form ID(C) 967 dated 5 September 2010, the Applicant again listed his shares in Century Ginwa as forming part of his investment in financial assets for the purpose of §4 of the Scheme Rules.

20.  On 12 October 2018, in view of the information received from SFC, ImmD wrote to the Applicant’s former legal representatives, Messrs Wong, Fung & Co, seeking confirmation on whether or not a loan agreement had been entered into between the Applicant and ICG on 23 October 2013, and asked the Applicant to provide a copy of the agreement and a detailed explanation of the purpose(s) of entering into such agreement before 9 November 2018.  ImmD also stated that unless the Applicant provided the document sought prior to the deadline of 9 November 2018, the 2^nd Application would be considered as abandoned.

21.  On 2 November 2018, Huen & Partners on behalf of the Applicant wrote to ImmD stating that the Applicant, in order to fulfil the requirements of the Scheme, had entered into a binding term sheet with ICG on 23 October 2013 for investment purposes, and a Supplemental Agreement with Delta on 24 October 2013 (collectively “the Additional Documents”).  Huen & Partners also stated that the Applicant gave authorization to ICG as trustee to operate the account with Delta, that ICG had assigned the said term sheet to First Prestige International Limited and had since become insolvent on 7 September 2015, and that the Applicant had suffered loss and damage and intended to commence legal proceedings against the concerned parties.  Huen & Partners ended by stating that the Applicant had possession of “the relevant documents and evidence concerning his fulfilment of requirements of the said scheme”.  The term sheet requested by ImmD was not provided.

22.  By an email dated 6 November 2018 to Huen & Partners, ImmD reiterated the request for a copy of the term sheet that the Applicant had entered into with ICG, and further asked the Applicant to provide (i) a detailed explanation of the reason(s) for entering into the term sheet with ICG and (ii) a copy of the Supplemental Agreement with Delta referred to in Huen & Partners’ letter dated 2 November 2018.  ImmD stated that if the requested documents and information were not provided by 20 November 2018, the Applicant would be treated as having abandoned the 2^nd Application.

23.  There was no response to ImmD’s request for documents and information prior to 20 November 2018.  On 11 December 2018, ImmD wrote to Huen & Partners stating that it had not received any reply to the email of 6 November 2018 and therefore it would cease processing the 2^nd Application.

24.  Between 27 December 2018 and 28 February 2019, Huen & Partners wrote to ImmD asking about the “status” of the 2^nd Application and how the application could be “revived”.  Interim replies were given by ImmD on 28 January 2019 and 13 March 2019 respectively.

(vi)    Fresh applications for extension of stay

25.  On 27 May 2019, the Applicant and the Family made fresh applications for extension of stay under the Scheme.

26.  Despite the making of the fresh applications, on 20 June 2019, Huen & Partners on behalf of the Applicant wrote to ImmD asking for an update in respect of the 2^nd Application.

27.  By a letter dated 5 July 2019, ImmD informed Huen & Partners that processing of the 2^nd Application had ceased as stated in ImmD’s previous letter dated 11 December 2018.

28.  In passing, I should mention that, according to the Affirmation of Cheng Chi Man, Senior Immigration Officer, filed on 21 August 2020:

(1)  assessment of the Applicant and the Family’s fresh applications has been suspended pending the investigation by the General Investigation Section (“GIS”) of ImmD into the Applicant’s possible involvement in relation to the suspicious capital investment arrangement referred to in §18 above; and

(2)  since August 2019, GIS has been attempting to contact the Applicant by his latest contact means known to ImmD for an interview.  However, GIS has so far not been able to successfully reach the Applicant.

APPLICATION FOR JUDICIAL REVIEW

29.  The Applicant made the present application for leave to apply for judicial review on 26 May 2020 to challenge the Director’s decision to refuse the 2^nd Application.  For the present purpose, I shall treat the Director’s decision to cease processing of that application, which was communicated to the Applicant’s former solicitors by letter dated 11 December 2018, as effectively a decision to refuse the 2^nd Application.

30.  Three grounds of judicial review are raised in the Form 86:

(1)  irrationality / Wednesbury unreasonableness;

(2)  breach of legitimate expectation;

(3)  procedural unfairness.

GROUND 1: IRRATIONALITY / WEDNESBURY UNREASONABLENESS

31.  The Applicant contends that the Decision is irrational or Wednesbury unreasonable because:

(1)  “the Applicant has shown that he qualified and has remained qualified under the [Scheme] by having complied with the [Scheme] Rules throughout the years” (see §27 of the Form 86); and

(2)  “the [Director] made the Decision simply based on the Applicant’s failure to submit the Additional Documents.  Yet, the Respondent has never explained how the Additional Documents relate to or affect the assessment of the [2^nd Application].  Therefore, the Additional Documents are considered to be irrelevant considerations which the [Director] should not have taken into account in their assessment of the [2^nd Application] (see §28 of the Form 86).

32.  My views on the aforesaid complaints of the Applicant are as follows.  In so far as (1) is concerned, the Applicant’s complaint is off focus because the Director refused the 2^nd Application not because he considered that the Applicant had failed to show that he qualified or remained qualified under the Scheme, but because the Applicant had failed to provide documents and information requested by the Director for processing the application.  It cannot seriously be disputed that the Director is entitled to require an entrant who seeks an extension of stay to provide documents and information in order to assess whether he has satisfied and continues to satisfy the requirements of the Scheme before deciding whether to grant the extension of stay sought by the entrant.

33.  In so far as (2) is concerned, it was stated in Huen & Partners’ letter to ImmD dated 2 November 2018 that:

“in order to fulfil the requirement of captioned scheme, [the Applicant], as a lender, entered into a binding term sheet with [ICG], as a borrower, on 23^rd October 2013 for investment purposes. On 24^th October 2013, [the Applicant] also entered into a Supplemental Agreement with [Delta] as part of the captioned scheme”.

34.  Huen & Partners also said that ICG, allegedly as trustee, was given a mandate to operate the CIES Account.  The explanation given by Huen & Partners on behalf of the Applicant in relation to the reason for entering into the Termsheet, namely, that “in order to fulfill the requirements of captioned scheme”, is difficult to understand.  There is nothing in the Scheme Rules which requires the Applicant to enter into any loan arrangement with ICG.  Such loan would not qualify as “Specified financial assets” under §4.1 of the Scheme Rules and, in any event, was not put forward as such.  It is also illogical that the Applicant, being lender, would authorize ICG as trustee to operate the CEIS Account in which the Specified financial assets are held.  There is no provision in the Scheme Rules which requires the Specified financial assets used by an applicant/entrant in satisfaction of the investment requirement under the Scheme to be managed by a third party-financial institution.  Be that as it may, having regard to the contents of Huen & Partners’ letter, it is clear that the documents and information sought by the Director are relevant to the question of whether the assets held in the CIES Account in fact belong absolutely to the Applicant.  The Director is entitled to further investigate into the true purpose of the Termsheet and the true arrangement entered into between the Applicant and ICG. The fact that the Director may already have copies of the Termsheet and Supplemental Agreement documents from some other sources is neither here nor there.  The Director is entitled to ask the Applicant to produce his version of the documents and check them against the copies in his hand.  The inquiries pursued by the Director cannot, in my view, be said to be “irrelevant considerations” for the purpose of assessing the 2^nd Application as contended by the Applicant.

GROUND 2: LEGITIMATE EXPECTATION

35.  Under this ground, the Applicant argues that “[h]aving fully complied with the Rules and remained eligible under the CIES throughout the years, it was reasonable for the Applicant to expect that the [2^nd Application”] would be approved just as his two earlier extension of stay applications were” (see §29 of Form 86).

36.  In my view, while the Applicant has a legitimate expectation that his application for extension of stay would be processed in accordance the Scheme Rules, he can have no legitimate expectation that his application would be approved, particularly in circumstances where he has failed to provide documents and information which the Director reasonably requires for the purpose of assessing his application.

GROUND 3: PROCEDURAL UNFAIRNESS

37.  Under this ground, the Applicant complains that the Director acted in a procedurally unfair manner by “having failed to inform the Applicant of the intended decision and the case against him before the Decision was made, and also to give reasons for the Decision” (see §32 of Form 86).

38.  This complaint is without factual foundation. Prior to the making of the Decision on 11 December 2018, the Director informed the Applicant’s former solicitors twice, on 12 October 2018 and 6 November 2018, that unless the Applicant provided copies of the Additional Documents and explain the purpose(s) of entering into the Termsheet, his application for extension of stay would be treated as abandoned.  The Applicant failed to provide the documents sought, and further failed to explain, or satisfactorily explain, the purpose of the Termsheet (see the discussion in §34 above).  In ImmD’s letter to Huen & Partners dated 11 December 2018, it was stated that processing of the 2^nd Application had ceased in view of the Applicant’s failure to respond to ImmD’s inquiries.  That seems to me to be a correct and adequate statement of the reason for the Decision.

39.  The Applicant also complains that the Director did not explain “how the Additional Documents could address [the Director’s] concern about the Applicant’s application”, and “never informed the Applicant of the case against him and/or disclosed the relevant evidence.  As a result, the Applicant was deprived of the opportunity to make representations before the Decision was made” (see §34 of the Form 86).  In my view, it is clear on the evidence that the Director was still investigating whether the Applicant actually satisfied the requirements of the Scheme so that he should be granted an extension of stay.  There was not yet any substantive case to be put to the Applicant which required an answer to be given by him.  All that the Applicant was required to do was to produce the Additional Documents and explain the purpose(s) of entering into the Termsheet.  The relevance of the inquiries was plain.  Neither the Applicant, nor his former solicitors, ever objected to the production of the Additional Documents on the ground of irrelevance.  The various complaints raised in §34 of the Form 86 have no substance.

40.  In all, Grounds 1, 2 and 3 of judicial review are not reasonably arguable, and have no realistic prospect of success.

OTHER GROUNDS

41.  In Mr Wong’s Skeleton Submissions dated 19 November 2020, he has sought to raise some other grounds of challenge to the Decision which have not been pleaded in the Form 86.  The Applicant is not entitled to rely on those grounds.  I shall nevertheless deal with them briefly for the sake of completeness.

42.  First, Mr Wong argues that the Decision was ultra vires the powers of the Director because the Scheme Rules do not provide that:

(1)  “submission of the requested documents is a condition of the Application”;

(2)  the Director may provide a deadline for the provision of documents; or

(3)  the Director may discontinue the application upon the Applicant’s failure to disclose documents (see §§33-34 of the Skeleton Submissions).

43.  This argument is patently unsound.  The Applicant was seeking the Director’s exercise of discretion to grant him an extension of stay under the Scheme.  It cannot seriously be argued that the Director had no power to ask the Applicant to provide relevant documents and information to enable him to assess the application.  The Director must also be entitled to impose a reasonable deadline for the provision of the documents and information sought, and refuse to further process the application in the event that the Applicant failed to comply with the Director’s requests without good reason. The Applicant did not ask for any extension of time to comply with the requests, and failed to give any response to ImmD’s email dated 6 November 2018.  In the circumstances, I fail to see how it can be said that the Decision was ultra vires the powers of the Director, or that the Director had no power to make the Decision.

44.  Second, Mr Wong argues that the Decision was disproportionate to the Applicant’s failure to provide the Additional Documents (see §§51 - 54 of the Skeleton Submissions).  As a matter of principle, “proportionality” outside the context of restriction of or interference with fundamental rights is not a recognized legal basis to mount a public law challenge to a decision of the Director on immigration matters.  I considered and rejected a similar argument raised in Riaz Hussian v Permanent Secretary for Security [2020] HKCFI 2532, at §33:

“In passing, I should mention that in the draft Amended Form 86, at §40, it is argued that a ground of review ‘may be’ a failure to assess the proportionality of a decision, and reliance is placed upon the judgment of the UK Supreme Court in Pharm v Secretary of State for the Home Department [2015] 1 WLR 1591 in support of this proposition. In Hong Kong, it is well-established that proportionality is relevant when considering whether a restriction of, or interference with, fundamental rights protected by the Basic Law or the Hong Kong Bill of Rights can be justified. This is not the occasion to consider in depth the question of whether a doctrine of ‘proportionality’, as distinct from ‘reasonableness’ in the Wednesbury sense, can or should be developed to apply to other cases outside the context of restriction of or interference with fundamental rights because, in the context of immigration decisions concerning persons who have no right to enter and remain in Hong Kong, such a development would be inconsistent with (i) the well-established strict immigration policy in Hong Kong which has been upheld by the courts on many occasions, and (ii) the Immigration Reservation to the ICCPR/Section 11 of the Hong Kong Bill of Rights Ordinance. On the basis of the existing jurisprudence in Hong Kong, I do not consider that it is open to the Applicants to challenge the Decision based on a principle of proportionality.”

DELAY

45.  The decision under challenge was made by the Director on 11 December 2018.  Even if one assumes, in the Applicant’s favour, that the “final” decision was not made until 5 July 2019 (as he contends), the Applicant did not make the application for leave to apply for judicial review until 26 May 2020.  There was plainly substantial delay in making the present application.  The Applicant’s attempt to explain the delay by reference to the COVID-19 pandemic is unacceptable, because the pandemic did not affect Hong Kong until early 2020.  Neither is it a good explanation to say that the Applicant’s former solicitors did not provide him with relevant documents, and the Applicant only received them from ImmD in December 2019.  Even if (contrary to the above conclusions) the intended application is reasonable arguable, I would not be minded to exercise my discretion to grant an extension of time to the Applicant to make the present application for leave to apply for judicial review taking into account the following factors:

(1)  the merits of the intended application for judicial review are not strong on any view of the matter;

(2)  there is no good explanation for the delay;

(3)  no issue of great general or public importance arises for determination in the present application;

(4)  there are no other special circumstances in favour of granting leave to apply for judicial review; and

(5)  the Applicant and the Family have made fresh applications for extension of stay under the Scheme which have yet to be assessed by the Director.

DISPOSITION

46.  The application for leave to apply for judicial review is dismissed.

47.  The principles governing an award of costs in an unsuccessful application for leave to apply for judicial review are well settled (see Leung Kwok Hung v President of the Legislative Council (No 2) (2014) 17 HKCFAR 841, at paragraph 17), and do not have to be repeated here.  I consider the Applicant should pay the costs of the Director in this case, because (i) the application clearly lacks merits, (ii) the Director filed evidence and attend the hearing of the application for leave to apply for judicial review upon the court’s directions, and has provided substantial and helpful assistance to the court; and (iii) the Applicant has effectively had a hearing on the merits of his intended application for judicial review.  I therefore make an order that the Applicant shall pay the Director’s costs of this application, including the costs of the hearing on 26 November 2020, to be taxed if not agreed.