SECRETARY FOR JUSTICE v. GUARDECADE LTD AND OTHERS

CACV 47/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 47 OF 2004

(ON APPEAL FROM HCMP NO. 3680 OF 2002)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1. This was an appeal by the 8th respondent from a judgment and order of Tong J given on 19 December 2003, whereby the judge refused the 8th respondent's application to vary a restraint order ("the restraint order") which had been made on 2 October 2002 under sections 15 and 16 of the Organized and Serious Crimes Ordinance, Cap. 455 ("the Ordinance") and dismissed the summons. At the conclusion of this appeal this court dismissed the appeal with costs, with reasons to be given in writing later, which we now do.

Background

2. The 2nd to 5th respondents have been charged with offences including conspiracy to deal with property known or believed to represent the proceeds of an indictable offence, namely, monies which have been removed from the Mainland in circumstances where tax has not been paid upon it which should have been paid. The allegation is that large sums of money were brought into Hong Kong on a daily basis. Sometimes those sums of money amounted to $92 million per day. In total it is said that the cash brought into Hong Kong amounted to something like HK$3.2 billion. The trial of the 2nd to 5th respondents is still underway and this court was informed is likely to last for about another month.

3. The evidence is that physical cash was brought into Hong Kong from the Mainland and received by the 1st respondent, which was a money changing company. It was then converted into Hong Kong dollars and deposited by employees of the 1st respondent into a large number of different bank accounts at the Po Sang Bank. One of those accounts was an account in the name of the 8th respondent ("the Po Sang Bank account"). There were at least 2 signatories to the Po Sang Bank account. The 8th respondent was one and the other was Yau Fu-Tin ("Mr Yau"), an employee of the 1st respondent. It would appear that Mr Yau was able to operate the Po Sang Bank account on his own signature. There were a large number of transactions in respect of the Po Sang Bank account and, for the purposes of this decision, it is assumed that most of those transactions were conducted either by Mr Yau or somebody else other than the 8th respondent.

4. On the basis that the Po Sang Bank account was being operated as part of a scheme for which the 2nd to 5th respondents are at present being tried, a restraint order was obtained in respect of the balance of the bank account under sections 15 and 16 of the Ordinance. For the purposes of this appeal, Mr Marash, who appeared on behalf of the 8th respondent, did not take issue with the making of the restraint order as such but averred that in respect of $15,459,900 in the Po Sang Bank account, that amount indisputably came from a Madam Hong Zhenzhen ("Madam Hong") in the Philippines. Madam Hong is the 8th respondent's sister-in-law. It is said that the money was remitted from the Philippines as part of an investment in China. One notable feature of the case is that it is said that the sum of $15,459,900 is the remaining balance out of a total of $38,197,548.00 transferred in a series of 26 remittances from the Philippines over a period of some five months. Some documentation in respect of that has been produced. However, to put the matter succinctly, neither the evidence, nor the documentation which has been produced, is sufficient to demonstrate that the various sums of money came from sources other than the cash which was brought from the Mainland to Hong Kong.

5. In the first place, neither the 8th respondent nor Madam Hong has produced any evidence as to the source of the sums of money which were remitted by Madam Hong from the Philippines. This, it seems to me, must be crucial if the 8th respondent is to establish that the $15,459,900 should not be caught by the restraint order. Given the allegations in the case, and in particular the large sums of money which are said to have been transferred in cash on a daily basis from the Mainland, it is necessary, in my view, for Madam Hong to establish the exact source of the various remittances made over the period of five months in comparatively small amounts. It is clearly not sufficient simply to say that the money was remitted from the Philippines. The allegation in this case is that there has been money laundering. There are good grounds to support that allegation. The 8th respondent is unable to deny that Po Sang Bank account has been used for money laundering. The sudden appearance of money in periodic remittances over a comparatively long time is, perhaps, a valid ground for suspicion of money laundering.

6. In the second place, I do not consider that there has been a proper explanation of the transfer of monies once they have arrived in Hong Kong. It is said that the money was remitted from the Philippines to Hong Kong to a bank account of one Lam Sau-man at the Chiyu Bank in Hong Kong. It is said that it was then converted from US dollars into Hong Kong dollars and then deposited into an account of Madam Hong at the Chiyu Bank. Finally it is said that Madam Hong transferred it to the Po Sang Bank account. However, the documentation produced seems to be deficient in a number of respects and is by no means complete.

7. Mr Marash argued that much of the documentation had been seized by the ICAC and, therefore, it was not available to the 8th respondent. Nevertheless, that should not be an absolute bar to its production, which could be on a confidential basis should circumstances require it, for the purposes of an application.

8. Mr Marash drew this court's attention to the difficulty faced by the 8th respondent in that if the restraint order remained and the 2nd to 5th respondents were found guilty and to have benefited to an amount equal to or in excess of the balance of the Po Sang Bank account, under the provisions of section 8 of the Ordinance, the court would have no discretion but to order confiscation of the amount which is the subject of the restraint order. Our attention has been drawn to various judgments including that of Stuart-Moore JA (as he then was) in HKSAR v Lung Wai Hung [1999] 1 HKLRD 598, where the lack of any discretion was pointed out and it was said that an amendment of the Ordinance should be considered. The mandatory provision is clearly long overdue for review. Nevertheless in the circumstances of this case, dismissal of the 8th respondent's application, based as it is on a lack of evidence to support the application, cannot prevent Madam Hong from making any application which she sees fit. She will, of course, have the advantage of knowing the basis upon which the 8th respondent has failed to succeed.

Hon Le Pichon JA:

9. I agree.