HKSAR v. LO WAI MAN AND OTHERS

CACC 411/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 411 OF 2009

(On Appeal From District Court Criminal Case No. 882 of 2004)

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BETWEEN

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J U D G M E N T

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Hon Cheung JA (giving judgment of the Court) :

Appeal against confiscation order

1.  This is an application for leave to appeal by the applicants against a confiscation order imposed by Deputy Judge Woodcock pursuant to section 8 of the Organised and Serious Crimes Ordinance (‘OSCO’) (Cap. 455).

2.  The applicants were convicted after trial of the offences of keeping a vice establishment contrary to section 139(1)(a) of the Crimes Ordinance (Cap. 200) and conspiracy to deal with a property known or reasonably believed to represent proceeds of an indictable offence, contrary to section 25 of OSCO (Cap. 455) and section 159A of the Crimes Ordinance.  The Judge had determined that the offences of which the applicants were convicted were organised crimes.

3.  The 1^st applicant together with the 2^nd to 4^th applicants managed five nightclubs and two cyber cafés that were vice establishments and also dealt with the proceeds arising from the income of the vice establishments.

4.  The applicants were first arrested and charged in March 2004.

Realisable properties

5.  The Judge first found that the applicants had benefited from their crime and had properties to the following value :

1st applicant	$112,779,043.32
2nd applicant	$37,186,178.80
3rd applicant	$86,955,783.18
4th applicant	$88,783,300.33

6.  The Judge then found that the realisable properties of the applicants and their value for the purpose of the confiscation order to be as follows :

1^st applicant

(1)	Various accounts in the 1st applicant’s name.	$609,296.30
(2)	Various accounts in the name of the 1st applicant’s wife and 1st applicant’s sister-in-law.	$40,463.27
(3)	Various real property in the 1st applicant’s name.	$4,530,000.00
(4)	Various real property under effective control of the 1st applicant, either in joint names with the 1st applicant’s wife or in the sole name of the 1st applicant.	$13,130,000.00
(5)	Cash found either on the 1st applicant’s person, in his residence or the monitor room.	$226,753.94
(6)	Cash and jewellery found in safe deposit boxes in the name of the 1st applicant’s brother with the 1st applicant’s wife as deputy.
	Cash :	$2,000,000.00
	Jewellery :	$273,000.00
(7)	Cash and jewellery found in another safe deposit box in the name of the 1st applicant’s wife.
	Cash :	$850.00
	Jewellery :	$215,000.00
(8)	Cash found on 1st applicant’s wife person.	$668.82 $7,460.00
	TOTAL :	$21,033,492.33

2^nd applicant

(1)	Various amounts in the 2nd applicant’s bank accounts.	$43,308.12
(2)	Various monies in bank accounts in names of vice establishments.	$200,905.77
(3)	Cash found on the 2nd applicant’s person.	$71,357.00
	TOTAL :	$315,570.89

3^rd applicant

(1)	Various monies in bank accounts in the 3rd applicant’s name.	$97.40
(2)	Monies in a joint bank account of the 3rd applicant and his wife.	$1,412,072.48
(3)	A bank account in the name of a vice establishment.	$33,126.92
(4)	A bank account in the name of the 3rd applicant and others.	$750.00
(5)	Cash and jewellery found on the 3rd applicant’s person and in his residence, the jewellery being separately valued at $180,000.	$400,362.00
(6)	Car in the name of the 3rd applicant.	$40,000.00
	TOTAL :	$2,066,408.80

4^th applicant

(1)	A bank account in the 4th applicant’s name.	$518,622.73
(2)	Various bank accounts in the names of vice establishments.	$318,432.82
(3)	Cash kept by Kwai Hung Finance Company in the 4th applicant’s name.	$66,817.53
(4)	Car in the 4th applicant’s name.	$5,000.00
(5)	Cash and a watch found on the 4th applicant.
	Cash :	$2,180.00
	Watch :	$50,000.00
(6)	Cash found in a Bank of China safety deposit box held in the 4th applicant’s name and that of his wife.	$320.00
	TOTAL :	$961,373.08

The order

7.  The Judge imposed a confiscation order on each of the four applicants in respect of the realisable properties.  The Judge imposed a six-month period for the applicants to comply with the order.  In default of compliance the Judge ordered the following terms of imprisonment to be imposed :

1st applicant	10 years
2nd applicant	18 months
3rd applicant	3 years
4th applicant	2 years

Statutory scheme

8.  The relevant statutory scheme for the issuance of a confiscation order is set out in sections 8 and 11 of OSCO.  Regard must also be made to the definitions contained in sections 2 and 12.  The relevant scheme can be summarised as follows :

1)  The Court has to decide whether the conviction of the defendant were specified offences or organized crimes.  (section section 8(1)(a) and section 2)

2)  The Court decides whether the defendant had benefited from the specified offence or organized crime of which he was convicted.  (section 8(4) or (5))

3)  The Court considers whether the defendant’s proceeds of the specified offence or organized crime total at least HK$100,000.  (section 8(4))

4)  The Court then decides what was the value of his benefit from the specified offence or organized crime.  (section 2(8) and section 8(6))

5)  A person’s proceeds of organized crime are—

(1)  any payments or other rewards received by him at any time (whether before or after 2 December 1994) in connection with the commission of one or more organized crimes;

(2)  any property derived or realised, directly or indirectly, by him from any of the payments or other rewards; and

(3)  any pecuniary advantage obtained in connection with the commission of one or more organized crimes (section 2(7)(a)).

6)  The value of the person’s proceeds of organized crime is the aggregate of the values of—

(1)  the payments or other rewards;

(2)  that property; and

(3)  that pecuniary advantage (section 2(7)(b)).

7)  ‘Realisable property’ is defined by section 12(1) as,  

(1)  any property held by the defendant;

(2)  any property held by a person to whom the defendant has directly or indirectly made a gift caught by OSCO;

(3)  any property that is subject to the effective control of the defendant.

8)  The question of gift caught by OSCO is provided for in section 12(9) :

(1)  it was made by the defendant at any time since the beginning of the period of 6 years ending when the proceedings were instituted against him; or

(2)  it was made by the defendant at any time and was a gift of property received by the defendant in connection with a specified offence or an organized crime committed by him or another; or

(3)  it was made by the defendant at any time and was a gift of property which in whole or in part directly or indirectly represented in the defendant’s hands property received by him in that connection.

9)  Property under the control of the defendant is provided for under section 12(11) :

‘ (a) property, or an interest in property, may be subject to the effective control of the defendant whether or not the defendant has

(i)  a legal or equitable estate or interest in the property; or

(ii)  a right, power or privilege in connection with the property;

(b)  without limiting the generality of any other provision of this Ordinance, in determining-

(i)  whether or not property, or interest in property, is subject to the effective control of the defendant; or

(ii)  whether or not there are reasonable grounds to believe that property, or an interest in property, is subject to the effective control of the defendant,

     regards may be had to –

 (A)  shareholdings….

 (B)  a trust that has a relationship to the property; and

 (C)  family, domestic and business relationship between persons having an interest in the property….’

10)  The amount to be recovered under the confiscation order is either the value of the defendant’s proceeds of the organised crime (section 11(1)) or the amount that may be realised if it is less than the assessed value of the proceeds of crime (section 11(3)).

Applicable principles

9.  1)     Section 8 of OSCO introduced confiscation orders designed to catch the profits of major crime.  Similar provisions are contained in section 3 of the Drug Trafficking (Recovery of Proceeds) Ordinance (‘DTROP’) (Cap. 405).  Hence assistance can be gathered from cases dealing with both legislations.

2)  The legislative intention was that when the Secretary for Justice had taken all proper steps to apply for a confiscation order and all the other requirements had been met, making such an order was mandatory: HKSAR v Lung Wai-hung [1998] 4 HKC 161.

3)  The legislation is designed to place the offender ‘into the financial position in which he would have found himself if he had not received his proceeds of drug trafficking’: R v Ko Chi Yuen [1993] 2 HKCLR 101; R v Dickens [1990] 2 WLR 1384; [1990] 2 QB 102.  The purpose is to impose a real deterrent on the criminal and others.  Hence the provisions are ‘strongly biased in favour of the prosecution in quantifying the recoverable amount included in a confiscation order’: HKSAR v Chun Yeung [1998] 1 HKLRD 343.

4)  In considering whether the defendant had benefited from the specified offence or organised crime of which he was convicted and the value thereof, the Court may make certain assumptions specified in section 9(1) and (2) of OSCO.  In The Queen v. Ko Chi-yuen [1994] 2 HKCLR 65 Bokhary JA (as he then was) held that similar assumptions under section 4(2) and (3) of DTROP do not infringe the presumption of innocence provision under Article 11(1) of the Bill of Rights.

5)  The standard that the prosecution has to prove the defendants had benefited from the specified offence and the amount to be recovered in pursuance of a confiscation order is on the balance of probabilities (section 8(8B) of OSCO).

6)  The onus is on the defendant to prove to a civil standard, on a balance of probabilities, that the amount that could be realised is less than the value of proceeds of the specified offence or organized crime he has committed : HKSAR v. Shing Siu Ming (No. 2) [2000] 3 HKC 96.

Issues of this appeal

10.  In the Court below the applicants did not challenge that they had benefited from organised crime or the amount of the benefit.  The challenge below was on the realised amount.  This remains to be the position in this appeal.

1^st applicant

1)  Beverly Villas

11.  The 1^st applicant’s appeal is focused on the property known as Beverly Villas and a car park thereof.  This property was purchased in April 2003 for $5.45 million and registered in the name of Madam Chan Wai Han, the wife of the 1^st applicant.  The 1^st applicant’s case is that the purchase of this property was funded by his wife’s sister Madam Chan Wai Yin who became the beneficial owner of the property and that neither he nor his wife has beneficial interest in the property.

12.  The prosecution showed that payment for the down payment and stamp duty of the property and the monthly mortgage payment from June 2003 to March 2004 came from the wife’s bank account.  She had no income of her own.

13.  There were deposits of $2.5 million into the wife’s account on 29 April 2003 :

(1)  $300,000 cash,

(2)  $1.5 million cash,

(3)  $700,000 cheque issued by the 1^st applicant.

14.  Between 1 February 2002 and 29 April 2003, $2.95 million was withdrawn from the 1^st applicant’s account.  The prosecution contended the deposits of $2.5 million came from the 1^st applicant.

15.  Between 29 April 2003 and 26 May 2003, the wife transferred $1,881,500 out of her account.

16.  The 1^st applicant’s case is that the wife’s sister lent him $1.7 million cash for his business.  He repaid $1 million in cash in January 2003.  The remaining $700,000 was repaid in March 2003.

17.   The wife’s sister wished to buy the property and had it registered in the name of the wife in order to hide it from her estranged husband who had separated from her.  At her direction, the 1^st applicant deposited the repayment of $700,000 into the wife’s account.  The wife’s sister then deposited $1.8 million cash into the wife’s account representing a total of $2.5 million deposited in the wife account.

18.  The Judge rejected this explanation.  We agree and we cannot see how she could be faulted.

1)  There was no explanation on why the wife’s sister would pay such a large sums of money in cash both in respect of the loans to the 1^st applicant and the subsequent deposit of $1.8 million to the wife’s account for the purchase of the property.

2)  The wife’s sister claimed that the $1.8 million that she gave to the wife was cash repayment from three debtors who had borrowed from her.  Again there was no explanation why the wife’s sister chose to conduct the transaction and receive the repayment by cash.

3)  The wife’s sister had bought properties in her own name in May and November 2002, not long before the purchase of the property in question.  She did not divorce her husband after 2003.

4)  In short the 1^st applicant was not able to discharge the onus of showing that the source of the fund used for the purchase came from the wife’s sister.

2)  Cash and jewellery in two safe deposit boxes in HSBC

19.  The two safe deposit boxes were No. 22546 and 22666 in HSBC.  They were opened on 14 November 2002 in the name of the 1^st applicant’s brother with the 1^st applicant’s wife as his deputy.

20.  Inside each box was found $1 million cash together with jewellery.  On 14 November 2002, when the two boxes were opened, the 1^st applicant had also withdrawn cash of $4.5 million from the same branch of HSBC where the boxes were kept.  This large amount of money was bound with HSBC bank straps when they were given to the 1^st applicant.

21.  The 1^st applicant’s case is that the $1 million cash in Box No. 22546 was the $1 million he had repaid the wife’s sister in January 2003.  The sister told the wife to keep it for her in the safety box.  This $1 million was found to be bound in HSBC bank straps.  The bank record showed that these bank notes were first delivered to the bank on 11 November 2002.

22.  The 1^st applicant said that the other $1 million cash in Box No. 22666, belonged to the wife.  She had accumulated the money from her business in the Mainland in partnership with the sister.  She said the 1^st applicant was not aware of the money.

23.  In our view the Judge rightly rejected the 1^st applicant’s explanation.

1)  It would be too much of a coincidence when on the same day the 1^st applicant withdrew $4.5 million cash from HSBC two safety boxes were also opened at the same time and later each was found to have cash of $1 million.

2)  It was an incredible story that the $1 million in Box No. 22456 was the money repaid in January 2003 when the straps that bound the money showed that the money was delivered to the bank on 11 November 2002.  This was only a few days before the 1^st applicant withdrew $4.5 million cash from the bank on 14 November 2002.

3)  If the wife wished to keep her own savings without letting the 1^st applicant know about it, there was no reason why she should put it in a safety box registered in the name of the 1^st applicant’s brother.

4)  The 1^st applicant failed to give a satisfactory explanation on where the $4.5 million cash he withdrew on 14 November 2002 had gone.

24.  The wife claimed that the 16 pieces of jewellery in Box No. 22666 belonged to her. They were gifts from family and friends or purchased by herself.  She also claimed that the jewellery found in another safety box in Bank of China also belonged to her.  It was submitted that some of the jewellery were wedding gifts to the wife.  The Judge rejected the explanation that the jewellery belonged to the wife.  The Judge had seen photographs of the jewellery.  Obviously she was not satisfied that the jewellery was traditional wedding jewellery that was given by the wife’s family.  We are not in a position to come to a different view.  Ultimately it is a question of the 1^st applicant not being to discharge his onus of showing that the items were not realisable properties.

The 2^nd applicant

25.  The 2^nd applicant only challenged the sum of $78,556.34 kept in the Bank of China savings account of Oriental Pearl Karaoke Nightclub.  The 2^nd applicant was one of the signatories of the bank account.  This nightclub was not connected to the charges at the trial.

26.  The Judge held that under section 12, realisable property does not need to be related to any criminal activities.  The evidence adduced by the prosecution in respect of the present proceedings showed that the transactions involved a current account and the savings account.  The accounts were opened by a male named Fong Yun-wah Kenneth (‘Fong’) on 30 December 2003.  The account could be operated by either of the signature of Fong or the 2^nd applicant.

27.  Except for the initial cash deposit, most of the deposits into the savings account were transferred from BOC Credit Card Company.  All of these funds were then either withdrawn by the 2^nd applicant in cash or transferred to the current account.  After the funds had been transferred to the current account, the funds were then dissipated by cheque withdrawals.  The cheques were all signed by the 2^nd applicant.  It is apparent that the current and savings accounts were solely controlled by the 2^nd applicant.  This comes within the definition of realisable property under section 12(1)(c) of OSCO, namely, property subject to the effective control of the 2^nd applicant. The Judge was correct to include the amount in the confiscation order.

The 3rd applicant

1)  Parc Royale

28.  The 3^rd applicant and his wife jointly purchased a property at Parc Royale, Shatin in 1996 for $5.58 million.  There was a mortgage of $3.9 million from HSBC.  Monthly mortgage instalments came from the 3^rd applicant’s personal account, HSBC 580-818722-888.  In the 6-year period that ran from March 1998 it was analysed that a total of $47 million-odd was deposited in this account.

29.  The Parc Royale property was repossessed by HSBC on 25 August 2006 and sold in March 2007.  The net sales proceeds, after deducting the outstanding loan, were deposited into a temporary joint account with a balance at May 2008 of $1,412,072.48.  This amount is subject to a restraint order.  There was no application by the 3^rd applicant or his wife for variation of the restraint order for the release of the sales proceeds to the wife.

30.  The 3^rd applicant contended that the wife had contributed to the purchase both by way of down payment and mortgage and she should have a share in the proceeds of sale.  This was, however, contradicted by the wife who said in her witness statement to the police that the property was purchased and paid for by the 3^rd applicant.  He paid all the mortgage instalments.  She did not work and had no income and was a full time housewife.

31.  The Judge found that the wife did not have the financial means to contribute towards the purchase.  Her interest in the property was subject to the effective control of the 3^rd applicant or that such interests can be construed as a gift to her from the 3^rd applicant and is caught by the OSCO.  The Judge held that the property and the proceeds of sale thereof were part of the 3^rd applicant’s realisable property.

32.  Mr. Wu, counsel for the 3^rd applicant, relied on two English cases, namely, Steven Richard Holah (1989) 11 Cr.App.R.(S) 282 and Peter John Taigel [1998] 1 Cr.App.R.(S) 328 which dealt with the enforcement of compensation orders by the disposal of a family home under the English legislation. 

33.  In Holah, Farquharson J held at 284 that

‘ In that kind of situation the courts have said on a number of occasions that it is inappropriate by way of compensation order to order the sale of a family house in this way. There may of course be exceptional circumstances where money obtained by fraud can be traced to an investment in the purchase of a house. Then it may be that different considerations would apply. But in ordinary circumstances this course should not be taken. There have been a series of decisions including that of Harrison (1982) Cr.App.R.(S) 313, Blackmore (1984) 6 Cr.App.R.(S) 244, and Butt (1986) 8 Cr.App.R.(S) 216. There is also a decision of this Court, Hackett (1988) 10 Cr.App.R.(S.) 388, decided on October 13,1988, where Henry J. giving the judgment of the court repeated the reasons that have always been emphasised by this Court why that kind of order should not be made.’

34.  In Taigel, Smedley J referred to cases including Holah, and held at page 332 that,

‘ Nonetheless, although there may be some cases where it is inappropriate to order that the compensation amount shall include the value of the matrimonial home, that is not, as we have pointed out, an absolute rule. In this case we are persuaded that an order which has the consequence that the matrimonial home will have to be sold should not have been made.’

35.  These two cases are dealing with different legislative schemes and they pre-supposed that the wife has an interest in the matrimonial home.  These cases are not identical to the issue that this Court has to decide. 

Presumption of joint interest

36.  After the hearing the Court carried out its own research and came across the recent case of Gibson v. Revenue and Customs Prosecutions Office [2009] QB 348 which referred to the House of Lord’s decision of Stack v. Dowden [2007] 2 AC 432 which dealt with the question of a woman’s interest in a family home purchased in the joint names of a man and woman who were not married but who lived in the property together as husband and wife.  In the light of these cases the Court invited further written submissions from the parties which the Court had now received.

37.  Parc Royale was in the joint names of the 3^rd applicant and his wife. They were married in 1977.  The property was purchased in 1996 the parties lived there until it was repossessed by the Bank in 2006.  Where a property is acquired in joint names, prima facie, the parties are entitled to equal legal and beneficial interests in the property.  The rationale is based on the common intention to own the property : see Stack per Baroness Hale of Richmond :

‘ 56. Just as the starting point where there is sole legal ownership is sole beneficial ownership, the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership cases, it is upon the joint owner who claims to have other than a joint beneficial interest.

….

  60. …… The law has indeed moved on in response to changing social and economic conditions.  The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.’

Presumption of advancement

38.  In the Court below arguments were raised on the presumption of advancement of Parc Royale in favour of the wife since it was the 3^rd applicant who financed the purchase.  The presumption of advancement, however, is no longer the legal basis for holding the equal interest of spouses in a joint property. Arden LJ held in Gibson at 356 that,

‘ 26. It is noteworthy that the argument in the court below and in this court has proceeded entirely on the basis that the principles which govern the rights of Mr and Mrs Gibson with respect to the property are those of a common intention constructive trust as recently set out in Stack v Dowden. No mention has been made of the presumption of advancement. Under this presumption, there is a one-sided presumption that a husband who transfers property into the name of his wife, intends to make a gift in her favour. The House of Lords has held that this presumption is no longer in keeping with modern conditions or at least is much diminished, or more easily rebutted, nowadays: see Pettitt v Pettitt [1970] AC 777, per Lord Reid, at p 793, per Lord Hodson, at p 811, and per Lord Diplock, at p 824, and see the observations in Stack v Dowden [2007] 2 AC 432 of Lord Walker of Gestingthorpe, at para 16, and Lord Neuberger of Abbotsbury, at para 101. The presumption has been entirely abolished by statute in relation to money and property derived from a housekeeping allowance: see section 1 of the Married Women’s Property Act 1964.’

Anti-gift provisions

39.  As pointed out earlier the definition of a realisable property includes any property held by a person to whom the defendant has directly or indirectly made a gift caught by the OSCO (section 12(1)(b) of OSCO).  The definition in section 12(9) of a gift caught by OSCO is, of course, extremely wide.  However, if the presumption of advancement is no longer the proper basis for considering the wife’s interest in the property, then the argument that the 3^rd applicant had made a gift to his wife which was caught by section 12(9) of the OSCO could not stand.  In any event, as conceded by Ms Chan, counsel for the respondent, it is wrong to say that the gift was caught by the OSCO because the date of the acquisition (hence the gift to the wife) was outside the six year period under section 12(9).  Hence the section does not apply.

40.  Ms Chan, however, argued that the wife has no beneficial interest in the property by the following reasons :

1)  The wife is a housewife and does not have income of her own.

2)  The down payment and monthly mortgage payments of the property were made by the 3^rd applicant.  This was confirmed by the wife in her witness statement to Police dated 25 March 2004.  This is contrary to what the 3^rd applicant said in his affirmation dated 16 January 2009.

3)  The utilities charges, although paid from the wife’s bank account, were funded by the 3^rd applicant.

4)  Apart from the mortgage account, the 3^rd applicant and his wife did not have other joint accounts.  They had separate bank accounts.  This indicated that the parties did not intend to pool their resources together.

5)  There was no application for the variation of the restraint order.

Our view on Parc Royale

41.  We are unable to accept Ms Chan’s arguments.  We are here dealing with the matrimonial home of a married couple and not properties registered in joint names in general.  More often than not the acquisition of a matrimonial home is financed by the husband who earns.  It does not mean that the wife who is a housewife and who has made no financial contribution will not acquire any interest in the property.  The consideration paid by the wife is usually in the form of bringing up the children and looking after the home.  This is recognized in Gibson at paragraph 10.  In any event, when a couple are joint owners of the home and are jointly liable for the mortgage, the inferences to be drawn from who pays for what may be different from the inferences to be drawn when one is an owner of the home (Stack at paragraph 69).  Stack, which is not a married couple case, reaffirms the principle that joint owners are intended to have joint legal and beneficial interest.  The position must be even stronger in the case of a married couple.  Baroness Hale said in Stack at paragraph 66 that,

‘ Committing oneself to spend large sums of money on a place to live is not normally done by accident or without giving it a moment’s thought.’

42.  A matrimonial home plays a significant role in a married couple’s life.  In family law, a spouse’s interest in the matrimonial home is well recognized : see the Court of Final Appeal’s judgment in DD v. LKW [2010] 6 HKC 528 which established, among other things, the principle of equality of a couple’s interest in the matrimonial home (irrespective whether it is in sole or joint names). Proceeding on the basis that the property in question was in joint names and bearing in mind that the parties have been married for a long time since 1977 and had been living in the matrimonial home for about ten years before it was repossessed, this course of conduct clearly reinforced the 3^rd applicant’s case that the shared intention of the parties in respect of the property was indeed that each would have an equal share in it.  It has been pointed out in Stack at paragraph 8 that a full inquiry in joint name cases is unlikely to lead to a different result unless the facts are very unusual.  There are no unusual features in this case and there is no evidence to suggest that the parties’ intention had subsequently changed.

43.  In Gibson,   the defendant was convicted of a drug trafficking offence and a confiscation order was made against him under the Drug Trafficking Act 1994. A receiver was appointed in respect of the defendant’s realisable assets which included the matrimonial home acquired in 1990, three endowment policies effected to support the mortgage on the house and two bank accounts, all of which were in joint names with the defendant’s wife.  In enforcement proceedings in the High Court to which the wife was joined, she claimed a half interest in the assets held in joint names.  The judge found that the wife had known that from 1993 money used to pay the mortgage and to make payments under the endowment policies had not been legitimately earned.  He held that although there was no provision in the 1994 Act which could deprive the wife of her 50% interest in the disputed property, public policy required that her guilty knowledge should be taken into account against her and he accordingly declared that the disputed property was held by the defendant as to 87.5% and the wife as to 12.5%.

44.  The English Court of Appeal allowed the wife’s appeal and held that the wife was entitled to a 50% share in the disputed property.  It applied Stack.  Wall LJ held that, on the facts of the instant case, the property was in joint names, and there was nothing to displace the presumption of equal beneficial ownership described in Stack.

45.  As to the question of public policy in the light of the wife’s knowledge that the money used to pay the mortgage was not legitimately earned, the Court of Appeal rejected the notion of a free-standing public policy which would deprive the wife of her interest in the property.  May LJ held that,

‘ 14. ...... The assets are hers without any court order in her favour. It is the prosecution who have to establish a public policy jurisdiction entitling the court to confiscate her assets, when she was not convicted; when no confiscation order has been made against her under the 1994 Act or otherwise; and when there is no statutory confiscatory provision in the 1994 Act or otherwise on which the prosecution can rely. The prosecution need to persuade the court that there is some freestanding public policy jurisdiction to support their case.

……

20.  As to public policy generally, Mr Bartlett submits that there is a clear public interest that those who traffic unlawfully in drugs should be deprived of the proceeds.  He suggests that the jurisdiction in matrimonial cases, where there is divorce, to decline to make a property adjustment order in favour of a spouse who is complicit in the illegality, should extend to those who are not divorced.  But, as I have indicated, the nature of the court’s power which would be involved here is quite different.  Declining to order the transfer to a complicit spouse of property which is not hers is one thing; confiscating property which she already owns is quite another.

21.  There is thus, in my judgment, no identifiable power in the court, supported by a public policy which in general I acknowledge, to supplement presently existing statutory provisions to achieve what the prosecution want to achieve in violation of Mrs Gibson’s rights under article I of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms.  Although, in the language in that article, the result contended for might be in the public interest, it would not be subject to conditions provided for by the law.  I decline to invent such conditions judicially.’

46.  In my view the observation of the English Court of Appeal on public policy is equally applicable to the present case even without relying on human rights provisions. If the half beneficial interest of the 3^rd applicant’s wife had been acquired from the time of the acquisition because of the shared intention of the parties which had not been changed subsequently, the public policy consideration that those who traffic unlawfully in drugs should be deprived of the proceeds does not provide the basis for confiscating her interest.  In any event, there was no evidence of knowledge in the 3^rd applicant’s wife of the illegitimate provenance of the monies. 

47.  Ms Chan further argued that in any event, the 3^rd applicant controlled the property under section 12(1).

48.  In our view, the 3^rd applicant obviously had effective control of his 50% interest of the property.  However, we do not see any additional factor in this case which indicates that he has effective control over the wife’s share as well.  We do not consider that just because the wife had not actively intervened in the proceedings and asserted an interest in the property, it could be an indication of the 3^rd applicant’s control.  Costs implications and the wife’s knowledge of the right to intervene must also be considered.

49.  We further do not see how the factors referred to in section 12(11)(b), namely, ‘shareholdings’ and ‘a trust that has a relationship to the property’ have any application to the present case.  As to the factor of ‘family, domestic and business relationship between persons having an interest in the property’, again it does not add anything to the existing position at all.

50.  In our view, in respect of the confiscation order, the 3^rd applicant had discharged the burden (even assuming he bears it on the joint names issue) by showing that in respect of the proceeds of sale of Parc Royale, only 50% of his share is realisable property and that the other 50% belongs to his wife. 

Others

51.  The Judge also made a confiscation order of the cash and jewellery found in the safe at the Parc Royale property. The wife had a key to the safe but she said that the safe was mainly used by the 3^rd applicant.

52.  The Judge found that the wife had no income of her own and she had not explained the origin of the jewellery.  The Judge found that the cash and jewellery inside the safe were realisable properties of the 3^rd applicant.  We agree with her finding.

The 4^th applicant

53.  In the Court below it was accepted by counsel for the 4^th applicant that the $518,622.73 in the bank account was realisable property.  This represented the proceeds of sale of a property in Sai Kung bought by the 4^th applicant.  This point cannot be reopened again.

54.  We are also satisfied that the Judge’s decision on the $318,432.82 being the amount in various bank accounts in the names of vice establishments were realisable property. 

55.  In respect of the car and watch they were properties held by the 4^th applicant and under his effective control and we agree that they were realisable properties.

Casa Paradizo

56.  The only issue that calls for discussion is the proceeds of sale of a property known as Casa Paradizo.  The property which was registered in the joint names of the 4^th applicant and his wife was purchased in June/July 1998 for $4.6 million.  The 4^th applicant paid the initial deposit of $300,000 and down payment of $1.2 million.  A mortgage loan of $3.4 million was obtained from a finance company.  The 4^th applicant was found living at the property when he was arrested.  The 4^th applicant and his wife had no children.  It is not disputed that the property was the matrimonial home of the parties.  Due to default in repayment of the mortgage loan, the finance company sold the property in December 2006 at a price of $3.8 million.  The net proceeds of sale of $66,817.53 have been kept in the finance company.

57.  Ms Chan repeated her arguments that she had advanced in the 3^rd applicant’s case and relied on the same factors relating to the payment for the acquisition of the property, namely, the relevant payment was made by the 4^th applicant.

58.  In the light of what we said about the 3^rd applicant’s case, we have to reject Ms Chan’s submission.

59.  Ms Chan further seeks to distinguish Gibson by saying that the wife there had provided consideration.  As apparent from paragraph 10 of the judgment, the consideration that the English Court of Appeal held the wife had provided for was bringing up the children and looking after the home.  It was by no means financial consideration.  Absence of financial contribution by the wife towards the purchase of a matrimonial home in joint names cannot be fatal to the wife’s interest.

60.  Ms Chan further argued that in respect of the 4^th applicant, if his wife’s interest in the property was to be regarded as a gift, then it was a gift caught by section 12(9)(1) in that the gift was made within the six-year period (the property was bought in July 1998 and the charge against the 4^th applicant was laid in March 2004).  In the Court below, counsel for the 4^th applicant accepted that if the presumption of advancement applies, then the wife’s interest in the property was a gift caught by section 12(9)(1).

61.  As we have discussed in relation to the 3^rd applicant, the wife’s interest in the property was acquired not by way of presumption of advancement, therefore the issue of gift does not arise at all irrespective whether it was caught by the relevant section or not because of the time factor.  When counsel made the concession below, clearly he was not aware of the recent development of the law which was only raised by the Court.  In any event, counsel for the 4^th applicant had first submitted below that the wife was entitled to a 50% interest because she was a joint owner of the property.  This submission was clearly sustainable in the light of Stack and Gibson.  In the circumstances we do not consider that this point is not open to the 4^th applicant.  Applying the same reasoning as in the case of the 3^rd applicant, we found that the 4^th applicant’s wife had a 50% interest in Casa Paradizo which is now in the form of the proceeds of sale upon its realisation.

Conclusion

62.   1)  Accordingly we will dismiss the application of the 1^st and 2^nd applicants.

2)  We will grant leave to the 3^rd applicant and his application is treated as the appeal proper.  The appeal of the 3^rd applicant is allowed to the extent that half of the balance of proceeds of sale of Parc Royale now in the temporary joint account is the realisable property of the 3^rd applicant and is subject to the confiscation order against him.

3)  We will grant leave to the 4^th applicant and his application is treated as the appeal proper.  The appeal of the 4^th applicant is also allowed to the extent that half of the balance of the proceeds of sale of Casa Paradizo is the realisable property of the 4^th applicant and is subject to the confiscation order against him.