SECRETARY FOR JUSTICE v. FANG JINAN

HCMP 599/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 599 OF 2016

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D E C I S I O N
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Introduction

1.  This is an application by the Secretary for Justice, under Order 117, rule 3A of the High Court Rules, Cap 4, for a confiscation order pursuant to section 8 of the Organized and Serious Crimes Ordinance, Cap 455, (OSCO), against the respondent, FANG Jinan, as an absconder. 

2.  The confiscation order is made in relation to a money laundering case.  The applicant submits that as a result of an email and telephone scam, nine Taiwanese female victims were deceived into depositing a total of HK$1.24 million into a Bank of China account number  012-885-9-221578-4 held in the name of the respondent.  The victims later realised that they had been involved in a scam and variously made reports to the Taiwanese authorities, which later referred the matter to the Hong Kong Police. 

3.  The Hong Kong Police carried out an investigation which revealed that the respondent was the sole holder and signatory of the bank account.  It had been opened on 19 March 2010 and ceased to operate on 21 June 2012.  It was also uncovered that the respondent applied for internet banking service for the account and instructed the Bank of China to send all statements to his residential address in mainland China. 

4.  An examination of the bank records revealed that a total sum of HK$31 million was deposited into the account during the period that it operated.  It appears that as sums were deposited into the account, similar sums were promptly withdrawn and that the majority of the funds deposited by the victims into the account were either transferred to other banks or withdrawn. 

5.  The last known credit balance of the account was EUR$9,974.94 and US$250.11. 

6.  The applicant submits that the respondent, a resident of mainland China, only came to Hong Kong on two occasions.  One occasion was on 19 March 2010 when the bank account was opened and the other was on 15 February 2012 when a sum of JP$20 million was transferred out of the account. On each occasion, the respondent stayed in Hong Kong for one or two days only. Since leaving Hong Kong on 15 February 2012, the respondent has not returned and his whereabouts is unknown. 

7.  The applicant submits that a check with the Inland Revenue Department revealed that the respondent has not filed any tax returns in Hong Kong. 

8.  On 4 November 2014, a warrant of arrest was issued against the respondent for an offence of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1) of OSCO.  The proceeds involved were alleged to be in the sum of HK$31,166,309.9. 

Statutory regime

9.  The power of the Court to make a confiscation order is contained in section 8 of OSCO. 

10.  The procedures and conditions for an application of a confiscation order pursuant to section 8 are the same as those contained in section 3 of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405, (DTROP).  Section 3 of DTROP was explained in Secretary for Justice v Lee Cheung-wah, HCMP 113/2009, 6 June 2001, unreported, per Lugar-Mawson J, which followed the judgment of Secretary for Justice v Lee Chau-ping and anor [2000] 1 HKLRD 49, and the comments about the procedures and conditions of section 3 of DTROP are apposite to section 8 of OSCO. 

11.  Section 8(1) provides that an application may be made by or on behalf of Secretary for Justice for a confiscation order in circumstances where a person has been convicted of one or more specified offences, or where proceedings for one or more specified offences have been instituted against the person but have not been concluded because the person has died or absconded. 

12.  I will focus on the circumstances where application for a confiscation order is made against an absconder where proceedings have not been concluded.  So far as material, section 8 reads:

“(1) Where-

(a) either-

(i) …; or

(ii) proceedings for one or more specified offences have been instituted against a person but have not been concluded because the person-

(A)…; or

(B) has absconded; and

(b) an application is made by or on behalf of the Secretary for Justice for a confiscation order,

the Court of First Instance or the District Court, as the case may be, shall act as follows.

…

(3) The court shall-

(a) …

(b) …

(c) where subsection (1)(a)(ii)(B) is applicable-

(i) first be satisfied that-

(A)the person has absconded and that not less than 6 months have elapsed beginning with the date which is, in the opinion of the court, the date on which the person absconded;

(B) in the case of-

(I) a person who is known to be outside Hong Kong and whose exact whereabouts are known-

(aa) reasonable steps have been taken, but have been unsuccessful, to obtain the return of that person to Hong Kong for the purposes of the proceedings concerned;

(bb) if that person is in custody outside Hong Kong for purposes other than the purposes referred to in sub-sub-sub-subparagraph (aa), he is in such custody by virtue of conduct which would constitute an indictable offence if it had occurred in Hong Kong; and

(cc) notice of those proceedings was given to that person in sufficient time to enable him to defend them;

(II)subject to subsection (3A), a person whose exact whereabouts are not known, reasonable steps have been taken to ascertain the person's whereabouts (including, if appropriate, a step mentioned in paragraph (a), (b) or (c) or rule 5(1) of Order 65 of the Rules of the High Court (Cap 4 sub. leg. A)) and notice of those proceedings, addressed to that person, has been published in a Chinese language newspaper, and an English language newspaper, circulating generally in Hong Kong; and

(C) having regard to all relevant matters before it, the person could have been convicted in respect of the offence or, as the case may be, the offences concerned;

(ii) then, where the court is satisfied under subparagraph (i), determine, if the prosecution so requests, whether the offence or any of the offences concerned could have been an organized crime.

(3A) Where subsection (3)(c)(i)(B)(II) is applicable, and notwithstanding that the court is satisfied as mentioned in that subsection that actions have been taken, the court may, if it is satisfied that it is in the interests of justice to do so, require that notice of the proceedings mentioned in that subsection be given to the person mentioned in that subsection in such additional manner as the court may direct.

(4) The court shall then determine-

(a) …

(b) where subsection (1)(a)(ii) is applicable, whether the person has benefited from the specified offence of which the court is satisfied that he could have been convicted or from that offence taken together with any specified offence of which the court is satisfied that he could have been convicted in the same proceedings or which the court could have taken into consideration in determining his sentence if he had not died or absconded, as the case may be,

and, if he has, whether his proceeds of that specified offence or offences are in total at least $100000.

(5) If the court has determined-

(a) …

(b) where subsection (1)(a)(ii) is applicable-

(i) under subsection (3)(b)(ii) or (c)(ii), as the case may be, that the specified offence or any of the specified offences concerned could have been an organized crime; and

(ii) under subsection (4), that his proceeds of the specified offence or offences referred to in that subsection are in total at least the amount specified in that subsection,

the court shall then determine whether the person has benefited from organized crime.

(6) If the court determines that his proceeds of the specified offence or offences are in total at least the amount specified in subsection (4), the court shall determine in accordance with section 11 the amount to be recovered in his case by virtue of this section.

(7) The court shall then, in respect of the offence or offences concerned, order the person to pay-

(a) that amount; or

(b) without prejudice to the generality of paragraph (a), such proportion of that amount as it thinks fits after taking into account any order or orders provided for or referred to in subsection (3)(a)(ii)(B)(I), (II) or (III) which has or have been made in respect of the person.

…

(8) For the purposes of subsection (3)(b)(i)(B) or (ii) or (c)(i)(C) or (ii), information may be furnished to the court after the person has died or absconded, as the case may be.

…

(8B) It is hereby declared that the standard of proof required to determine any question arising under this Ordinance as to-

(a) whether a person has benefited from a specified offence or offences;

(b) whether a person has benefited from organized crime; or

(c) the amount to be recovered in his case in pursuance of a confiscation order,

shall be on the balance of probabilities.

(8C) The fact that-

(a) under subsection (3)(b)(i)(B) or (c)(i)(C) the court is satisfied that a person could have been convicted in respect of the offence or, as the case may be, the offences concerned;

(b) under subsection (3)(b)(ii) or (c)(ii) the court determines that the offence or any of the offences referred to in subsection (3)(b)(i)(B) or (c)(i)(C) could have been an organized crime,

shall not be admissible in evidence in any proceedings for an offence.

…

(9) For the purposes of-

(a) subsection (3)(a)(i), (b)(ii) or (c)(ii), the court shall only have regard to evidence such as would be admissible in criminal proceedings;

(b) subsection (3)(a)(i), the court shall only make a determination that a specified offence is an organized crime if it is so satisfied beyond reasonable doubt.

(10)  Where subsection (1)(a)(ii)(A) or (B) is applicable, the reference in that subsection to "one or more specified offences" includes any offence previously specified in Schedule 1 or 2, and the other provisions of this section and this Ordinance (including paragraphs (b) to (e) of the definition of "specified offence" in section 2(1) and any subsidiary legislation) shall be construed accordingly.”

13.  It should be noted that section 8 also caters for the situation where a person had been convicted of one or more specified offences but has absconded before the application has been concluded (section 8(7A), (7B), (7C) and (7D)). 

14.  Relevant to an application under section 8 are sections 9 to 12.  Section 9 entitles the Court to make certain assumptions when assessing the value of a person’s proceeds of organized crime.  So far as material, section 9 reads:

“(1) The Court of First Instance or the District Court, as the case may be, may, for the purpose of determining whether-

(a) …

(b) where section 8(1)(a)(ii)(A) or (B) is applicable, a person whom the court is satisfied that he could have been convicted of a specified offence being an offence which the court determines that it could have been an organized crime,

has benefited from organized crime, and if he has, of assessing the value of his proceeds of organized crime, make the following assumptions, except to the extent that the defendant (or, in the case of a defendant who has died, his personal representative on his behalf) shows that any of the assumptions are incorrect in his case.

(2) Those assumptions are-

(a) that any property appearing to the court-

(i) to have been held by him at any time-

(A) …; or

(B) where section 8(1)(a)(ii) is applicable, since the application was made for a confiscation order in his case, as the case may be; or

(ii) to have been transferred to him at any time since the beginning of the period of 6 years ending when the proceedings were instituted against him, was received by him, at the earliest time at which he appears to the court to have held it, as his proceeds of organized crime;

(b) that any expenditure of his since the beginning of that period was met out of his proceeds of organized crime; and

(c) that, for the purpose of valuing any property received or assumed to have been received by him at any time as his proceeds of organized crime, he received the property free of any other interests in it.

(3)  For the purpose of assessing the value of the defendant's proceeds of organized crime in a case where a confiscation order, or an order under section 3(6) of the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405), has previously been made against him, the court shall leave out of account any proceeds of organized crime that are shown to the court to have been taken into account in determining the amount to be recovered under that order.”

15.  Section 10 provides that an application for a confiscation order may be supported by a statement of matters in relation to which the Court must be satisfied under section 8 which may be accepted by the Court in certain circumstances.  Section 10(7)(b) provides that in a case of an absconder a statement tendered will be deemed to have been served on him. 

16.  Section 11 reads:

“(1) Subject to subsection (3), the amount to be recovered in the defendant's case under the confiscation order shall be the amount the Court of First Instance or the District Court, as the case may be, assesses to be the value of the defendant's proceeds of any specified offence to which section 8(4) applies or, where the court has determined under section 8(3)(a)(i) that a specified offence is an organized crime or under section 8(3)(b)(ii) or (c)(ii) that a specified offence could have been an organized crime, all organized crime which he has committed.

(2) If the court is satisfied as to any matter relevant for determining the amount that might be realised at the time the confiscation order is made (whether by an acceptance under section 10 or otherwise), the court may issue a certificate giving the court's opinion as to the matters concerned and shall do so if satisfied as mentioned in subsection (3).

(3) If the court is satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount the court assesses to be the value of the defendant's proceeds for the purpose of subsection (1), the amount to be recovered in the defendant's case under the confiscation order shall be-

(a) the amount appearing to the court to be so realised; or

(b)  a nominal amount, where it appears to the court (on the information available to it at the time) that the amount that might be so realised is nil.”

17.  Section 11A deals with interest on amounts to be recovered under confiscation order and section 12 provides definitions of various terms used under OSCO, including definition of “realisable property”. 

Conditions for a confiscation order

18.  Pursuant to section 8(1), the following conditions must be met for an application for a confiscation order against an absconder.  They are as follows:

(1) the application is made by or on behalf of the Secretary for Justice (section 8(1)(b));

(2) proceedings for one or more specified offences under OSCO have been instituted against the person but have not been concluded (section 8(1)(a)(ii)); and

(3) the proceedings have not been concluded because the person has absconded (section 8(1)(a)(ii)(B)).

19.  Proceedings for an offence are defined under OSCO.  Sections 2(15) and (16) of OSCO provide:

“(15) Proceedings for an offence are instituted-

(a) when a magistrate issues a warrant or summons under section 72 of the Magistrates Ordinance (Cap 227) in respect of the offence;

(aa) when a person has been arrested for the offence and released on bail or has refused bail;

(b) when a person is charged with the offence after being taken into custody without a warrant; or

(c) when an indictment is preferred by the direction or with the consent of a judge under section 24A(1)(b) of the Criminal Procedure Ordinance (Cap 221),

and where the application of this subsection would result in there being more than one time for the institution of proceedings, they shall be taken to have been instituted at the earliest of those times.

(16) Proceedings for an offence are concluded on the occurrence of one of the following events-

(a) the discontinuance of the proceedings whether by entry of a nolle prosequi or otherwise;

(b) an order or verdict acquitting the defendant, not being an order or verdict which is subject to appeal or review within the meaning of subsection (17);

(c) the quashing of his conviction for the offence except where, under section 83E of the Criminal Procedure Ordinance (Cap 221), an order is made that he be retried;

(d) the grant of the Chief Executive's pardon in respect of the conviction for the offence;

(e) the court or magistrate sentencing or otherwise dealing with him in respect of his conviction for the offence where the Secretary for Justice either does not apply for a confiscation order, or applies for a confiscation order and the order is not made; or

(f)  the satisfaction of a confiscation order made in the proceedings (whether by payment of the amount due under the order or by the defendant serving imprisonment in default).”

20.  A “specified offence” is also defined under section 2(1) of OSCO and means:

“(a) any of the offences specified in Schedule 1 or Schedule 2;

(b) conspiracy to commit any of those offences;

(c) inciting another to commit any of those offences;

(d) attempting to commit any of those offences;

(e) aiding, abetting, counselling or procuring the commission of any of those offences.”

21.  In deciding whether to grant an application for a confiscation order against an absconder, the Court must be satisfied of the following matters:

(1) The person had absconded and that not less than six months had elapsed beginning with date which is, in the opinion of the Court, the date on which the person absconded (section 8(3)(c)(i)(A)).  Section 2(1) of OSCO provides that “absconded” means “in relation to a person, includes absconded for any reason whatsoever, and whether or not, before absconding, the person had been (a) taken into custody; or (b) released on bail”.  Clearly from this definition of absconded, it is not necessary that an absconder has been charged or taken into custody before he is regarded as having absconded.

(2)(a) In the case of a person who is known to be outside Hong Kong and whose exact whereabouts are known:

(i) reasonable steps have been taken but have been unsuccessful to obtain his return for the proceedings concerned (section 8(3)(c)(i)(B)(I)(aa));

(ii) if the person is in custody outside Hong Kong for purposes other than the proceedings concerned, and he is in custody by virtue of conduct which would constitute an indictable offence if it had occurred in Hong Kong (section 8(3)(c)(i)(B)(I)(bb)); and

(iii) notice of the proceedings was given to the person in sufficient time to enable him to defend them (section 8(3)(c)(i)(B)(I)(cc)).

(2)(b) In the case of a person whose exact whereabouts are not known, that reasonable steps have been taken to ascertain the person’s whereabouts and notice of the proceedings has been published in a Chinese language newspaper and an English language newspaper circulated generally in Hong Kong (section 8(3)(c)(i)(B)(II)), although the Court may, if it is satisfied that it is in the interest of justice to do so, require the notice of the proceedings be given in such additional manner as the Court may direct (section 8(3A)).

(3) The person could have been convicted in respect of the offence or the offences concerned (section 8(3)(c)(i)(C) and (8)). If requested by the prosecution, whether the offence or any of the offences concerned could have been an organized crime (section 8(3)(c)(ii) and (8)).

(4) The person has benefited from the specified offence or offences in a sum in total exceeding $100,000 (section 8(4)).

22.  Under section 8(4) the Court is to determine whether the person has benefited from the specified offence of which the Court is satisfied that he could have been convicted or from that offence taken together with any other specified offence of which the Court is satisfied that he could have been convicted in the same proceedings, or which the Court could have taken into consideration in determining his sentence if he had not absconded and, if he has, whether his proceeds of that specified offence or offences are in total at least $100,000.

23.  The Court is further required to determine in accordance with section 11 the amount to be recovered (section 8(6)).  The determination that the Court needs to make can be summarised as follows:

(1) The value of the benefit from the specified offence or offences (section 8(4)(b) and (6) and section 11(1)).

(2) The amount of the confiscation order (section 11(3)(a)).

(3) The amount that may be realised for the purposes of making a certificate (section 11(2)).

24.  To summarise the conditions on which the Court must be satisfied in granting a confiscation order against an absconder, they are as follows:

(1) the application is made by the Secretary for Justice;

(2) proceedings for one or more specified offences have been instituted against the person but have not been concluded;

(3) the proceedings have not been concluded because the person has absconded;

(4) six months has elapsed from the date on which the person absconded;

(5)(a) the person is known to be outside Hong Kong and his exact whereabouts are known and reasonable steps have been taken to obtain his return to Hong Kong but they have been unsuccessful or he is in custody outside Hong Kong for conduct which would constitute an indictable offence if it had occurred in Hong Kong and he has been given sufficient notice of the proceedings; or

(b) the person’s exact whereabouts are not known and reasonable steps have been taken to give him notice of the proceedings;

(6) the person could have been convicted of the specified offence or offences; and

(7) the person has benefited from the specified offence or offences in a total sum exceeding $100,000.

Standard of proof

25.  The standard of proof required to determine an application for a confiscation order is on the balance of probabilities.  This is provided for by section 8(8B) which specifies that the standard of proof required to determine any question arising under OSCO as to whether a person has benefited from a specified offence or offences, whether a person has benefited from organized crime, or the amount to be recovered in his case in pursuance of a confiscation order shall be on the balance of probabilities.  

26.  As noted, section 10 of OSCO provides that an application for a confiscation order can be supported and granted on the basis of a statement furnished for the purpose of satisfying the Court that the person could have been convicted in respect of the offence or offences concerned, whether the person has benefited from a specified offence or an organized crime and in assessing the value of the person’s proceeds of a specified offence or an organized crime.  See SJ v Lee Chau-ping and anor [1999] 2 HKC 103 at 50I to 51A.

27.  As also noted, section 10(7)(b) of OSCO provides that it is not necessary for a section 10 statement to be served on the respondent as it would be deemed to be served on him. 

Present application

28.  I am satisfied of the following conditions to the requisite standard:

(1) The application is made for or on behalf of the Secretary for Justice.

(2) Proceedings for a specified offence have been instituted against the respondent.  An arrest warrant was issued against the respondent on 4 November 2014 for the offence of dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) of OSCO, and it remains in force.  This offence is Item 16 in Schedule 1 of OSCO.  Hence criminal proceedings have been instituted against the respondent. 

(3) The proceedings have not been concluded because the respondent has absconded.  The respondent left Hong Kong on 15 February 2012 after having remitted an amount of JP$20 million to another bank account on that day and has not returned to Hong Kong. 

(4) Immigration records revealed that there is no further movement record by the respondent in Hong Kong.  Accordingly, six months has elapsed since he absconded. 

(5) The respondent is a resident of mainland China and his exact whereabouts are unknown.  Reasonable steps have been taken to notify the respondent of the confiscation proceedings. 

The respondent has been on the Immigration Watch List since 3 November 2014 but has not been located.  In the related restraint proceedings, the sealed copy restraint order was sent to his last known address in mainland China and was acknowledged by another person on his behalf.  However, when a sealed copy of the continuation of the order was sent to his address in mainland China by registered post, it was undelivered and returned.  A notice of legal proceedings in relation to the restraint order and the continuation order was published in one Chinese language and one English language newspaper generally circulated in Hong Kong. There has been no response from the respondent.  A notice of the confiscation proceedings has also been published in one Chinese language and one English language newspaper generally circulated in Hong Kong on 23 March 2016.  There has been no response from the respondent and the police have taken reasonable steps to locate him but his exact whereabouts remain unknown.  Inquiries have been made to locate him but to no avail. 

(6) The respondent could have been convicted of the specified offence, of dealing with property known or believed to represent proceeds of an indictable offence.  From the section 10 statement it is alleged that the respondent used the bank account to launder proceeds of an indictable offence in which he would deposit and withdraw funds, totalling over the relevant period HK$31 million.  As indicated, the respondent came to Hong Kong on only two occasions, first on 19 March 2010 to open the account and later on 19 March 2012 to remit JP$20 million from the account.  Part of the funds received included proceeds of an email/telephone scam obtained from victims which sums were shortly transferred or withdrawn from the account.  The balance of the account now stands at EUR$9,974.94 and US$250.11.33.  Records from the Inland Revenue Department show that the respondent has not filed any tax returns and has no legitimate or genuine employment or business in Hong Kong.  It would seem that the account served no legitimate purpose other than as a repository for the proceeds of illicit activities. 

Having regard to all relevant matters, I am satisfied on a balance of probabilities that the respondent could have been convicted of a specified offence in relation to the proceeds from victims of the email/telephone scam.  The proceeds involved the total sum of HK$1.24 million.

(7) The respondent received at least HK$1.24 million, the funds from the nine known victims, in connection with the commission of the specified offence and therefore exceeded the minimum amount of HK$100,000.

29.  The value of the respondent’s realizable property is reflected by the last credit balance of EUR$9,974.94 and US$250.11 held in the bank account.  Under section 11(1) the amount of the confiscation order should be the value of proceeds of the specified offence and under section 11(3) where the value of the realizable property is less than the value of a defendant’s proceeds, the amount of the confiscation order should be “the amount appearing to the court to be so realized”.  Accordingly, the amount of the confiscation order in this case is EUR$9,974.94 and US$250.11, subject to any bank charges or interest. 

Conclusion

30.  I make an order that the credit balance in the Bank of China account in the name of the respondent be confiscated and be paid to the Registrar of the High Court.