KOT SEE FOR v. LAM MAN CHEUNG AND ANOTHER

CACV 536/2019

[2021] HKCA 348

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 536 OF 2019

(ON APPEAL FROM HCA 743/2019)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

1.  In this appeal, the 2^nd Defendant sought to overturn parts of an order made by Deputy High Court Judge M K Liu (“the Judge”) on 3 May 2019. The relevant parts of the order were paragraphs 2 to 4 which were in the following terms:

“ 2. The 2nd Defendant shall, on or before 12 noon on 10 May 2019, disclose to the Plaintiff, by affirmation/affidavit:

(1) the precise address and location at which each of the Subject Antiques are presently stored or located;

(2) whether each of the Subject Antiques are in the possession, custody and/or power of the 2^nd Defendant;

(3) if any of the Subject Antiques are not in the possession, custody and/or power of the 2^nd Defendant, details of when and how the 2^nd Defendant parted with such possession, custody and/or power of the same;

(4) whether any of the Subject Antiques have been transferred by the 2^nd Defendant to another party, and if so, the details of such transfer(s), including the dates of such transfer(s), to whom such transfer(s) were made and the consideration for which such transfer(s) were made, and the relevant documents pertaining to and evidencing such transfer(s); and

(5) whether any of the Subject Antiques have been pledged, charged or otherwise encumbered in any way, and if so, the details of all such encumbrances, including the dates of such encumbrances, to whom such encumbrances were made and for what purpose, and the relevant documents pertaining to and evidencing such encumbrances.

3. The 2^nd Defendant shall take all necessary steps to procure, effect and facilitate the delivery up of each of the Subject Antiques which are within his possession, custody and/or power on or before 12 noon on 10 May 2019 to Eric Art Services of Rooms 7-8, 13^th Floor, Texaco Centre, 126-140 Texaco Road, Tsuen Wan, Hong Kong (the ‘Storage Company’) for detention, custody and preservation, which shall not be removed or released unless with the written consent of both the Plaintiff and the 2^nd Defendant or further order of the Court.

4. The 2^nd Defendant shall, at or before 12 noon on 8 May 2019, inform the Plaintiffs solicitors in writing of the date and time of the intended delivery of the Subject Antiques to the Storage Company by the 2^nd Defendant pursuant to paragraph 3 above.”

2.  These paragraphs provided for disclosure of information concerning and the delivery up of several pieces of antiques which are parts of a collection of Chinese porcelain antique collection called the Tianminlou Collection and the subject matters in respect of which the Plaintiff seeks, amongst other things, proprietary relief in the Writ and the Amended Statement of Claim.

3.  The Plaintiff’s (Kot’s) claim was summarized by the Judge at [16] of the judgment of 24 July 2019 as follows:

“ (1) Kot is now 86 years old and a collector of the Tianminlou Collection. He is the victim of a fraudulent scheme (“the Fraudulent Scheme”) perpetrated by the 1^st Defendant (“Lam”) and Tang, pursuant to which Lam and Tang conspired together to induce Kot into pledging and thereafter assigning the Subject Antiques to Tang at gross undervalue, for the purported purpose of funding or facilitating a fictitious transaction which never existed.

(2) In around May 2016, Kot was induced by Lam and others into opening a purported account for investment in gold products (“the Purported Investment Account”), into which Kot injected not less than HK$73 million during the period between June 2016 and May 2017.

(3) In around June 2017, and as Kot was keen to exit his purported investments, Lam and Tang fraudulently misrepresented to Kot that there were buyers in London willing to enter into a transaction to purchase his investments in the Purported Investment Account (“the Purported London Transaction”).

(4) Thereafter, Lam and Tang fraudulently misrepresented to Kot that various additional sums of funding were temporarily required for the purpose of facilitating the Purported London Transaction, which sums would be returned to him together with the remittance of the sale proceeds when the transaction was completed.

(5) Induced by fraudulent misrepresentations made by Lam and Tang, and during the period between June 2017 and October 2018:

(a) Kot entered into four pledge agreements (collectively, “the Pledge Agreements”) pursuant to which he agreed to pledge various antiques as security for purported loans from Tang in order to meet the alleged funding requirements for the Purported London Transaction.

(b) On Lam’s instructions, Kot paid over HK$129.5 million of the HK$130 million (being the entirety of the proceeds of such loans) to Lam and Wayshine Global Group Limited (“Wayshine Global”), amongst which at least HK$17,717,000 was immediately transferred back to Tang by Lam.

(c) Kot subsequently entered into three assignments (collectively, “the Assignments”) pursuant to which (i) he assigned the pledged antiques at gross undervalue in discharge of his purported liability under the pledge agreements (ii) assigned an additional antique, also at gross undervalue, to raise further funds for the Purported London Transaction which was in turn also paid to Lam and Wayshine Global.

(6) As a result of the Fraudulent Scheme, Kot was induced to pay over (a) a total of HK$283.65 million to Lam and/or Wayshine Global, (b) HK$15.2 million to Tang in discharge of purported loans (and interest) owed to him, and (c) HK$3.6 million to the 3^rd Defendant on the instructions of Tang. Kot has also parted with possession of the Subject Antiques, the whereabouts of which are now unknown (Tang has refused to disclose the same). Kot obtained virtually nothing in return after making all these payments.

(7) Kot (with his son’s assistance) discovered the fraud in around late October 2018 (including that the Purported Investment Account and the Purported London Transaction never existed), and the matters were reported to the Police and arrests were made as a result.

(8) In December 2018, Kot applied for and obtained Norwich Pharmacal disclosure orders against various banks, pursuant to which disclosures have been ongoing even up to the end of March 2019, which revealed further evidence of fraud (including, inter alia, the remittance of funds from Lam to Tang as mentioned in the above).

(9) Further, all the Pledge Agreements are illegal and unenforceable as a matter of law by reason of the following:

(a) Each of the Pledge Agreements contravenes section 18 of the Money Lender Ordinance (“MLO”), for there is no inclusion or attachment of a summary of provisions of Part III and Part IV of the MLO in each agreement. This is a contravention of section 18(2) of the MLO.

(b) On the date of each of the Pledge Agreements, Tang did not hold a money lender’s licence granted under section 11 of the MLO, in contravention of section 23 of the MLO.

(c) The first 3 Pledge Agreements provide directly for the rate or amount of interest being increased by reason of any default in the payment of sums due therein, in contravention of section 22(1)(c) of the MLO.”

4.  The 2^nd Defendant is Tang and his summons of 14 May 2019 to discharge the order was dismissed by the Judge on 24 July 2019.  Leave to appeal was initially refused by the Judge.  On 21 November 2019, this Court granted leave to appeal and a stay of execution of paragraphs 2 to 4 of the order pending appeal.

5.  In this appeal, Mr Ho SC (appearing together with Mr Chan for the 2^nd Defendant)’s main ground of appeal is that in making such order the Judge failed to give proper effect to the privilege against incrimination (“PSI”) which protected the 2^nd Defendant from being compelled to give evidence that would incriminate himself.  Counsel said this is a fundamental right under the Basic Law and the Judge erred in his approach in holding that it was a matter of balance and the concern of the 2^nd Defendant could be taken care of by the Plaintiff’s undertaking that he (including his nominees, agents or servants or any of them) would not divulge any information disclosed by the 2^nd Defendant in compliance with the Injunction to the police or the Department of Justice or any law enforcement agency.

6.  In the Notice of Appeal, the following matters were highlighted as matters showing that the 2^nd Defendant faces a real and appreciable risk of prosecution if he complied with the order:

“ 1. The learned deputy judge erred in holding that the 2^nd Defendant's right of privilege against self-incrimination ("PSI") is not a ground for the discharge of paragraphs 2 to 4 of the Injunction Order (Decision §§29-30). Specifically:

1.1. The learned deputy judge erred in failing to have regard or proper regard to the infringement of the 2^nd Defendant's fundamental right of PSI in continuing paragraphs 2 to 4 of the Injunction Order. In particular, the learned deputy judge erred in failing to hold that:

(a) The 2^nd Defendant faces a real and appreciable risk of prosecution if he were to comply with paragraphs 2 to 4 of the Injunction Order in circumstances where:

(i) the 2^nd Defendant was arrested and put on police bail pending investigation;

(ii) the 2^nd Defendant attended a cautioned interview by the police on 2 January 2019 during which the police stated that they had grounds to believe that the 2^nd Defendant conspired with the 1^st Defendant to defraud the Plaintiff;

(iii) the 2^nd Defendant exercised his right of silence to the questions put by the po1ice in the said interview which resembled the information sought under paragraphs 2 to 4 of the Injunction Order; and

(iv) the police conducted searches at the 2^nd Defendant's residence and office on 2 January 2019 and were unable to locate the subject antiques (as set out in Schedule 1 to the Injunction Order) (‘Subject Antiques’). …”

Risk of prosecution

7.  The offences for which Mr Ho said the 2^nd Defendant faces a real and appreciable risk of prosecution are the common law offence of conspiracy with the 1^st Defendant to defraud and the offence of knowingly dealing with property known or believed to represent proceeds of an indictable offence contrary to section 25 of the Organized and Serious Crimes Ordinance (“OSCO”) Cap 455.  These are offences pleaded in the Amended Statement of Claim of the Plaintiff.

8.  Section 25(1) of the OSCO sets out the primary elements of the offence and it reads:

“ Subject to section 25A, a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.”

9.  The meaning of proceeds of an offence is set out in Section 2(6)(a) of the OSCO:

“ a person’s proceeds of an offence are—

(i) any payments or other rewards received by him at any time (whether before or after 2 December 1994) in connection with the commission of that offence;

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

(iii) any pecuniary advantage obtained in connection with the commission of that offence”

10.  In our view, it is doubtful if the subject antiques can be regarded as proceeds of an offence.  There is nothing before us suggesting that there is a real and appreciable risk that such contention is tenable.  It appears to us the taking of the antiques by the 2^nd Defendant was, according to the Plaintiff’s allegations, part of the perpetuation of fraud instead of the dealing with the proceeds of an offence already committed.

11.  In any event, on the facts as alleged, it is plain that the more appropriate and straightforward charges would be fraud under Section 16A or obtaining property by deception under Section 17 of the Theft Ordinance, Cap 210.  These sections provide:

“ 16A. Fraud

(1) If any person by any deceit (whether or not the deceit is the sole or main inducement) and with intent to defraud induces another person to commit an act or make an omission, which results either—

(a) in benefit to any person other than the second-mentioned person; or

(b) in prejudice or a substantial risk of prejudice to any person other than the first-mentioned person,

the first-mentioned person commits the offence of fraud and is liable on conviction upon indictment to imprisonment for 14 years.

(2) For the purposes of subsection (1), a person shall be treated as having an intent to defraud if, at the time when he practises the deceit, he intends that he will by the deceit (whether or not the deceit is the sole or main inducement) induce another person to commit an act or make an omission, which will result in either or both of the consequences referred to in paragraphs (a) and (b) of that subsection.

(3) For the purposes of this section—

act (作為) and omission (不作為) include respectively a series of acts and a series of omissions;

benefit (利益) means any financial or proprietary gain, whether temporary or permanent;

deceit (欺騙) means any deceit (whether deliberate or reckless) by words or conduct (whether by any act or omission) as to fact or as to law, including a deceit relating to the past, the present or the future and a deceit as to the intentions of the person practising the deceit or of any other person;

gain (獲益) includes a gain by keeping what one has, as well as a gain by getting what one has not;

loss (損失) includes a loss by not getting what one might get, as well as a loss by parting with what one has;

prejudice (不利) means any financial or proprietary loss, whether temporary or permanent.

(4) This section shall not affect or modify the offence at common law of conspiracy to defraud.

17. Obtaining property by deception

(1) Any person who by any deception (whether or not such deception was the sole or main inducement) dishonestly obtains property belonging to another, with the intention of permanently depriving the other of it, shall be guilty of an offence and shall be liable on conviction upon indictment to imprisonment for 10 years.

(2) For the purposes of this section a person is to be treated as obtaining property if he obtains ownership, possession or control of it, and obtain (取得) includes obtaining for another or enabling another to obtain or to retain.

(3) Section 7 shall apply for the purposes of this section, with the necessary adaptation of the reference to appropriating as it applies for the purposes of section 2.

(4) For the purposes of this section—

deception (欺騙手段) means any deception (whether deliberate or reckless) by words or conduct (whether by any act or omission) as to fact or as to law, including a deception relating to the past, the present or the future and a deception as to the intentions of the person using the deception or any other person.”

12.  It is noteworthy that Section 16A is a provision introduced in Hong Kong by an amendment to our Theft Ordinance in 1999 after the publication of a Report on Creation of a Substantive Offence of Fraud by the Law Reform Commission in July 1996.  There is no equivalent in the English Theft Act 1968.  Instead, there is a new Fraud Act 2006 where there is a statutory provision abrogating PSI under Section 13.

13.  In Hong Kong, with the addition of Section 16A to our Theft Ordinance, the scope of Section 33(1) of the Theft Ordinance (as discussed below) has been expanded insofar as it also covers PSI claim for the offence of fraud under Section 16A.  This is significant for present purposes because though the common law offence of conspiracy to defraud remains in our criminal law, there is indeed substantial overlap in the offence of conspiracy and the statutory offence of fraud in situations where there is more than one fraudster participating in the fraudulent scheme.

14.  Coming back to Section 25 of OSCO, there is actually no evidence to suggest that the offence under OSCO was being considered by the police.  At the police interview of 2 January 2019, the police officer only cautioned the 2^nd Defendant for the offence of “conspiracy to obtain property by deception” and it appeared that he was arrested accordingly.

15.  We agree with the submission of Mr Yuen SC (appearing together with Ms Mak for the Plaintiff) that the fact that the Plaintiff’s pleading referred to the offence under Section 25 of OSCO to support an averment on the unlawful nature of the act is not evidence of risk of such prosecution.

16.  We further agree with Mr Yuen that the way in which the Plaintiff pleaded the conspiracy claim in the Amended Statement of Claim could not preclude this Court from analysing the applicability of Section 33 on the facts of the present case.  The formulation of a civil cause of action is not the same exercise in the preferment of a criminal charge on the same setl of fact.  Obtaining property by deception is not a civil cause of action. On the other hand, it is plain to us that fraud has been pleaded against both the 1^st and 2^nd Defendants.  Whilst it is true that a plea of conspiracy is also advanced, the Plaintiff’s case is that the fraud had actually been perpetuated.  The cause of action of fraudulent misrepresentation was pleaded under Section D2 of the Amended Statement of Claim against both the 1^st and 2^nd Defendants.  

17.  On the materials before us, we are of the view that the risk of the 2^nd Defendant facing a criminal prosecution under Section 25 of OSCO is fanciful, contrived and remote.

18.  Given the factual matrix in the case, it is plain to us that if the Plaintiff’s factual allegations were established, the obvious options are offences of fraud under Section 16A of the Theft Ordinance, obtaining property by deception under Section 17 of the Theft Ordinance and the common law offence of conspiracy to defraud.

19.  Contrary to the submissions of Mr Yuen, on the materials before us it is not possible to say that a charge of conspiracy to defraud is fanciful or contrived.  As Mr Ho demonstrated at the hearing before us, on the facts of this case the Plaintiff’s claim and likewise a prosecution against the 2^nd Defendant depend on the establishment of the conspiracy between him and the 1^st Defendant in the perpetuation of the fraudulent scheme as pleaded. 

20.  The main difference between a conspiracy charge and charges for the substantive offences under the Theft Ordinance is that in respect of the former the crucial element is the agreement (or conspiracy) between the defendants whilst in the latter the actus reus consisted of the substantive deceptive conduct on the parts of the defendants which caused the loss suffered by the victim.  In a case where the defendants are acting in concert in a fraudulent scheme (as alleged by the Plaintiff here), in many instances it is also possible for the same set of facts to support a charge of conspiracy as well.

21.  In the present context, the mere advancement of the loans by the 2^nd Defendant and the taking of the subject antiques as collateral cannot establish the offences under either Section 16A or Section 17.  The prosecution would have to prove further that the 2^nd Defendant acted in concert with the 1^st Defendant before deception or fraud can be established by showing that the loan transactions were the means to facilitate the 2^nd Defendant to obtain the subject antiques at gross undervalue as part of the overall fraudulent scheme which entailed that the Plaintiff (by reason of the lack of return from the fictitious London investment) would not be in a position to redeem the same.  There are therefore substantial overlaps on the facts of the present case between the conspiracy charge and the substantive charges under Sections 16A and 17.

22.  On the facts as alleged by the Plaintiff, it is quite obvious that the conspiracy had been carried into effect and the fraud had been perpetuated.  In other words, the actus reus of the substantive offences under Sections 16A and 17 had been committed.

23.  In Pacific Harbor Advisors Pte Ltd v Winson Federal Ltd HCA 1257/ 2013, 29 January 2016 Deputy High Court Judge Le Pichon referred at [49] to the general rule that where there is an effective and sufficient charge of a substantive offence a charge of conspiracy is undesirable, citing Archbold Hong Kong 2016 paragraph 36-57 which in turn cited Verrier v DPP [1967] 2 AC 195.  Her Ladyship applied that principle in that case and held that given that charges of the substantive offences of theft and false accounting were the obvious charges an additional charge of conspiracy was remote and fanciful.

24.  When application for leave to appeal was made to the Court of Appeal in that case in HCMP 532/2016, 10 May 2016, at [11] this Court preferred to rest our decision regarding the charge of conspiracy on the basis of the principle in Khan v Khan [1982] 1 WLR 513 which we shall discuss below.   

25.  The general approach discussed in Verrier v DPP, supra, remains good law today: see Archbold Hong Kong 2021 paragraph 36-54.  However, as it is made clear in Archbold, it is not a rigid rule and each case must be considered on its own facts. There are indeed exceptions.

26.  In the present case, Mr Ho submitted the exception set out in paragraph (2)(a) of paragraph 36-57 is applicable.  In particular, it is more appropriate to have an indictment charging conspiracy which would simplify issues, shun complexity and avoid multiplicity of counts and presenting the case in a manner which may more accurately reflect the overall criminality. 

27.  Whilst the preferment of criminal charges must be a matter for the prosecuting authority, we can see the force of this submission on the facts as presently set out before us.  In light of the centrality of the conspiracy between the 1^st and the 2^nd Defendants in the factual allegations raised by the Plaintiff in the present case, Mr Yuen failed to persuade us that the risk of the 2^nd Defendant being charged with conspiracy is fanciful.    

28.  At the same time, we do not find any basis for suggesting that only a charge of conspiracy would be considered or proceeded upon by the prosecution if there is sufficient evidence to substantiate the facts as alleged by the Plaintiff.  Mr Ho realistically accepted that the substantive charges under Sections 16A and 17 of the Theft Ordinance cannot be ruled out.

29.  We are of the view that there is at least an equal risk that the 2^nd Defendant may face a prosecution for the substantive offences and prosecution for conspiracy.  We shall proceed on this basis in the following analysis.

30.  We also reject Mr Yuen’s submission that compliance with the order would not generate any risk of incrimination against the 2^nd Defendant.  By way of example, Mr Ho postulated that if the 2^nd Defendant were to answer the interrogatories by stating that possession of the subject antiques were passed to the 1^st Defendant or that they were stored in a warehouse controlled by the 1^st Defendant, such answers would reinforce the case of conspiracy or acting in concert between the two defendants.

Section 33(1) of the Theft Ordinance

31.  Section 33(1) of the Theft Ordinance abrogates PSI in civil proceedings for recovery of property with safeguards to protect a defendant from the use of incriminating materials provided by him under compulsion in subsequent criminal proceedings:

“ A person shall not be excused, by reason that to do so may incriminate that person or the wife or husband of that person of an offence under this Ordinance—

(a) from answering any question put to that person in proceedings for the recovery or administration of any property, for the execution of any trust or for an account of any property or dealings with property; or

(b) from complying with any order made in any such proceedings,

but no statement or admission made by a person in answering a question put or complying with an order made as aforesaid shall, in proceedings for an offence under this Ordinance, be admissible in evidence against that person or (unless they married after the making of the statement or admission) against the wife or husband of that person.”

32.  Though conspiracy to defraud is a common law offence, the English Court of Appeal held in Khan v Khan [1982] 1 WLR 513 that the court should have regard to the substance of the criminal proceedings and the real reasons for requiring the defendant to make the statements in determining whether the protection under the equivalent of our Section 33(1) should be uplifted by reason of inclusion of an alternative or additional charge to a charge under the Theft Act.  Stephenson LJ said at p.519 E to H:

“ … What is possible is that he may be prosecuted for theft and forgery. But proceedings for theft and forgery would, in my judgment, still be proceedings for an offence under the Theft Act. It would be monstrous if the assistance given by s 31 to persons seeking to recover their stolen property could be defeated by the bare possibility of an alternative charge of an offence under some other Act, or at common law, being introduced into the criminal proceedings. And, although this court cannot control the discretion of a prosecutor or the Crown Court, I think it would be monstrous also if the prosecution were to resort to what Lord Wilberforce in Rank Film Distributors Ltd v Video Information Centre [1981] 2 All ER 76 at 80, [1981] 2 WLR 668 at 674 described as ‘a contrived addition to other charges’ for the purpose of defeating the protection given to a defendant by the section and introducing otherwise inadmissible evidence.

But if an attempt were made to introduce any statement made by the first defendant in compliance with this order into proceedings for theft and forgery, the court would have to consider the substance of the proceedings and the real reason why he has not been excused from compliance with the order, and then the proceedings will be seen to be in substance proceedings for an offence under the Theft Act and so he could not have been compelled to incriminate himself except for an offence under that Act. Accordingly, any such statement would not be admissible in evidence against him in the proceedings.”

33.  The approach was further explained by Morritt LJ in Renworth Ltd v Stephansen [1996] 3 All ER 244 at p.254:

“ A given state of facts may constitute an offence under the Theft Act and a second offence under some other Act or under the common law. If the section is read literally, a person might refuse to answer questions which would expose him to the risk of proceedings for the Theft Act offence, on the ground that his answer might expose him to proceedings for the second offence, however unlikely it may be that he would ever be charged with that second offence alone. A solution to that problem would be to treat the section as applying whenever the answer might expose the person in question to proceedings for an offence under the Theft Act, notwithstanding that to do so would also expose him to proceedings for the other offence. But, in that event, the privilege would be removed from those persons who have committed a Theft Act offence which is subsidiary to a more substantive offence not under the Theft Act. It is not to be presumed that Parliament intended either extreme case.

In my view, the solution to this problem, which appears to me to be what Stephenson LJ was referring to, is to consider the matter from the point of view of separate claims to privilege in respect of both the Theft Act offence and the second, non-Theft Act, offence.  In each case the test would be—whether to answer the question would tend to expose the relevant person to proceedings for the relevant offence in the sense of creating or increasing the risk of proceedings for that offence.  If the test is satisfied in the case of the Theft Act offence, s 31 will apply and prima facie the question must be answered or the document or thing produced.  In the case of the second, non-Theft Act, offence, the test would be whether to answer the question etc would create or increase the risk of proceedings for that offence, separate and distinct from its connection with the Theft Act offences. If the answer is in the negative, there is no privilege.  But if it is in the affirmative, then the privilege will subsist in relation to the non-Theft Act offence, notwithstanding the availability of the Theft Act charges.”

34.  Locally, though Khan v Khan, supra, was distinguished by Sakhrani J in Pheby v Paier [2003] 2 HKLRD 323, the judgment of Renworth Ltd v Stephansen, supra, had not been cited to the learned judge. Likewise, in International Management Group v Lun Sheung Mei Serina [2006] 2 HKC 463, Recorder E Chan SC held that section 33 could not cover potential charges for conspiracy and forgeries.  Neither Khan v Khan nor Renworth Ltd v Stephansen was cited.   

35.  Subsequently, in Pacific Harbor Advisors Pte Ltd v Winson Federal Ltd HCMP 532/2016, 10 May 2016, this Court adopted the approach in the English authorities and held that in a case where offences under the Theft Ordinance are the obvious charges to be laid, the additional charge of conspiracy to defraud would not render the protection under Section 33 inapplicable.

36.  In our judgment, as a matter of Hong Kong law, Pheby v Paier and International Management Group v Lun Sheung Mei Serina should be read subject to the approach adopted in Pacific Harbor Advisors Pte Ltd v Winson Federal Ltd in this respect.

37.  We are of the view that it is necessary to adopt a purposive interpretation of Section 33 and Morritt LJ’s approach reflects the proper construction of the section.  Whilst we are mindful of the principle of legality[1] (which is applicable since PSI is a fundamental but not absolute right), such principle does not preclude the court from holding that a statutory provision has abrogated common law PSI by necessary implication: see A v Commissioner of ICAC (2012) 15 HKCFAR 362; Beghal v Director of Public Prosecution [2016] AC 88.

38.  Before we discuss how purposive interpretation of Section 33 leads to an approach similar to the one adopted by Morritt LJ, it is useful to remind ourselves of the recent observations of Lord Hughes JSC (with whom Lord Neuberger PSC, Lord Hodge JSC and Lord Dyson MR agreed) in Beghal v Director of Public Prosecution, supra at [61] on statutory abrogation of PSI:

“ A statute may, however, exclude this privilege in a particular situation, and may do so either expressly or by necessary implication: the Bishopsgate case [1993] Ch 1, 39. Because the privilege is firmly embedded in the common law, such necessary implication must be established with clarity and is not to be assumed.”

His Lordship continued with a citation of the often-quoted dicta of Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115 at p.131.  For present purposes, it suffices for us to quote part of it:

“ … But the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual.”

39.  In the context of Section 33(1) of the Theft Ordinance, there is no doubt that the legislature enacted this provision to abrogate PSI under the common law and confer limited statutory protection on a defendant by precluding the use of incriminating statements, obtained under a court order in civil proceedings, in future criminal prosecution of the same defendant.  The only issue in the present appeal is the scope of its operation: whether Section 33(1) also impliedly abrogated PSI arising from a conspiracy charge arising from substantially the same facts as a charge under Section 16A or 17. 

40.  In Beghal v Director of Public Prosecution, supra, the Supreme Court addressed a challenge to the power of detention and interrogation under section 53(1) of and Schedule 7 to the Terrorism Act 2000. One of the grounds of challenge was that such power was incompatible with the right to a fair trial under article 6 of the European Convention for the Protection of Human Rights which encompasses some of the rights under PSI in common law[2].  The prior question was whether the statutory provisions in question (which did not expressly abrogate PSI of the person subject to questioning) had the effect of abrogating PSI under the common law.  This issue was addressed by Lord Hughes at [59] to [64].

41.  After referring at [63] to instances where statutes were held to have impliedly abrogated PSI because the transparent purpose of such provisions would be stultified if a person required to give the requisite information could refuse to answer by claiming privilege, Lord Hughes applied the same test at [64] to the provisions in the Terrorism Act 2000 in the following manner:

“ … The Schedule 7 powers are patently not aimed at the obtaining of information for the purpose of prosecuting either the person questioned or his spouse. Whilst that does not by itself mean that there is no real risk that such information could be so used subsequently, it is an indicator that the process of information gathering is not to be limited by the operation of privilege. The reality is that Schedule 7 powers would be rendered very largely nugatory if privilege applied. The necessary implication is that it does not.”

42.  Thus, the court should apply a purposive construction of the statutory provision in question and ask itself whether the availability of PSI would nullify the statutory objective.  If the answer is affirmative, PSI for conspiracy charge in a case where charges under Sections 16A or 17 can be preferred is abrogated by necessary implication.  We shall come back to the judgment of Lord Hughes later when we discuss the risk of answers given under compulsion being used directly for criminal prosecution.

43.  A similar approach was adopted by our Court of Final Appeal in A v Commissioner of ICAC, supra at [31] to [32] and [71] to [74] in respect of Section 14 of the Prevention of Bribery Ordinance Cap 201.  Ribeiro PJ summed up the relevant test at [71]:

“ The question is therefore whether s.14(4) unmistakably expressly or by necessary implication, abrogates the appellant’s privilege against self-incrimination.”

44.  Coming back to Section 33(1), there is no doubt that the legislative objective is to abrogate PSI under common law to facilitate a plaintiff to obtain the necessary information in his effort to recover his property or to obtain an account of his property whilst at the same time ensuring that the information so disclosed would not be used as evidence against the person giving such information in subsequent criminal proceedings.

45.  It is perhaps worth emphasising that there are two fundamental rights being engaged[3].  First, the right of silence (or right against self-incrimination) under common law which, as Lord Mustill helpfully discussed in R v Director of Serious Fraud Offices, ex p Smith [1993] AC 1 at 30, is actually a disparate group of immunities which differ in nature, origin, incidence and importance.  Six different class of immunities were identified, some general and some specific.  As held in Pacific Harbor Advisors Pte Ltd v Winson Federal Ltd [2016] 6 HKC 14, for present purposes, we should focus on item (2) in that list, viz a general immunity from being compelled on pain of punishment to answer questions the answers to which may incriminate them.

46.  But there is another side of the coin.  There is another class of fundamental right which is also engaged: the right of access to court by a plaintiff seeking remedies by civil proceedings for wrong done to him.  This right is also an entrenched right protected under Article 35 of the Basic Law, see the discussion at [82] to [86] of YBL v LWC [2017] 1 HKLRD 823.  Associated with it is also the right to lawful protection of one’s private property under Articles 6 and 105, see Hysan Development Co Ltd v Town Planning Board (2016) 19 HKCFAR 372 at [29] to [35].  Take the present case as an illustration, if the 2nd Defendant can rely on PSI to refuse to provide the information required under the disclosure order, the Plaintiff’s efforts to obtain timely and effective remedy from the court for the preservation of the subject antiques could be frustrated.

47.  This second class of fundamental right was plainly the one the legislature had regard to when Section 33 was enacted to redress the balance which the common law previously had tilted in favour of PSI.  In Rank Film Ltd v Video Information Centre [1982] AC 380 at p.409, Lord Denning MR referred to paragraphs 200-205 of the Eighth Report of the Criminal Law Revision Committee on Theft and Related Offence (1966) (Cmnd. 2977) in discussing the policy underlying Section 31 of the Theft Act 1968, on which our Section 33 modelled.  His Lordship then explained the policy consideration by reference to the scenario where a property owner brought a civil action to recover property which he had been deprived of and sought to interrogate the defendant how the property came to be taken and what had become of it:

“ In fairness to the plaintiff, the defendant should answer the question; but, in fairness to the defendant, the law should ensure that his answer is not to be used against him in any criminal proceedings.”

48.  Section 31 of the Theft Act 1968 was not the first statutory attempt to abrogate common law PSI in respect of property offences.  Previously, there were statutory provisions covering specified offences under various statutory provisions (discussed at paragraph 201 of the Eighth Report).  Section 31 was a step in broadening the scope of abrogation to cover all offences under the Theft Act.  Such change was deemed necessary because the limitation of the abrogation to particular offences was unsatisfactory as the prosecution could charge some offence to which the rules did not apply, see paragraph 202 of the Eighth Report, where the following conclusion was expressed:

“ … Whether to make any exception from the privilege of non-incrimination and to give any protection in return are questions of policy. We have no doubt that, for reasons mentioned in paragraph 200, the discovery of the facts is so important, both in civil proceedings between parties and in bankruptcy proceedings, that the privilege of non-incrimination must give way to it …”

49.  At paragraph 200, which was also quoted by Lord Denning, the Criminal Law Revision Committee[4] highlighted the underlying policy as follows:

“ … The civil proceedings referred to are proceedings for the recovery or administration of any property, for the execution of a trust or for an account of property or dealings in property. The policy of this provision … is that on balance the public interest requires that persons in possession of property on behalf of others should be compelled to give information about their dealing with the property in order to protect the interests of those entitled to it, notwithstanding that this involves departing from the general rule that a witness need not incriminate himself. But it is thought that in return the making of the disclosure should give a measure of protection in respect of criminal proceedings. Disclosure is specially important in the case of small properties, which might disappear if a defalcator could obstruct proceedings for the recovery or administration of the property by standing on his privilege of refusing to disclose his dealings with the property on the ground that disclosure might incriminate him.”

50.  There was no discussion in the Eighth Report on conspiracy to defraud.  It is perhaps not that surprising given that the report was published in 1966, when the scope of the offence of conspiracy to defraud had yet to be elucidated by the judgment of the House of Lords in R v Scott [1975] AC 819[5] and the general approach on undesirability of charging conspiracy when a charge of substantive offence could be advanced (as discussed in R v Dawson [1960] 1 WLR 163 and reiterated in Verrier v DPP, supra) had therefore carried a greater impact.  Thus, in cases where property had to be recovered, the substantive office had been committed.  Against such background, the legislature adopted references to “an offence under this Act” describing the scope of abrogation of common law PSI and subsequent protection in Section 31 of the Theft Act[6].

51.  In Rank Film, Lord Denning also held that Section 31 should apply by analogy to a charge of conspiracy to defraud, see p.409G to 410D.  However, because the subject matter in that case was copyright which other members of the Court of Appeal[7] and the House of Lords[8] did not regard as coming within the definition of “property” under the Theft Act, Lord Denning’s minority view did not prevail.

52.  Subsequently, in Istel Ltd v Tully [1993] AC 45, Lord Templeman discussed the rationale behind various statutory provisions (including Section 31 of the Theft Act) abrogating PSI for the purpose of civil proceedings at p.53B to 55G.  The observation at p.55F summed up the position:

“ There is no reason why the privilege should be blatantly exploited to deprive the plaintiffs of their civil rights and remedies if the privilege is not necessary to protect Mr Tully.”

53.  Stephenson LJ obviously had in mind the statutory objective of Section 31 when in Khan v Khan, supra, he refused to frustrate the assistance given by Section 31 to persons seeking to recover their property by the bare possibility of an alternative charge of a non-Theft Act offence being introduced into the criminal proceedings.

54.  Likewise, Morritt LJ in Renworth Ltd v Stephansen, supra, rejected the extreme position that a person might refuse to answer questions which would expose him to the risk of proceedings for the Theft Act offence, on the ground that his answer might expose him to proceedings for another offence, however unlikely it may be that he would ever be charged with that second offence alone.

55.  For reasons we have already canvassed in discussing the substantial overlap between a charge of conspiracy to defraud with a charge under Sections 16A or 17 of the Theft Ordinance in many cases where more than one defendant is alleged to be involved in a fraudulent scheme, taking such extreme position would largely nullify the effect of Section 33(1) and frustrate the statutory objective underlying the same in those cases.

56.  Section 33(1) refers to two different focal points in its operation.  The first focal point is the civil court where a plaintiff seeks to recover (or obtain an account of) his property or money of which he has been deprived by act(s) which can constitute offence(s) under the Theft Ordinance.  As explained by Morritt LJ, those acts could also constitute other offences under other statutes or common law.  Ex hypothesi the property or money has already been taken and the substantive offence(s) have been committed.  Thus, reference is made naturally to the substantive offences under the Ordinance though in the course of events leading to the perpetration of such substantive offences the inchoate offence of conspiracy would also have been committed.

57.  The statutory objective at this point is to facilitate a plaintiff in the recovery of his property in civil proceedings by removing the obstacle previously imposed by the common law rule on PSI.  The statutory solution is the abrogation of PSI for the purposes of such civil proceedings.

58.  The second focal point is the criminal trial of a defendant who has previously been compelled by a civil court to make some incriminating statements.  Section 33(1) provides that in such trial the criminal court should not admit such incriminating statements as evidence against that defendant.  Thus, even though the common law PSI is abrogated, statutory protection is put in place to safeguard the right against self-incrimination under article 11(2)(g) and the right to fair trial under article 10 of the Hong Kong Bill of Rights.    

59.  When a civil court considers the issue arising from Section 33(1), it usually occurs at a very early stage of proceedings and there is not much information concerning the likely charge (if any) that the prosecuting authority would actually prefer against the defendant. Take the present case as an example, though the 2^nd Defendant had been cautioned and interviewed by the police, up to the time when the appeal is heard we do not have further information on the likelihood of the 2^nd Defendant actually being charged and, if so, charged with which offence. 

60.  Hence, in many instances (as in the present case), the civil court cannot rule out the conspiracy charge as fanciful and contrived whilst at the same time the substantive charges under Sections 16A and 17 appear to be at least equally apt.  

61.  Though a civil court cannot bind a criminal court on the admission of evidence in a criminal trial (a topic to which we shall return later), in order to give effect to Section 33(1), it is obliged to undertake an assessment on the future risk of self-incrimination the defendant would be subject to in determining whether the claim of PSI provides a valid ground for refusing to make an order for interrogatory or discovery. It is inherent in such assessment that the civil court should consider whether the interest of a defendant is sufficiently protected by the safeguard in Section 33(1).  It is in this context we consider if the approach of Morritt LJ represents the law in Hong Kong.

62.  In our judgment, in a case like the present one where the likelihood of a charge of conspiracy to defraud cannot be said to be overwhelmingly higher than a charge of substantive offences under the Theft Ordinance and the factual matrix supporting these charges were substantially the same, the court should adopt the approach of Morritt LJ in assessing the risk of a defendant being exposed to self-incrimination without the protection of Section 33(1).  In other words, if the underlying facts and evidence were the same for both the conspiracy charge and the charges under the substantive offences in the Theft Ordinance, the court should proceed on the basis that the additional charge of conspiracy to defraud would not render the abrogation and protection under Section 33 inapplicable.  Otherwise, the statutory objective of Section 33 would be substantially curtailed.

63.  Examining Section 33(1) by way of purposive construction, we should consider if the statutory provision unmistakably by necessary implication abrogates the 2^nd Defendant’s PSI in respect of a charge of conspiracy when substantive charges under Sections 16A or 17 are equally likely to be brought.  We would answer in the affirmative because any other approach would substantially deprive Section 33(1) of its effect and frustrate the statutory objective.  Likewise, in such circumstances, the statutory protection under the latter part of the sub-section should also be extended to the charge of conspiracy if it were to be brought.

64.  Though the view of Lord Denning that the statutory provision applied by analogy to the charge of conspiracy was rejected in Rank Film, we do not believe such rejection precludes us from adopting the more nuanced approach of Morritt LJ.  As we have said, the rejection by the judges in Rank Film was on the ground that property does not include copyright.  Therefore, there was no substantive offence under the Theft Act to trigger the operation of Section 31 of that Act.  There was no consideration of the issue from the perspective of implied statutory abrogation in a situation like the one we are considering.

65.  Applying the approach of Morritt LJ (which we respectfully endorse as the correct one to be applied in the context of Section 33 of the Theft Ordinance in Hong Kong), on the facts of the present case (as discussed above) the risk of prosecution for conspiracy to defraud could not be separate and distinct from the risk of prosecution in connection with the offences under Sections 16A and 17 of the Theft Ordinance.  In light of that conclusion, the protection under Section 33 should also be available to the 2^nd Defendant in respect of the charge of conspiracy even though it would not be laid under the Theft Ordinance.

Sufficient safeguards

66.  Mr Ho submitted that the Section 33 protection against the use of answers in a criminal trial would not be adequate as it would not preclude derivative use.  PSI protects a defendant not only against use of statements for criminal prosecution, but also the risk of prosecuting authority making indirect use of the information from the defendant to obtain independent evidence for direct use in the criminal trial. 

67.  In our judgment, there is nothing to suggest that the Plaintiff would act in breach of the implied undertaking that information obtained through discovery would only be used for the purpose of this action. Mr Yuen intimated to the court that the Plaintiff is willing to give an express undertaking to that effect.  Thus, even though the Plaintiff had previously made a report to the police, we cannot see any basis for there being a real or appreciable risk that the answers provided by the 2^nd Defendant pursuant to the order would be passed onto the police.

68.  Mr Ho also suggested that the police might obtain a court order or search warrant to compel the Plaintiff to disclose such information.  Counsel placed great reliance on the judgment of Hobhouse LJ in the unreported decision of Johnstone v United Norwest Co-operatives Ltd [1994] 11 February 1994, Lexis Citation 2846.  For the reasons we shall further elaborate below, the legal position has developed since then with higher regard being placed on the relevant human rights consideration.  Thus, in Secretary for Justice v Florence Tsang Chiu Wing [2014] 6 HKC 285 at [23], the Court of Final Appeal held that the court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery.  We find the likelihood of a court granting such order or search warrant to the police in disregard of the 2^nd Defendant’s fundamental right against self-incrimination to be fanciful. 

69.  Hence, there is no foundation for the suggestion that there would be derivative use by the police.

70.  Moreover, it is doubtful if PSI can be relied upon to protect against derivative use.  As held by Ribeiro PJ in HKSAR v Lee Ming Tee (2001) 4 HKCFAR 133 at p.177:

“ … it is important to bear in mind that the purpose of the privilege is to respect the will of the accused to remain silent, thereby ensuring that the accused in not compelled to provide proof of his or her guilt. The privilege has no application to evidence which exists independently of the will of the accused. … Indeed, in my judgment, there is much to be said for the general proposition that there is no inherent unfairness in establishing a person’s guilt by the use of reliable objective evidence obtained from an independent source, even if the acquisition of that evidence was facilitated by clues contained in the excluded admissions…”[9]

71.  We are therefore not persuaded by Mr Ho that the exclusion of statements given by the 2^nd Defendant pursuant to the order from being admitted as evidence in a criminal trial under Section 33 would not be an adequate protection.

72.  Mr Ho also relied on several authorities and submitted that short of an undertaking from the prosecuting authority the court would not accept other form of safeguard (apart from a statutory abrogation and protection) as adequate: AT &T Istel Ltd v Tully [1993] AC 45; Manufacturer’s Life Insurance Co of Canada v Harvest Hero International Ltd [2002] 1 HKLRD 838.

73.  As regards the exclusion in a criminal trial of evidence obtained under compulsion, Mr Ho submitted that such discretionary protection is too uncertain and nebulous to be considered as an adequate protection.  He also submitted that in principle a civil court should not be engaged in a proportionality analysis involving a balancing exercise between the severity of the nature of compulsion and the pressing social purpose of a particular criminal offence at an early stage.

74.  These questions only arise if Section 33 does not afford statutory protection to the 2^nd Defendant.  Whilst we have held that Section 33 is applicable in the present circumstances, we can also observe that the law has moved forward in these respects and there is now greater certainty on how the power to admit evidence in a criminal trial would be exercised in cases where answers were compulsorily obtained as a result of PSI being abrogated for other purposes.  AT &T Istel Ltd v Tully, supra and Johnstone v United Norwest Co-operatives Ltd, supra were decided before Saunders v United Kingdom (1996) 23 EHRR 313 in which the European Court of Human Rights examined the admission of compulsorily obtained evidence in a criminal trial from the angle of the right to fair trial and presumption of innocence under article 6 of the European Convention.

75.  With such development, the UK Supreme Court acknowledged in Beghal v Director of Public Prosecutions, supra, at [66] and [67] that it is now possible for the civil court to have regard to the inevitable outcome in the exclusion of compulsorily obtained evidence in the assessment of risk of self-incrimination.  Lord Hughes JSC said at [66]:

“ It is to be accepted as a general proposition that reliance on a judicial discretion is not to be equated, for a prospective defendant, with the exercise of his privilege against self-incrimination … But the section 78 controlling power, vested in the trial judge in criminal proceedings, is not sufficiently described as a matter of discretion. It is a matter of judgment. If in practice the outcome of the exercise of that judgment is inevitably that the evidence will be excluded, then the real and appreciable risk which the privilege against self-incrimination exists to guard against is not present. The circumstances in which the evidence was obtained are a central consideration in the exercise of the section 78 judgment. Evidence obtained from the defendant himself … by means of legal compulsion is a classic case of evidence which it will be unfair to admit. Even without the direct application of article 6 of the Convention the outcome of the section 78 judgment is effectively inevitable. Once article 6, directly binding on a court under section 6(3) of the Human Rights Act 1998, is brought into the equation, there is simply no room for any contrary conclusion, for, as is shown by Saunders v United Kingdom, article 6 has the effect that any use in a criminal prosecution of answers obtained under compulsion of the law will be a breach of the right to a fair trial… For this reason, it is simply nothing to the point that the Director of Public Prosecutions declined in the Divisional Court to volunteer an undertaking never to seek to adduce Schedule 7 material if later there were a criminal prosecution; she would never be allowed to do so…”

76.  Thus, self-incriminating evidence obtained under compulsion should be excluded by the criminal court: see also R v K (A) [2010] QB 343. 

77.  Though these English cases were decided under the section 78 of the Police and Criminal Evidence Act 1984, similar power to exclude evidence existed under the common law in Hong Kong.  As held by the Court of Final Appeal in HKSAR v Muhammad Riaz Khan (2012) 15 HKCFAR 232 at [20], the court should consider the following before admitting evidence obtained in breach of a defendant’s constitutional rights with a view to strike a proper balance between the interests of individual defendant and those of the society as a whole:

(a)  whether the reception of such evidence is conducive to a fair trial;

(b)  whether the reception of such evidence is reconcilable with the respect due to the constitutional right concerned; and

(c)  whether the reception of such evidence would encourage any future breaches of that right.

78.  In respect of the direct use of a self-incriminating statement obtained under compulsion, in light of the implication of the use of such evidence on the right to a fair trial as discussed by the Court of Final Appeal in Koon Wing Yee v Insider Dealing Tribunal (2008) 11 HKCFAR 170, it is difficult to see how the balance could be struck in favour of the admission of such evidence.  Nor can we see how such direct use could be reconcilable with PSI as protected under art 11(1) of the Hong Kong Bill of Rights.  As submitted by Mr Yuen, such use would be a disproportionate response to the social need for the prosecution of the criminal offence.

79.  We do not read the judgment of the Court of Appeal in Manufacturer’s Life Insurance Co of Canada v Harvest Hero International Ltd, supra, as precluding us from giving effect to our above analysis.  In that case, the plaintiff actually succeeded in the appeal and the order for discovery was made.  Though Rogers V-P identified two possible safeguards for the protection of the right against self-incrimination (one of them being an assurance by the Secretary for Justice), His Lordship did not hold that these were the only possible means to achieve the objective.  No argument on safeguard based on the court’s control over the admission of evidence in a criminal trial had been advanced in that case.        

80.  The same observation can be made regarding the decision in Hui Chi Ming v Koon Wing Yee HCA 1479/2009, 25 September 2009.

81.  We are of the view that notwithstanding the lack of assurance from the Department of Justice (which is understandable in light of the fact that the criminal investigation is at an early stage), sufficient safeguards are in place to protect the 2^nd Defendant from the use of his answers given under compulsion of the order in a subsequent criminal prosecution (if any) against him.

Disposition

82.  For the above reasons, we uphold the decision of the judge and dismiss the appeal.  We also order the 2^nd Defendant to pay the costs of the Plaintiff in this appeal, such costs are to be taxed if not agreed.