TAM SZE LEUNG AND OTHERS v. COMMISSIONER OF POLICE

CACV 152/2022, [2023] HKCA 537

On Appeal From [2021] HKCFI 3118

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 152 OF 2022

(ON APPEAL FROM HCAL NO 191 OF 2021)

____________

____________

_________________

J U D G M E N T

_________________

Hon G Lam JA (giving the Judgment of the Court):

I.  Introduction

1.  The Applicants sought to challenge, by way of judicial review, the decision of the Commissioner of Police (“Commissioner”) to issue and maintain “letters of no consent” in respect of their bank accounts under the Organized and Serious Crimes Ordinance (Cap. 455) (“OSCO”). In his judgment handed down on 30 December 2021 (“Judgment”),[1] Coleman J held that three out of six grounds advanced by the Applicants were made out.  In a further decision on relief and costs dated 23 March 2022,[2] the judge granted the following declaration in favour of the Applicants:

“ The Letters of No Consent were, and the No Consent Regime as operated by the Commissioner (‘the Commissioner’) is:

(1) ultra vires sections 25 and 25A of OSCO; and

(2) incompatible with articles 6 and 105 of the Basic Law, because the No Consent Regime as operated by the Commissioner is not prescribed by law and is disproportionate.”

2.  The Commissioner now appeals to this court.

II.  The relevant provisions of OSCO

3.  OSCO was first enacted in 1994, creating a general money laundering offence as an extension from the equivalent provision in the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405) which related to drug money.  In 1995, both Ordinances were amended, with new sections 25 and 25A substituted.  OSCO, together with cognate legislation such as the Drug Trafficking (Recovery of Proceeds) Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615), operate as measures taken by Hong Kong against the backdrop of a global effort in combating money laundering, terrorist financing and other related threats to the integrity of the international financial system, which is coordinated by the Financial Action Task Force, an inter-governmental organisation that sets global standards and promotes measures for these purposes.

4.  The provisions of OSCO that are central to this appeal are sections 25 and 25A which form a scheme.  Section 25(1) and (2) provide:

“ 25. Dealing with property known or believed to represent proceeds of indictable offence

(1) 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.

(2) In proceedings against a person for an offence under subsection (1), it is a defence to prove that—

(a) he intended to disclose to an authorized officer such knowledge, suspicion or matter as is mentioned in section 25A(1) in relation to the act in contravention of subsection (1) concerned; and

(b) there is reasonable excuse for his failure to make disclosure in accordance with section 25A(2).”

5.  “Dealing” with property is given a wide definition in section 2(1) to include:

“ (a) receiving or acquiring the property;

(b) concealing or disguising the property (whether by concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it or otherwise);

(c) disposing of or converting the property;

(d) bringing into or removing from Hong Kong the property;

(e) using the property to borrow money, or as security (whether by way of charge, mortgage or pledge or otherwise)”

6.  Section 25A provides:

“ 25A. Disclosure of knowledge or suspicion that property represents proceeds, etc. of indictable offence

(1) Where a person knows or suspects that any property—

(a) in whole or in part directly or indirectly represents any person’s proceeds of;

(b) was used in connection with; or

(c) is intended to be used in connection with,

an indictable offence, he shall as soon as it is reasonable for him to do so disclose that knowledge or suspicion, together with any matter on which that knowledge or suspicion is based, to an authorized officer.

(2) If a person who has made a disclosure referred to in subsection (1) does any act in contravention of section 25(1) (whether before or after such disclosure), and the disclosure relates to that act, he does not commit an offence under that section if—

(a) that disclosure is made before he does that act and he does that act with the consent of an authorized officer; or

(b) that disclosure is made—

(i) after he does that act;

(ii) on his initiative; and

(iii) as soon as it is reasonable for him to make it.

(3) A disclosure referred to in subsection (1)—

(a) shall not be treated as a breach of any restriction upon the disclosure of information imposed by contract or by any enactment, rule of conduct or other provision;

(b) shall not render the person who made it liable in damages for any loss arising out of—

(i) the disclosure;

(ii) any act done or omitted to be done in relation to the property concerned in consequence of the disclosure.

(4) In the case of a person who was in employment at the relevant time, this section shall have effect in relation to disclosures to the appropriate person in accordance with the procedure established by his employer for the making of such disclosures as it has effect in relation to disclosures to an authorized officer.

(5) A person commits an offence if, knowing or suspecting that a disclosure has been made under subsection (1) or (4), he discloses to any other person any matter which is likely to prejudice any investigation which might be conducted following that first-mentioned disclosure.

(6) In proceedings against a person for an offence under subsection (5), it is a defence to prove—

(a) that he did not know or suspect that the disclosure concerned was likely to be prejudicial in the way referred to in that subsection; or

(b) that he had lawful authority or reasonable excuse for making that disclosure.

   ……”

7.  “Authorised officer”, referred to in section 25A(1) and (2)(a), is defined in section 2(1) to mean:

“ (a) any police officer;

(b) any member of the Customs and Excise Service established by section 3 of the Customs and Excise Service Ordinance (Cap. 342); and

(c) any other person authorized in writing by the Secretary for Justice for the purposes of this Ordinance”.

III.     The procedures adopted by the police

8.  As will be described in greater detail below, the above provisions have a direct impact on financial institutions such as banks.  Where they apply, section 25(1) potentially criminalises banks for operating their customers’ accounts, and section 25A(1) requires them to make disclosure to an authorised officer.  Such disclosure is in practice referred to as a suspicious transaction report (“STR”).  Within the Government, the Joint Financial Intelligence Unit (“JFIU”), set up in 1989 and jointly staffed by the police and the Customs & Excise Department with a Superintendent of the police as its Head, is the designated unit to receive and analyse STRs and disseminate them to local or overseas law enforcement agencies or financial intelligence units worldwide, in accordance with the recommendations of the Financial Action Task Force. 

9.  Under section 25A(2)(a) an authorised officer may give consent for an act to be done which would otherwise attract criminal liability under section 25(1).  Although as defined in OSCO an “authorised officer” includes any police officer, by internal arrangement only the Head of JFIU may exercise that power to give or withhold consent.  The power is exercised after an STR is received.  Where consent is not given, the authorised officer is not required by law to take any positive step, but in practice the Head of JFIU issues a letter, which has generally been referred to as a Letter of No Consent (“LNC”), to the relevant financial institution that filed the STR.  The typical content of an LNC may be seen in §25 below.  Between 2018 and May 2021, JFIU received a total of 207,146 STRs, less than 2% of which resulted in the issuance of LNCs.

10.  The procedures followed by the police and the JFIU after receiving an STR are set out in Chapter 27-19 of the Force Procedures Manual (“Manual”) headed “ ‘No Consent’ Mechanism in respect of Property held by Financial Institutions”.  The material paragraphs have been quoted in the Judgment.[3] A summary suffices for present purposes:

(1)  Upon receiving an STR from a financial institution, the JFIU may send it to an appropriate investigating unit in the police if it requires follow-up action.  The Superintendent commanding that unit (“SPI”) has to decide within 2 working days (extendable in exceptional circumstances) whether consent for dealing with the property should be refused and, if so, to make a written request, with justifications, to the JFIU for an LNC to be issued.  If the SPI does not act within 2 working days, the JFIU will issue a letter giving consent for the financial institution to deal with the property.

(2)  The underlying principle is that the use of the “No Consent” mechanism must be necessary, proportionate and reasonable.  In the deliberation, the SPI may consider the prospect of obtaining a confiscation order (which in turn requires the SPI to take into account the nature and seriousness of the offence, the laying of a charge and the prospect of obtaining a conviction, the value of the proceeds of crime, and the existence of realisable property), the prospect of obtaining a restraint order, the likelihood of a victim obtaining an injunction within a reasonable period of time, any other consideration that may have a bearing such as when dealing with an absconder or an overseas request, and the underlying principle that persons guilty of criminal offences are denied the proceeds of crime.

(3)  After the LNC is issued, the investigating unit should make their best endeavours to obtain a restraint or confiscation order as soon as practicable or advise the victim to apply for a civil injunction.

(4)  Each LNC must be reviewed every month by the SPI and, after 3 months, by the Formation Commander.

(5)  An LNC should normally last no more than 6 months.  Before the expiry of the 6-month period, the Formation Commander should critically review the case to decide whether there are exceptional circumstances to justify the LNC going beyond that period.  The Formation Commander should ensure that the exceptional circumstances and reasoning are fully documented and submitted to the JFIU, and that the OC Case[4] submit the file to the Department of Justice for examining the prospect of obtaining a restraint order.  If these actions have not been completed after 6 months, the LNC will lapse and the JFIU will issue a consent letter to the financial institution.

11.  A similar description of the procedures and the relevant considerations has been posted on the JFIU’s website since 22 April 2021.

IV.  Interush Ltd v Commissioner of Police

12.  The constitutionality of sections 25 and 25A of OSCO in the context of the no consent mechanism as described in the Manual was challenged in the case of Interush Ltd v Commissioner of Police [2019] HKCA 70, [2019] 1 HKLRD 892.  There the applicants held accounts at two banks.  In early November 2013, the police were alerted by newspaper coverage to start an investigation into an alleged pyramid scheme implicating the applicants.  At around the same time, the two banks also had suspicions about the applicants’ accounts.  One bank decided to suspend the accounts (and later terminated them and made a report to the police).  The other bank submitted an STR to the JFIU, which was followed immediately by an LNC issued by the JFIU to the bank.  A restraint order was eventually granted against the applicants’ accounts.

13.  The applicants there instituted judicial review proceedings, contending, inter alia, that sections 25 and 25A of OSCO were unconstitutional for infringing property rights under the Basic Law and rights of access to court under both the Basic Law and the Hong Kong Bill of Rights. They also challenged the JFIU’s decision to issue an LNC to one of the banks and the decisions to withhold consent for the funds in the applicants’ bank accounts to be released.

14.  At first instance, P Li J rejected the application for judicial review, holding, inter alia, that neither section 25 nor section 25A engaged the applicants’ property rights.[5]  Dismissing the applicants’ appeal, this court[6] held that the applicants’ property rights were engaged since whether consent was given under section 25A had an effect on the applicants’ use of their money in the bank accounts, but that the statutory regime met the proportionality test and was therefore not unconstitutional.  The applicants there also sought to argue that the restriction on fundamental rights failed to meet the “prescribed by law” requirement, but were not permitted to do so as the point had not been made in the Form 86 or raised below.

V.    Factual background

15.  The Applicants in the present case are family members.  We shall refer to them individually as “A1” to “A4” respectively.  A1 is the younger brother of A2.  A3 is their mother.  A4 is A2’s wife.  A2 was a stockbroker at a securities brokerage firm in Hong Kong. A1 appears to have worked as an engineer up to 2018 and thereafter as an assistant at a business set up by A2 to receive commissions from the brokerage firm.  A1 and A2 also appear to have owned (as to 8% and 92% respectively) and operated a self-storage business with branches in Tsuen Wan and Kwai Chung.  A3 appears to have worked as a hotel dishwasher between 2014 and 2020.  A4 did not report any income to the Inland Revenue in the assessment years 2014/15 to 2019/20.

16.  Since 2019, the Applicants have come under suspicion by the Securities and Futures Commission (“SFC”) for having committed breaches of the Securities and Futures Ordinance (Cap 571).  In particular, it is suspected that the Applicants and other persons had engaged in market manipulation of over 10 different stocks in Hong Kong between September 2018 and November 2020.  The alleged activities, colloquially known as “pump and dump”, involved using various securities accounts to purchase a large amount of stocks at low prices, and then arranging for other persons to provide, through social media and other messaging applications, false stock trading tips or insider information to others in order to raise the share prices, before finally selling them at a profit.  It is alleged that the Applicants and other suspects earned profits of over $300 million at the expense of investors who bought the shares from them and suffered significant losses when the stock prices came down after the sale. 

17.  It is further suspected that the Applicants had transferred their profits to various bank accounts including those which were the subject matter of the judicial review proceedings.  These accounts were held with four banks, namely, Bank of China Hong Kong (“BOCHK”), Bank of East Asia (“BEA”), the Hongkong and Shanghai Banking Corporation (“HSBC”) and Hang Seng Bank (“HSB”).  We shall refer to them collectively as the “Banks”.  The police claim that fund flow analyses show that during the material period, there were hundreds of deposits into the Applicants’ accounts at the Banks from unknown third parties totalling many millions of dollars which were in many instances closely followed by transfers out to unknown parties.  The police suspect that the balances in the accounts represent proceeds of crime.

18.  The investigation was initially conducted by the SFC.  On 31 July 2019, searches were conducted by the SFC under search warrants at two residential properties occupied by A1 and A3, and A2 and A4, respectively. 

19.  In February 2020, BOCHK sought information from A1 regarding the sources of a number of sizeable deposits into his account and the details of a number of significant transfers out of his account during the period from September 2018 to November 2019.  At around that time, BOCHK also made enquiries with A4 with regard to certain transactions in her account during the same period, including transactions with A1 and A2.

20.  In late November 2020, HSB asked A3 to update the personal information with respect to her bank account and subsequently asked her about her change of name more than 20 years ago (when A3 removed her husband’s last name from her name after their divorce).

21.  On 25 November 2020, searches were conducted again by the SFC under search warrants at residential properties then occupied by A1 and A4 respectively.  On the same date, the SFC referred the matter to the police for investigation against the Applicants for the suspected offence of “money-laundering”.

22.  From 27 November 2020 onwards, the police took a number of steps that eventually led to certain bank accounts of the Applicants being “frozen” by the banks.  We shall set them out in some detail as they are the subjects of the Applicants’ complaint in these proceedings. 

23.  After the referral from the SFC, the police sent emails to three of the Banks (with the exception of HSB), in varying terms and degree of detail, informing them of the investigation against the Applicants and requesting for action on the part of the banks:

(1)  On 27 November 2020, a Detective Senior Inspector sent an email to BEA in relation to a specified bank account of A3 with BEA, as follows:

“ Case

Police is conducting an investigation against one subject in relation to a case of Money Laundering. Details of subject are as follow:

Name	Bank	Account No.
Kong Chan	BEA	xxxxxx

Request

•  In order to ascertain whether they have maintained any account with your bank, kindly provide the updated balance of such account, if any.

•  LNC will be issued if the account balance exceeds HKD100,000.

•  The results of the asset scan will be used only for police intelligence purpose.

•  Suspicious Transaction Report (‘STR’) is recommended.”

(2)  On 27 November 2020, a Detective Inspector sent an email to BOCHK in relation to certain accounts of the Applicants as follows:

“ Police investigation revealed that the below subjects were suspected to be involved in market manipulation-related money laundering activities. Please confirm whether the following subjects have maintained by bank account(s) with your bank and provide us with the updated balance, if any.

If the accounts maintain the amount over HKD100,000, please file STR.

   [The names of the Applicants, their HKID numbers, and their known account numbers are then set out.]

   Should you have any queries, please feel free to contact me at [tel no].  Thank you very much for your kind assistance.”

This was followed by another email to BOCHK on the same date, which read:

“ Please hold the below accounts and file STR asap as LNC will be issued.

…

   [The names of A1, A2 and A4, their HKID numbers, and their known account numbers are then set out.]

   Should you have any queries, please feel free to contact me at [tel no].  Thank you very much for your kind assistance.”

(3)  On 27 November 2020, a Senior Inspector sent an email to HSBC, stating:

“ Case background

SFC is investigating a suspected market manipulation case which involves securities accounts at China Industrial Securities International Brokerage Limited and other 7 securities companies. Investigation revealed that the suspects have sold the target shares and based on T+2 settlement they will receive the sale proceeds. Investigation revealed that two persons have received crime proceed. …

Details of the persons as below:

   [The names of A1 and A3, their HKID numbers, and their known account numbers are then set out.]

Request

(a) In order to facilitate the SFC’s investigation, please suspend the operation of the account held by the above Subject Kong Chan and TAM Sze leung as they are suspected to be involved with money laundering; and

(c) According to the law (Cap 455 OSCO), Suspicious Transaction Report (STR) to JFIU is urgently requested.

   Should you have any queries, please feel free to contact me at [tel no].  Thank you very much for your kind assistance.”

(4)  On 30 November 2020, a Detective Senior Inspector sent an email to BEA, stating:

“ Officers of SFC are investigating a case of ‘market manipulation related money laundering’ in connection with the following suspect … Enquiries reveal that he has maintained an account with Bank of East Asia:-

   [The names of A1, his HKID number, and an account number are then set out.]

   Your kind assistance is now being sought to file a STR.  Letter of No Consent will be considered for any substantial balance.  You should also consider taking appropriate action in accordance with the relevant legislation(s).”

24.  On 30 November 2020, BOCHK submitted an STR to the JFIU relating to the accounts of A1, A2 and A4.  On that day and the following day, BEA submitted an STR relating to an account of A3 and A1 respectively to the JFIU.  The STRs were referred to the Financial Investigation Division of the Financial Intelligence and Investigation Bureau of the police, which, after considering them, requested the JFIU to issue LNCs in relation to the relevant accounts.

25.  Pursuant to these requests, the Head of JFIU issued (i) an LNC to BOCHK dated 1 December 2020 in relation to the specified accounts of A1, A2 and A4, (ii) two LNCs to BEA dated 10 and 14 December 2020 in relation to the accounts of A3 and A1 respectively, and (iii) an LNC to HSBC dated 17 December 2020 in relation to the accounts of A1 and A3.  These LNCs were similarly worded, and read as follows:

“ I refer to your disclosure made to JFIU under the following reference:

JFIU No. Your Reference Dated

xxxxxx xxxxxx xxxxxx

Your disclosure is related to an investigation of ‘Dealing with property known or believed to represent proceeds of indictable offence’ by officers of Financial Investigation, Narcortics Bureau under reference xxxxxx.

In my capacity as an Authorized Officer under the provisions of section 25A(2) of Drug Trafficking (Recovery Of Proceeds) Ordinance, Cap. 405 (“DTROP”) and Organized and Serious Crimes Ordinance, Cap. 455 (“OSCO”), I wish to inform you that you do NOT have my consent to further deal with funds in the account listed in Annex A since the funds in the account is believed to be crime proceeds.

As you should know, dealing with property known or reasonably believed to represent to proceeds of an indictable offence is an offence under section 25 of DTROP and OSCO. This information should be treated in strict confidence and disclosure of the contents of this letter to any unauthorized person, including the subject under investigation which is likely to prejudice the police investigation, may be an offence under section 25A(5) DTROP and OSCO. Neither the account holder nor any other person should be notified about this correspondence.

If any person approaches your institution and attempts to make a transaction involving the account, please ask your staff to immediately contact the officer-in-charge of the case, and decline the transaction. Should the account holder or a third party question the bank as to why he could not access the funds in the account he should be directed to the officer-in-charge of the case, without any further information being revealed.

Please contact the officer-in-charge, Detective Senior Inspector Mr. CHAN Hok-lun, Ivan on [telephone number] or [email address] or the undersigned should you have any query or seek clarification of the contents of this letter.”

26.  The LNCs were subsequently maintained upon monthly reviews conducted pursuant to the procedures stipulated in the Manual.

27.  Meanwhile, in around late November or early December 2020, the Applicants discovered that they were unable to withdraw funds from their accounts with the Banks.  They instructed solicitors, O Tse & Co, who wrote to BOCHK and HSBC on 1 December, to HSB on 4 December and to BEA on 7 December, seeking an explanation and instructing the Banks to close the relevant accounts and return the full account balances to the relevant Applicants.

28.  On 3 December 2020, BOCHK replied to O Tse & Co, stating that they were prohibited by law from disclosing information about the subject matter of the enquiry, and asked them to contact Detective Senior Inspector, Mr Ivan Chan.  HSBC replied on 9 December, stating that they were looking into the matter, but did not follow up with any further reply.  On 10 December, BEA replied to O Tse & Co, stating that they were not in a position to accede to the request in their letter, and that if there was any further enquiry, they should contact Detective Senior Inspector, Mr Ivan Chan.  On 28 December 2020, HSB replied directly to A1, stating:

“ From time to time, we conduct reviews of our products, services and accounts. In a cause of these reviews, we consider various factors. We regret to inform you that, following an in-depth review and considering the various factors, your account services has been suspended and under review.” [sic]

29.  On 8 December 2020, after receiving the reply from BOCHK, O Tse & Co wrote to the police asking them to confirm that LNCs had been issued to the Banks and to reveal the legal basis and reasons for issuing the LNCs and the persons who decided to issue them.  O Tse & Co also asked whether the police would be prepared to hold a hearing for the Applicants to make representations or to receive their written representations, and whether the police would be prepared to release money from the accounts to meet the Applicants’ living expenses and/or legal costs.

30.  On 14 December 2020, the Commissioner replied:

“ Please be informed that the above-named subjects are currently under investigation by Financial Investigations Division, Narcotics Bureau for a case of ‘Dealing with property known or believed to represent proceeds of indictable offence’. I would be grateful if you could ask the above-named subjects to contact us for further investigations.

   Should you require more information, please feel [free] to contact the undersigned or the Officer-in-Charge Senior Inspector CHAN Hok-lun Ivan at [telephone number].”

31.  Further letters from O Tse & Co elicited essentially the same response from the Commissioner on 24 December 2020 and 15 January 2021 respectively.

32.  On 18 February 2021, the Applicants filed their Form 86 in the Court of First Instance to seek leave to apply for judicial review against the Commissioner.  The decision challenged was specified to be (i) the decision on or around 1 December 2020 to issue and maintain LNCs (together with the operation of the No Consent Regime[7]) in respect of 12 specified accounts of the Applicants at the Banks (“Accounts”); and (ii) the failure or refusal to consent to the withdrawal of any funds from the Accounts. The balances in the Accounts (including cash and investments) amounted to a combined total of around $30 – 40 million.

33.  On 4 March 2021, the Applicants were arrested for the offence of money-laundering.  They remained silent under caution and refused to answer any questions.  They were released the next day on police bail of $100,000 each with no charges laid.

34.  It may be noted that separately, on 15 March 2021, the SFC issued restrictive notices under sections 204-206 of the Securities and Futures Ordinance to three securities firms in relation to the trading accounts held by A1, A3 and A4, leading to some of their cash and securities assets therein being frozen.  They also brought a legal challenge against the statutory regime for issuing restrictive notices, alleging that it was unconstitutional.[8] That challenge was subsequently dismissed by Coleman J in a decision dated 26 September 2022.[9]

35.  In April 2021, production orders were obtained by the police from the High Court and served on 29 entities including banks and securities firms.  Over 10,000 pages of bank and trading records have been obtained.

36.  On 24 May 2021, HSB submitted an STR to JFIU in relation to A1’s accounts at HSB.  On 8 June 2021, two LNCs were issued by the Head of JFIU to HSB in relation to A1’s accounts.  The LNCs followed the wording mentioned above, except that for one of the accounts containing securities, the LNC stated that consent was given to HSB to sell the securities and credit the proceeds to the settlement account.  No LNC was issued in relation to A3’s account at HSB.

37.  On 2 September 2021, upon completion of initial investigation, the relevant case files were submitted by the OC Case to the Department of Justice for advice.

38.  On 7 October 2021, the Secretary for Justice made an ex parte application for a restraint order in respect of the credit balances in a number of accounts held by the Applicants at banks and securities firms, including but not limited to the Accounts (except A3’s account with HSB).[10]  The application was heard by Yau J on 11 October 2021, who granted a restraint order (“Restraint Order”) which was effective until 10 April 2022 in the first instance and has apparently been continued to date by further orders.  The Restraint Order states that the Applicants must not, whether by themselves or otherwise, remove from Hong Kong or in any way dispose of, or deal with, or diminish the value of, the property specified therein.

39.  On 12 October 2021, the Head of JFIU wrote to the Banks stating that since the Restraint Order had been issued, the refusal of consent to deal with funds in the relevant accounts was lifted for the Banks’ compliance with the court order.

40.  The Applicants’ application for leave to apply for judicial review was heard in a rolled-up hearing before Coleman J on 19 and 20 October 2021.

VI.     The grounds for judicial review, the judgment and the appeal

41.  As mentioned above, by the time of the hearing below, the Restraint Order had been granted and the LNCs issued to the Banks had in effect been withdrawn.  It would be pointless for the court to quash the LNCs or the decision to issue them or the refusal to consent to the withdrawal of funds, which were among the orders sought in the Form 86. 

42.  In an attempt to maintain the judicial review proceedings, the Applicants submitted that seeking the Restraint Order was a tactical manoeuvre by the Commissioner for the purpose of undermining the basis of the judicial review proceedings.  The judge rejected this allegation, but nevertheless decided to determine the application even though it had become academic, for the reason that issues of real public importance were raised.[11]

43.  The six grounds advanced by the Applicants for judicial review may be broadly described as follows (adopting the judge’s summary[12] with modifications):

(1)  The issue and maintenance of the LNCs are tainted by procedural impropriety and unfairness, in that there is a lack of notice (before or after the issue of the LNCs), no reasons have been provided, and there is no opportunity for a fair hearing or other opportunity to make meaningful representations.  We shall refer to this as the “procedural unfairness ground”.

(2)  The LNCs are ultra vires OSCO, which does not confer power on the Commissioner to operate a de facto property freezing regime by the use of such letters and attendant procedures.  We shall refer to this as the “ultra vires ground”.  There is an associated alternative argument that the LNCs were issued for an improper purpose.  We shall refer to this as the “improper purpose ground”.

(3)  The LNCs interfere with the Applicants’ constitutional rights under the Basic Law and Bill of Rights – specifically to (i) the use of a person’s property under arts. 6 and 105 of the Basic Law, (ii) a fair hearing under art. 10 of the Bill of Rights, (iii) access to legal advice and to the court under art. 35 of the Basic Law and art. 10 of the Bill of Rights, and (iv) private and family life under art. 14 of the Bill of Rights – and such interference is not “prescribed by law”.  We shall refer to this as the “prescribed by law ground”.

(4)  (Partially overlapping with (3) above), the LNCs breach the Applicants’ right to a fair hearing under art. 10 of the Bill of Rights.  We shall refer to this as the “fair hearing ground”.

(5)  The No Consent Regime and the LNCs disproportionately interfere with the Applicants’ fundamental rights mentioned in (3) above.  We shall refer to this as the “proportionality ground”.

(6)  The decisions to refuse consent even to a partial release of funds are unlawful in that the LNCs cause a “blanket freeze”, without any distinction as to which assets are or could be alleged to represent the proceeds of crime and which assets could not.  We shall refer to this as the “blanket freeze ground”.

44.  There was argument before the judge whether these grounds (except the ultra vires ground) were open to the Applicants in light of this court’s decision in Interush.  The judge concluded that the circumstances in this case were different from Interush and that the Applicants were therefore not precluded from raising the challenges,[13] although he considered he was bound by this court’s view against the Applicants’ argument that access to judicial review does not cure the procedural flaws in the No Consent Regime.[14]

45.  The judge eventually upheld the ultra vires ground (and, as an adjunct, the improper purpose ground), the prescribed by law ground, and the proportionality ground (except in relation to rights to private and family life), but rejected the procedural unfairness ground, the fair hearing ground and the blanket freeze ground.  The judge’s reasoning on each ground will be referred to below.  After receiving further submissions, the judge, in a further decision on relief and costs, granted the declaration set out in §1 above. 

46.  The Commissioner now appeals, contending that the declaration should be set aside and the application for judicial review dismissed. 

47.  For their part, the Applicants contend, by their amended respondents’ notice, that the declaration made should be upheld or alternatively supplemented by (i) adding incompatibility with art. 35 of the Basic Law and arts. 10 and 14 of the Bill of Rights to the existing declaration; and (ii) adding a further declaration that the Commissioner’s failure or refusal to consent to the withdrawal of any funds from the Accounts is unlawful.  The grounds relied upon are essentially those rejected by the judge and the additional ground that this court’s decision in Interush is plainly wrong.

VII.    The “No Consent Regime as operated”

48.  Before discussing the various grounds for judicial review, it is necessary to refer to the concept of the “No Consent Regime as operated by the Commissioner”, which forms the basis of the judge’s reasoning in many respects as well as for distinguishing Interush[15] and is also the subject matter of the declaration granted. 

49.  On the evidence, there appear to be two different ways in which the LNCs in this case came about.  It appears but is by no means clear that the gravamen of the Applicants’ complaint is directed to the first scenario below. 

(1)  In the case of BOCHK, BEA and HSBC, the police by emails informed the banks that the funds in the accounts in question were suspected to be proceeds of crime and requested that the banks file STRs (see §23 above). STRs were then submitted by the banks, and the Head of JFIU issued LNCs at the request of the investigation unit.

(2)  There is no evidence that the police sent any similar initial email to HSB.  Instead, HSB’s response dated 28 December 2020 to A1’s queries was that, following an in-depth review, his account services had been suspended and placed under review, without referring to any police investigation.  The “freezing” of A1’s accounts, and the submission of an STR considerably later on 24 May 2021, appear to have been done by HSB of its own motion.  The police responded with two LNCs issued to HSB on 8 June 2021 (see §§28 & 36 above).

50.  There is no definition of the phrase “No Consent Regime as operated by the Commissioner” either in the Judgment or the subsequent decision on relief.  In the Form 86, the rubric of “No Consent Regime” is used, which is defined by reference to the “matters” in certain paragraphs.[16] Those matters do not however clearly set out the components of the “regime”, and it is not clear that the judge adopted that definition.

51.  The Applicants have attacked the “regime as operated” as being systemically unlawful or unconstitutional without impugning the statutory provisions, no doubt in order to bypass the decision in Interush that sections 25 and 25A are not invalid.  But this approach is problematic, and the problems permeate the grounds upheld the judge.  The operation of the statutory provisions involves an interplay between the actions of financial institutions and of the police respectively, as explained below.  To say that the “No Consent Regime as operated by the Commissioner” is systemically unlawful or unconstitutional leaves one in doubt as to what precisely is held to be unlawful and as to the continued effect of the statutory provisions, which are apparently intact.

52.  We shall deal below with, first, the grounds for judicial review accepted by the judge, followed by the grounds raised by the respondents’ notice.

VIII.   The grounds accepted by the judge

(1) The ultra vires ground

53.  On the ultra vires ground, in summary Coleman J considered that where a statute does not expressly abrogate or restrict rights, the fundamental right of access to property can only be restricted by the “No Consent Regime” if there is a necessary implication that such restriction is provided for by the legislation.  As a practical reality, the issue of an LNC will cause the financial institution not to deal with the relevant funds, and the purpose of the Commissioner in issuing an LNC is to ensure that the recipient will refuse to deal with the relevant property which will be “informally frozen”.  It is implausible that the legislature, having created the mechanism of restraint orders and charging orders (sections 14 – 16 of OSCO), could have also consciously enacted a “secret, informal and unregulated asset freezing power” of the kind exercised by the Commissioner under section 25A.  The judge concluded that there is no basis for a necessary implication of the power the Commissioner says he has, and has operated.[17]

54.  With great respect, we do not agree with this analysis. It assumes that in a case such as the present the police are wielding an asset-freezing power.  In our opinion this is not the correct starting point.  To deal with the ultra vires ground it is necessary to analyse how sections 25 and 25A operate.  Money in a bank account is a debt owed by the bank to the customer, and as such a chose in action and thus “property” within the meaning of the OSCO.[18] A bank will have “dealt” with such property if it repays that debt, such as by releasing funds to the customer or transferring them to his order.  It is the bank who owes a debt to its customer and the bank who has immediate control of its funds.  Whether or not it pays out funds to a customer or to his order when instructed by the customer to do so is a matter decided by the bank in the performance of its contract with the customer.  Where the bank possibly “knows or has reasonable grounds to believe” that the account balance represents proceeds of crime, the risk for it is that it may be held criminally liable under section 25(1) if it releases the money to the customer.  In addition, where a bank “knows or suspects” that the account balance represents proceeds of crime or was used or is intended to be used in connection with crime, it is required by section 25A(1), on pain of punishment, to make disclosure to an authorised officer.

55.  This puts the bank in an unenviable position. On the one hand, it has contractual duties to and a commercial relationship with its customer, who is entitled to give instructions for operating his account.  On the other hand, it may incur criminal liability if it releases any funds with the requisite mental element. 

56.  The bank’s position may be alleviated in two ways.  First, the bank’s contractual duties may be suspended by operation of law where their performance has been rendered temporarily illegal by statute: K Ltd v National Westminster Bank plc [2007] 1 WLR 311, §11; alternatively, its duties may be tempered by an implied term that it can refuse to operate the account in any way where to do so may expose it or its staff to criminal liability, or by similar express terms.  Where these conditions apply, the bank may refuse to follow the customer’s instructions without incurring civil liability.  Whether, on the facts of a particular case, the bank is so entitled is a matter of contract law that can be resolved in civil litigation between the bank and the customer: see Garnet, §§42 & 58; Amalgamated Metal Trading Ltd v City of London Police Financial Investigation Unit & others [2003] 1 WLR 2711, §27.  For actual examples of these contests, see Squirrell Ltd v National Westminster Bank plc [2006] 1 WLR 637; K Ltd v National Westminster Bank plc, supra; Shah v HSBC Private Bank (UK) Ltd [2010] EWCA Civ 31; Lonsdale v National Westminster Bank plc [2018] EWHC 1843; see also Crown Aim Ltd v UCO Bank [2020] HKCFI 212 which concerned a bank’s decision to suspend a customer’s account due to investigations by foreign authorities.

57.  Secondly, section 25A(2) provides that a bank is not criminally liable under section 25(1) for releasing funds to a customer (even with the requisite mental element) if either (a) it makes disclosure pursuant to section 25A(1) before releasing the funds and it releases the funds with the consent of an authorised officer; or (b) it makes disclosure pursuant to section 25A(1) after releasing the funds, on its initiative, and as soon as reasonable.  These two limbs of section 25A(2) provide protection to the bank from criminal liability where it is minded to release funds pursuant to the customer’s instruction.  The practice of issuing letters of consent and LNCs stems from the first limb.  (Section 25(2) further provides a defence where the bank intended to make disclosure and there is reasonable excuse for its failure to make disclosure.) 

58.  In our view, the correct legal analysis is that in a case such as the present, the account is “frozen” not because there is any enforceable order made by the police (like a Mareva injunction granted by a civil court) that blocks the account, but because the bank has chosen, whether or not permissibly under the banking contract, not to comply with its customer’s instruction, no doubt due to its concern about criminal liability under section 25(1) for dealing with property that represents proceeds of crime.  The withholding of consent no more “freezes” an account than the giving of consent compels the bank to release money.  The police have no power to require the bank to do anything.  What the police are empowered by the statute to do is to give consent, as an authorised officer, for an act in contravention of section 25(1), i.e. a dealing with the property.  Coupled with prior disclosure under section 25A(1), such consent immunises the bank from criminal liability under section 25(1).

59.  In a similar vein, the Court of Appeal of Guernsey in The Chief Officer, Customs & Excise, Immigration & Nationality Service v Garnet Investments Ltd (Guernsey Judgment 19/2011, 6 July 2011) stated, with reference to analogous statutory provisions, that funds in a bank account are:

“ in effect frozen, not by virtue of any refusal of consent, but by virtue of the ordinary operation of the criminal law which in the absence of consent will make the person seeking consent unwilling to transact for fear of punishment”,

and held that:

“ it is not the FIS [the body in Guernsey given the power to consent to the dealing of property] that is denying Garnet access to its property and preventing judicial oversight, it is the impact of the width of the criminal law and its chilling effect upon the person holding the fund, namely BNP.”^[19]

60.  That analysis was adopted by this court in Interush, where Cheung JA said[20] that an LNC “does not by itself freeze the accounts” and that:

“ The freezing of the account is by the financial institution itself. For example, if the bank reasonably suspects that the credit balance in an account are proceeds of crime, then it would be legally obliged under section 25 not to deal with it, whether the police has replied to its STR or not under the letter of consent regime. Conversely, if the bank subsequently determines that there are no reasonable grounds to believe that the money has that character, then it is free to deal with the account even though the police has, in response to the STR, issued a letter of no consent.”

61.  We do not think that asking whether the “No Consent Regime” is by necessary implication provided for in the statute is the correct approach to the question of vires.  Ultra vires, as a concept borrowed by public law from company law,[21] means that a public body has acted beyond its lawful authority and powers.  In determining whether the police acted beyond their powers, it is necessary to identify and focus upon the acts of the police.  The Applicants criticise this as an “artificial, atomised approach”, but the judge himself said (correctly, in our view) that rather than asking whether section 25A has been “re-purposed” or “weaponised” by the Commissioner, the “more neutral and preferable approach is simply to focus on what powers exist, and whether the steps which have been taken by the Commissioner fall within or outside those powers.”[22] 

62.  What then are the steps taken by the Commissioner in this case?  Essentially there are two: (1) first, the police sent emails to three of the Banks (but not HSB), alerting them to potential money laundering offences and requesting for STRs; (2) after the Banks filed STRs, the police issued LNCs to them.

63.  Are these steps beyond the powers of the police? As to (1), it is part of the duties of the police to take all steps that appear to them necessary for preventing crime: Rice v Connolly [1966] 2 QB 414, 419B-C.  If they reasonably suspect that a criminal has put the fruits of crime in a bank account, they would be acting within their duties to try to prevent him from using the money, for that would be a further crime of money laundering contrary to section 25(1).  The Applicants and the judge, correctly in our view, accepted that the police have the power to alert financial institutions to potential money laundering offences by informing them of suspicions arising from the police’s own investigations.[23] There is no suggestion that it was ultra vires for the police, as they did by emails to the three banks, (i) to request information on the balance of the relevant account, (ii) to request that the account be suspended, (iii) to recommend that the bank submit an STR, and/or (iv) to inform the bank that the police would not give consent for the release of funds from the account.

64.  Nor in our view can the issuance of LNCs be said to be ultra vires.  The judge held, correctly in our view, that the power for an authorised officer to give consent under section 25A(2)(a) necessarily implies a power to withhold or refuse consent.[24] There is no suggestion that it is ultra vires for the police to inform a bank by letter of the decision not to give consent.  The judge did not base his finding of ultra vires on the ground that the police issued an LNC without apparently being asked to consent to a specific act of dealing (though we do not know the terms of the STRs and in particular whether consent was sought therein).  Nor do we think this gives rise to a question of vires.  The police have the power to refuse consent and it is not ultra vires for them to inform a bank, as they do in practice by an LNC, that in relation to a particular account, the bank does not have the police’s consent to deal further with the funds in that account. 

65.  Rather, the judge appears to have been concerned that the banks’ suspicions were derived from the police and that it was the contact from the police informing the banks of the pending investigation and the police’s suspicion that triggered the freezing of the Accounts.[25]  As explained in §49 above, this was not the way in which the LNCs issued to HSB arose, and the concern does not apply to the statutory mechanism as operated in relation to the accounts in HSB.  Indeed, where a bank has on its own initiative filed an STR, and the JFIU issues an LNC in response, Mr Abraham Chan SC accepted at the hearing on behalf of the Applicants that there is no question of the police acting ultra vires. 

66.  But even in relation to the other three Banks, in our view it does not matter for the purpose of vires that their suspicion was triggered by information from the police.  Alerting the banks to relevant investigations and suspicions is admittedly within the power of the police.  Of course there can be grounds for complaint if that power was exercised in bad faith or irrationally (there is no such allegation in this case).  If however there are proper grounds for alerting the banks, it does not follow that a subsequent LNC becomes ultra vires simply because the police had “proactively reached out” and alerted the banks to the suspicious circumstances in the first place.  It may be noted in this connection that under the first limb of section 25A(2) (in contrast to the second limb), there is no requirement that the bank’s disclosure should be made on its initiative. 

67.  It should also be noted that in a case where the bank is first alerted by the police, any suspension of the account is likely to have been imposed by the bank based on the information thus communicated and any further investigation the bank may be prompted to carry out itself.  The bank is thereby put on notice that the account possibly contains proceeds of crime, potentially triggering the prohibition against dealing in section 25(1).  The subsequent issuance of an LNC simply informs the bank it does not have immunity under section 25A(2)(a) to deal with the funds.  Even if no LNC is issued (or, as in the present case, the LNC is declared ultra vires by the judge), the fact remains that no consent has been given by an authorised officer.  The bank will remain unprotected by section 25A(2)(a), and insofar as it considers it is exposed to criminal liability under section 25(1), it will in all probabilities continue to “freeze” the account. 

68.  On behalf of the Applicants, Mr Chan submits that neither the initial police emails nor the subsequent LNCs gave the three Banks much information in terms of grounds to believe that the accounts contained proceeds of crime, and that there is nothing to show that the three Banks conducted any internal investigation themselves.  But this does not support the ultra vires ground.  It is instead a complaint that the three Banks had wrongfully frozen the accounts without having any knowledge or reasonable ground to believe that the account balances represented proceeds of crime, i.e. without the requisite mental element for criminal liability under section 25(1).  On that premise, depending on the terms of the banking contracts (which have not been disclosed), there may be an argument that the three Banks have thereby acted in breach of contract.  But it does not follow that the police have acted beyond their powers.  In any event there is nothing to prevent the police from putting into their communication to a bank more information on the suspicious activities and even a request for the bank to conduct its own internal investigation into the account.

69.  Mr Chan points out that the police did not only alert the three Banks of the pending investigations, but also requested STRs be filed and the accounts be suspended.  Where they have the necessary mental element, the Banks are of course prohibited by section 25(1) from dealing with the accounts and required by section 25A(1) to make disclosure.  We do not see how it can be said to be ultra vires for the police to request or recommend compliance with these provisions.  In any event the ultra vires ground cannot hinge on such wording of the police’s communication to the banks.  Is it intra vires if the police simply tell the bank their suspicions, without recommending that it issue an STR?  Does it become ultra vires if the police in addition draw the bank’s attention to sections 25(1) and 25A(1) but stop short of requesting an STR and the suspension of the account?  Mr Chan has not been able to identify any clear or sensible line, which is essential for the Commissioner to know the boundaries of his powers. 

70.  Recognising the difficulties, at the hearing Mr Chan suggested that what is ultra vires can be defined by reference to §76 of the Judgment, where the judge stated:

“ As I have pointed out, in cases such as the present where the financial institution itself had no prior relevant suspicion, it is the contact from the police informing the financial institution of the pending investigation and the police’s suspicion (even without any express request for an STR) that will trigger the freezing. …”

We do not see how the suggestion assists or what precisely is said to be ultra vires by reference to this passage.  If, as is accepted, it is not ultra vires for the police to inform a bank of their suspicion, how can it be suggested that the act becomes ultra vires if such contact leads to the bank deciding to freeze the account?

71.  The Applicants submit that the Commissioner has no power to operate a “secret, informal, unregulated” asset freezing regime.  In our view this elides the distinction between the banks and the police as explained above.  In the ultimate analysis, the “freeze” is maintained by the Banks.  The power to give or withhold consent conferred on the police is not subject to any statutory appeal or review mechanism, but it is common ground that it is subject to the court’s supervisory jurisdiction in judicial review, and not wholly unregulated.  It should be noted that in the present case there is no suggestion that the decision not to give consent was irrational.  There was no claim for an order of mandamus to require the Commissioner to give consent under section 25A(2)(a) for any funds to be released by any bank.  The declaration sought, that the LNCs were ultra vires, does not mean that the police are obliged to give consent.  The declaration that the “No Consent Regime as operated by the Commissioner” is ultra vires is unclear in meaning, but it clearly cannot mean that section 25(1) has no effect and can be ignored by banks.

72.  For these reasons, we take the view that the ultra vires ground fails.

(2) The improper purpose ground

73.  An alternative argument raised is that the LNCs were issued for the purpose of securing an informal, unregulated asset freeze, and that any exercise of the power under section 25A(2)(a) for such an improper purpose would be ultra vires.[26] The judge accepted this contention, though he did not adopt the language of ultra vires in this context.[27]  We also think that this should be considered as a separate ground, as it would be confusing to use “ultra vires” in such a broad sense as to encompass every misuse of power.

74.  Much has been made by the Applicants of various statements in the Commissioner’s evidence or submissions regarding an “informal freezing regime” or the like.  Again, with respect, this confuses the objective overall effect of the statutory provisions (see Interush, §6.10) with the exercise of police powers.  To deal with this ground it is necessary to focus on the relevant allegation here, which is that the implicit power to refuse consent under section 25A(2)(a) is being used for an improper purpose. 

75.  As explained above, such consent from an authorised officer negatives any criminal liability that a person such as a bank may have if it does an act in contravention of section 25(1), provided disclosure under section 25A(1) is made before he does that act.  It is envisaged therefore that the decision whether or not to give consent to a person will be preceded by that person’s disclosure of his knowledge or suspicion together with the underlying matters.  In other words, the decision presupposes that the financial institution knows or suspects that the property in question represents proceeds of crime or was used or is intended to be used in connection with crime.  Even so there may be occasions on which consent may properly be given.  As pointed out in Garnet:[28]

“ the consent regime gives the police the operational freedom to grant relief from criminal liability in circumstances where it is considered to be in the interests of law enforcement so to do. Thus consent may be granted to avoid a suspected criminal becoming aware of the suspicions that are harboured in relation to him. This objective is also reinforced by the existence of offences in connection with tipping off (see section 41). Consent may also be granted so as to permit a controlled transfer to take place so that funds can be traced for investigative purposes.”

76.  Conversely, where no such purpose for allowing dealing exists, the police may consider it appropriate to refuse consent, so that the bank will remain subject to the prohibition against dealing so long as it has the requisite mental state.  Whether or not the bank will nevertheless deal with the property is ultimately a decision for itself, though by issuing an LNC the police clearly do not want any dealing to take place before they can obtain a restraint order.  In the present case, it is clear that the purpose of the investigating unit in requesting for, and the purpose of the JFIU in issuing, the LNCs, was to prevent dissipation of the funds in the Accounts[29] while police investigation was ongoing.

77.  We do not think that it is improper to refuse consent for the purpose of preventing dissipation of the property in question.  As stated in HKSAR v Pang Hung Fai (2014) 17 HKCFAR 778 at §36, one of the public purposes of the statutory scheme embodied in sections 25 and 25A is to deprive perpetrators of crime of the proceeds of their conduct.  The statute does so by criminalising dealing with property with the requisite mental state, subject to consent.  It has also been said in HKSAR v Li Kwok Cheung George (2014) 17 HKCFAR 319 at §§35 & 38 that the purpose of OSCO is to deprive serious offenders of their ill-gotten gains, and that it does so by, inter alia, making it difficult for them to get help in dealing with and concealing those gains by criminalising money laundering activities.  As accepted by the judge,[30] the power of an authorised officer to decide not to give consent is exercisable not only where he or she is satisfied in fact – but also where there is reasonable suspicion – that the property is derived from criminal conduct: Interush, §6.49; Amalgamated Metal Trading Ltd v City of London Police Financial Investigation Unit & others [2003] 1 WLR 2711, §27.  There is no suggestion that the police did not have such reasonable suspicion in this case when they issued and maintained the LNCs.  Accordingly, in our opinion the improper purpose ground is not made out.

(3) The prescribed by law ground

78.  There is no dispute that any restriction of fundamental rights such as those relied upon by the Applicants in this case must be “prescribed by law”, as stated in Art. 39 of the Basic Law.  The principle is that of legal certainty, and is often divided into two separate limbs: (1) that the law must be adequately accessible; and (2) that the norm is formulated with sufficient precision to enable the citizen to regulate his conduct. 

79.  The Applicants contend that the interference by the power to issue LNCs with fundamental rights is not “prescribed by law” because section 25A(2)(a) does not adequately indicate the scope of the power or the manner in which it is to be exercised.  It is said that the statute does not set any limits as to what evidential threshold has to be met before the power can be exercised, what property the power may be exercised over, what factors an authorised officer may or must consider, the duration for which the power may be exercised, what procedural rights are accorded to affected persons, and any mechanism for review or any reviewing body.

80.  There is no dispute that the applicable principles are set out by this court in Chee Fei Ming v Director of Food and Environmental Hygiene [2020] 1 HKLRD 373.[31] As stated there at §36, the crucial question is whether there is sufficient clarity as to the scope of the power and the manner of its exercise and whether the law provides adequate effective safeguards against abuse. 

81.  In discussing this ground, the judge accepted that the application of the “prescribed by law” requirement must be realistic, and that it is enough that the law lays down principles which are capable of being predictably applied to any situation, although with the infinite variety of situations in which issues of compliance may arise and the inevitable element of judgment involved in assessing them, complete codification is impossible.[32] The judge took into account the Manual since relevant parts of it had been published, though he noted the Applicants’ criticisms of its deficiencies.[33]  The judge appears to consider that there was a divergence or major development in the Commissioner’s own understanding as to the true source, nature and extent of the police’s powers under the regime.[34]  The judge doubted whether judicial review provides an appropriate judicial safeguard to the “No Consent Regime as operated”,[35] and also whether commencing civil proceedings against the bank provides an appropriate remedy, not least since most banking contracts will permit the bank to refuse to operate the account where it has suspicions relating to money laundering, and such a remedy is unlikely to be achieved expeditiously.[36]  His Lordship concluded that there is no clarity or certainty to be found in OSCO itself, and the Manual suffers from the same vices.  He therefore held that the “No Consent Regime as operated” is not prescribed by law.

82.  With great respect, we have come to a different conclusion.  The difference is due at least in part to our different analysis of the way in which the statutory scheme operates, as explained above, which results in the property being temporarily “frozen”.  The problems resulting from (i) assessing the “No Consent Regime as operated” without clearly defining what it means, and (ii) attributing the overall effect of the statutory provisions to the LNCs, seem to us to continue to affect this part of the judge’s analysis.  Indeed, the judge said that his conclusion on the prescribed by law ground may simply be a reflection of his view on the ultra vires ground.[37]

83.  In a case like the present involving bank accounts, the interference with property right comes directly from the bank’s decision not to allow the customer to operate his or her account.  Any prior communication by the police to the bank, before it files an STR, is a matter governed by common law.  Its nature is the provision of information and request for compliance with the law, and does not in itself interfere with any property right.  Whether the bank is entitled to refuse to follow the customer’s instructions depends primarily on two matters: first, whether the bank is at risk of committing the offence of money laundering if it allows the account to be operated; secondly, the terms of the banking contract.  The former is governed by section 25(1) whose meaning and effect have been elucidated in numerous cases, and in particular turns on whether the bank has the requisite knowledge or reasonable grounds for belief, whatever the source, that the property directly or indirectly represents proceeds of crime.  The latter is a matter of contract.  While the customer may think that the terms of the banking relationship are tilted in favour of the bank, there can be no complaint that the bank’s refusal to comply with instructions is not “prescribed by law”.  As explained above, it is open to the customer to pursue civil remedies against the bank and, where appropriate, seek interlocutory relief.  Likewise, the obligation on the bank to make disclosure, arising under section 25A(1), is clearly defined and depends on whether the bank has the requisite knowledge or suspicion of the matters specified in that subsection, whatever the source.

84.  The power conferred by section 25A(2)(a) on the police is not one of freezing property, but of deciding whether or not to give consent, so that, coupled with prior disclosure under section 25A(1), the bank will not face criminal liability if it deals with the property.  The police should not withhold consent without good reason: R (UMBS Online Ltd) v Serious Organised Crime Agency [2007] Bus LR 1317 §36.  The purpose of the provision is, as discussed above, to deprive offenders of the proceeds of their crime.  Although no criteria for the exercise of this power are set out in the statute, the scope of the discretion is delineated by the object of the statutory provision, as the power must be exercised bona fide for the achievement of that object: Chee Fei Ming, §§59-65.  Since the most important context in which sections 25 and 25A apply is the investigation stage, there is no suggestion that consent may only be refused if the property is proved to be proceeds of crime.  As held by the Judge, the power to refuse consent may be exercised where there is reasonable suspicion that the property is derived from criminal conduct.  Reasonable suspicion may not be a very high evidential threshold, but it is not uncertain, and is certainly familiar: see, for example, section 50 of the Police Force Ordinance (Cap 232) on the power of arrest of suspected persons and seizure of suspected property.

85.  As recognised by the judge in the context of the fair hearing ground,[38] despite the absence of any prescriptive words in the statute:

“ the … discretion was not unfettered, because he must seek to exercise his powers so as to promote the statutory purpose for which he is given them. He must direct himself correctly in law. He must act lawfully. He must do his best to exercise an objective judgment on the relevant material available to him. He must exercise his powers in good faith, uninfluenced by any ulterior motive, preselection or prejudice.”

86.  Further, even where the police have initially issued an LNC, consistently with public law duties they must be prepared to revisit their decision on a proper request by the person directly affected: R (UMBS Online Ltd) v Serious Organised Crime Agency, §52.

87.  Recognising the potentially serious effect the statutory provisions may have on the use of private property, the police have devised principles and procedures governing the issuance of LNCs in the form of the relevant provisions in the Manual (see §10 above).  The standards include: (1) the underlying principle that an LNC is issued where it is necessary, proportionate and reasonable; (2) best endeavours are to be made to obtain a restraint order or confiscation order as soon as practicable; (3) monthly reviews, initially by the SPI and after 3 months by the Formation Commander; and (4) an LNC should normally last no more than 6 months, unless there are exceptional circumstances. 

88.  The Applicants do not dispute that in the holistic approach applicable in this context, published policies and guidelines may be taken into account: see Chee Fei Ming at §§38 & 88, citing R (Munjaz) v Mersey Care NHS Trust [2006] 2 AC 148.  Whilst they are not law in the strict sense, the Commissioner is not at liberty to ignore or depart from these guidelines without good reasons: see Deluxe Ascent Ltd v Director of Lands [2023] HKCA 305, §§18 & 21.  These provisions, since they are published, also give guidance to the public, and the citizen is entitled to expect they will be observed in decision-making unless there is good reason for deviation.  The public law norm requiring adherence to published policies is intended to remove arbitrariness, which is a key concern of the prescribed by law requirement.  It was stated in Interush, albeit in the context of the proportionality requirement, that the procedures set out in the Manual are not so vague or uncertain as to fall foul of the law.[39]  It is true, as the Applicants say, that the Manual may be changed by the Commissioner, but such alteration in policies will again have to be published, for under public law the Commissioner is not entitled to justify a position contrary to published policy by relying on some secret or hidden policy: Deluxe Ascent Ltd, §18.

89.  Whilst the statute does not set out the duration for which the power to refuse consent may be exercised, the self-imposed policy for best endeavours to be made to obtain a restraint order or confiscation order as soon as practicable and the requirement that an LNC last no more than 6 months save in exceptional circumstances seem to us to go some way towards addressing the concern about the lack of a time limit.  A number of matters that may be considered by the SPI are listed in the Manual.  It should also be noted that the stipulated procedures provide for a division of functions such that the Head of JFIU is the only person authorised within the police to issue an LNC. It is for the investigating unit, headed by the SPI or the Formation Commander, to ensure that the relevant steps have been completed, otherwise the JFIU will issue a consent letter after the lapse of 6 months. 

90.  It is true that the LNCs in the present case lasted more than 6 months.  According to the police, there are exceptional circumstances due to the complexity of the case, the number of entities and transactions and the volume of documents involved.  The evidence is that there were suspected manipulative activities by the Applicants and other persons in relation to 10 different stocks over a period of some 26 months (September 2018 to November 2020); over 100 securities accounts and bank accounts were involved; over 10,000 pages of bank and trading records had been gathered since production orders were obtained in April 2021.  In any event, where the police have acted contrary to their own guidelines, it would prima facie be a ground for judicial review of their action.

91.  Whilst there is no mechanism for any appeal against refusal of consent, there is no dispute that the exercise of this power may in any given case be challenged by way of judicial review based on both common law grounds and fundamental rights under the Basic Law and the Bill of Rights including a proportionality assessment based on the particular case. The guidance afforded by the existing body of public law may be enhanced by the development of case law on the particular power in question: Mo Yuk Ping v HKSAR (2007) 10 HKCFAR 386, §62; Chee Fei Ming, §43.

92.  The Judge also accepted, following Interush, that the availability of judicial review of the police’s decision and civil action against the bank means that there is no infringement of the right of access to court under art. 35 of the Basic Law and the right to an independent and impartial tribunal under art. 10 of the Bill of Rights.[40]  The Applicants contend that judicial review is not a sufficient remedy and rely on, inter alia, Television Broadcasts Ltd v Communications Authority [2016] 2 HKLRD 41 at §§155-167, but it seems to us that the system under consideration there was far removed from the facts of the present case.  That case was concerned with the power of the Communications Authority to impose a financial penalty on a broadcaster for breach of competition law rules in the Broadcasting Ordinance, subject to an appeal by way of petition to the Chief Executive in Council, and it was in that context that the court held that judicial review was not adequate to cure the lack of determination by an independent and impartial tribunal.  Here, we are not concerned with any adjudicatory or penal power, but a discretion vested in law enforcement agencies to give consent to banks which immunise them against liability for dealing with property suspected to be proceeds of crime.  As the judge held, during the investigative stage, a higher standard of review than that permitted in judicial review would not be appropriate.[41]

93.  Furthermore, there are provisions in section 29(4)-(6) of OSCO that confer on the court a power to award compensation, as follows:

“ (4) Without prejudice to subsection (1), where—

(a) a disclosure is made by any person in accordance with section 25A(2) in relation to any property;

(b) in consequence of the disclosure and for the purposes of an investigation or prosecution in respect of a specified offence or offences any act is done or omitted to be done in relation to that property; and

(c) no proceedings are instituted against any person in respect of that offence or those offences or no order is made by the Court of First Instance under section 15 or 16 in relation to that property,

the Court of First Instance may, on application by a person who held the property, order compensation to be paid by the Government to the applicant if, having regard to all the circumstances, it considers it appropriate to make such an order.

(5) The Court of First Instance shall not order compensation to be paid under subsection (4) unless it is satisfied—

(a) that there has been some serious default on the part of any person concerned in the investigation or prosecution of the offence or offences concerned and that, but for that default, the act or omission referred to in subsection (4)(b) would not have occurred; and

(b) the applicant has, in consequence of the act or omission referred to in subsection (4)(b), suffered loss in relation to the property.

(6) The amount of compensation to be paid under this section shall be such as the Court of First Instance thinks just in all the circumstances of the case.”

94.  The judge did not take this into account in discussing the prescribed by law ground.  It is unclear whether that was because he thought that section 29 applies only in the context of restraint orders and charging orders.[42] Admittedly, compensation is not payable where proceedings for the offence in question have been instituted or where a restraint order or charging order has been obtained (as is the case here, since the Applicants were arrested[43] and a restraint order was granted).  Further, compensation is not available unless there has been serious default on the part of the authorities leading to the act or omission in question.  Despite these limitations in the compensation scheme, it is part of the statutory regime that needs to be considered together in a systemic challenge.

95.  Finally, the judge thought that there was a change since Interush in the Commissioner’s own understanding of his powers, and that this underlined the lack of adequate legal certainty for the wider public.[44] With respect, we do not see any substantive change in the Commissioner’s stance on the source, nature and extent of his powers, other than semantic differences in the descriptions of the mechanism.  In any event, the compliance with the prescribed by law requirement is assessed by the court on an objective basis.

96.  In our judgment, there is no relevant uncertainty or vagueness in section 25(1) which prohibits dealing with property in specified circumstances, gives rise to concerns on the part of third parties such as banks, and eventually leads them to take steps to prevent any dealing with the property.  There are remedies in private law for any infringement of property or contractual rights that may have occurred.  Although the discretion for giving or refusing consent under section 25A(2)(a) is conferred on the police without any specified fetters or parameters, there are sufficient constraints as discussed above to guard against arbitrary or capricious refusal, and sufficient signposts to give guidance for a citizen, with legal advice, to anticipate the scope of the discretion and the manner of its exercise.  It follows that in our view the statutory scheme does not fall foul of the prescribed by law requirement.

(4) The proportionality ground

97.  Interference with property rights, which are fundamental rights protected by art. 6 and 105 of the Basic Law, needs to be justified as proportionate.  To approach a proportionality challenge properly, it is important to see whether the challenge is mounted against the specific decisions in question, i.e. the operation of the system in relation to the applicant in the particular instance, or against the system generally.  To raise a systemic challenge on proportionality is to say that the disproportionality is inherent in the system itself. 

98.  In Interush, the applicants raised, inter alia, a systemic proportionality challenge against sections 25 and 25A of OSCO, seeking a declaration that those provisions are unconstitutional for being inconsistent with property rights under art. 6 and 105 of the Basic Law.[45]  That challenge was rejected.  Thus Cheung JA said at §6.50:

“ … this being a constitutional challenge, the standard of assessment is whether it is ‘manifestly without reasonable foundation’. Applying this standard, my view is that the measure is no more than necessary for the legitimate purpose and societal benefit of anti‑money laundering. The consent regime is part and parcel of the measures used to combat organised crime in money laundering. In my view, a reasonable balance has been struck between the societal benefits of the consent scheme and constitutionally protected rights of the individual. It cannot be said that the pursuit of the societal interest results in an unacceptably harsh burden on the individual.”

99.  G Lam J, having expressed broad agreement with the judgment of Cheung JA, said at §11.3:

“ [OSCO] contains nothing that prevents the authorities from exercising their powers in a way that common law principles and respect for the property rights protected by Articles 6 and 105 of the Basic Law may require, or impedes the courts from giving relief where there is a failure by the authorities, in any particular case. The applicants have in my view failed to demonstrate that the consent regime systemically mandates a result that is incompatible with the Basic Law such that the relevant statutory provisions should be declared unconstitutional.”

100.  Yuen JA agreed with the judgments of both Cheung JA and G Lam J.

101.  Under the fundamental doctrine of precedent, Interush is binding on the judge and also on this court unless we take the exceptional course of departing from it on the ground that it is plainly wrong: Solicitor (24/07) v Law Society of Hong Kong (2008) 11 HKCFAR 117, §45.  In light of this, according to their Form 86, the Applicants (rightly, in our view) do not contend in the Court of First Instance that the No Consent Regime disproportionately interferes with property rights, but only reserve the right to do so in the event the matter proceeds to a higher court.  What the Applicants do raise in the Form 86 is instead a “fact-specific challenge” contending that the LNCs in this case disproportionately interfere with their property rights.[46]  Despite this, “partly in light of the Commissioner’s change of stance”, the judge considered it open to the Applicants at the hearing to pursue a systemic proportionality challenge.[47]  His Lordship went on to conclude that, particularly by reference to the fact that the regime can operate without temporal limitation yet with only internal intermittent review of justification, itself apparently lacking any proportionality assessment the longer the period of operation continues, it fails the proportionality assessment.[48]

102.  The Applicants submit that Interush is distinguishable.  First, it is said that the Commissioner in this case accepted that the No Consent Regime is an “informal freezing regime”.  We do not see the significance of generic descriptions such as this, which seems to us no more than an acknowledgment of the effect of the combined operation of sections 25 and 25A, as explained above.  Leaving these labels aside, in refusing consent under section 25A(2)(a), the purpose of the police plainly is to prevent the dissipation of property reasonably suspected to be proceeds of crime.  In Interush, it was recognised that the relevant object was deterring criminal activity by restricting access to the proceeds of crime and that this was a legitimate societal aim (per Cheung JA at §6.39). Likewise, in the present case, as the judge stated:[49]

“ There is an obvious legitimate purpose and a rational connection to the legitimate purpose of deterring criminal activity by restricting access to the proceeds of crime.”

It is difficult to see how Interush can be distinguished on this basis.

103.  Further, the Applicants submit that the STRs in this case were procured by the police and not filed by the Banks on their own initiative.  This is not the case in relation to HSB (see §49 above).  In any event, even in relation to the other three Banks, it is difficult to see how this provides a basis for distinguishing Interush.  As accepted by the Applicants, the police are entitled to alert financial institutions to ongoing investigations and their obligations to make disclosure under section 25A(1). Whether or not to file an STR is a matter for the bank in question.  The nature and scope of the prohibition against dealing in section 25(1) and of the power to give consent under section 25A(2)(a) do not depend on the source of the bank’s suspicions which cause it to suspend operation of the account; they are the same whether the police first contacted the bank or vice versa. 

104.  In our view, Interush is binding authority in this court and below that sections 25 and 25A of OSCO and the practice of the JFIU in issuing LNCs as set out in the Manual are not systemically unconstitutional.  With respect, the judge ought not to have entertained the systemic challenge, especially when the Form 86 does not advance it in the Court of First Instance.

IX.  The respondents’ notice grounds

(1) Whether Interush plainly wrong

105.  In their respondents’ notice, the Applicants contend that Interush was clearly wrong (though in their skeleton argument it is only stated that they reserve the right to argue this on a further appeal). The point that has been briefly touched on is that there is a lack of safeguards (such as a temporal limit or a right to review) which is not specifically justified.  The decision of this court in Junior Police Officers’ Association of Hong Kong Police Force v Electoral Affairs Commission (No 2) [2020] 3 HKLRD 39 is prayed in aid.  That case is, however, a very different one: the concern there was that the electoral registers showing names and addresses of registered electors are open to public inspection without any power whatsoever to restrict inspection even where there is a real concern for the safety of an elector and those residing with him.  It was held that a higher standard of review than “manifestly without reasonable foundation” should be applied in examining the proportionality of the absence of a limited discretion for restricting public access, and that in imposing an absolute requirement for the information to be open to inspection without such limited discretion, the statute was disproportionate in its interference with fundamental rights.  As the court made clear, it was not laying down a principle of law that in each case the lack of an identifiable measure capable of ameliorating the interference with fundamental rights must itself be specifically justified as proportionate.[50] In the present case, as explained above, there are existing means of recourse available to a person whose property is “frozen” as a result of the operation of sections 25 and 25A.  On a systemic challenge the Applicants have to show that the system is “inevitably unlawful” and “incapable of being operated in a proportionate way” (see e.g. R (Bibi) v Secretary of State for the Home Department [2015] 1 WLR 5055, §§2 & 69).  This court held in Interush that the appropriate standard of review is that of “manifestly without reasonable foundation”,[51] and that the system was not inherently disproportionate.  We are not satisfied that that decision was plainly wrong.

(2) The procedural unfairness ground

106.  Under the procedural unfairness ground, the Applicants complain of (i) the lack of notice prior to or immediately after issuing an LNC, (ii) the lack of reasons given to the person affected for issuing an LNC, and (iii) the lack of a hearing or an opportunity to provide meaningful written representations.  They contend that, as a result, the Commissioner’s decision to impose and maintain the LNCs should be quashed for procedural unfairness.

107.  The judge did not accept this ground.  He considered that as a matter of general principle, there should be no requirement for disclosure of anything which is material in a pending prosecution, and that it would be contrary to public interest for the grounds of an officer’s suspicions to be disclosed while the investigation is in progress.  The requirement of notice is completely contrary to the statutory framework under OSCO as well as common sense.  For similar reasons there is no requirement for the Commissioner to give detailed reasons as to why an LNC has been issued.  The judge did not accept that there was any lack of opportunity for the Applicants to make representations, and considered that if the Applicants exercise their right to silence then they also pro tanto give up the opportunity to make relevant representations.  The judge found as a fact that the Applicants had not attempted to dispel any suspicions over the funds even in the judicial review proceedings.[52]

108.  In our view, the Applicants have failed to show the judge erred in these conclusions.  They submit that it was too wide to say that giving notice even after the fact would be contrary to the statutory framework.  But this does not assist them, because, as the judge found, the Applicants clearly understood that LNCs had been issued against the Accounts as soon as they received letters from BOCHK and BEA directing them to contact the police. The police’s reply to O Tse & Co stated that the Applicants were under investigation for money laundering and requested them to contact the police for further investigations.  It should also be noted that OSCO contains provisions that emphasise the need for confidentiality: see sections 25A(5) and 26(3).  Nor do we think there is any systemic flaw as regards representations as the Applicants submit.  There is nothing in the statute, or in the police’s policies that we have seen, to prevent the police from receiving oral or written representations as appropriate.  Accordingly, we also reject the procedural unfairness ground.

(3) The fair hearing ground

109.  Related to the procedural unfairness ground is the fair hearing ground.  As advanced in the Form 86, this attacks the No Consent Regime systemically.  It is said that the system is “incapable of operating fairly”, “inherently unfair”, and “incompatible” with art. 10 of the Bill of Rights.[53] The main point that is not already covered by the procedural unfairness ground is the contention that the power to withhold consent is not subject to any hearing before an independent and impartial tribunal in terms of art. 10.

110.  The judge considered that the point was already tested in Interush, which held that art. 10 is not engaged because of the judicial remedies available by way of judicial review of the police’s actions and the civil claim against the banks.  The same reason would suggest that if art. 10 is engaged, it is not infringed.  As to the adequacy of judicial review for purposes of compliance with art. 10, the judge considered himself bound by this court’s decision in Interush, but he also accepted the Commissioner’s submission that because of the nature of the investigation process, a more intensive review by the court than that available via judicial review would not be appropriate.[54]

111.  In Interush at §6.60, Cheung JA said “the access to court rights have not been engaged because of the judicial remedies available to the applicants by way of judicial review and civil claim against the banks”.  Further, given the analysis above as to how sections 25 and 25A operate, we doubt if a decision by an authorised officer to withhold consent under section 25A(2)(a) can be said to involve the “determination … of [a person’s] rights and obligations in a suit at law” within the meaning of art. 10.  It is the bank that refuses to follow the customer’s instructions for operating the account.  Whether it is entitled to do so is a matter that may be determined in a civil action between the bank and the customer.  The consent that is given or withheld by an authorised officer may influence the bank’s decision whether to release funds to a customer, but such consent does not seem to us to determine the customer’s rights or the bank’s obligations.

112.  In any event, there is access to the court by way of a civil action and an application for judicial review.  Although judicial review is different from a merits-based appeal, we consider, in agreement with the judge, that a more intensive review is not essential for compliance with art. 10 in the present context.  As the authorities make clear, what that provision requires is access to an independent and impartial tribunal, not necessarily by way of a complete re-hearing, but with “full jurisdiction to deal with the case as the nature of the decision requires”: Lam Siu Po v Commissioner of Police (2009) 12 HKCFAR 237, §§125-133.  This ground therefore also fails.

(4) Rights to private and family life and access to legal advice and to the court

113.  The Applicants submit that the judge should also have held, in the context of the proportionality ground, that rights to private and family life (under art. 14 of the Bill of Rights) and rights of access to legal advice and to the court (under art. 35 of the Basic Law and art. 10 of the Bill of Rights) are also engaged and should have taken them into account in considering the systemic proportionality of the No Consent Regime.

114.  The judge held that there was no basis for the Applicants to claim that the No Consent Regime would in a significant number of cases affect all or substantially all of a person’s realisable assets such that their private life would be affected.  The judge also noted that the Applicants had not adduced evidence of any hardship and had apparently found funds otherwise to live their lives and to engage legal representatives.  He therefore held that art. 14 of the Bill of Rights was not engaged.  It seems implicitly the judge’s view that rights of access to legal advice and to the court are also not engaged in this context.

115.  There is no real submission advanced by the Applicants against the Judge’s holding, which seems to us to be correct.

(5) The blanket freeze ground

116.  By this ground, the Applicants in essence complain that the LNCs extended to the entire account balances without any meaningful opportunity for them to make a case for the release of part of the funds.

117.  The judge rejected this complaint, observing that the Applicants had not adduced any evidence of actual hardship and had chosen not to seek to dispel suspicions that the funds in the Accounts are the proceeds of crime.[55]

118.  In our view, given that the LNCs have been superseded by the Restraint Order, this fact-specific challenge is wholly academic and of no further interest and should not be entertained again in this court.

X.  Conclusion and disposition

119.  For the above reasons we find ourselves in respectful disagreement with the judge in relation to the grounds he upheld, and would set aside the declaration and order of costs made in court below.  The respondents’ notice which seeks to augment the declaration is dismissed.

120.  Leave to apply for judicial review should be granted in respect of the ultra vires ground, the improper purpose ground and the prescribed by law ground, which were upheld by the judge, but in our judgment the substantive application fails.  Leave should be refused for the proportionality ground since a systemic challenge on that ground is precluded by Interush and a fact-specific challenge is academic.  In relation to the grounds rejected by the judge, his Lordship did not specify whether leave to apply for judicial review was refused, or leave was granted but they were rejected on the substantive application.[56]  This is material to the orders that can be made on appeal.[57]  In the circumstances of this case, we proceed on the basis that the judge did not grant leave to apply for judicial review in respect of those grounds.  Accordingly, the order we make in substitution is that leave to apply for judicial review on Grounds 2 and 3 as set out in the Form 86 be granted but that the application for judicial review be dismissed.

121.  There will be an order nisi that the Applicants do pay the Commissioner the costs here and below, with a certificate for two counsel.