SECRETARY FOR JUSTICE v. HU WANG LI CHIA

HCMP 928/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 928 OF 2016

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D E C I S I O N

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Introduction

1.  This is an application by the Secretary for Justice pursuant to section 8(1)(a)(ii)(B) of the Organized and Serious Crimes Ordinance, Cap 455, (OSCO), for a confiscation order against the respondent who is an absconder.

Background facts

2.  The background facts giving rise to the application concern a case involving the laundering of the proceeds of an email scam in which the Hongkong and Shanghai Banking Corporation, (HSBC), in Panama received fraudulent remittance instructions by facsimile transmission purportedly sent by a client in Venezuela on 24 March and 5 April 2011.  In response to the instructions, HSBC Panama transferred two sums of US$196,970 and US$126,970 from the client’s account to an account with HSBC in Hong Kong in the name of Top Team Group Limited on 25 March and 6 April 2011 respectively without verification.

3.  It was later discovered that the client did not give such remittance instructions and the signatures on the related remittance application forms were not genuine.  A formal complaint was made by the client with the bank and a report was made to the police in Panama.

4.  An investigation revealed that the respondent was the sole signatory of the company account in Hong Kong to which the funds had been transferred and that she was the sole shareholder and director of the company that held the account.  It was also revealed that the amount of US$46,222 was subsequently remitted on 13 April 2011 from the company account to a personal account held by the respondent with HSBC in Hong Kong.

5.  Upon being informed of these transactions, an officer of the HSBC in Hong Kong on 26 April 2011 contacted the account holder of the company account who claimed that the remittances were payments made to the company by a buyer in Panama for goods purchased.  The account holder was requested to provide documentary evidence of the transactions but refused to do so.

6.  Police inquiries in Hong Kong have revealed that the respondent is a Brazilian with an address in Brazil.  An examination of the respondent’s Hong Kong immigration record reveals that she had come to Hong Kong once on 20 December 2010 and left on 24 December 2010.  It was during this period that the respondent opened the bank accounts for the company and herself.  The company was incorporated in the Seychelles on 19 November 2010 where its registered agent is also located.  The company has no business or company registry records in Hong Kong.

7.  On 4 February 2014, a warrant of arrest was issued against the respondent for an offence of dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) of OSCO.

Application for a confiscation order

8.  Pursuant to Order 117, rule 3A of the High Court Rules, Cap 4A, the Secretary for Justice has filed an ex parte originating summons for an application for a confiscation order under section 8 of OSCO. 

9.  In this decision, references to statutory provisions will be in relation to OSCO unless specified otherwise. 

10.  The procedure and conditions for an application of a confiscation order under OSCO are set out in SJ v Fang Jinan, HCMP 599/2016, which applied the judgments of SJ v Lee Cheung-wah, HCMP 113/2009 and SJ v Lee Chau-ping and anor [2001] 1 HKLRD 49.  The relevant passages read as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Determination of the confiscation order

11.  I have been furnished with a section 10 statement which addresses matters relevant to the application in some detail. It is provided under section 10(7)(b) that in the case of the defendant who has absconded the court can receive such a statement as if it had been served on the defendant.

12.  I am satisfied that the requisite conditions have been met, and in particular, I make the following findings:

(1) Proceedings of a specified offence have been instituted against the respondent but have not yet been concluded because she has absconded.  In that an arrest warrant was issued against the respondent on 4 February 2014 for the offence of dealing with property known or believed to represent the proceeds of an indictable offence and that it remains in force. 

(2) The respondent has absconded in that she left Hong Kong on 24 December 2010 having opened the two bank accounts which were subsequently used for receiving the proceeds of an indictable offence and has not returned to Hong Kong. 

(3) Six months have elapsed since the respondent absconded, namely leaving Hong Kong on 24 December 2010 and not returning.

(4) The respondent is a Brazilian who returned to Brazil upon leaving Hong Kong.  Reasonable steps have been taken by the authorities to secure the return of the respondent but without success, and adequate notice of these proceedings has been given, in that there has been attempted service of relevant papers to the respondent at her last known address and public notice of the proceedings in a newspaper.  There has been no response from the respondent.

(5) On the balance of probabilities, the respondent could have been convicted in respect of the subject offence of the present application.

(6) The respondent benefited from the specified offence, namely she received a total sum of about US$323,940 which was remitted to the company account and received by her via her personal account.  Such sum represents the proceeds of the offence which satisfies the minimum requirement of being in excess of HK$100,000 as required under section 8(4)(b) and the value of the respondent’s realisable property is the last credit balance of the two accounts, namely US$30,460.85 and US$77,097.25.

The amount of the order

13.  The amount to be recovered in the confiscation order is the value of the defendant’s proceeds of the specified offence: section 11(1).  As provided under section 2(6)(a), a person’s proceeds of an offence are: (i) any payments or other rewards received by him at any time in connection with the commission of that offence; (ii) any property derived or realised, directly or indirectly, by him from any of the payments or other rewards; and (iii) any pecuniary advantage obtained in connection with the commission of that offence.

14.  Where the value of the realisable property is less than the value of a defendant’s proceeds, the amount of the confiscation order should be the amount appearing to the court to be realised: section 11(3). 

15.  Accordingly, in the present case, the value of the respondent’s realisable property is reflected by the last credit balance of the two bank accounts, namely US$107,558.10.  The amount of the confiscation order in the present case is for such sum, subject to any bank charges or interest.

16.  For the foregoing reasons, I make an order that the credit balance in the HSBC bank accounts in the name of the company and the respondent be confiscated and be paid to the Registrar of the High Court. 

The interest of a third party

17.  In the course of oral submissions, it was raised with Ms Denise Chan, counsel for the applicant, what provision is made by law or otherwise, to return the property, the subject of the confiscation order, to a third party who may have a legitimate claim over it, such as a victim or someone who has suffered loss as a result of the specified offence.

18.  In the present case, I am informed that the account holder whose account was the subject of the email scam was reimbursed for the loss that she had suffered by the bank, namely, HSBC Panama.  However, from my understanding of the case, the deception was carried out on the bank and as a result it suffered loss. 

19.  It raises the question what happens to property that has been recovered that can be readily identifiable as legitimately belonging to a victim of the offence.  One would naturally expect that the property recovered should be returned to the person who has suffered the loss of it.  It appears that may not be the case.

20.  Under section 8(6), once the court determines that the person’s proceeds of the specified offence fulfil the terms of subsection (4), it then determines the amount to be recovered in accordance with section 11. 

21.  The amount to be recovered under section 11(1) is the amount assessed by the court to have been the value of the defendant’s proceeds.  However, in section 11(3):

“If the court is satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount the court assesses to be the value of the defendant’s proceed for the purpose of sub-s.(1), the amount to be recovered in the defendant’s case under the confiscation order shall be:

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

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

22.  Section 8(7) reads:

“The court shall then, in respect of the offence or offences concerned, order the person to pay:

(a) that amount; or

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

23.  The orders referred to in section 8(7)(b), include a fine, compensation or restitution. 

24.  Once all the preconditions are satisfied the confiscation order is mandatory.  In HKSAR v Lung Wai Hung [1999] 1 HKLRD 598,the Court of Appeal at 602H to 603B upon its examination of sections 11(3) and 8(7) held that:

“From the combination of these provisions it can be seen that it is in the nature of the legislation that the provisions are mandatory, once the necessary requirements have been established for the making of a confiscation order.”

25.  I am informed by Ms Chan that prior to a restraint order application, it is the standing practice of the law enforcement agency to write to an identified victim to assess whether any civil proceedings would be instituted by him or her for recovery of his or her loss.  An identified victim would be reminded that if no civil proceedings are initiated in respect of the loss, the Secretary for Justice would apply for a confiscation order and the realisable property confiscated would not be shared with the victim.  This seems to follow the observations of the Court of Appeal in Lung Wai Hung at 606 where it was suggested that this practice should be employed given the absence of discretion in making an order for confiscation. 

26.  Under OSCO, provision is made for the restraint or charge of property in order to preserve it for purposes of satisfying a confiscation order, if and when it is made. 

27.  In respect of restraint order proceedings, section 15(6) provides that any affected person, including a victim, may apply for a variation of a restraint order, and the court by virtue of section 15(5) may vary a restraint order in relation to any property. 

28.  Ms Chan submits that it is then that a victim can make his or her claim for all or some of the property that confiscation will be eventually sought once the requirements and conditions have been satisfied.

29.  In respect of confiscation order proceedings, there are two sets of circumstances that an application may be made.  One is in relation to proceedings before the Court of First Instance or the District Court where a person is to be sentenced having been convicted of a specified offence (section 8(1)(a)(i) and (b)).  This will be an application before the trial court.  The other is in relation to proceedings for a specified offence that have been instituted against the person but have not been concluded because the person has died or absconded (section 8(1)(a)(ii) and (b)).  This will be a separate application in accordance with section 8.

30.  In respect of the former situation, the trial court must follow the procedure and requirements as specified in section 8(3)(a) which reads:

“(a) where subsection (1)(a)(i) is applicable-

(i) first determine, if the prosecution so requests, whether the specified offence or any of the specified offences of which the person stands convicted is an organized crime;

(ii) then, or where no request has been made under subparagraph (i), first-

(A) impose on the person such period of imprisonment or detention (if any) as is appropriate in respect of the offence or, as the case may be, the offences concerned;

(B) make such order or orders (other than a confiscation order) in relation to sentence as is appropriate in respect of the offence or, as the case may be, the offences concerned, and such order or orders may be or include any order-

(I) imposing any fine on the person;

(II) involving any payment by the person; or

(III) under section 38F or 56 of the Dangerous Drugs Ordinance (Cap 134), or under section 72, 84A, 102 or 103 of the Criminal Procedure Ordinance (Cap 221);”

31.  By virtue of section 8(3)(B)(II), the trial court when sentencing may include an order involving any payment by the person, such as a compensation order under section 73 or a restitution order under section 84 of the Criminal Procedure Ordinance, Cap 221.  But these provisions apply upon the conviction of a person.

32.  In respect of the latter situation, the court is required to make a determination, on a balance of probabilities, whether the person “could have been convicted” of the specified offence.  In this situation, the court must follow the procedure and requirements, in the case where the person has died, section 8(3)(b), and in the case where the person has absconded, section 8(3)(c) and (3A).

33.  As noted by section 8(7), it further provides that the court, having determined the proceeds of the offence or the amount to be recovered in accordance with section 11, shall order the person to pay (a) that amount; or (b) such proportion of that amount as it thinks fit after taking into account any order or orders provided for or referred to in subsection (3)(a)(ii)(B)(I), (II) or (III) which has or have been made in respect of the person.  This therefore provides for any sum that has been the subject of an order by the court, such as a compensation order, to be taken into account if the court thinks fit.

34.  There is a lacuna in the provisions in the latter situation because the order cannot be varied to allow for any order of compensation or restitution, as the court in that instance, is not a trial court where the person “has been convicted” but for the purpose of the confiscation order makes a determination as required on the basis that the person “could have been convicted” of the offence concerned.  In such a case, section 8(3)(a) does not apply and it would appear that the court is obliged, under section 8(7)(a), as section 8(7)(b) would not apply, to make an order for that amount representing the recoverable amount of the person’s proceeds of the specified offence as determined in accordance with section 11 (section 8(6)).  Also the court cannot make orders of compensation or restitution under the Criminal Procedure Ordinance because they can only be made when the person “has been convicted” of the relevant offence as opposed to “could have been convicted”. 

35.  The issue is more vexed in relation to the provisions which are not conviction based, such as, sections 38F and 56 of the Dangerous Drugs Ordinance, Cap 134, and sections 102 and 103 of the Criminal Procedure Ordinance, and whether by separate application at the same time they could be entertained.  I make no determination on this issue. 

36.  I note however in the present case that in accordance with the practice the police informed HSBC Panama of the restraint proceedings and that if they took no civil action to recover the funds in question, a confiscation order would be applied for and upon successful application would be confiscated without any payment to the victim.  There followed a series of reminders with HSBC Panama as to its position but with no response. 

37.  HSBC Hong Kong eventually advised that it had not received any reply from HSBC Panama and suggested that the normal procedures under Hong Kong law be followed to confiscate the funds in question.