XCHRX SECRETARY FOR JUSTICE v. CHAN YIN BING AND OTHERS

HCMP4292/4294/98
HCMP4295/4296/98
HCMP4297/4298/98
HCMP4303/4305/98
HCMP4306/4307/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. There are ten matters currently before me. On 25 August 1998 after an ex-parte hearing under Section 15(4)(b) of the Organise and Serious Crime Ordinance, Restraint Orders under section 15(1) of the Ordinance were made against the ten respondents by Suffiad J. The matter now comes before me under Order 117, Rule 52 of the Rules of the High Court for the Government to show cause in an inter-parties hearing that they should continue, and if they are to continue, on what terms? The respondents oppose their continuance.

2. The relevant parts of Sections 14 and 15 of the Ordinance provide:

"15(1) The High Court may by order (referred to in this Ordinance as a 'restraint Order') prohibit any person from dealing with any realisable property, subject to such conditions and exceptions as may be specified in the Order.

(2) A restraint order may apply -

(a) to all realisable property held by a specified person, whether the property is described in the order or not; and

(b) to realisable property held by a specified person being property transferred to him after the making of the order.

(3) This section shall not have effect in relation to any property for the time being subject to a charge under Section 16.

(4) A restraint order -

(a) may be made only on an application by the prosecutor;

(b) may be made on an ex-parte application to a judge in chambers; and

(c) shall provide for notice to be given to the persons affected by the order.

(5) A restraint order -

(a) may be discharged or varied in relation to any property; and

(b) shall be discharged on the conclusion of the proceeding or application concerned.

(6) An application for the discharge or variation of a restraint order may be made by any person affected by it.

14(2), Those powers [that is the powers conferred on the High Court by Sections 15(1) and 16(1)] are also exercisable where the High Court is satisfied -

(a) that whether by the laying of an information or otherwise, a person is to be charged with a specified offence; and

(b) that there is reasonable cause to believe that he has benefited from that specified offence."

3. Under Section 14(2) of the Ordinance the High Court has power to make a restraint order where the judge is satisfied of two things: firstly, that a person is to be charged with a specified offence and; secondly, there is reasonable cause to believe that he has benefited from that specified offence. No criminal proceedings have yet been instituted against any of the respondents for a specified offence. Section 2(1), and the First and Second Schedules to the Ordinance, set out what are specified offences for the purposes of the Ordinance.

4. Certain statutory requirements are attached to the form of the application. Order 117, Rule 4(2)(b)(ii) of the Rules of the High Court requires that an application shall be supported by affidavit stating that a person is to be charged with a specified offence.

5. Where the proceedings have not been instituted, Order 117 Rule 4(2)(d) requires that the affidavit must verify that the Secretary for Justice is to have conduct of the proposed proceedings. Order 117, Rule 4(2)(e) requires that it must indicate when it is in intended that they are to be instituted. Order 117, Rule 4(4) provides that the affidavit may contain statements of information or belief, with the sources or grounds of the information.

6. The affidavits filed in support of the Government's applications, all made by Woman Detective Senior Inspector LEE Shu-wai, say that the respondents are to be charged with 'money laundering.' There is no such offence by that name in Hong Kong's law. However, Section 25 of the Ordinance creates an offence which strikes at activities that may be described as money laundering. It provides:

"25(1) Subject to Section 25(A) [which is not applicable] 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 persons proceeds of an indictable offence, he deals with that property.

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

(a) he intended to disclose to an authorised officer such knowledge, suspicion or matter as is mentioned in Section 25(A)(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 25(A)(2).

(3) A person who commits an offence under subsection (1) is liable -

(a) on conviction upon indictment to a fine of $5,000,000 and to imprisonment for 14 years; or

(b) on summary conviction to a fine of $500,000 and to imprisonment for 3 years."

(4) In this section and Section 25A, references to an indictable offence include a reference to conduct which would constitute an indictable offence if it had occurred in Hong Kong."

7. The Section 25 offence is a specified offence listed in the First Schedule as item 16.

8. Mr John Reading, the Government's counsel, confirms that if the respondents are to be charged it will be with a Section 25 offence.

9. It is the respondents' counsels' submission that the Government has no admissible evidence with which to charge each respondent for that offence, and that therefore the statement in each of Woman Detective Senior Inspector LEE's affidavits that the respondent is to be charged with money laundering is, at the highest, deliberately untrue, or at the least, a statement of a conditional intention that there will be a charge once admissible evidence is available. It is argued that this is not sufficient jurisdiction for the court to make the order. There must be a settled intention to commence criminal proceedings in order to satisfy the Section 14(2) requirement. A conditional intention, depending on the strength of further evidence to be obtained, does not suffice.

10. The state of the evidence against each respondent, as outlined in Woman Detective Senior Inspector LEE's four affidavits sworn in these proceedings, is very unusual. In each respondent's case it may be summarised as follows.

11. Towards the end of July 1998, the Mainland authorities announced the arrest of 32 persons, 18 of whom are Hong Kong residents. In it they were alleged to be responsible for a number of cross-border crimes. The ringleader of the gang was said to be a Hong Kong man called CHEUNG Sze-keung. The investigation in the mainland, which was conducted by the Guangdong Public Security Bureau, showed that five of the 18 Hong Kong residents were involved in two kidnapping cases that occurred in Hong Kong.

12. The first was said to have happened in the evening of 23 May 1996. The alleged victim was travelling in his limousine, driven by his driver, when he was intercepted and kidnapped not far away from his home in Deep Water Bay Road. He was taken to Kwu Tung, Sheung Shui and detained there. His slightly damaged car was found abandoned at a roadside in Shouson Hill Road. He was released a few days later, after a ransom of HK$1,038 million was paid. The victim nor his family members made no report of a kidnap to the Hong Kong Police Force.

13. The second was said to happened in the evening of 29 September 1997. The alleged victim was kidnapped at Beach Road, Repulse Bay, when he was on his way home in his car. He was subsequently taken to premises in Yuen Long, and detained there. He was released a few days later after a ransom of $600 million was paid by his family. Again, neither the victim nor his family members made a report of the kidnapping to the Hong Kong Police Force.

14. The announcement went on to say that, once the Guangdong Public Security Bureau had completed its enquiries, the case would be heard in the Intermediate People's Law Courts. I believe that the trial is now being heard in Guangdong.

15. In a subsequent affidavit filed in these proceedings, Woman Detective Senior Inspector LEE gave the name of the alleged victims and the name of the persons who had allegedly paid the ransoms to secure their release. She had obtained this information from the Guangdong Public Security Bureau.

16. As I have said, neither victim made a crime report to the Hong Kong Police Force. I am informed that they have refused to assist in any investigation. Neither have other persons who could be material witnesses - such as the driver, the recipients of the demands for ransom, and the payers of the ransoms - co-operated with the Hong Kong Police Force.

17. In her subsequent affidavit, Woman Detective Senior Inspector LEE said that officers from the Hong Kong Police Force have been to the Mainland and interviewed four of the alleged perpetrators of the offences and have oral admissions from them of their involvement and oral statements implicating others.

18. Investigations in Hong Kong have shown that substantial sums of money, sufficient to pay the ransoms allegedly demanded, were withdrawn from bank accounts in the effective control of the alleged recipients of the demands around the dates given by the Guangdong Public Security Bureau.

19. Each respondent is in some way related to one of the alleged perpetrators of the kidnappings. And each respondent around the time of the given dates of one or other of the alleged kidnappings came into possession of substantial cash assets which their known employment and situation in life would be inadequate to provide.

20. Mr Reading accepts that on the state of the available evidence none of the respondents could currently be charged with a Section 25 offence. His reply to the respondents' counsels' arguments is:

21. Firstly, that the proceedings are not confiscation proceedings, and accordingly do not require proof of any of the elements required to satisfy a court that a confiscational order should be made.

22. Secondly, as the proceedings are civil in nature, they do not require proof of the elements of the specified offence - the offence under Section 25 of the Ordinance. The standard to which I must be satisfied of the elements required to justify continuing the present orders is the civil standard of proof on the balance of probabilities. This, he says, is provided for in Section 8(8B) of the Ordinance, which reads:

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

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

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

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

shall be on the balance of probabilities."

23. Thirdly, the suggestion that before making the ex parte restraint orders on 25 August 1998, Suffiad J should have examined the state of the evidence in respect of the specified offence in order to be satisfied that the prosecution was in a position to prove that offence is flawed. Provided he was satisfied as to the two elements - namely that each respondent is to be charged with a Section 25 offence and that there is reasonable cause to believe that he or she benefited from that offence - and there was some evidence, hearsay or otherwise, implicating each in the commission of a Section 25 offence, there was no necessity for him to go further and satisfy himself that the prosecution was in the position to prove the offence. If the prosecution was required to have sufficient evidence to prove the specified offence before a restraint order could have been made, then Section 14(2) of the Ordinance would be superfluous.

24. Fourthly, it has always been the Government's position that the prosecution had, on 25 August, and has now, an unconditional intention to charge the respondents with a Section 25 offence once admissible evidence is available to justify this. If it transpires that the ongoing investigation fails to provide the additional evidence in admissible form sufficient to justify charging the respondents, then that intention must necessarily change, and the Government will apply to discharge any restraint orders then subsisting. But for the present, the investigation is continuing. As stated in Woman Detective Senior Inspector LEE's affidavits, the Government expects the investigation to end by December.

25. I cannot agree with Mr Reading's argument. I accept that the standard of proof for the requirement of a reasonable belief that the respondents have benefited from a specified offence is a balance of probabilities. Section 8(8B) provides so. But Section 8(8B) does not say that is the appropriate standard for proof of the requirement that the respondent is to be charged. The phrase used in Section 14(2)(a) "...is to be charged" can only mean a settled intention existing at the time the statement is made, coupled with the ability to do what the speaker says is to be done.

26. Here the Government is not in a position to charge any of the respondents. That is because they are not in the position to prove that anyone was kidnapped, that someone paid ridiculously large sums of money to secure their release, and that the sources of the funds in the respondents' possession are the ransom moneys, or part of them.

27. From Woman Detective Senior Inspector LEE's affidavits, I have no reason to doubt that the Hong Kong Police Force are investigating a report received from the Guangdong Public Security Bureau and have reason to suspect that the money in the respondents' hands represents the proceeds of a crime connected with that report. I have no doubt that once evidence in an admissible form is available to them, they will charge the respondents with a Section 25 offence. But that is a conditional intention and I am with the respondents' counsel when they say that in order to satisfy Section 14(2)(a)'s requirements, there must be a settled intention to commence criminal proceedings. A conditional intention depending on the strength of further evidence to be obtained cannot suffice.

28. The restraint orders against each respondent will lapse with immediate effect.

29. That is sufficient to dispose of these applications. But I would like to comment on two submissions made by the respondents' counsel.

30. The first was that these proceedings are analogous to Mareva injunction proceedings. It is true that they share many points of similarity, but they are not analogous. These proceedings are statutory. They are governed by their own rule of the High Court - Order 117. No undertaking is required from the Secretary for Justice to indemnify the respondent against damages sustained by the restraint order (see Order 117, Rule 5(1)). I am satisfied that the provisions of the Chief Justice's Practice Direction No. 12.4, dated 27 January 1998, do not apply to these proceedings.

31. The second was Mr Hemmings' submission that parts of Woman Detective Senior Inspector LEE's statement should be struck out, as the matters she referred to had to be provable by the sources indicated by her in her affidavits. Mr Hemmings relied on Peter Gibson J's judgment in Savings and Investment Bank Limited v Gasco Investments (Netherlands) BV, [1984], 1 WLR, 271, as authority for this proposition. The authority of Gasco has been doubted in Deutsche Ruckversicherung AG v Walbrook Insurance Co Limited & Others, [1994], 4 All ER, 181, where Phillips J said, at page 191,

"I agree with Peter Gibson J (in Gasco) that the purpose of Rule 5(2) is to enable a deponent to put before the court, frequently in circumstances of great urgency, facts which he is not able of his own knowledge to prove. Having regard to that purpose I cannot, with great respect, follow the judge in concluding that, at the interlocutory stage, a deponent must identify as the source of his information or belief an original source of evidence which will be admissible at the trial. The object of the rule militates against placing this restriction upon the natural meaning of its words.

In a situation of urgency a plaintiff may well not have time to identify or trace evidence which will be admissible at the trial. If he has learned of facts via an intermediate source which there is good reason to believe will, itself, have had access to primary sources of information, I can see no good reason for precluding the plaintiff from relying upon that intermediate source as a ground for seeking interlocutory relief. Perhaps the most important form of interlocutory relief is the injunction. It seems to me that the power of the court to grant an interlocutory injunction is one that should be flexible and not fettered by the technical rules of admissibility of evidence that apply at a trial."

32. As Order 117, Rule 4(4), provides that the affidavit may contain statements of information or belief with the sources or grounds of the information, if I had found it necessary to consider the position, I would have followed Phillips J's line of reasoning.