R. v. Chan Suen Hay

Case No. 83 of 1994

IN THE DISTRICT COURT OF HONG KONG
(Miscellaneous Proceedings)

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RULING

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1. This defendant appeared before me on the 15th. February, 1995 for sentence. He had pleaded guilty to two offences of obtaining a pecuniary advantage by means of a deception and one of furnishing false information, which offences had been committed in October, 1988. On that occasion the Crown applied for me to make a disqualification order under section 168E of the Companies Ord. Cap. 32. This section became effective law as from the 1st. July, 1994. It provides as follows:

"(1) The Court may make a disqualification order against a person where he is convicted of an indictable offence(whether or indictment or summarily):-

(a) in connection with the promotion, formation, management or liquidation of a company; or

(b) in connection with the receivership or management of a company's property

or any other indictable offence his conviction for which necessarily involves a finding that he acted fraudulently or dishonestly.

(2) In subsection (1) "the court" means the High Court or the court by or before which the person is convicted of the offence.

2. The effect of a disqualification order, in summary, is to prohibit a person, without leave of the court, to be a director, liquidator or receiver of a company or to be connected or take part in any way in the promotion, formation or arrangement of a company for a specified period: see section 168D. Under section 168E (3) the maximum period for which a District Court judge may impose such an order is 10 years.

3. The defendant had been convicted by me on the 25th. January, 1995. The offences, which undoubtedly involved a finding of fraud or dishonesty, had been committed nearly six years before the provisions of section 168E came into effect. There had been no corresponding or equivalent discretionary powers vested in the courts at the time the offences were committed.

4. The Crown relied on section 168T which provides as follows:

"168T. Transitional

(1) Sections 168E and 168G do not apply in relation to anything done before this Part comes into operation by a person in his capacity as liquidator of a company or as receiver or manager of a company's property.

(2) Subject to subsection (1), sections 168E and 168G apply in a case where a person is convicted of an offence, referred to in the relevant section, which he committed (and in the case of a continuing offence has ceased to commit) before this Part comes into operation, but in such a case a disqualification order under the relevant section shall not be made for a period in excess of 5 years."

5. At first blush section 168T would appear to be in conflict with Article 12(1) of the HK BORO which reads as follows:-

Article 12

No retrospective criminal offences or penalties

(1) No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence, under Hong Kong or international law, at the time it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time when the criminal offence was committed. If, subsequent to the commission of the offence, provision is made by law for the imposition of a lighter penalty, the offender shall benefit thereby.

6. The question involved here is simply put: is a disqualification order imposed under section 168E a "penalty" within the meaning of Article 12(1 )? If so then section 168T is in conflict with Article 12(1) and, so, of no effect. If not, then section 168T is good law. Easy though the question may be to put, however, the answer is somewhat knottier since both the Crown and the defence put forward powerful counter arguments backed up by authority. The point is an important one since, as Mr. Casewell for the Crown agreed, this is a retrospective provision and there is nothing to stop anyone who has been convicted in the past of an qualifying offence being made the subject of such an order, even though the offence may have been committed some decades ago.

7. This is undoubtedly a matter of serious public concern. I will summarise the counter arguments as succinctly as I can before giving my ruling.

The Crown's case

8. The Crown contends that Article 12(1) is directed only to criminal sanctions which may be imposed in sentencing a person convicted of a criminal offence. It does not extend to all punitive consequences of a conviction. Such consequences may also be of a civil or administrative nature. The disqualification, it is submitted, is a possible consequence of the conviction, which may be partly punitive in nature, but it is not a criminal sanction.

9. Authority for this proposition can be found, indirectly, in R. v. Wan Kit-Man a decision of Hooper J. The point concerned Article 11(6) of the BORO which reads:

"No one shall be liable to be tried or punished again for an offence for which he has already been finally convicted or acquitted in accordance with the law and penal procedure of Hong Kong".

10. Although the word "penalty" is not used in Article 11(6) it is quite clear, in my view, that the word "punished" is referring to sanctions of a criminal and penal nature. The issue, inter alia, was whether the automatic disqualification of a motorist by virtue of either the accumulation of excess penalty points over a period of time or such matters as conviction for drink driving offences operated as a criminal punishment and, hence, to a double punishment.

11. His Lordship conducted an careful review of a number of Canadian authorities on this very point. Such authorities have always been treated by the courts of Hong Kong as of great assistance. I trust I shall not be considered indolent for not repeating the review of the learned judge for the gist of it can be shortly stated.

12. Section 11(h) of the Canadian Charter is in very similar terms to our Article 11(6). Likewise, there exists in Canada very similar provisions for the disqualification of motorists from holding or obtaining a driving licence where they have accumulated penalty points over a period of time. There also exists provision for the automatic disqualification from holding a driving licence of persons who infringe the drink/driving laws. The Canadian authorities have held that such legislation was concerned with matters of road safety and the local licensing authorities have it within their power to impose such disqualifications for persons who have demonstrated their unfitness to be on the road. Such disqualification does not constitute "punishment" within the meaning of section 11 (h) but is a civil disability arising out a conviction for a criminal offence.

McFadyen J. in Re Bulmer v. Solicitor-General of Alberta said:

"It is not an additional penalty imposed for a violation of the criminal law".

Mr. Justice Hooper said that if the principles in the Canadian cases were to be followed in Hong Kong then a disqualification should not be considered as a punishment. He followed the authorities saying:

"In my judgement disqualification is not a punishment but a civil consequence of an offence."

Of particular importance to the Crown was the following extract from the judgment in Bulmer;

"Where the real object of the legislation is for the protection of the public by a scheme of regulating the future conduct of individuals who have committed past infractions, the proceedings do not come within the protection of section 11 although the effect may be punitive".

13. The Crown say that the disqualification order sought here is overwhelmingly for the protection of the public by regulating the future conduct of persons with a track record of fraud and dishonesty in so far as there connection with companies is concerned. It is submitted that there is no difference in principle between disqualifying a man from driving, on the one hand, and disqualifying a man from being a director of a company on the other.

14. Mr. Casewell also relied on the judgment of Bokhary J.A. in The Queen and KO Chi-yuen which concerned the making of a confiscation order under section 3(6) of the Drug Trafficking (Recovery of Proceeds) Ordinance which deals with persons who have already been convicted and sentenced in respect of drug trafficking offences. Section 4 sets out certain rebuttable assumptions which the court may make in determining if the defendant has benefited from the proceeds of drug trafficking. The argument was that those assumptions were in conflict with Article 11(1) of the BORO which provides that everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty. His Lordship, having identified the question as to whether Article 11(1) extended to confiscation proceedings such as these said:

"What we have here are assumptions designed to make convicted and sentenced drug traffickers disgorge their ill-gotten gains. When a prison term in default is fixed, that is not to punish him for benefiting from drug trafficking. It is to enforce the court's order for payment. A person against whom a confiscation order is sought is not charged with benefiting from drug trafficking. There is no such offence known to the law.

Article 11(1) does not extend to confiscation proceedings such as these."

15. What Mr. Casewell submits His Lordship's remarks mean is that because Article 11(1) does not protect a confiscation order then a confiscation order is not a criminal sanction. It must, therefore, be a civil sanction. He extrapolates that if Article 11(1) only embraces criminal sanctions then so must Article 12(1) and, further, that if a confiscation order is a civil sanction then so must be a disqualification order.

16. Finally, Mr. Casewell prays in aid the scheme of the Companies Ordinance. Section 168 is in Part IV of the Ordinance which deals with the management and administration of Companies. As he rightly points out there are various ways in which a person may be made the subject of a disqualification order. An application by originating summons being one and upon conviction by the convicting court being only one other. The scheme, he submits, is essentially civil in its structure and application. This, he submits, further demonstrates that disqualification is a civil disability rather than a criminal penalty.

The Defence Case

17. Mr. Tse points out that none of the cases relied on by the Crown in any way touch directly on the point in issue here, i.e. does Article 12(1) prohibit the imposition of a retrospective penalty flowing from a criminal offence committed before the penalty was made into law. All of the cases cited by the Crown deal with an automatic disqualification imposed not by the courts but as a result of statutory provisions automatically disqualifying a person given a certain course of conduct by him.

18. In addition to these automatic powers the courts have the right to impose periods of disqualification in respect of specific offences, even for careless driving, which are quite separate from and independent of the automatic powers. There is not one case which holds that the imposition of a discretionary disqualification to be a civil consequence rather than a penal sanction.

19. He submits that it is the discretionary nature of a power to disqualify which distinguishes "penalties" under Article 12(1) from the question of double "punishment" under Article 11(6) i.e. that if a sentencing court decided, e.g. on a reckless driving case, to exercise its discretionary power to disqualify a convicted defendant that that disqualification would operate as a criminal penalty imposed by the court quite separate from any civil disability to further disqualification which might be imposed by accumulation of penalty points.

20. The amended provisions of section 168 do not provide for an automatic disqualification and cannot be imposed other than by a court of law after a hearing: see section 168P(1). The discretionary nature of the power is very important, says Mr. Tse, since it can be imposed by the convicting court at the time when sentence is passed. He argues that the severe consequences of disqualifying a man from being a company director for many years, thereby affecting his livelihood, is one the matters which the sentencing judge should properly take into account when deciding the overall sentence i.e. a person being so disqualified for many years may receive a lesser prison sentence or fine than would otherwise be the case.

21. That being so, he submits, the disqualification order should properly be considered as part and parcel of the criminal sanctions imposed by the sentencing court. Indeed, he says, even if the "civil" route is taken and the matter comes before the High Court in its civil capacity it would still be incumbent on the civil judge to examine the sentence passed by the criminal court to see if the length of any disqualification should be affected by the sentence passed, given that a mitigating factor which could have been urged on the criminal court was not so urged if no application to disqualify had been made by the Crown at the time of conviction.

22. He submits that the amended section 168 is an unusual cocktail of civil and criminal powers but that the powers of the criminal court should mean that the disqualification should be interpreted as a penalty under Article 12(1). Thus, neither the criminal court nor the High Court in its civil capacity would have the right to impose a retrospective penalty because of the operation of Article 12(1).

23. He agrees that there is no difference in principle between a discretionary disqualification from holding or obtaining a driving licence, on the one hand, and a discretionary disqualification from being a director on the other. Unlike the Crown, he submits, who do not have any authority for their proposition that a discretionary disqualification is not a penalty, he has an authority which says precisely that it is. He relies on the Scottish case of Coogans v. MacDonald a 1954 decision of the Scottish High Court of Judiciary. The court was a strong one comprising of the Lord-Justice General(Cooper), The Lord Justice-Clerk(Thomson), and Lords Russell, Carmont and Patrick. It was not a Bill of Rights case but it was directly on the point of whether a discretionary disqualification from holding or obtaining a driving licence is a "penalty" or not.

24. That case concerned an offence under s. 11 of the Road Traffic Act, 1930 where the court, by virtue of s. 6 of the Act, had the power to, but was not bound to, impose a disqualification from holding or obtaining a driving licence. The notice sent to the defendant did not point out that the Sheriff had such a power but the law required that the notice should specify the statutory penalties to which the accused would be liable on conviction.

Lord Russell said:

"I am of the opinion that in the notice imperatively required to be given by section 46(3) of the Criminal Justice (Scotland) Act, 1949, in the terms set out in Form 2 of the Seventh Schedule to that Act, the word "penalty" must reasonably be interpreted as including an order of Court disqualifying an accused person from holding or obtaining a licence to drive a motor vehicle on the road."

25. Such was the unanimous decision of the court. Unlike the Canadian cases and Wan Kit-man, submits Mr. Tse, which were concerned solely with an automatic statutory disqualification, this case is squarely on the point that a discretionary disqualification is, indeed, a penalty.

26. What Mr. Tse argues is that the Crown are inviting me to adopt a restrictive approach to the interpretation of Article 12(1). The word "penalty" is plain English and there is nothing in the Article which restricts the operation of that word to "criminal sanctions and not civil disabilities". The correct approach to interpreting Article 12(1) is a broad approach and he relies upon R v. Wan Siu-kei and R v. Chan Chi-hung.

27. Both cases concerned a different limb of Article 12(1) but, it seems to me, that one cannot have a broad approach for one limb of that Article and a restrictive approach for another. The approach to the whole of Article 12(1) must surely be the same.

In Wan Siu-kei Litton JA said (at 236):

"Ultimately, what we are concerned with here is the application of Article 12(1) of the Bill of Rights and in particular the last sentence thereof....In applying the Hong Kong Bill of Rights the courts are required to adopt a broad and purposive approach, having regard to the fact the "purpose of this Ordinance is to provide for the incorporation into the law of Hong Kong of provisions of the International Covenant on Civil and Political Rights as applied to Hong Kong....".

The headnote to Chan Chi-hung reads as follows:

"Held (dismissing the appeal; Macdougall VP dissenting)

1. There were two possible approaches to the interpretation of Article 12(1); the "broad" approach approved in R v. Wan Siu-kei; and the "restrictive" approach adopted in R v. Faisal. The latter was inconsistent with the proper approach to the interpretation of the Bill of Rights approved in R v. Sin Yau-ming and adopted in other cases. While the Court of Appeal was bound to follow its own clear previous decisions, this rule did not prevent it from adopting the "broad" approach."

The broad approach is set out in R. v. Sin yau-Ming in the judgement of Silke VP:

"The onus is on the Crown to justify. It is to be discharged on the preponderance of probability. The evidence of the Crown needs to be cogent and persuasive. The interests of the individual need to be balanced against the interest of society generally but, in the light of the context of the Covenant and its aims and objects, with a bias towards the interests of the individual."

28. Adopting this broad approach to Article 12(1), submits Mr. Tse, can only result in the word "penalty" being given its plain meaning, that a retrospective disqualification order under section 168T is punitive in nature, whether it be for the protection of the public or not, and is thus a penalty, and that it therefore conflicts with the requirement of Article 12(1) that no heavier penalty should be imposed than existed at the time the offence was committed. The Bill of Rights must prevail.

Ruling

29. Both sides have put forward cogent and well reasoned arguments and I am obliged to counsel for that. However, since hearing arguments I have come across another case which was not cited to me and which is a powerful authority in favour of the defence arguments. The case is that of Welch v. United Kingdom, a decision of the European Court of Human Right, reported in the Times Law Reports on the 15th. February, 1995.

30. This was a case which concerned a drugs confiscation order made by the English High Court under section 1 of the Drug Trafficking Offences Act, 1986. The provisions relating to confiscation orders under that Act are identical to those set out in the Drug Trafficking (Recovery of Proceeds) Ordinance in force in Hong Kong. The European Court's decision did not concern the point raised in the case of Ko Chi-yuen (see page 6 above) but was directly on the question of whether such an order amounted to the retrospective application of relevant legislation and was in conflict with Article 7.1 of the European Convention on Human Rights. The relevant part of Article 7.1. is in identical terms to that part of Article 12(1) of the Bill of Rights with which I am concerned.

31. In that case the defendant had been charged with drug offences committed between January 1st. 1986 and the 3rd. November, 1986. The operative provisions of the 1986 Act had come into force on the 12th. January, 1987 and the defendant was convicted on the 22nd. August, 1988 at which date the sentencing court had imposed the confiscation order. The defendant appealed first to the Court of Appeal, which dismissed his appeal, and then to the European Court on the basis that the confiscation order was a heavier penalty than was in force at the time the offences were committed and, so, was in breach of Article 7.1.

32. The relevant extracts from the Court's judgment are as follows:

"The only question to be determined was whether the order constituted a penalty within the meaning of Article 7.1. The concept of a penalty in that provision was an autonomous Convention concept. To render the protection offered by Article 7 effective, the court had to remain free to go behind appearances and assess for itself whether a particular measure amounted in substance to a penalty within the meaning of the provision.

The wording of the second sentence of Article 7.1. indicated that the starting point in any assessment of the existence of a penalty was whether the measure in question was imposed following conviction for a criminal offence.

Other factors that would be taken in account as relevant in that connection were the nature and purpose of the measure in question, its characterisation under national law, the procedures involved in the making and implementation of the measure and its severity.

As regard the connection with a criminal offence, it was to be observed that before an order could be made under the 1986 Act the accused must have been convicted of one or more drug trafficking offences. That link was in no way diminished by the fact that, due to the operation of the statutory presumptions concerning the extent to which the applicant had benefited from trafficking, the court order could affect proceeds or property which were not directly related to the facts underlying the criminal conviction.

While the reach of the measure could be necessary to the attainment of the aims of the 1986 Act, that did not alter the fact that its imposition was dependant on there having been a criminal conviction.

In assessing the nature and purpose of the measure, the Court had regard to the background of the 1986 Act, which was introduced to overcome the inadequacy of the existing powers of forfeiture and to confer on the courts the power to confiscate proceeds after they had been converted into other forms of assets. The preventative purpose of confiscating property that might be available for use in future drug trafficking operations as well as for the purposes of ensuring that crime did not pay were evident from the ministerial statements that were made to Parliament at the time of the introduction of the legislation.

However, it could not be excluded that legislation which conferred such broad powers of confiscation on the courts also pursued the aim of punishing the offender. Indeed, the aims of prevention and reparation were with a punitive purpose and could be seen as constituent elements of the very notion of punishment....

The Court agreed...that the severity of the order was not in itself decisive since many non-penal measure of a preventive nature could have a substantial impact on the persons concerned. However, there were several aspects of the making of an order under the 1986 Act which were in keeping with the idea of a penalty as it was commonly understood even though they could also be considered as essential to the preventative scheme inherent in the 1986 Act.

The sweeping statutory assumptions in section 2(3) of the 1986 Act, that all the property passing through the offender's hands over a six year period was the fruit of drug trafficking unless he could prove otherwise, the fact that the confiscation order was directed to the proceeds involved in drug dealing and was not limited to actual enrichment or profit, the discretion of the trial judge, in fixing the amount of the order, to take into consideration the culpability of the offender, and the possibility of imprisonment in default of payment by the offender, were all elements which, when considered together, provided a strong indication of, inter alia, a regime of punishment.

Finally, looking behind the appearances of the realities of the situation. whatever the characterisation of the measure of confiscation, the fact remained that the applicant faced far more reaching detriment as a result of the order than that to which he was exposed at the time of the commission of the offences for which he was convicted.

Taking into account the combination of punitive elements outlined above, the confiscation order amounted to a penalty. Accordingly, there had been a breach of Article 7.1"

33. In the case of a disqualification order under section 168E there must have been a prior criminal conviction involving fraud or dishonesty to trigger the order. The order can affect matters which are in no way connected with the conviction. Whilst the section was undoubtedly required to overcome the inadequacy of powers to prevent persons convicted of dishonesty it cannot be excluded that legislation which confers such broad powers of disqualification on the courts also pursues the purpose of punishing the offender.

34. The fact that the disqualification order is directed to companies and powers not the subject of the criminal conviction, the discretion of the trial judge in fixing the length of the disqualification, and the possibility of imprisonment under section 168M for acting in breach of a disqualification order are, in my view, elements, which when considered together, provide a strong indication of a regime of punishment.

35. Further, when looking behind appearances at the realities of the situation, the fact is that the defendant faces far more detriment than that to which he was exposed at the time of the commission of the offence.

36. For the purposes of retrospective application I see little difference between a confiscation order under the 1986 Act and a disqualification order under section 168E.

37. The Canadian authorities are persuasive but they are not on point. I find that there is a distinction which is to be made between an automatic disqualification and one which lies within the discretion of the court. I would not seek to disagree with the judgement of Hooper J. that automatic disqualifications are appropriately described as civil disabilities flowing from a course of conduct. As such they do not amount to double punishment.

38. A discretionary disqualification is one which lies within the power of the court to impose or not to impose as it sees fit. As such it is clearly punitive in nature. Now, no-one is suggesting that the provisions of section 168 empowering disqualification are in conflict with the provisions of the Bill of Rights. Such a power, it is accepted by all concerned, are proportionate and reasonable. From the time that the section came into force a person in Hong Kong knew that, if he committed an offence involving fraud or dishonesty, he would render himself or herself liable to be disqualified under the terms of that section.

39. I also respectfully agree with the Scottish Law Lords that the discretionary exercise of the power to disqualify a person from holding or obtaining a driving licence means the invoking of a "penalty". I can perceive no difference between such a disqualification and that of a disqualification under section 168. Indeed, the Crown itself has relied heavily on the parallel between the two. The broad and purposive approach to Article 12(1) is one which I am bound to follow as a matter of law. What is the broad and purposive intention of this limb of Article 12(1)? It is to ensure that no-one shall suffer a heavier penalty than that which existed at the time the offence was committed. I divine in this not simply an issue of fairness, though such is certainly present. There is also surely the question of finality.

40. If the Crown be right then the long arm of the law could reach back infinitely into the past and make a person who had committed some offence in distant times liable to be disqualified as a director of a company when such powers were not remotely contemplated. In theory, a man who had been convicted of, say, shoplifting prior to the Japanese occupation could suddenly find himself the subject of an application under section 168 because of a change in the law in 1994. That cannot be right and, in my view, that is the sort of thing which Article 12(1) is designed to prevent.

41. This is a point of considerable public importance. I strongly urge the Crown to test this ruling before their Lordships. For my part, however, I find that section 168T conflicts with Article 12(1) of the Bill of Rights and is thus in breach of that Article. I have no power to make the disqualification they seek.

42. For the avoidance of doubt may I say that if I am wrong and did have the discretionary power to disqualify this defendant under section 168E then I would have exercised my discretion in favour of the defendant given the particular facts of this case and the staleness of the offences which he committed.