SECRETARY FOR JUSTICE v. JOHNSON CYNTHIA AND ANOTHER

HCMP 1789/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1789 OF 2016

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DECISION FOR RESTRAINT ORDER

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1.  This is an application by the Secretary for Justice for a restraint order against the 1^st and 2^nd respondents pursuant to section 15 of the Organized and Serious Crimes Ordinance, Cap 455 (OSCO).

2.  The facts giving rise to the application are contained in the affidavit of Woman Senior Inspector of Police, Wong Chuk Kwan Ada dated 8 June 2016. 

3.  In summary, two remittances of US$11,000 and US$12,254 were made by two victim companies on 17 and 18 September 2013 respectively as a result of receiving fraudulent emails instructing them to transfer the remittances into the Hong Kong Shanghai Banking Corporation Ltd (HSBC) bank account of the 2^nd respondent in Hong Kong.  The account was opened on 30 July 2013 with the 1^st respondent as its sole authorised signatory.  The 1^st respondent is also the sole director and shareholder of the 2^nd respondent.  Since opening the account there were two large deposits in foreign currencies, and as at 19 November 2015, the account had a credit balance of GBP 239,510.16, US$0.07 and HK$290.92. 

4.  The 1^st respondent has visited Hong Kong on four occasions: from 10 to 12 July 2013, 30 July 2013, 30 August to 3 September 2013 and 16 to 17 September 2013.

5.  The registered address of the 2^nd respondent was of a company secretarial service.  Enquiries by the police revealed that the 1^st respondent paid RMB 5800 at the Guangzhou branch of the company secretarial service to incorporate the 2^nd defendant in Hong Kong.  The company secretarial service could not contact the 1^st respondent for payment of the annual fee of the 2^nd respondent and on 18 August 2014 resigned and ceased to act as the corporate secretary of the 2^nd respondent.  Enquiries by the police with the Inland Revenue Department reveal that the respondents have not filed any tax returns in Hong Kong.

6.  The police issued a no consent letter against the HSBC account on 31 October 2013.

7.  A warrant of arrest was sought and granted against the 1^st respondent on 13 May 2016 in relation to a single charge of dealing with property known or believed to represent proceeds of an indictable offence, contrary to sections 25(1) and (3) of OSCO.

8.  I am satisfied that the conditions for a restraint order are made out against the 1^st and 2^nd respondents in the terms sought by the Secretary for Justice.  See Secretary for Justice v Hu Wang Li Chia, HCMP 928/2016, 30 May 2016, unreported. 

9.  I am satisfied that criminal proceedings have been instituted against the 1^st respondent for a specified offence. A warrant of arrest was issued on 13 May 2016 against the 1^st respondent for the offence commonly known as money laundering which is a specified offence under Schedule 1 to OSCO.  Accordingly, proceedings have been instituted against the 1^st respondent that have not been concluded. 

10.  I am also satisfied on a balance of probabilities that there is reasonable cause to believe that the respondents have committed the specified offence. 

11.  I am further satisfied that the 1^st respondent would have benefited from the specified offence, namely the total sum of the two remittances of US$23,254 which were received by her through the 2^nd respondent’s account from the two victim companies. 

12.  I note that the amount of benefit to the 1^st respondent exceeds HK$100,000 as required by section 8(4) of OSCO.  I also note that the police have written to the two victim companies to assess whether any civil proceedings would be instituted by them for the recovery of their losses.  I am informed that the last communications in writing with the two victim companies were made on 18 January and 8 March 2016 respectively but no replies have been received. 

13.  I am satisfied that the requirements set out in section 14 of OSCO have been fulfilled and will make the order in the terms sought by the Secretary for Justice.  In accordance with Order 117, rule 5(2) of the Rules of the High Court, Cap 4A, I fix a return date for the inter partes hearing of the application on 1 September 2016. 

14.  As noted in this decision a no consent letter was issued on 13 October 2013 and it is about 2 years and 10 months later that an application is made to restrain the respondents from dealing with the funds in the bank account pursuant to section 15 of OSCO. 

15.  I am not seeking to address the issue of the no consent regime as I have not had the benefit of fully argument before me.  I have, however, been helpfully assisted by Ms Denise Chan, for the applicant, in addressing the delay in making the restraint order by reference to the relevant legal principles. 

16.  The issue of the no consent regime was recently addressed in Interush Ltd and Another v Commissioner of Police and Others [2015] 5 HKC 158.  In that case a constitutional challenge was mounted against the use and practice of a no consent letter under section 25A(2)(a) of OSCO.  P Li J in his judgment rejected the constitutional challenge and upheld the regime of the no consent letter by addressing various criticisms as to its jurisdiction and procedure.  There are aspects of this provision and regime that may require further scrutiny by the courts as it seems that a regime has developed that possibly exceeds the language of the provision.

17.  A no consent letter is issued pursuant to section 25A(2)(a) which provides:

“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.”

18.  The invocation of section 25A(2)(a) is by section 25(1) which provides:

“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.”

19.  By the wording of section 25(1) it would seem to operate in relation to a person who knows or suspects that property represents a person’s proceeds of an indictable offence which he discloses to an authorised officer.  The person having made such disclosure is protected from criminal liability as provided by subsection (2). 

20.  The police have submitted a chronology of events from the time the no consent letter was issued until the present application. It is apparent that a number of inquiries were made in relation to the underlying matter of the alleged email scam and to the stance of the victims as to whether they would take any civil action against the respondents.  It seems the delay in making the application was primarily a result of inquiries made with the victims which started in late 2013 and continued until just prior to the making of the present application.  The inquiries mainly consisted of reminder letters to the victims which they have not properly responded to or indicated a desire to take civil action against the respondents. 

21.  Ms Chan explained that it is common practice, because of the amount of effort and resources required to take out restraint proceedings and the number of cases that they have to deal with, that where a victim or victims have been identified the authorities will seek to ascertain whether they will take civil action against a relevant party which would obviate the need to take out restraint proceedings under OSCO. 

22.  It would appear from the practical point of view restraint proceedings may take some time before they are instituted.  Ms Chan acknowledged that this would depend upon the particular circumstances of the case. 

23.  As I have mentioned in Secretary for Justice v HU WANG LI Chia, HCMP 928/2016, 30 May 2016, unreported, at §25 there is the standing practice by the authorities to contact an identified victim or victims to ascertain whether they would institute any civil proceedings for recovery of any loss that they have sustained.  The victim or victims are also informed if no civil proceedings are instituted by them that once a confiscation order is made, the realisable property confiscated would not be shared with them.  This is because a confiscation order can only be made in favour of the government if the victim or victims have not previously made a claim for all or some of the property during the restraint order proceedings. See HKSAR v Lung Wai Hung [1999] 1 HKLRD 598 at 606.  The victim or victims have a right under section 15(6) of OSCO to apply for a variation of a restraint order but this right is not available in relation to a confiscation order. 

24.  It is accepted by Ms Chan that a no consent letter will only be issued as a result of a suspicious transaction report made under section 25A(1).  She notes that such reports are commonly made by banks or financial institutions. 

25.  As already noted, section 25A(1) creates a duty to disclose any suspicious property to an authorised person.  Section 25A(2)(a) creates a defence for a person who has made a disclosure in relation to further dealings with the property after such disclosure. 

26.  The operation of the no consent regime was examined and discussed in Interush.  The regime is operated by the Joint Financial Intelligence Unit (JFIU) pursuant to guidelines.  The guidelines can be summarised as follows.  Upon receipt of a suspicious transaction report the JFIU will refer the matter to an investigation unit for action.  The Superintendent of the investigation unit would decide whether a no consent letter is warranted.  Relevant factors that would be taken into account in making this decision include: “the nature of the offence; prospect of a conviction; value of proceeds and realizable property; reasonable likelihood of obtaining a restraint order; reasonable likelihood of obtaining an injunction by the victim and the preservation of proceeds of crime for confiscation”.  Once a no consent letter is issued through the JFIU, any extension of it would be reviewed by the Superintendent of the investigation unit on a monthly basis.  If the aggregate extension exceeds three months, the Formation Commander (Senior Superintendent or Chief Superintendent) would review the matter on a monthly basis.  Under normal circumstances, a no consent letter should not exceed six months duration.  In exceptional cases, namely where the life of the no consent letter exceeds six months, the Formation Commander will review the situation critically and consult the Department of Justice for legal advice.  See Interush §§59 to 62. 

27.  The guidelines and the no consent regime were more fully addressed in Interush at §§58 to 62, 68 to 72. 

28.  At this stage, all I wish to say, and without ruling on the regime, is that it is important that those persons responsible or involved in issuing and maintaining a no consent letter do so in accordance with the relevant guidelines and procedure that are in place, bearing in mind the relevant statutory provisions and the exercise of power involved.