SECRETARY FOR JUSTICE v. LIN XIN NIAN

CACV 250/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2000

(ON APPEAL FROM HCMP NO. 5651 OF 1998)

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J U D G M E N T

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Keith JA (giving the judgment of the Court):

Introduction

1. Part IVA of the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405) ("the DTROP") provides for the detention and forfeiture of cash which is brought into or taken out of Hong Kong and which is connected with drug trafficking. This appeal raises a short point on the use which may be made of hearsay evidence when an order of the court is sought to sanction the forfeiture of cash which has been seized.

The facts

2. On 19 October 1998, the Respondent arrived in Hong Kong at Chek Lap Kok airport on a flight from Vancouver. Although he had a PRC passport, he lived in Canada. Acting on information received, police officers searched him in the arrivals hall, and he was found to be in possession of CAN$380,060.00 in cash. That represented about HK$1.9m. The majority of the cash was in $20.00 notes. There were 14,003 of them, plus 400 $50.00 notes and 80 $1,000.00 notes. The majority of the cash was in the Respondent's suitcase, and the remaining CAN$80,000.00 was stuffed into the pockets of the trousers he was wearing. He was asked where he had got the money from. He said that part of it was his but that most of it had been borrowed from his sister in Canada. He was asked what he was bringing it into Hong Kong for, and he said that he was taking it to the Mainland to give to his father.

3. The police were sceptical of these answers. In view of the fact that the money was for the most part in small denominations, the police suspected that the money was connected with drug trafficking. The money was seized pursuant to section 52(3) of the Dangerous Drugs Ordinance (Cap. 134) and detained pursuant to section 24B of the DTROP. The money continued to be detained thereafter pursuant to orders made by judges sitting in the Court of First Instance pursuant to section 24C(2) of the DTROP.

4. In the meantime, an investigation into the source of the money was carried out by Detective Senior Inspector Cheung Hon Bun, an officer in the Financial Investigations Section of the Narcotics Bureau. His investigations related to investigations in Hong Kong. In addition, acting on DSI Cheung's requests, the Public Security Bureau carried out investigations in the Mainland, and the Royal Canadian Mounted Police carried out investigations in Canada. Those investigations revealed that persons connected with the Respondent were the subject of a major ongoing investigation into drug trafficking in Canada.

The forfeiture proceedings

5. The section in Part IVA of the DTROP which provides for forfeiture is section 24D. Section 24D provides (so far as is material):

"(1) While any seized property is detained under section 24C(2) ...., a court may, if satisfied on an application made by or on behalf of the Secretary for Justice that such property-

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

(b) has been used in drug trafficking; or

(c) is intended for use in drug trafficking,

order .... the forfeiture of such property....

(3) An order may be made under this section whether or not proceedings are brought against any person for an offence under which the seized property concerned is connected.

(4) The standard of proof on an application under this section shall be on the balance of probabilities."

"Seized property" is defined in section 24A as meaning "any property seized under section 52 of the Dangerous Drugs Ordinance (Cap. 134) on the ground that it is suspected to be specified property". "Specified property" is defined in section 24A as meaning

".... any property specified in Schedule 4-

(a) being imported into or exported from Hong Kong; and

(b) which -

(i) in whole or in part directly or indirectly represents any person's proceeds of drug trafficking;

(ii) has been used in drug trafficking; or

(iii) is intended for use in drug trafficking ...."

6. Section 55B(1) of the High Court Ordinance (Cap. 4) provides that the rule-making power of the Rules Committee of the High Court includes the "power to make rules regulating the means by which particular facts may be proved, and the mode by which evidence thereof may be given ...." That power applies to applications under Part IVA of the DTROP, and is spelt out in section 24F(2) of the DTROP which provides that rules of court may be made for applications under Part IVA. Such rules have been made, and are to be found in Ord. 115 of the Rules of the High Court. The rule governing applications for forfeiture of seized property is Ord. 115 r. 29, which provides (so far as is material):

"(1) An application under section 24D(1) for the forfeiture of seized property shall be made by summons .....

(2) An application under paragraph (1) shall be supported by an affidavit, which shall state the grounds for believing that the seized property-

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

(b) has been used in drug trafficking; or

(c) is intended for use in drug trafficking."

Further provisions are made for the service of the summons and the affidavit in support, and for the service of any affidavit in opposition.

7. Pursuant to section 24D, the Secretary for Justice applied to the Court of First Instance for an order for the forfeiture of the cash. It was supported by an affirmation of DSI Cheung. A further affirmation from him was subsequently filed, as were affirmations from the Respondent, his sister and his father, together with a further affirmation from DSI Cheung responding to them and a further affirmation of the Respondent responding to that. DSI Cheung's affirmations exhibited various documents. Those documents included statements, affidavits, affirmations and reports which were generated in the course of the investigation into the source of the money. Those documents, together with the circumstances in which the Respondent brought the money into Hong Kong, formed the basis of DSI Cheung's belief that the cash represented the proceeds of drug trafficking. In the affirmations themselves, DSI Cheung summarised the relevant contents of those documents which had contributed to that belief.

8. In due course, the application was heard by Deputy Judge McMahon. In his judgment, which is now reported at [2000] 4 HKC 404, he declared himself to be satisfied, on the balance of probabilities, that all the money seized represented directly or indirectly the proceeds of drug trafficking of some person or persons in Canada. He restricted his findings to section 24D(1)(a), and made no findings on sections 24D(1)(b) or 24D(1)(c). He therefore ordered the forfeiture of all the money. It is from that order that the Respondent now appeals.

The right to appeal

9. A preliminary question arises as to whether an appeal lies to the Court of Appeal from Deputy Judge McMahon's order. It is common ground between Mr John Mullick for the Respondent and Mr Michael Blanchflower SC for the Secretary for Justice that if an application for forfeiture under section 24D of the DTROP is not a "civil cause or matter", it does not come within any of the circumstances set out in section 13(3) of the High Court Ordinance in which the criminal jurisdiction of the Court of Appeal may be invoked. Thus, for the present appeal to be competent, an application for forfeiture under section 24D of the DTROP has to be a civil cause or matter within the meaning of section 13(2)(a) of the High Court Ordinance.

10. In R (McCann) v. Crown Court at Manchester [2001] 1 WLR 358, Lord Woolf CJ said at para. 18:

"What are criminal, as opposed to civil, proceedings is a matter which can be difficult to determine. There is no one overriding test within our domestic law for determining whether proceedings are civil or criminal. To some extent it is like describing an elephant; it is recognised when seen but it is difficult effectively to describe."

The approach of the courts has been to identify the various factors supporting one view or the other, and then to determine which set of factors carries the greater weight.

11. Two factors favour treating an application for forfeiture under section 24D of the DTROP as criminal proceedings. First, the cash to which the application relates must have been seized by an officer who suspected that it was connected with the commission of a criminal offence, namely drug trafficking, and pursuant to powers conferred by the Dangerous Drugs Ordinance, being the Ordinance which criminalises drug trafficking. Secondly, Ord. 1 r. 2(3) of the Rules of the High Court provides that the Rules do not apply "to any criminal proceedings other than criminal proceedings to which [a number of orders including Ord. 115] applies". However, we do not think that that necessarily means that those responsible for drafting Ord. 1 r. 2(3) thought that all proceedings to which Ord. 115 relates are criminal proceedings. Some of the other orders referred to in Ord. 1 r. 2(3), for example Ord. 53, relate to both criminal and civil proceedings. We construe the words "criminal proceedings to which .... Ord. 115 ... applies" in Ord. 1 r. 2(3) as meaning "those proceedings within Ord. 115 which are criminal proceedings". Construed in that way, Ord. 1 r. 2(3) does not assist one way or the other on the question whether an application for forfeiture under section 24D of the DTROP are criminal proceedings.

12. On the other hand, a larger number of factors favour treating an application for forfeiture under section 24D of the DTROP as a civil cause or matter:

(i) An application for forfeiture under section 24D does not involve the trial, conviction or punishment of any person, which are the hallmarks of criminal proceedings. Indeed, section 24D(3) permits such an application to be made even if there are no ancillary proceedings brought against anyone for an offence with which the seized cash is connected.

(ii) As a result of the provisions of Ord. 115 r. 29, an application for forfeiture has the procedural form of civil proceedings. It is commenced by summons (r. 29(1)), it is intended to be conducted on the basis of evidence given on affidavit or affirmation (r. 29(2)-(4)), and the civil standard of proof applies (section 24D(4)). Moreover, Ord. 115 r. 31 permits "any person who may be affected by any order made [in proceedings under the DTROP to] be joined as a party to the proceedings".

(iii) If an application for forfeiture is not a civil cause or matter, no right of appeal from either the grant or refusal of an order for forfeiture exists. It is improbable that the legislature would have intended such an outcome. Similar thinking was expressed by Lord Hoffmann in Government of the United States of America v. Montgomery [2001] 1 WLR 196 at para. 23.

13. Both Mr Mullick and Mr Blanchflower contended that these factors favour treating an application for forfeiture under section 24D of the DTROP as a civil cause or matter. Having weighed up the various factors, we agree. We are fortified in this view by the fact that proceedings under a similar statutory regime, i.e. an application for the forfeiture of cash under section 25(1) of the English Criminal Justice (International Co-operation) Act 1990, have been assumed to constitute civil proceedings: see Ali v. Best (1997) 161 JP 393 at p. 400A. We therefore rule that an appeal does lie to the Court of Appeal from Deputy Judge McMahon's order.

The issue on the appeal

14. The critical issue which the appeal raises relates to the use which the judge was entitled to make of those parts of DSI Cheung's affirmations which contained hearsay statements. If he was entitled to take them into account, it is not contended by Mr Mullick that it was not open to the judge to make the finding of fact in terms of section 24D(1)(a) which he did. By the same token, if he was not entitled to take them into account, it is not contended by Mr Blanchflower that the judge's finding of fact could nevertheless stand. Accordingly, the outcome of this appeal is directly dependent on whether the judge was entitled to take into account those parts of DSI Cheung's affirmations which contained hearsay statements.

15. The point should be made at the outset that there was no question of any part of DSI Cheung's affirmations being inadmissible. They had to contain, to use the language of Ord. 115 r. 29(2), the grounds for his belief that the cash represented the proceeds of drug trafficking. Since his belief was based on the statements, affidavits, affirmations and reports which the investigation had generated, his affirmation had to exhibit those documents or at the very least summarise their contents - whether or not the court was entitled to take those documents into account in deciding as a fact whether the cash represented the proceeds of drug trafficking. That is what the judge meant when he said at p. 410F:

"... the grounds for the deponent's belief .... do not themselves have to be in such a form or of such a nature so as to be independently admissible as evidence."

16. We return, then, to the critical question: even though an affirmation filed pursuant to Ord. 115 r. 29(2) may refer to facts which are not within the deponent's own knowledge, is the court entitled to take those facts into account when deciding as a fact whether cash which has been seized represents the proceeds of drug trafficking? Properly analysed, Mr Mullick's contentions consisted of two arguments based respectively on Ord. 41 r. 5(1) of the Rules of the High Court and the provisions of Part IV of the Evidence Ordinance (Cap. 8).

(i) Ord. 41 r. 5(1). Ord. 41 r. 5(1) prohibits hearsay statements in affidavits and affirmations. It provides:

"Subject to Ord. 14 rr. 2(2) and 4(2), to Ord. 86 r. 2(1), to paragraph (2) of this rule and to any order made under Ord. 38 r. 3, an affidavit may contain only such facts as the deponent is able of his own knowledge to prove."

This rule is subject to various exceptions. One exception relates to interlocutory proceedings (Ord. 41 r. 5(2)). The other exceptions relate to the rules referred to in Ord. 41 r. 5(1) and to any order made under Ord. 38 r. 3. None of those exceptions apply to affidavits or affirmations filed pursuant to Ord. 115 r. 29(2). Therefore, so Mr Mullick said, the prohibition contained in Ord. 41 r. 5(1) on hearsay statements in affidavits and affirmations applies to affidavits and affirmations filed pursuant to Ord. 115 r. 29(2).

17. We cannot go along with this argument. It ignores the express terms of Ord. 115 r. 29(2). If the deponent's grounds for his belief are based only on what he has been told by others, he will not be able to comply with the terms of Ord. 115 r. 29(2) if Mr Mullick's argument is correct. In our view, Ord. 41 r. 5(1) must be read as subject to any other statutory provision or rule of court which necessarily contemplates the reference by the deponent to facts which are not within his own knowledge. Ord. 115 r. 29(2) is such a rule. This was in effect the view of the judge. At p. 411B-C, he said:

"Ord. 41 r. 5(1) may not expressly exempt Ord. 115 r. 29 from its operation as it does the other specified orders therein. But sense must be given to Ord. 115 r. 29. If Ord. 41 r. 5(1) were to apply to section 24D(1) (Cap. 405) applications, then Ord. 115 r. 29, which expressly and specifically applies to such applications, would have no effect. That cannot be intended.

In my judgment, applications pursuant to section 24D(1) (Cap. 405) are governed by Ord. 115 r. 29, and Ord. 41 r. 5(1) has no application so as to prevent the operation of Ord. 115 r. 29 which in its terms allows hearsay evidence."

18. As it is, Ord. 41 r. 5(1) relates only to the contents of affidavits and affirmations. Once it is held that Ord. 41 r. 5(1) does not prevent affidavits and affirmations filed pursuant to Ord. 115 r. 29(2) from containing facts which are not within the deponent's own knowledge, the remaining question is what use the court can make of those facts. That is not a question which Ord. 41 r. 5(1) engages.

(ii) Part IV of the Evidence Ordinance. Prior to its repeal by the Evidence (Amendment) Ordinance 1999 (Ord. No. 2 of 1999) ("the amending Ordinance"), Part IV of the Evidence Ordinance, when read in conjunction with Part III of Ord. 38 of the Rules of the High Court, prohibited the court from relying upon hearsay statements unless various notices had been served. Even then, only "first-hand" hearsay statements could be relied upon, though second-hand hearsay statements could be relied upon if they were contained in a record. Since no such notices had been served, Mr Mullick argued that the prohibition on the court taking account of hearsay statements applies to DSI Cheung's affirmations.

19. We cannot go along with this argument either. It would be surprising if the Rules Committee of the High Court really intended (a) to require the affidavit or affirmation in support of an application for forfeiture under section 24D of the DTROP to contain references to facts which may not have been within the deponent's knowledge while at the same time (b) to deny to the court the right to take those facts into account. What on earth would be the point in doing that? Why require facts not within the deponent's knowledge to be included in the affidavit or affirmation in support if the court was not entitled to take those facts into account? If, as we think, Ord. 115 r. 29(2) was intended, to use the language of section 55B of the High Court Ordinance, to "regulat[e] the means by which particular facts may be proved, and the mode by which evidence thereof may be given", it must follow that it was intended to permit the court to take into account all the facts contained in the affidavit or affirmation in support even if some or all of them were not within the deponent's knowledge. It would be for the court to decide what weight to give to such facts. This, in effect, was the reasoning of the judge. He said at p. 408G:

"Any provision such as Ord. 115 r. 29(2) ... which permits evidence to be provided to a court or tribunal expressed in the form of a belief based on disclosed grounds or sources must envisage the deponent providing what would otherwise be hearsay evidence to the court."

20. This reasoning represents an example of the circumstances in which an implied statutory exception to the rule against hearsay arises. Other examples include (a) hearsay evidence obtained in the course of an official investigation into the affairs of a company in support of an application by the Secretary of State for Trade and Industry for a disqualification order under section 8 of the Company Directors Disqualification Act 1986 (In re Rex Williams Leisure Plc (In Administration) [1994] Ch. 350), and (b) similar hearsay evidence obtained from an office holder in support of an application by the Secretary of State for a disqualification order under section 7 of the 1986 Act (Secretary of State for Trade and Industry v. Ashcroft [1998] Ch. 71).

21. One can readily see the reasons why the Rules Committee would have wanted to sanction the court's use of hearsay evidence on an application for forfeiture under section 24D of the DTROP (provided, of course, that the facts which constitute the hearsay evidence form part of the deponent's grounds for believing that the cash represents the proceeds of drug trafficking). The cash does not have to represent the proceeds of drug trafficking in Hong Kong. It can represent the proceeds of drug trafficking anywhere in the world. The laundering of the proceeds of drug trafficking is now an international trade, and the evidence relied upon by law enforcement authorities to establish that cash brought into or taken out of Hong Kong represents the proceeds of drug trafficking may come from many different parts of the world.

22. Thus, if the court was not entitled to take account of hearsay statements in the deponent's affidavit or affirmation, separate affidavits or affirmations (themselves not containing hearsay statements) would be required from whoever could give relevant information about the source of the cash - irrespective of the country in which they happened to be. And if they happened to be in a country in which Hong Kong has not negotiated an arrangement for mutual legal assistance, there is no procedure for compelling such a witness to provide an affidavit or affirmation. Indeed, the costs involved in obtaining affidavits or affirmations from witnesses overseas could well exceed $125,000.00, which is the minimum amount of cash which can be made the subject of an order for forfeiture under section 24D. Thus, in some cases, the cost of obtaining the evidence to justify an application for a forfeiture order may be prohibitive if the court was not entitled to take account of hearsay statements in the deponent's affidavit or affirmation. All these considerations apply with equal force to any affidavit or affirmation on which a person affected by the application might wish to rely. It may be difficult or even impossible for him to show that the cash came from a legitimate source without being able to rely on hearsay evidence.

23. Finally, the judge drew a distinction between (a) the various documents which were exhibited to DSI Cheung's affirmations and (b) DSI Cheung's summary of the contents of those documents in his affirmations. The former could not be taken into account, but the latter could be. Expressed as baldly as that, we doubt whether the distinction which the judge drew was correct. However, the judge may have been saying that DSI Cheung referred to only some of the contents of the documents in his affirmations because it was only those parts of the documents upon which his belief that the cash represented the proceeds of drug trafficking was based. If the judge was saying that, the distinction which he drew becomes supportable. However, we need not consider the question further in view of our conclusion that the reliance which the judge placed on the material upon which he chose to rely was legitimate.

Conclusion

24. For these reasons, we conclude that the judge did not err in relying on the hearsay statements in the affirmations of DSI Cheung for the purpose of determining whether the cash represented the proceeds of drug trafficking. Accordingly, this appeal must be dismissed. At present, we see no reason why costs should not follow the event, and the order nisi which we make as to costs is that the Respondent must pay to the Secretary for Justice her costs of the appeal, to be taxed if not agreed.

25. There is one final point we wish to make. The old regime of Part IV of the Evidence Ordinance applied to the present case only because the application for forfeiture was made before the provisions repealing it came into operation: section 7 of the amending Ordinance provides that the Evidence Ordinance applies to civil proceedings which were commenced before the amending Ordinance came into operation as if the repeal of Part IV had never been made. The new regime is contained in the new section 47(1) of the Evidence Ordinance, which provides:

"In civil proceedings evidence shall not be excluded on the ground that it is hearsay unless -

(a) a party against whom the evidence is to be adduced objects to the admission of the evidence; and

(b) the court is satisfied, having regard to the circumstances of the case, that the exclusion of the evidence is not prejudicial to the interests of justice."

Thus, the issue which this appeal has raised is unlikely to arise again.