CACV 120/2008
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 120 OF 2008
(ON APPEAL FROM HCMP NO. 1240 OF 2007)
____________
IN THE MATTER of the Organised and Serious Crimes Ordinance (Cap. 455)
____________
BETWEEN
SECRETARY FOR JUSTICE
Applicant
and
Male ZHANG HONGBAO(張宏堡) also known
as WANG XINGXIANG (王行祥) holder of
People’s Republic of China
Identity Card No. 460100540105183
1st Respondent
Female YAN QINGXIN (閻慶新) also known as
TIAN JING (田靜) holder of
People’s Republic of China
Identity Card No. 510102194510220465
2nd Respondent
____________
Before: Hon Tang Ag CJHC and Cheung JA in Court
Date of Hearing: 14 December 2010
Date of Judgment: 14 December 2010
Date of Reasons for Judgment: 24 December 2010
_________________________________
REASONS FOR JUDGMENT
_________________________________
Hon Tang Ag CJHC:
1. On 29 June 2007, a Restraint Order prohibiting disposal of assets in Hong Kong and elsewhere, under section 15 of the Organised and Serious Crimes Ordinance, Cap. 455 (“OSCO”), was made against the 1st Respondent Zhang Hongbao and the 2nd Respondent Yan Qingxin. As a result，various funds deposited in various bank accounts totalling, in April 2007, some HK$458 million were frozen. Of that total HK$81 million stood in accounts held in the sole name of the 2nd Respondent; HK$96 million stood in joint accounts held by both respondents and the balance in accounts bearing the name of the 1st Respondent.
2. The 1st and 2nd Respondents, who lived as husband and wife, parted in 2001. The 2nd Respondent now resides in the USA, where she enjoys political asylum. She has since married an US Attorney. The 1st Respondent was killed in a car crash in July 2006.
3. By a summons dated 11 September 2007, the 2nd Respondent applied for an order that the Restraint Order be varied:
“1. … so as to allow the release to Respondent 2 of a specified sum so as to allow her to meet her reasonable living and legal fees and expenses in respect of the preparation and conduct of the proceedings herein;”.
4. That application was dismissed by the Deputy High Court Judge Line (as he then was) on 1 February 2008.
5. This is the 2nd Respondents’ appeal.
6. By her Notice of Appeal dated 5 May 2008, she asked that:
“A sum of US$876,529, or such other sum which the Court may direct, be released from bank accounts or property in the sole name of Respondent 2 which are presently restrained.”
7. The sum of US$876,529 is said to represent:
(a)
Total amount of legal expenses already incurred by the 2nd Respondent up to 18 January 2008
US$464,529
(b)
Anticipated initial legal expenses likely to be incurred
US$250,000
(c)
9 months of living expenses
US$162,000
(See the 2nd affidavit of Malcolm Bernard Kemp, partner in the firm of Stephenson Harwood & Lo, solicitors for the 2nd Respondent at the time.)
8. There is a notice of intention to act in person signed by the 2nd Respondent dated 20 November 2008 but only received by the Court on 7 October 2010.
9. At the hearing of the appeal, the 2nd Respondent did not appear. For that reason, this Court has an inherent jurisdiction to dismiss the appeal. See Brooksbank v. Rawsthorne & Company [1951] 2 ALL E.R. 413. In the circumstances, I have no doubt that the appeal should be dismissed.
10. The Respondent to the appeal, the Secretary for Justice, appeared by counsel. Ms Fung, for the Applicant, has provided a skeleton argument dated 29 November 2010. She also made oral submissions to us. In deference to the submission of Ms Catherine Fung, SPP, for the Applicant, I will say a few words on the merits.
11. As was explained by this Court in Secretary for Justice v Tan Lam Chuan and Ors [2005] 3 HKC 545 in the judgment of Ma CJHC (as he then was):
“15. … a restraint order is a temporary measure used to freeze the assets of a person against whom a confiscation order may in due course be made. …”
12. Ma CJHC said:
“21(2) Where, as in the present case, a person seeks to vary a restraint order to allow monies or property to be released for his personal benefit (whether living or legal expenses), then it will be essential in my view to demonstrate a beneficial entitlement to the monies or property in question. In the absence of some special arrangements or circumstances, I find it hard to conceive of a situation in which a person will be permitted to use monies or property belonging to someone else for his own expenses. He is simply not ‘affected’ by the restraint order against the relevant property. And even if he were to have some sort of interest such as being a trustee of that property, he would still need to demonstrate how his status would entitle him to the relief sought. … ”
13. If beneficial entitlement can be shown:
“21(3). The second stage arises. The Court must then go on to exercise a discretion whether or not to allow the variation. Here, the Court takes into account many factors such as, for example, whether full disclosure has been made of assets. …”
14. In this case, Deputy Judge Line said in his judgment that save in connection with an irrelevant exception,
“8. … it was common ground that the funds in question had been generated by the activities of corporate bodies.”
15. The corporate bodies were a group of companies founded by the 1st Respondent which ran a number of businesses centered around “China Health Care and Wisdom Enhancement Practice”, also known as “Zhong Gong”. The Applicant’s case is that the businesses prospered producing profits of some RMB 695 million between 1995 and 1999; that the respondents between them had control of the companies and caused their profits to be substantially understated, arranging cash to be sent to Hong Kong through underground remittance agents; that it was a company incorporated in New South Wales, Australia called Europe America Asia Australia Perpetual Holding Property Ltd where was the ultimate holding company of the group and that the respondents were its shareholders and directors, the 1st Respondent holding 70% of the shares and the 2nd Respondent 15%. The 2nd Respondent’s case is that the moneys were donations, presumably to Zhong Gong, and that the proceedings were part and parcel of the persecution of Zhong Gong in the Mainland.
16. As the learned Deputy Judge said, there is prima facie evidence that the monies in the Hong Kong bank accounts were the proceeds of crime in the sense that they came from cash smuggled from Mainland China into Hong Kong to avoid tax. Also on the evidence, he was not satisfied that the 2nd Respondent was beneficially entitled to any of the moneys under restraint.
17. The argument put before the learned Deputy Judge was that even if she had failed to establish beneficial entitlement to the funds in question, she was still entitled to payment out of the moneys restrained because of the existence of “special arrangements or circumstances”. It is said that the alleged persecution of the Zhong Gong amounted to special circumstances.
18. With respect, I agree with the learned Deputy Judge, the expression “in the absence of someone’s special arrangements or circumstances” used by Ma CJHC does not cover the alleged persecution of Zhong Gong.
19. More importantly, in this case, the learned Deputy Judge was not satisfied that she has made a full and frank disclosure of all her assets. The learned Deputy Judge’s conclusions are compelling. He said:
“22. It is therefore apparent that in numerous countries there exist many bank accounts in the name of the second respondent and that she has or has held real estate in different countries in her name.
23. How much is there and where is it now?
24. The astonishing answer from the second respondent is that she does not know and is unable to make any disclosure in this respect. She asserts that this is because the first respondent had possession of and refused to return all her papers and that without those papers she was powerless to find out any assets existing in her name. It was said that there was nothing in her memory to enable her now to identify a single one of these accounts.
25. I say that the answer is astonishing in view of the sort of woman the papers reveal the second respondent to be. In her third affidavit she speaks of serving by the end of 1989 as the head of Human Resources of the Chengdu Radio and Television Bureau for five years, being Director of the Office of the Communist Party Bureau Branch, Director of the Economic Department of the Bureau, and being selected to be one of the two persons in training for the position of Bureau Chief. She said that it was because of her management abilities that the Zhong Gong developed so rapidly, she being its administrative head and taking the organization from a small group to one of over 38 million members with several billion dollars in assets.
……
27. Given her demonstrable managerial skills and the availability of legal help, I simply do not believe that she is unable to reveal more about her worldwide assets. The claim that the lack of papers prevents recollection of any detail that could lead to identifying any of the worldwide accounts is an excuse so feeble as to be unworthy of regard.
28. It is to be noted that the claim made by the second respondent in her first affidavit was specifically to the effect that the first respondent had all along had custody of all documents relating to her bank accounts in her alias name in Australia, Macau and Hong Kong. It was common ground that the second respondent sought to access her subsequently restrained Hong Kong bank accounts in 2004 to be told by the bank that there were problems with her signature when in fact the bank had been warned not to release any funds. The apparent lack of paper did not prevent contact between her and the bank in Hong Kong.
29. That funds might exist in these accounts which are said to have escaped the second respondent's memory is to be inferred in the circumstances. What occurred in relation to two Hang Seng bank accounts in Hong Kong in her name is an instance of an ‘unremembered’ account holding substantial funds. She had not disclosed the existence of these two accounts in her first affidavit sworn in August 2007. She said she had forgotten them, last having operated them in January 2001. There was over 23 million Hong Kong dollars in the two accounts.”
20. Therefore, I would also dismiss the appeal on the merits.
Hon Cheung JA:
21. I agree.
Hon Tang Ag CJHC:
22. The appeal is dismissed. We also make an order nisi that the Applicant is to have the costs of the appeal to be taxed unless agreed.
(Robert Tang)
(Peter Cheung)
The 2nd Respondent, in person, absent.
Ms. Catherine Fung, SPP of Department of Justice, for the Applicant.