HKSAR v. LEE HANG WING

HCMP No. 2427/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MICELLANEOUS PROCEEDINGS NO. 2427 OF 1997

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REASONS FOR JUDGMENT

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The Respondent pleaded guilty to three counts of trafficking in dangerous drugs on 20th October 1998 and was sentenced to four years imprisonment under HCCC 83 of 1998 before me. The HKSAR government, the Applicant, now applies for an order to confiscate the Respondent's assets under the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405 ("the Ordinance").

2. Section 3 of the Ordinance provides that in the situation where the Respondent finds himself, the court has to first determine whether the Respondent has benefited from drug trafficking. If the court finds that the Respondent has so benefited, the court should then determine the amount to be recovered from the Respondent. Section 6 of the Ordinance specifies that the amount to be recovered from the Respondent should be the value of the Respondent's proceeds of drug trafficking but if the value of the realizable assets of the Respondent is less than the proceeds of drug trafficking, the court may only order the Respondent to pay an amount equal to the value of the realizable assets. Section 7 of the Ordinance goes on to define realizable assets as:-

(a) any property held by the defendant;

(b) any property held by a person to whom the Respondent has directly or indirectly made a gift caught by the Ordinance; and

(c) any property that is subject to the effective control of the Respondent.

3. In support of the application, Ms. Chan for the Applicant relied on a statement made by Police Constable 46704 CHAN Kam Sing filed and served pursuant to Section 5 of the Ordinance. That statement says, inter alia, that the Respondent has admitted in writing the following facts:-

(1) The Respondent has benefited from drug trafficking.

(2) The proceeds of drug trafficking received by the Respondent is $1.1 million being proceeds at $20,000 per month for the period from January 1993 to July 1997.

(3) The Respondent has a total of $316,774.30 as credit balance in several bank accounts under his sole name and the Respondent is joint tenant with his wife of a flat in Mei Foo Sun Chuen ("the matrimonial property") which is valued at $1.4 million for sale with vacant possession.

4. Ms. Chan for the Applicant suggested that the amount the court should order to be recovered from the Respondent should be $316,774.30 plus $700,000 being 50% of the value of matrimonial property.

5. Mr. Li for the Respondent, during the course of arguments, conceded that the Respondent did benefit from drug trafficking to the tune of $1.1 million and that all the monies in bank accounts under the Respondent's own name may be made subject of a confiscation order under the Ordinance. However, echoing my concern over the meaning of "realizable property", Mr. Li submitted that the Respondent's interest in the matrimonial property does not represent a value that can be made the subject of a confiscation order and in any case not $700,000 as assessed.

6. The problem presented by the matrimonial property is twofold. First, it is owned by the Respondent and his wife as joint tenants. The peculiar nature of a joint tenancy is that each joint tenant holds the whole and holds nothing. See Dawson v. Inland Revenue Commissioners [1983] 1 W.L.R. 930 at 934 per Nicholls L.J. and Elements of Land Law, Second Edition, by Kevin Gray at page 461. Because a joint tenant cannot force his co-tenant to sell the property, it may be said that the interest of a joint tenant in the property is not realizable within the meaning of the Ordinance. It would be different if the interest of the co-tenant is also subject to confiscation where, for example, that interest represents a gift from the first guilty co-tenant and thus traceable as part of the proceeds of drug trafficking. It may be noted in passing that the matrimonial property in this case was purchased well before the Respondent started drug trafficking.

7. Ms. Chan for the Applicant contended that the Ordinance covers properties held under joint tenancy because Section 7(4) reads:-

(4) Subject to the following subsections, for the purposes of this Ordinance, the value of property (other than cash) in relation to any person holding the property -

(a) where any other person holding in the property is -

(i) the market value of the first mentioned person's beneficial interest in the property, less

(ii) the amount required to discharge any encumbrance (other than a charging order) on that interest; and

(b) in any other case, is its market value.

Moreover, it is argued that if properties held under joint tenancy with an innocent party is not caught by the Ordinance, it would be easy for drug traffickers to evade the force of the Ordinance.

8. In answer to the latter point, Mr. Li urged the court to bear in mind the basic principle that a penal provision should not be given force and effect unless it is expressed in clear terms: see Statutory Interpretation, Third Edition, by F.A.R. Bennion, page 652. As to Section 7(4) of the Ordinance, it begs the further question of what value to be attributed to a spouse's interest as a joint tenant in the matrimonial home. Since the husband cannot force the sale of the matrimonial property, the husband's interest in a joint tenancy of the property has no market value. Even if the husband issues a notice of severance to turn the joint tenancy into a tenancy in common so that he can theoretically sell his 50% share in the property, because the wife has the right to continue to occupy the matrimonial property, the husband's 50% share in the property is virtually unmarketable. Who would buy the husband's 50% share in the property knowing that the wife can stay in there? Where a share in a property does not fetch a price in the market, the court cannot fix its value to determine the amount to be included in the confiscation order to be made under the Ordinance. Ms. Chan seemed to think that the court at the later enforcement stage may order the sale of the matrimonial property. Of course I am not concerned with enforcement at this stage but I wonder if the Ordinance empowers the court to apply penal provisions to the prejudice of the interests of an innocent party.

9. I asked Ms. Chan if there are guiding authorities on the meaning and operation of the relevant provisions in the Ordinance. It appears that, despite diligent research by Ms. Chan, there is no decided case in Hong Kong or England in which a judge has considered the problems presented by joint tenancies. These are, however, ample cases in which the courts have decided, without examining the nature and the valuation problem of matrimonial home held by joint tenancy, that an amount equal to the nominal 50% value of a drug trafficker's joint tenancy interest is included in the total for recovery in a confiscation order. Ms. Chan also referred me to an unreported English case, Re "B" DTOA/123/88, decided by Henry J. in which there is some discussion regarding a matrimonial property. However, even in that case, it was unclear whether the property was held in joint names and the confiscation order was made on the basis that the matrimonial property there represented a gift by the drug trafficker to his wife. Ms. Chan also cited a passage from Restraint and Confiscation Orders by T.J. Millington wherein the learned author states, without citing any authority, that an interest in joint tenancy is realizable property.

10. On the other hand, Ms. Chan assured me that whatever I make in terms of a confiscation order is not final in the sense that there will be a subsequent enforcement stage at which the court may revise the actual amount recoverable from the drug trafficker taking into account the actual price, if any, fetched by the sale of assets and any innocent party, such as the spouse of the trafficker, may make representation for a mode of enforcement that would do justice to the parties. Apparently, it is quite common for the rigours of a confiscation order to be reviewed and reduced at the enforcement stage.

11. In the premises, although I had and still have misgivings, I saw no real harm in making a confiscation order in terms as sought requiring recovery from the Respondent a total sum of $1,016,774.30. However, I refused to approve a certificate of sentence and any order stating the term of imprisonment imposed in the event of failure on the part of the Respondent to pay under the confiscation order because the exact amount the Respondent is liable to pay may be varied at the enforcement stage. This kind of certificate or order is premature. In my view, the government must make a fresh application for a term of imprisonment to be imposed should the Respondent really fails to pay as ordered and, on such application, the Respondent is entitled to representation as to his explanation for not paying so much as ordered or at all.