HKSAR v. CHENG WAI KEUNG & OTHERS

HCMP2801/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.2801 OF 2002

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J U D G M E N T

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1. On 6 May 2002 by my order pursuant to the provisions of sections 15 and 16 of the Organized & Serious Crimes Ordinance, Cap.455 ("the Ordinance") the assets of 12 respondents, including the present 1st, 2nd and 3rd respondents as named in that order, were restrained and charged.

2. By their summons dated 1 April 2003, as amended so as to include the 3rd respondent as the 3rd applicant, the respondents seek a variation of the original order so as to allow the release to them of specified sums they say are required for their reasonable legal fees and expenses to be incurred in respect of the preparation and conduct of their upcoming trial.

3. The three respondents are, so far as the 1st and 2nd respondents are concerned, husband and wife, and so far as the 3rd respondent is concerned, the mistress of the 1st respondent.

4. The charges they face arise out of allegations that they were involved in the operation of a very large syndicate running and managing vice establishments in Hong Kong and the handling of the financial proceeds of that criminal enterprise.

5. The 1st respondent is said to be the ringleader or one of the ringleaders of that operation. The 2nd and 3rd respondents are alleged to have assisted in the operation and management of the vice establishments and the distribution or handling of the proceeds of the syndicate. The three respondents were arrested on 7 May 2002. All three respondents have been committed for trial in this court. No trial date has yet been fixed. That trial when it takes place, it is common ground, is at this stage estimated to last for some 80 days. It involves some 60 box files of exhibits and presently some 123 witnesses are to be called.

6. By a schedule provided to me by Mr Plowman, SC who represented the respondents in the present proceedings, the 1st respondent seeks the release of HK$1.3 million of his restrained assets for his legal expenses, the 2nd and 3rd respondents seek the release of a combined sum of HK$800,000 for their legal expenses and all three respondents seek the release of a further total sum of HK$400,000 as anticipated solicitors fees for the three of them, they having retained the same firm of solicitors.

7. There s no dispute from Mr Kelvin Lee who represents the Secretary for Justice in these proceedings that, given the anticipated scope and duration of the forthcoming criminal trial, the amounts sought by the respondents for their legal expenses are reasonable. What is an issue is simply whether each respondent has made full disclosure of their present assets.

8. Mr Lee, in respect of each respondent, relies on the affirmation of Senior Inspector Chung Yat Cheung made on 4 May 2002. That affirmation, so far as each respondent is concerned, summarizes the totality of transactions which have taken place in the bank accounts controlled by or in the name of the respondent over a six-year period between 1996 and 2001.

9. Mr Lee points that out that in respect of each respondent large sums of money came into that respondent's accounts and were disbursed from those accounts over that period. He says that no explanation or no sufficient explanation was provided by each respondent as to either the source or destination of the funds flowing through those accounts and that accordingly the respondents have individually failed to satisfy the court that they do not have access to other pools of funds which would be available to meet their legal expenses.

10. In this regard, however, it should be said that the prosecution's own case is that the largest part of the monies passing through each respondent's bank accounts came form the activities comprising the offences with which they are charged, and represents the regular operating profits, or part thereof, of those activities which since the arrest of the respondents have in any event ceased. It seems to me it is difficult for the prosecution then to assert that the respondents have not disclosed the source of these funds and to rely on the respondents' lack of disclosure in this regard as leaving open the probability the funds were provided to those accounts from another and unknown source.

11. The real issue therefore in respect of each respondent on the prosecution case is where those funds went after they were processed through the particular respondent's bank accounts and whether they are, on the probabilities, still in an undisclosed but available form.

12. Mr Plowman argues that all the respondents are required to do under the terms of the order of 6 May 2002 is make a full disclosure of their present assets. They are not required to explain where funds they no longer possess were provided from nor where funds they no longer possess went. Mr Plowman argues that there has been full and open disclosure of the assets, including the present state of the respondents' bank accounts and that accordingly they have complied with the terms of the order.

13. The funds in question which went into and were disbursed from bank accounts controlled by or in the name of the respondents can be summarized as follows : So far as the 1st respondent is concerned between 1996 and 2001 there were total incoming funds into his bank accounts of some HK$85 million of which some HK$55 million was made up of cash deposits. Disbursements from those accounts over that same period totalled some HK$82 million of which $48 million is accounted for. Some HK$9 million related to cash withdrawals. It is these cash withdrawals which, for the 1st respondent, also form a basis of the prosecution's concern that there is an undisclosed pool of funds presently available to the 1st respondent. This is because by the nature of such withdrawals little, presumably, can be done to determine, independently of any evidence provided by the 1st respondent, what was done with them and whether they are still available in any significant degree or form to the 1st respondent. There has been no attempt to explain the whereabouts of those or other funds by the 1st respondent in his affirmations provided to this court nor has he proferred any explanation as to why he has not done so.

14. Given the substantial nature of those funds and the 1st respondent's silence concerning them, it seems to me that without some explanation as to at least how they were expended I cannot be satisfied that there is not some other pool of assets presently available to the 1st respondent.

15. That being so, it seems to me that the 1st respondent has failed to discharge the burden of proof which is upon him to show that he has no other assets with which to meet his legal expenses : Secretary of Justice v. Cheung & Leung, HCMP55/2000.

16. I appreciate there is a discretion in this court even in the absence of any disclosure by the 1st respondent to allow him his legal expenses : Assets Investment Pte Ltd v. United Islamic Investment Foundation & Other (1995) 1 HKC 560 and, so far as the analogous principles of Mareva injunctions apply, Mussels v. Oherentugloa Thompson & Another (1985) 135 NLJ 1012.

17. But in my judgment, given the very large sums involved, to allow the 1st respondent the variation sought to the order without evidence before me addressing the destination of the sums of money involved or at least as to him giving some explanation as to why no such evidence is before me, it would be wrong to allow the 1st respondent any part of the restrained funds to meet his legal expenses whether on a discretionary basis or otherwise.

18. So far as the 2nd respondent is concerned over the same period of time from 1996 to 2001, she was in control of bank accounts which received some HK$4.5 million in deposits. Over that same period of time there was disbursed in cash from those accounts some HK$1.5 million. It is true that in her affirmations provided to this court the 2nd respondent in no way addressed the question of the disbursement of these funds , nor did she provide any reason for not doing so. There is no doubt however that the level of unexplained disbursements of the 2nd respondent is at a significantly lower level than that of her husband, the 1st respondent. Her unexplained cash disbursements for example total only some HK$1.5 million over six years, representing, approximately, a disbursement level of HK$25,000 per month. In other words, the level of unexplained cash disbursements from her bank accounts is no more than one would perhaps expect of a person's usual regular living expenses in Hong Kong over that period so far as her own and her family expenses were concerned.

19. Although she has not expressly so stated in her affirmations to the court, I am prepared to proceed on the basis that she has made substantial disclosure of her present assets and in so far as there are unexplained disbursements in her accounts those disbursements are at a level commeasure with the day-to-day living expenses she incurred. On that basis her lack of disclosure as to the expenditure of that sums of money over the six-year period is not, on the whole of the evidence before me, fatal to her application and accordingly I propose to allow a variation in the order so as to release funds to her for her reasonable legal expenses.

20. As far as the 3rd respondent is concerned it seems to me she is in very much the same position as the 2nd respondent. She has total cash withdrawals from her bank accounts in an amount similar to those of the 2nd respondent over the same period of six years from 1996 to 2001 and for the same reasons I propose to allow her application for reasonable legal expenses.

21. So far as both the 2nd and 3rd respondents are concerned, in my view, the legislation in the terms of section 5(1) of the Ordinance, does not countenance the releasing of one defendant's funds, where they are not husband and wife, so as to pay another defendant's legal expenses.

22. Therefore the orders I make so far as the 2nd and 3rd respondents are concerned relate to the release of funds from bank accounts and property owned by them for their own legal expenses. I decline to order that any part of the contents of the 2nd respondent's bank accounts be released for the purpose of payment of the 3rd respondent's legal expenses.

Order

23. I order as follows :

(1) For the reasons I have given, I decline to vary the order so as to allow the release to the 1st respondent of a sum to meet his reasonable legal expenses and his application under that summons is dismissed.

(2) I order, however, that the 6 May 2002 order be varied so as to allow the release to the 2nd and 3rd respondents of a sum to each so as to allow them to meet their reasonable legal expenses in respect of each, that means a sum of HK$600,000 be released from bank accounts or property in that respondent's name which are presently restrained.

(3) I order that so far as the 2nd respondent is concerned that the sum of $600,000 be firstly released and paid to her from bank accounts in her sole name and that the balance then be withdrawn or released from bank accounts held jointly with her husband up to a limit of her interest in those bank accounts.

(4) So far as the 3rd respondent is concerned, the totality of funds restrained in any such bank account controlled by her is $172,273.83. Accordingly, I further order that the balance of $430,000 be made available to her by way of the property in her name at 16/F Wing Hing Lung Building in Sai Yeung Choi Street, Kowloon, which is presently restrained, being made available for sale. Any surplus from any such sale is to be placed in a bank account in her name which is presently subject to the provisions of the order of 6 May 2002.

(3) I direct firstly that a draft order be prepared and forward to the court reflecting the terms of this judgment and secondly, I give liberty to either side to have this matter listed for mention within the next 14 days.