INTERUSH LTD AND ANOTHER v. THE COMMISSIONER OF POLICE AND OTHERS

CACV 230/2015

[2019] HKCA 70

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 230 OF 2015

(ON APPEAL FROM HCAL NO. 167 OF 2014)

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J U D G M E N T

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Hon Cheung JA :

I. Appeal from judicial review

1.1   The applicants applied by way of judicial review for a declaration that sections 25(1) and 25A of the Organized and Serious Crimes Ordinance (‘OSCO’) (Cap. 455) are unconstitutional for being inconsistent with the protected property rights under Articles 6 and 105 of the Basic Law, access to court rights under Articles 35 and 80 of the Basic Law and Article 10 of the Hong Kong Bill of Rights.  They also asked for, among other things, a declaration that the following decisions were null and void and of no legal effect :

1)   The 3^rd respondent’s decision (made on behalf of the 1^st respondent (‘Police’) and 2^nd respondent (‘Customs & Excise) not to give consent to Hang Seng Bank, Limited (‘HSB’) to deal with funds in the 1^st and 2^nd applicants’ accounts with HSB made on 6 November 2013 (the ‘No Consent Decision’).

2)  The Commercial Crime Bureau of the Police (‘CCB’)’s continuing decision (made on behalf of the Police and Customs & Excise) to maintain the No Consent Decision (the ‘Continuing No Consent Decision’); and

3)  The Joint Financial Intelligence Unit’s (‘JFIU’) and the CCB’s decisions, if any (made on behalf of the Police and Customs & Excise), to withhold consent from HSB and the Bank of East Asia, Limited (‘BEA’) to deal with funds in the 1^st and 2^nd applicants’ HSB accounts and the 1^st applicant’s Merchant Service account with the BEA (the ‘BEA account’).

1.2   Patrick Li J refused the judicial review.  The applicants now appeal.

II.    Background

2.1   The background of this case has been summarised by the Judge in paragraphs 4 to 14 of his judgment as follows.

2.2   On 1 November 2013, alerted by newspaper coverage, officers of CCB started an investigation into the 1^st applicant for promoting an alleged pyramid scheme (‘the pyramid scheme’) contrary to Pyramid Schemes Prohibition Ordinance, Cap. 617 (‘PSPO’).

2.3   The main features of the scheme were the following :

1)   The 1^st applicant offered cloud based Internet services at a monthly charge of $800. 

2)   There was an initial membership fee of $390. 

3)   If a member subscribed to three sets of identical services at $2,400 per month and recruited new members, he might be entitled to monthly bonus up to $234,000. 

4)  The 1^st applicant would pay dividend to members when it was publicly listed in Hong Kong. 

2.4   On the same day, BEA suspended the account of the 1^st applicant as their investigation since June 2013 revealed that the account might be used in connection with illegal activities.  

2.5   On 4 November 2013, further investigation by CCB revealed that a large number of individuals in Mainland China had been arranged to come to Hong Kong and had attended the office of the 1^st applicant for registration.  According to some individuals interviewed by CCB officers, they only joined the scheme with a view to earning the bonus.  They had no knowledge of the underlying services. 

2.6   On the same day, HSB had suspicion about the accounts of the 1^st and 2^nd applicants.  HSB filed a ‘Suspicious Transaction Report’ (‘STR’), to the JFIU.  

2.7   On 6 November 2013, CCB officers searched the office of the 1^st applicant and found about 50,000 completed registration forms.  Five members of the senior management of the 1^st applicant were arrested for the offence of ‘Promoting a pyramid scheme’. 

2.8   In the meantime, the JFIU issued a ‘no consent’ letter   to HSB covering the accounts of the 1^st and 2^nd applicants. 

2.9   Two days after the search, the Chief Executive Officer of both applicants, Mr MJ Matthews, surrendered to the Police.  He was also arrested for the same offence. 

2.10   On 6 February 2014, Mr MJ Matthews was further interviewed and cautioned for the offence of ‘Dealing with property representing proceeds of an indictable offence’.  

2.11   Financial analysis revealed that between 2012 and 2013, there were 2,040 deposits totalling HK$680 million and 1,926 withdrawals totalling HK$497 million through the accounts of the 1^st applicant held in HSB.  The majority of the sources and destinations of these transactions were outside Hong Kong. 

2.12   On9April2015, a restraint order was granted against the accounts of both applicants in HSB and Bank of America.

2.13   The Judge elaborated on the suspension of the BEA and HSB accounts as follows :

‘ 40. For BEA, they had signed merchant agreements in March 2010 with the 1^stapplicant which set out the rights and obligations of the parties. Since January 2013, BEA noticed sharp increase in the balance of the accounts of the 1^st applicant. Staff of BEA sought to meet the 1^st applicant to ascertain the reasons for this growth but with limited progress. On 1 November 2013, BEA noticed the newspaper coverage. It suspected that there might be a pyramid scheme. It decided to suspend the account of the 1^st applicant on the ground that there were breaches of the merchant agreements.

41.   On 2 July 2014, BEA terminated the merchant agreements and withheld the balance in the accounts of the 1^st applicant.  BEA also made a report to the police.  

42.   In the case of HSB, the accounts of both applicants were opened in 2007.  Detailed terms and conditions were set out in the Integrated Business Solution accounts agreements. 

43.   On 1 November 2013, HSB noticed the newspaper coverage which triggered off their internal investigation into the accounts of the 1^st applicant.  HSB suspected that the 1^st applicant was involved in a pyramid scheme.  HSB found that from August 2013 to October 2013, there were huge sums deposited into the 1^st applicant’s account and substantial transfer out to the account of a company overseas.  During this period, the account of the 2^nd applicant was inactive.’ 

2.14   The Judge also referred to the evidence produced by the Police that there were about 49,000 applicants for membership of the scheme. They were from different provinces of China.  The main ones were Guangdong, Guangxi and Zhejiang. 

2.15   The Judge also recorded that Mr MJ Matthews was formally charged with ‘Conspiracy to deal with property knownor believed to represent proceeds of indictable offence’ contrary to section 25(1) on 31 March 2015.  It is common ground that he was acquitted on 31 May 2017 after trial.

2.16   The applicants had on 7 July 2014 commenced civil proceedings against HSB and BEA in HCMP 1626/2014.  The proceedings are currently stayed by the parties’ own agreement pending the outcome of this appeal.

III. The Statutory Regime

1)   Organized and Serious Crimes Ordinance

3.1.   Section 25(1) of OSCO creates the offence of dealing with property known or believed to represent proceeds of crime, commonly known as the ‘money laundering’ offence :

‘25. Dealing with property known or believed to represent proceeds of indictable offence

   (1) Subject to section 25A, a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.’

3.2   Section 25A(1) and (7) creates an offence where a person fails to disclose suspicious transactions relating to property known or believed to represent proceeds of crime.  Section 25A(2)(a) provides a defence for that person to continue dealing with those proceeds when an authorised officer has given his consent (‘the consent regime’) :

‘ 25A. Disclosure of knowledge or suspicion that property represents proceeds, etc. of indictable offence

(1)   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.

(2)   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

....

(7)   A person who contravenes subsection (1) commits an offence and is liable on conviction to a fine at level 5 and to imprisonment for 3 months.’

3.3   Section 15 of OSCO empowers the Court of First Instance to impose a restraint order on application by the prosecutor prohibiting any person from dealing with any realisable property.  

3.4   Section 29 of OSCO deals with compensation.  It provides, among other things, that if an investigation is begun against a person for a specified offence and proceedings are instituted against him but do not result in his conviction, the Court of First Instance may, on application by a person who held realisable property, order compensation to be made by the Government to the applicant.

‘ 29. Compensation

(1)   If an investigation is begun against a person for a specified offence or offences and any of the following circumstances occur, namely—

   (a)  –

   (b)  proceedings are instituted against that person but do not result in his conviction for any specified offence (including any proceedings referred to in section 8(1)(a)(ii) where no confiscation order is made against that person);

   (ba)  –

   (c)  –

   the Court of First Instance may, on application by a person who held property which was realisable property (or, in the case of such a person who has died, his personal representative on his behalf), order compensation to be paid by the Government to the applicant if, having regard to all the circumstances, it considers it appropriate to make such an order.

(2)   The Court of First Instance shall not order compensation to be paid under subsection (1) unless it is satisfied—

(a)   subject to subsection (3A), that there has been some serious default on the part of any person concerned in the investigation or prosecution of the offence or offences concerned; and

(b)   that the applicant has suffered loss in consequence of anything done in relation to the property by or in pursuance of an order of the Court of First Instance under sections 15 to 17.

....

(4)   Without prejudice to subsection (1), where―

(a)   a disclosure is made by any person in accordance with section 25A(2) in relation to any property;

(b)   in consequence of the disclosure and for the purposes of an investigation or prosecution in respect of a specified offence or offences any act is done or omitted to be done in relation to that property; and

(c)   no proceedings are instituted against any person in respect of that offence or those offences or no order is made by the Court of First Instance under section 15 or 16 in relation to that property,

the Court of First Instance may, on application by a person who held the property, order compensation to be paid by the Government to the applicant if, having regard to all the circumstances, it considers it appropriate to make such an order.’

2)    Force Procedures Manual

3.5   The persons that are most likely to have knowledge or suspicion of transactions relating to suspected proceeds of crime and to seek consent from the authority to deal with their customers’ instructions are financial institutions, such as banks.  In order to implement the consent regime, the Police has published an internal manualForce Procedures Manual (the ‘Manual’), the relevant part of which is Chapter 27‑19. 

3.6   Paragraph 5(d) of that chapter of the Manual deals with the considerations in deciding whether to issue the ‘letter of no consent’ :

‘ 5(d) While it is difficult to set out all the circumstances in which the “No Consent” operation should be invoked, hence each case must be decided on its own facts and merits, the underlying principle is that the operation of “No Consent” is reasonable, necessary and proportionate in the circumstances. In his deliberation, SPI may take into account the following:

(i) the reasonable prospect of successfully obtaining a confiscation order.  This in turn requires SPI to take into account:

the nature and seriousness of the offence;

the laying of a charge and the reasonable prospect of successfully obtaining a conviction;

the value of the proceeds of crime; and

the existence of realizable property.

(ii) the reasonable likelihood of obtaining a restraint order;

(iii) the reasonable likelihood of a victim obtaining an injunction within a reasonable period of time;

(iv) any other consideration that may have a bearing such as when dealing with an absconder or an overseas request; and

(v) the underlying principle that persons guilty of criminal offences are denied their proceeds of crime.’

3.7   The manual also deals with the actions to be taken after the ‘letter of no consent’ has been issued :

‘ (e) After the “Letter of No Consent” has been issued, the investigating unit should make the best endeavour to obtain a restraint or confiscation order as soon as practicable or, if the property belongs to a victim(s), request the victim(s) to apply for a civil injunction in respect of the property. Reference may also be made to the ‘Guideline for Cases Concerning Victims’ issued by the Department of Justice (Appendix C);

(f) The OC Case will open a confidential L/M and enclose copies of the “Letter of No Consent”, the written request for it, and all subsequent correspondence in it;

(g) The L/M will be BU monthly to SPI, who will determine whether the “No Consent” operation should be continued or ceased.  He will document his decision and the underlying reasons on the L/M and notify SP JFIU NB of such in writing;

(h) If after a lapse of three months a restraint order or a civil injunction has not been obtained, a monthly review of the investigation by the Formation Commander must be undertaken.  If the “Letter of No Consent” is considered justifiable on the basis of reasonableness, necessity and proportionality, the Formation Commander should ensure the supporting arguments are properly documented before endorsing the L/M for the continued operation of the “Letter of No Consent”.  Otherwise, the Formation Commander should terminate the “Letter of No Consent”. SP JFIU NB must be notified in writing of the Formation Commander’s decision as soon as possible;

(i) “Letter of No Consent” should normally last no more than six months from the date of issue. Only where there are exceptional circumstances will “Letter of No Consent” continue beyond the six‑month period.  Prior to the lapse of the six‑month period, the Formation Commander should critically review the “Letter of No Consent” to decide whether there are exceptional circumstances to justify it to go beyond the six‑month period.  If the Formation Commander is satisfied such “Letter of No Consent” should continue beyond the six‑month period, he or she should ensure the exceptional circumstances are properly documented.  The Formation Commander should also ensure the OC Case submit the relevant case to the Proceeds of Crime Unit of Department of Justice (“DoJ”) for an examination of the prospect of obtaining a restraint order.  If after a lapse of six months and all the above‑mentioned actions have not been taken, the “Letter of No Consent” will lapse and JFIU will issue a “Consent Letter” to the financial institution;

(j) The decision making process by the reviewing officers should be fully documented on the confidential L/M and with JFIU with a view to demonstrating the reasonableness, necessity and proportionality of the operation; and

(k) At any time when the circumstances do not justify the continued operation of the “No Consent”, SP JFIU NB must be notified in the first instance, who will then cease the operation of “No Consent” as soon as practicable.

6. For cases submitted to DoJ for advice, be it on criminal investigation or on restraint order application, OCs Case are to mention in the covering report and/or minute as to whether “Letters of No Consent” have been issued and if so, when they were issued.  This would help DoJ to prioritize the cases accordingly.’

IV.   Constitutional rights

4.1   The rights that are said to have been infringed in the constitutional challenge are property rights (under Articles 6 and 105 of the Basic Law) and access to court rights (under Articles 35 and 80 of the Basic Law and Article 10 of the Hong Kong Bill of Rights). 

4.2   As apparent from the stand taken by the applicants before us (represented by Mr Abraham Chan SC and Mr Joshua Chan) the focus of the appeal is on the property rights.

   Property rights

‘ Article 6 Basic Law

   The Hong Kong Special Administrative Region shall protect the right of private ownership of property in accordance with law.’

‘ Article 105 Basic Law

   The Hong Kong Special Administrative Region shall in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property.

   Such compensation shall correspond to the real value of the property concerned at the time and shall be freely convertible and paid without undue delay. 

   The ownership of enterprises and the investments from outside the Region shall be protected by law.’

Access to Court

‘ Article 35 Basic Law

     Hong Kong residents shall have the right to confidential legal advice, access to the courts, choice of lawyers for timely protection of their lawful rights and interests or for representation in the courts, and to judicial remedies.

   Hong Kong residents shall have the right to institute legal proceedings in the courts against the acts of the executive authorities and their personnel.’

‘ Article 80 Basic Law

The Courts of Hong Kong Special Administrative Region at all levels shall be the judiciary of the Region, exercising the judicial power of the Region.’

‘Article 10 Bill of Rights

Equality before courts and right to fair and public hearing

All persons shall be equal before the courts and tribunals. In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law. The press and the public may be excluded from all or part of a trial for reasons of morals, public order (ordre public) or national security in a democratic society, or when the interest of the private lives of the parties so requires, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice; but any judgment rendered in a criminal case or in a suit at law shall be made public except where the interest of juvenile persons otherwise requires or the proceedings concern matrimonial disputes or the guardianship of children.’

V.   The Judge’s decision

1)   Property rights

(1)   Systemic challenge

5.1   The Judge summarised the applicants’ case on the infringement of property rights as follows :

‘ 17. Mr Shieh argues that s 25 in conjunction with s 25A infringes Articles 6 and/or 105. Section 25 interferes with the use or disposal of the property of the applicants. It imposes criminal liability without prescribing:

a   any time limit within which the authorised officer should decide whether or not to give consent under s 25A(2)(a);

b   any time limit for the expiry of a ‘no consent’ decision; and/or

c   any compensation by the Government for the loss of an applicant whose property was withheld under a ‘no consent’ letter.’

5.2   The applicants described this as the systemic challenge.

5.3   The Judge first held that in relation to section 25, Articles 6 and 105 are not engaged.  He held that :

‘ 32. In my view, the proof of an offence under s 25(1) does not depend on s 25A at all. The two sections deal with different situations. The former creates an offence of dealing with any property representing proceeds of an indictable offence. The latter creates a duty to disclose suspicious property.

   33.   Besides, s 25(2) creates a defence for a person who has not make a disclosure while s 25A(2) creates a defence only for a person who has made a disclosure. 

   34.   There is no justification to link both sections together as Mr Shieh argues. 

   35.   The constitutionality of s 25A(2)(a) would not affect that of section 25(1).  The latter is not concerned with intervention, confiscation or deprivation of any property.  Its operation is independent of s 25A(2)(a).  In my judgment, so far as s 25 is concerned, articles 6 and 105 are not engaged.

   ...’

5.4   In respect of section 25A, the Judge held that :

‘ 47. The law imposes general duties on financial institutions to monitor the activities in the accounts of their customers. Individual financial institution also incorporates clear clauses in their agreements with customers enabling them to perform these duties.

  48.   For BEA, it suspended the accounts of the 1^st applicant on 1 November 2013, long before it reported the suspicion to the police in July 2014.

   49.   For HSB, it suspended the accounts of the 1^st applicant shortly after receiving the ‘no consent’ letter.  Be that as it may, I anticipate HSB would refuse instructions of both applicants based on their suspicion even without the ‘no consent’ letter.  As stressed in the affidavit of Mr Tam Heung Wing, HSB was entitled to refuse the instructions of both applicants on the authority of the expressed and implied terms of the agreements.  

   50.   In my view, financial institutions like HSB and BEA would monitor activities in their customers’ accounts and take steps to protect the interest of the bank.  They would refuse instructions from their customers and withhold the suspicious accounts on their own initiative.  The ‘no consent’ letter, which is often issued subsequent to the disclosure, is not a prerequisite. 

   51.   Apart from financial institutions, there could be people who may hold or control suspicious property under other circumstances.  If these people disclose the suspicious property to an authorised officer under s 25A(1), they must have the requisite knowledge or suspicion.  I am sure they would not further deal with the property after disclosure as it may amount to an offence under s 25(1). The dealing also contradicts their knowledge or suspicion.  The ‘no consent’ letter is not a prerequisite for the decision of these people. 

   52.   In my judgment, s 25A(2)(a) does not operate to withhold the accounts or property of a suspect.  It only creates a defence for further dealings with the property after disclosure.  This ensures that the further dealing would not prejudice the investigation. Certainly, it remains for the financial institutions to decide whether to honour the instructions of their customers despite their suspicion and the disclosure.’ 

5.5   The Judge referred to The Chief Officer, Customs & Excise, Immigration & Nationality Service v Garnet Investments Ltd. (unreported Guernsey Judgment 19/2011, 6 July 2011) and he held that :

‘ 55. I agree with the observation of Montgomerry JA. For the analysis above, the “no consent regime” under s 25A(2)(a) does not operate to freeze suspicious property. Articles 6 and 105 of the Basic Law are not engaged. I need not proceed to the other stages of analysis set out in Ng Po On.’

5.6   The Judge also addressed the applicants’ argument that section 25 does not stipulate any time limit for the no consent regime :

‘ 58. It is true that s 25A does not stipulate any time limit for the “no consent regime”. Theoretically, the police can extend the ‘no consent’ letter for an indefinite period.

59.   The 3^rd respondent has filed an affirmation explaining the internal guidelines on the operation of the “no consent regime”.   In gist, when the JFIU receives a STR, it will refer the STR to an investigation unit for action.  The Superintendant of the investigation unit would decide whether a ‘no consent’ letter is warranted. 

60.   Relevant factors for consideration 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.

61.   Once a ‘no consent’ letter is issued through the JFIU, its extension would be reviewed by the Superintendant of the investigation unit on a monthly basis.  If the aggregate extension exceeds three months, the Formation Commander will be responsible to review the situation on a monthly basis.

   62.   Under normal circumstances, a ‘no consent’ letter should not exceed 6 months.  In exceptional cases, the Formation Commander will review the situation critically and consult the Department of Justice for legal advice. 

   63.   Though of no legal effect, the above guidelines are sufficient safeguard to ensure that the “no consent regime” operates fairly.  In the affirmation of Senior Superintendant Yuen Yuk Kin, some records of the review are exhibited.  It shows that from January 2013 to March 2015, the “no consent regime” in relation to the applicants was reviewed monthly.  This supports the 3^rd respondents’ affirmation that when the aggregate extension exceeds three months, the Formation Commander will review the situation on a monthly basis. 

   64.   One could always query whether the police would strictly observe the guidelines.  In my view, in case of any grievance, the owner of the property can always sue the financial institution or person holding the suspicious property.  In that event, the court may look into the matter in detail.’ 

5.7   In respect of the argument on compensation, the Judge held that section 29 of OSCO enables an applicant to apply for compensation provided the conditions are met.

5.8   Because of the Judge’s view that the property rights were not engaged, he held that it was not necessary for him to consider the other aspects of the constitutional challenge, such as proportionality.

(2)    Fact-specific challenge

5.9   Apart from the systemic challenge the applicants also rely on the fact‑specific challenge.  The Judge summarised the argument as follows :

‘ 94. Mr Shieh argues that even if s 25(1) is not unconstitutional per se, given the following facts, the decision of the police to refuse consent is unlawful:

a   The respondents are using the “no consent regime” to freeze the applicants’ accounts.  There was no right for compensation under s 29. 

b   The respondents failed to take into account the extent of the financial damage suffered by the applicants. 

c   The respondents failed to produce evidence to show that they have seriously considered the applicants’ case.

95.   Mr Shieh also argues that the refusal of consent in all circumstances was unreasonable and irrational.’ 

5.10   The Judge also rejected this argument.  He referred to the evidence produced by the Police :

‘ 102. Inspector Cheng had reasonable suspicion that this is a pyramid scheme contrary to PSPO. The suspected proceeds were deposited in the accounts of the applicants with HSB.

.....

104.   Financial analysis revealed that from 2012—2013, there were 2040 deposits totalling HK$680 million and 1926 withdraws/transfers totalling HK$497 million in the applicants account with HSB.  In response to a production order, the applicants could only produce bank statements with no subscriber record or account ledgers. 

105.   Given the circumstances, Inspector Cheng concluded that the ‘no consent’ letter was justified.

106.   Senior Superintendant Yuen Yuk Kin is the head of fraud section of CCB.  He oversees the review of the ‘no consent’ letter in this case.  In his affirmation dated 10 April 2015, he explained the following:

a   The ‘no consent’ letter was reviewed by Superintendant Cheng Hung in the first 3 months.  After that, the situation was reviewed by Chief Superintendant Wong and himself on a monthly basis.  He produced memos from CCB to JFIU recommending continuation of the ‘no consent’ letter.

b   There was constant liaison with Department of Justice for legal advice with a view to lay charge and apply for a restraint order. 

c   The scale of the investigation was large due to the volume of transactions and that applicants spread over several provinces in China. 

d   The cross border investigation took longer time.

e   There was little co-operation from Mr MJ Matthews in providing necessary business records such as ledgers of the 1^st applicant.

f   This was one of the largest pyramid sales case investigated in Hong Kong.

   107.   In the affirmation of the 3^rd respondent, he explained the operation of the “no consent regime” and the internal guidelines.  He also confirmed that there was constant liaison between JFIU and CCB in this case.’ 

5.11   The Judge then held :

‘ 108. I have read the affirmation of Mr MJ Matthews dated 1 June 2015, I address his queries as follows:

a   He pointed out that given the complexity of this case as the officers claimed in their affirmations, the police could not have decided on 6 November 2013 that a “no consent letter” was justified. 

i   On 1 November 2013, there was the newspaper coverage.  The police made a preliminary enquiry of the background of the 1^st applicant and learned about the suspected pyramid scheme.

ii   On 4 November, the police had interviewed several applicants and had information about the seminar in the office of 1^st applicant. 

iii   On 6 November, the police searched the office of 1^st applicant locating about 50,000 completed application forms.  On the same day, HSB filed a STR in relation to the accounts of both applicants. 

iv   Given these events, I am satisfied that the police had suspicion to justify a ‘no consent’ letter. 

v   Certainly, the further investigation was complicated given the scale of the alleged scheme.  It uncovered more information to support the initial suspicion.

b   He criticised that there was no mention of the legal advice by the Department of Justice in the affirmation of Senior Inspector Cheng.  In my view, this kind of information is usually not disclosed as it is privileged and sensitive.  I do not think it is relevant here. 

c   There was no evidence that the 1^st applicant used its business as a façade to launder crime proceeds.  In my view, Mr Matthews fails to appreciate that the business itself may be a crime in Hong Kong.  Any profit/benefit arising out of the business may be proceeds of a crime.  Anyone dealing with the proceeds in the account of the 1^st applicant may commit an offence under s 25(1) OSCO if he has the requisite intent. 

d   Certainly, Mr Matthews may exercise his right of silence.  The point raised by the police about lack of co-operation was mainly about business records such as ledgers of 1^st applicant. This contributed to additional difficulty in their investigation. 

109.   I appreciate there are information which may not be disclosed in the affirmations of the police because of the ongoing investigation.  However, I am satisfied that on the information so far before me, there was no indication that the respondents have acted unreasonably.  In my view, they have taken into account relevant factors.  The initial ‘no consent’ letter and its subsequent extension are justified.  They are not Wednesbury unreasonable.’

2)   Access to Court

5.12   In respect of right of access to Court, the Judge held that the applicants can commence civil claims against the two banks to recover the money in their accounts and the applicants can also commence judicial review against the decision of the Police in granting the ‘Letter of No Consent’.  The Judge held that the right of access to Court is not engaged.

VI.   The present appeal

1)   Property rights:

A)   The systemic challenge

(1)   ARE PROPERTY RIGHTS ENGAGED?

6.1   The first issue is whether the constitutional right to property is engaged. 

(I)   THE APPLICANTS’ ARGUMENTS

6.2   Mr Chan submitted that the Judge was wrong to hold property rights are not engaged.  He submitted the Judge erred in holding that the withholding of consent under section 25A(2)(a) does not operate to freeze funds because (i) it is the substantive offence under OSCO section 25(1) which deters banks from dealing with the funds, and (ii) proof of the offence under section 25(1) does not depend on the issuance of a ‘no consent letter’: Judgment paragraphs 25‑35.  This reasoning wrongly focused on the formal, when it is the overall substantive effect of the withholding decision and its practical impact upon the bank – the ‘chilling effect’ – that matters.  The Judge further erred in holding that the ‘no consent’ letters do not operate to freeze funds because banks and like institutions refuse customer instructions ‘on their own initiative’: Judgment paragraphs 49‑50.  This again ignored both the practical realities on the ground and the principle that, even where interference may depend in part on the voluntary acts of third parties, fundamental rights are still engaged if the public authority in effect encouraged or materially increased the likelihood of such acts.  Further, contrary to paragraph 50 of the judgment, the legal threshold is not whether ‘no consent’ is an absolute ‘prerequisite’ for a bank’s account freezing decision but whether it may materially influence that decision.  The Judge misread paragraphs 53‑55 of the judgment in Garnet by attributing to it a significance essentially opposite to the true position.  The Guernsey Court of Appeal recognised that the chilling effect of potential criminal liability under the no‑consent regime would prevent banks from dealing with the funds: [29-31], [42].  It expressly held that the right to property under Article 1 Protocol 1 of the European Convention of Human Rights (‘ECHR’) was engaged: [94‑100].

6.3   Mr Chan had extracted from the cases four relevant factors in assessing whether the constitutional rights are engaged. These factors are not challenged by the respondents : 

(1)   The Court is concerned with substance, not form.  It must ‘look behind the appearances and investigate the realities of the situation complained of’: Sporrong and Lonroth v Sweden (1983) 5 EHRR 35, [63]; Koon Wing Yee v Insider Dealing Tribunal (2008) 11 HKCFAR 170, [51].

(2)   A statutory provision’s effect should not be viewed in isolation but in light of its interaction with other parts of the statute: A v ICAC (2012) 15 HKCFAR 362, [37‑48], HKSAR v Ng Po On (2008) 11 HKCFAR 91, [48].  The Court considers how relevant provisions operate in tandem or lockstep and the net effective ‘burden on the [constitutional] right’: Official Receiver & Trustee in Bankruptcy of Chan Wing Hing v Chan Wing Hing (2006) 9 HKCFAR 545, [37‑39].

(3)   Where a provision’s precise scope is uncertain, individuals may in reality be deterred from acting within their strict rights even if ‑ on a detailed forensic and legal analysis - the conduct falls outside its scope.  Constitutional review being concerned with practical effects, this ‘chilling effect’ should be taken into account: see e.g. Stunt v Associated Newspapers Ltd [2017] 1 WLR 3985, [54], Mosley v United Kingdom (2011) 53 EHRR 30, [116], [125-132].

(4)   Human rights protections may still be engaged where interference involves private third party acts.  For example, public authorities are required to protect individuals from third party acts which interfere with fundamental rights such as free expression: Leung Kwok Hung v HKSAR (2005) 8 HKCFAR 229, [22-24], Chan Hau Man Christina v Commissioner of Police [2009] 4 HKLRD 797, [14‑16].  At the least, public authorities are under a duty not to instruct, assist, encourage or threaten third parties to engage in acts amounting to interference with fundamental rights if carried out directly by the authority itself.  That the third party took the initiative in its act is no defence.  To hold otherwise ‘would be tantamount to allowing [public] authorities to evade their [constitutional] responsibilities ... by the use of private agents’: MM v Netherlands (2004) 39 EHRR 19, [36-41], Van Vondel v Netherlands (2009) 48 EHRR 12, [45-49], The Law of Human Rights (2^nd ed), [12.242].

(ii)    My view on engagement

6.4   I am happy to adopt the four factors advanced by Mr Chan in paragraph 6.3 above.

6.5   In my view, section 25 whether by itself or in combination with section 25A does not engage the property rights.  Section 25 merely sets out the creation of the offence of dealing with property known or believed to be the proceeds of an indictable offence.  By no stretch of the imagination can this section be held to have an effect on the property rights of the applicants.  However, section 25A is a different story.  In coming to this view I respectfully adopt the analysis in Garnet.

(1)  Garnet

6.6   The Court of Appeal of Guernsey was dealing with an appeal in which the first instance judge granted an application made on behalf of Garnet Investments Limited (‘Garnet’) for judicial review of a decision of the Financial Intelligence Service (‘FIS’) which refused to consent to instructions given by Garnet in relation to its bank accounts held with BNP, Guernsey, under subsection 39(3) of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999 as modified in accordance with the provisions of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) (Enforcement of Overseas Confiscation Orders) Ordinance, 1999, section 1(2), Schedule 2, paragraph 16, with effect from 1^st January, 2000 (‘the Guernsey Proceeds of Crime Law’).

6.7   The wording of the relevant sections of the Guernsey law is quite similar to our OSCO dealing with the offence of money laundering and the no consent regime.  For ease of reference, I set out the relevant Guernsey provisions :

‘ Assisting another person to retain the proceeds of criminal conduct

39. (1) Subject to subsection (3), if a person enters into or is otherwise concerned in an arrangement whereby –

(a) the retention or control by or on behalf of another person (called in this Law “A”) of A’s proceeds of criminal conduct is facilitated (whether by concealment, removal from the Bailiwick, transfer to nominees or otherwise), or

(b) A’s proceeds of criminal conduct –

   (i)    are used to secure that funds are placed at A’s disposal,

   (ii)   are used for A’s benefit to acquire property by way of investment,

   knowing or suspecting that A is a person who is or has been engaged in criminal conduct or has benefited from criminal conduct, he is guilty of an offence.

   (2)   In this section, references to any person’s proceeds of criminal conduct include a reference to any property which in whole or in part directly or indirectly represents in his hands his proceeds of criminal conduct.

   (3)   Where a person discloses to a police officer a suspicion or belief that any funds or investments are derived from or used in connection with criminal conduct or discloses to a police officer any matter on which such a suspicion or belief is based –

(a) if he does any act in contravention of subsection (1) and the disclosure relates to the arrangement concerned, he does not commit an offence under this section if-

(i) the disclosure is made before he does the act concerned and the act is done with the consent of the police officer (and in this case the person doing the act shall incur no liability of any kind to any person by reason of such act), or

(ii) the disclosure is made after he does the act, but is made on his initiative and as soon as it is reasonable for him to make it, and

(b) the disclosure-

(i) shall not be treated as a breach of any obligation as to secrecy or other restriction upon the disclosure of information imposed by statute or contract or otherwise, and

(ii) shall not involve the person making it in any liability of any kind to any person by reason of such disclosure.

   (4)   In proceedings against a person for an offence under this section, it is a defence to prove-

(a) that he did not know or suspect that the arrangement related to any person’s proceeds of criminal conduct,

(b) that he did not know or suspect that by the arrangement the retention or control by or on behalf of A of any property was facilitated or, as the case may be, that by the arrangement any property was used as mentioned in subsection (l)(b), or

(c) that-

(i) he intended to disclose to a police officer such a suspicion, belief or matter as is mentioned in subsection (3), in relation to the arrangement, but

(ii) there is reasonable excuse for his failure to make disclosure in accordance with subsection (3)(a).

   (5)   In the case of a person who was in employment at the relevant time, subsections (3) and (4) shall have effect in relation to disclosures, and intended disclosures, to the appropriate person in accordance with the procedure established by his employer for the making of such disclosures as they have effect in relation to disclosures, and intended disclosures, to a police officer.

   (6)   A person guilty of an offence under this section shall be (a) on summary conviction, to imprisonment for a term not exceeding 12 months, a fine not exceeding level 5 on the uniform scale, or both, or (b) on conviction on indictment, to imprisonment for a term not exceeding 14 years, a fine, or both.

   (7)   No prosecution shall be instituted for an offence under this section without the consent of Her Majesty’s Procureur.’

6.8   The important difference with our law is that Guernsey legislation does not have the general offence of failing to disclose possible money laundering.   The Guernsey Court of Appeal (per Montgomery JA) first identified the purpose of the consent regime :

‘ 26. In our judgment, in the context of this very wide ranging offence, the consent regime in subsection 39(3) of the Guernsey Proceeds of Crime Law serves two purposes. First the existence of the consent regime provides a strong incentive to persons who are suspicious of funds to report those suspicions before any transaction is effected. Unlike other parts of the United Kingdom (see for example ss 330-332 of Proceeds of Crime Act 2003 (POCA)), Guernsey does not have a general offence of failing to disclose possible money laundering.

 27.   Second, the consent regime gives the police the operational freedom to grant relief from criminal liability in circumstances where it is considered to be in the interests of law enforcement so to do.  Thus consent may be granted to avoid a suspected criminal becoming aware of the suspicions that are harboured in relation to him.  This objective is also reinforced by the existence of offences in connection with tipping off (see section 41).  Consent may also be granted so as to permit a controlled transfer to take place so that funds can be traced for investigative purposes.’

6.9   She then held that :

‘ 29. Any funds reported to the police or the FIS for the purpose of seeking consent are in effect frozen, not by virtue of any refusal of consent, but by virtue of the ordinary operation of the criminal law which in the absence of consent will make the person seeking consent unwilling to transact for fear of punishment.’ (my emphasis)

6.10   Montgomery JA commented that while the decided cases showed the courts have used the term ‘informal freeze’.

‘ 31. ... this is an observation as to the practical impact of the criminal law on the bank rather than an accurate characterisation of the consent regime as an aid to the freezing of property.’

6.11   She held that the freezing power is granted by, for example, a restraint order rather than by the consent regime :

‘ 34. Consent provisions were a feature of anti money laundering legislation before there was any developed legislative system permitting the restraint of funds during the investigation of crime. Under the Drugs Trafficking Offences Act 1986, for example, a restraint order could only be granted after proceedings for a drug trafficking offence had commenced.

 35.   This legislative history does not suggest that the consent provisions as they originally emerged were intended to enable the regime of consent to be used informally in aid of the formal systems of restraint or confiscation.

 36.   The only lawful mechanisms for freezing suspected proceeds of crime in Guernsey are the powers conferred on the courts under sections 26(1), 27(1) and 28(1) of the Guernsey Proceeds of Crime Law.  It appear to us to be highly unlikely that the consent provisions in the Guernsey Proceeds of Crime Law were intended to confer unregulated and informal freezing powers on the police to be exercised before the courts are involved without any mechanism for review or limitations on the circumstances in which any informal freeze could be imposed.

 .....

 38.   True it is that in practice the process of reporting suspicious transaction and seeking consent might be used by the reporting institution for delaying possibly difficult decisions as to whether to transact and may also in practice provide a period in which the police may consider whether they wish to commence an investigation or seek any restraint orders, but the practical utility of the hiatus that is created whilst an application for consent is pursued does not mean that this was the sole or dominant purpose of the consent regime and does not support the argument that this was the intention of the legislation.

 .....

 41.   In our judgment, it is not the FIS that is denying Garnet access to its property and preventing judicial oversight, it is the impact of the width of the criminal law and its chilling effect upon the person holding the fund, namely BNP.’

6.12   Montgomery JA went on to consider whether the consent regime was in breach of Article 1 of the first Protocol of the European Convention of Human Rights (‘the Convention’), as applied in Guernsey.

6.13   Article 1 of the first Protocol provides :

‘ Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.’

6.14   She held that Article 1 was engaged.  She first considered that the term ‘possession’ is not limited to tangible assets but to include any right which has an economic value.  She held that the money standing to the credit of a customer in the bank has an economic value :

‘ 95. As the Lieutenant Bailiff indicated in paragraph 54, the term “possessions” is not limited to tangible assets. Since the decision in Marckz v Belgium, there have been numerous decisions of the Strasbourg Court determining what falls within the concept of possessions (in French: biens). Whilst the decisions have proceeded very much on a case by case basis, it seems correct now to indicate that almost any right which has an economic value falls to be included in the notion. Such rights have included a licence to extract gravel, a licence to operate a bonded warehouse and a right to fish on rivers: see Fredin v Sweden (1991) 13 EHRR 784, Rosenweig v Poland, Judgment 28 July 2005 and Baner v Sweden (1989) 60 DR 128.

 96.   In the circumstances before us we are of the opinion that, as a matter of national law, sums standing to the credit of a customer in a bank account are not part of the property of the customer.  They have been taken by the bank on an improper loan (that is a loan where the subject matter of the loan may be consumed), and no debt arises until a demand for payment is made: see Joachimson v Swiss Bank Corporation [1921] 3KB 110.  However, the right under the contract between banker and customer undoubtedly has an economic value where the account between banker and customer stands to the credit of the customer.  We are therefore of the opinion that the right to demand payment of money under a contract between banker and customer is a right with an economic value and, therefore, a possession for the purpose of Article 1 of the first Protocol.’

6.15   Montgomery JA went on to hold that there was no deprivation of the possession :

‘ 99. In our opinion, the present circumstances do not amount to a deprivation as that concept is understood under Article 1 of the first Protocol. Garnet has not been put in the position of having no means whatsoever of dealing with its property, namely, the right to demand payment under the banking contract. The ability to enforce that contract is a matter of civil law. Put simply, only if the bank can establish a relevant defence will Garnet fail to obtain repayment of its funds. Doubtless the bank would defend the proceedings, but the existence of the lack of consent under Section 39(3) would not be relevant as a defence to that claim. The parties would be joined on an issue or issues as to whether or not the funds were tainted and it seems to us likely as we have indicated above that the burden of proof - to the civil standard of balance of probabilities - would be upon the bank to show that the funds were indeed tainted. Even if Garnet lost that action, they would not lose the funds. Assuming that there were no further developments and that all that happened was the continuation of the lack of consent, the funds would remain in the hands of the bank. Were the factors which had led the court to find in favour of the bank to change, FIS might decide to consent, or the bank might decide to agree to release the funds; and in any event upon a change of circumstances Garnet could raise further proceedings against the bank.’

6.16   But she went on to hold that :

‘100. The temporary seizure of property in criminal proceedings constitutes a control of use for the purposes of the second paragraph of Article 1 of the first protocol: see Raimondo v Italy.’ (my emphasis)

6.17   On that basis, she held that the question of proportionality arises and having considered the situation of Guernsey, she came to the view that the present case does not

‘ 101. ..... disclose a lack of proportionality between the overall aim of the States of Guernsey to tackle money laundering and the inability of Garnet to have access to its funds for the time being.’

(2)    The present case

6.18   The wording of Article 1 of the Convention is different from our Article 105, but the overall intention is the same, namely, the protection of an individual in the use of his property.  Deprivation of the property must be subject to law.  In Hong Kong, a property owner has the right to compensation for unlawful deprivation of his property.  Property is not confined to tangible assets but includes any right which has an economic value.  The right under the contract between the banker and his customer undoubtedly has an economic value where the account between the banker and customer stands to the credit of the customer.  As submitted by Mr Chan the word ‘property’ includes a chose in action.  The applicants’ money in the banks is in the form of a chose in action.  The receipt of money by a banker from or on account of his customer constitutes him the debtor of the customer: Foley v. Hill (1848) 2 HL. Cas 28 referred to in Garnet.  A debt has been held to be a chose in action (Halsbury’s Law of England, 5^th Ed. Vol. 13, paragraph 5).  Based on the analysis of Garnet, I accept that the ‘Letter of No Consent’ does not by itself freeze the accounts of the applicants but this letter has affected the use by the applicants of their money in the bank accounts.  Although the ‘temporary freezing’ of the applicants’ accounts does not constitute a deprivation of their property, the use by the applicants of their property in the nature of the debt which has an economic value is affected. 

6.19   As Mr Chansubmitted, where consent is withheld, the bank ‘invariably errs on the side of caution and refuses to make the payment.  The result is that the account is ‘informally frozen’ for so long as the bank has the relevant suspicion and the police do not consent’: Chief Officer of Jersey Police v Minwalla [2007] JRC 137, [18].

6.20   In assessing whether constitutional rights are engaged, the Court is concerned with substance and not form.  In line with this principle, the practical impact of the criminal law on the banks affects the right of the applicants to make use of their money deposited with the banks in the form of a chose in action.  

(3)   Assumption of risks?

6.21   Mr McCoy SC (together with Mr Martin Hui SC, Mr Albert N B Wong and Ms Denise Chan) for the respondents submitted that the funds are both material in the investigation and also potentially forfeitable.  The temporary seizure of exhibits, pending criminal charges, by the police (in other investigations) is a lawful exercise.  There is a duty on the Police to seize material exhibits in investigations.  The present regime is further removed though, as the Police has not seized the account or its funds.

6.22   Mr McCoy referred to the decision of the European Court of Human Rights in Gasus Dosier und Fordertechnik GmbH v Netherlands,Series A No 306‑B (1995) 20 EHRR 403 which was concerned with tax enforcement by the Dutch tax authorities.  They were authorised to seize any assets on the premises of a tax debtor, including those subject to a retention of title clause in favour of a seller.  The sellers were in no position to ascertain the actual risk of seizure, because the purchaser’s tax debts were confidential and would not be released by the authorities.  The applicant company (G) sold a concrete-mixer to a Dutch company (A) on the condition that title would not pass until the full price had been paid.  The machine was seized to cover A’s tax debts.  G complained that it had not had access to an independent and impartial tribunal, contrary to Article 6(1) of the Convention, and that it had been deprived of its possessions in violation of Article 1 of Protocol No. 1.  The Court there held that while the property rights provision was engaged, the requirement of proportionality has been satisfied.  It held that :

‘ 70. It is nonetheless true, as observed by the Commission, that the applicant company was engaged in a commercial venture which, by its very nature, involved an element of risk. The facts of the case show that Gasus were in fact sufficiently aware of their risk to take steps to limit it.’ (emphasis added)

6.23   Although Gasus was concerned with the proportionality issue, it seems the purpose of Mr McCoy relying on this case is to show that property rights are not engaged because of the assumption of risks by the applicants when they entered into a commercial transaction with their banks which is subject to the provisions of OSCO regarding suspicion of money laundry.  This argument is similar to the one raised in the recent decision of Hysan Development Co Ltd v Town Planning Board (2016) 19 HKCFAR 372 where it was argued that the property rights protection is not engaged in respect of planning restrictions imposed on property owners because their rights as property owners are intrinsically defined by and subject to legal restrictions, including the power of the Board to impose such planning restrictions, as incidents of their ownership in accordance with the general law, so that the restrictions whenever imposed do not represent incursions into constitutionally guaranteed rights and thus do not need to be justified.

6.24   This view was roundly rejected by the Court of Final Appeal.  Ribeiro PJ held the focus of the argument is on the phrase ‘in accordance with law’ :

‘   30.   Articles 6 and 105 stipulate that the obligation is to be discharged by providing such protection “in accordance with law”.  That phrase and similar phrases such as “prescribed by law” and “according to law”, appear in numerous Articles of the Basic Law and the Hong Kong Bill of Rights Ordinance (Cap. 383).  It is well-established that they mandate the principle of legal certainty, requiring the subject matter of the Article to be regulated by laws which are accessible and precisely defined.  It follows that the phrase introduces another aspect of protection: Property rights are to be guaranteed by clear and accessible laws, and not, for instance, left to uncharted administrative discretion.

   31.   In many other Articles of the Basic Law, the phrase functions in the same way, stipulating a requirement for legally certain means for protecting rights and freedoms.  To take just one example, Art. 4 provides:

The Hong Kong Special Administrative Region shall safeguard the rights and freedoms of the residents of the Hong Kong Special Administrative Region and of other persons in the Region in accordance with law.

This appears alongside Art. 6 in Chapter I which lays down General Principles.  It obliges the HKSAR to safeguard a broad spectrum of rights and freedoms in clear and accessible terms.

   32.   I can therefore see no basis for reading the words “in accordance with law” as qualifying or limiting the protection conferred by Arts. 6 and 105.  Such an interpretation of the Articles in effect involves the unwarranted insertion of the word “only” before the phrase in question.  Far from diminishing the protection of those Articles, the phrase confers the added protection of legal certainty.’ (emphasis added)

6.25   Applying the rationale in Hysan, I reject the assumption of risk argument advanced by the respondents as being contrary to the express provisions of Articles 6 and 105.  They are for the protection of individuals and are not intended to qualify the protection by treating the individuals as having assumed a ‘qualified’ protection.

6.26   It is of note that in Hysan, Ribeiro PJ made certain qualifications to the ambit of his discussion :

‘ 41. I should however make it clear that I am not excluding the possibility that it may in law be open to an owner to raise constitutional objections based on arts.6 and 105 in respect of planning restrictions which were in place prior to his acquisition of the land. I wish to leave open such an argument since a similar question was the subject of disagreement in the House of Lords in Wilson v First County Trust Ltd (No 2). There, the issue was whether A1P1 was engaged when a contract of loan made on the security of a car pawned to a pawnbroker was rendered unenforceable by a provision in the English Consumer Credit Act 1974. Lord Hope of Craighead, Lord Hobhouse of Woodborough and Lord Scott of Poscote held that it was not engaged since the Act had invalidated the contract from the outset so that no existing contractual right had been interfered with when the Act operated to make the transaction unenforceable. Lord Nicholls of Birkenhead disagreed, stating:

   ... The proposition advanced by the Secretary of State [accepted by the three members of the panel referred to above] would mean that however arbitrary or discriminatory such legislation might be, if it was in existence when the transaction took place a court enforcing human rights values would be impotent.  A Convention right guaranteeing a right of property would have nothing to say.  That is not an attractive conclusion. (emphasis added)

   42. The present discussion relates only to challenges made to decisions taken by an executive authority pursuant to statutory machinery, not involving a challenge to the constitutionality of the empowering statute itself. Different types of legislation may give rise to different forms of interference having differing impacts upon property rights. I wish also to leave open the question whether, and if so, in what way arts.6 and 105 are engaged on a challenge to the constitutionality of such legislation.’

6.27   The issue before us is a full frontal constitutional challenge of the empowering statute itself.  The OSCO has been in place since 1995 well before the applicants used the service of the two banks.  On my part, proceeding on principles, I would associate with the views of Lord Nicholls of Birkenhead quoted in paragraph 41 of Ribeiro PJ’s judgment which I have underlined for emphasis and hold that the property rights are engaged in the present case.

(2)   Prescribed by law

6.28   Mr Chan submitted that before the Court proceeds to examine whether the intrusion of the property rights can be justified under the proportionality test, the Court should first consider the issue of whether the consent regime was ‘prescribed by law’, details of which I will elaborate on in the next paragraph.  In Hysan the discussion on ‘prescribed by law’ took place after the topic on engagement of rights but before proportionality.  In Leung Kwok Hung & Others v HKSAR (2005) 8 HKCFAR 229, the Court of Final Appeal stated that the discussion came under the heading of ‘The Constitutional requirements for restriction’.  Although in my view, in the context of this case, the logical place to examine the ‘prescribed by law’ argument should be under the proportionality analysis because the issue is whether the impairment or restriction is justified, I am content to deal with this topic first. 

6.29   Mr Chan relies on paragraph 30 of the holdings of Ribeiro PJ in Hysan and submitted that the principle of legal certainty requires the restraint on rights to be prescribed by laws which are accessible and precisely defined, and not for instance left to uncharted administrative discretion (‘prescribed by law argument’).  He argued that a restraint upon fundamental rights fails the ‘prescribed by law’ requirement if not adequately accessible and sufficiently precise to enable individuals to regulate and foresee the consequences of their conduct: Shum Kwok Sher v HKSAR (2002) 5 HKCFAR 381, [62‑63].  The consent regime under OSCO, sections 25 and 25A falls foul of these requirements.  The statute provides no guidance at all as to when consent may be refused and if so for how long and by what criteria.  The Court can only take into account administrative practices, instructions or directives if the individuals concerned are made sufficiently aware of their contents: Silver v United Kingdom (1983) 5 EHRR 347, [88], Leander v Sweden (1987) 9 EHRR 433, [51].  So Chapter 27‑19 of the Manual cannot rectify the position, as it was not made available to the general public or the applicant.  In any event, the manual procedures are themselves too vague.  For example, paragraph 5(f) states that consent should not be withheld for more than six months unless there are ‘exceptional circumstances’.  There is no guidance as to what sort of exceptional circumstances are required.  The absence of clear and accessible guidelines with binding force is acute.  He relied on SJ v Johnson Cynthia (unreported, HCMP 1789/2016, 4 August 2016) where Zervos J (as he then was) called for a review of the position after pointing out that the ‘informal freezing’ caused by the ‘no consent’ letter in that case lasted for about two years and 10 months.

6.30   Mr Chan, however, accepted that this issue was not raised in the applicants’ Form 86, it was not raised before the Judge and it was not included in the Notice of Appeal but only appeared in his written submission.  At the direction of the Court, Mr Chan formulated this issue in a proposed amendment of the Form 86 as follows :

‘ 129C. Further still, insofar as OSCO does not (l) prescribe any temporal limit to the power to withhold consent under section 25A(2)(a), or (2) provide any other indication as to the scope of the discretion to withhold consent under section 25A(2)(a), it is excessively uncertain, inadequately accessible and is not prescribed by law.’

6.31   Although Mr McCoy had briefly addressed the ‘prescribed by law’ issue in his written submission, his ultimate position in Court is that the applicants should not be allowed to rely on this issue for the first time in this Court.  He submitted that the respondents would have filed evidence if this issue had been pleaded and raised in the court below.  In my view, the objection raised by Mr McCoy is legitimate.  In a constitutional challenge, the burden rests upon the respondent to justify the incursion of the protected rights.  If the ‘prescribed by law’ issue had been raised below, the respondent in order to discharge this burden was clearly entitled to adduce evidence in order to justify why the Hong Kong legislative and executive authorities chose to deal with the consent regime in its current form, in particular why details of the operation are only provided in an internal manual not accessible to the public.  This has a direct bearing on the margin of discretion principle.  Although there is material concerning the second reading of the Organised and Serious Crimes Bill in the Legislative Council in 1995, at the very least, the respondents should be given a chance to explore if there are other materials covering specifically the use of the Manual if the issue of ‘prescribed by law’ had been expressly raised in the Form 86.

6.32   In any event the larger picture is that sections 25 and 25A of OSCO are part of the legislative scheme to combat the crime of money laundering.  There are similar disclosure and consent regime in the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405), sections 25 and 25A.  Likewise, there are also compliance requirements for financial institutions in Anti‑Money Laundering and Counter‑Terrorist Financing Ordinance (Cap. 615), Schedule 2, Part 2.  This means a decision on sections 25 and 25A of OSCO will inevitably have an impact on the effectiveness of these legislations.  All the more reason why the respondents should be given an opportunity to respond if the issue had been raised below.  I am of the view that the applicants are not entitled to rely on the ‘prescribed by law’ arguments for the first time in this Court.

(3)   Justification : Proportionality

(i)   Four stage approach

6.33   The next topic of discussion is whether the infringement of property rights is justified under the proportionality test.  Recently, in Hysan,Ribeiro PJ was of the view that the four‑step analysis which has generally been accepted in the United Kingdom and the European Union should be explicitly adopted in Hong Kong.  The four‑step approach is as follows :

(1)   whether the intrusive measure pursues a legitimate aim;

(2)   if so, whether it is rationally connected with advancing that aim;

(3)   whether the measure is no more than necessary for that purpose; and

(4)   where an encroaching measure had passed the three‑step test, the analysis should incorporate a fourth step asking whether a reasonable balance had been struck between the societal benefits of the encroachment and the inroads made into the constitutionally protected rights of the individual, asking in particular whether pursuit of the societal interest resulted in an unacceptably harsh burden on the individual.

6.34   Ribeiro PJ emphasized the overlapping nature of these four elements of the analysis :

‘ 60. However, the point to emphasise is that the three (or four) distinct elements of the analysis cannot be treated as existing in isolated airtight compartments, unaffected by each other. Recent authority has highlighted the fluidity and flexibility of the proportionality concept and the fact that its elements are conceptually interrelated and interdependent. ...’

(ii)   The two standards

6.35   Ribeiro PJ then identified the two standards used to assess the permissible extent of the infringement into the protected rights. The first is whether the intruding measure is ‘no more than necessary’ and the second is whether the intruding measure is ‘manifestly without reasonable foundation’ :

‘ 136. At the third stage, assessing the permissible extent of the incursion into the protected right, two main standards have been applied. The first is the test of whether the intruding measure is “no more than necessary” to achieve the legitimate aim in question. This must be understood to be a test of reasonable necessity. If the Court is satisfied that a significantly less intrusive and equally effective measure is available, the impugned measure may be disallowed.

   137.   An alternative standard which may be applied at the third stage is one which asks whether the encroaching measure is “manifestly without reasonable foundation”, being a standard closely related to the concept of “margin of appreciation” in ECtHR jurisprudence.’  (emphasis added)

6.36.   Ribeiro PJ held that the second standard is closely related to the concept of ‘margin of appreciation’ (at supra‑national level) and the concept of ‘margin of discretion’ (at domestic level).  He held that where the original decision-maker is better placed to decide the legitimacy of the societal aims of the challenged measures and the means to achieve them, the standard to apply is the ‘manifestly without reasonable foundation’ standard.

‘ 138. At the supra-national level of the ECtHR, the margin of appreciation doctrine involves the recognition that on certain issues, the Court should allow Member States latitude to decide on the legitimacy of their societal aims and the means to achieve them since they are better placed to make the assessment. Similar considerations have led the Court at a domestic level to allow the legislative and executive authorities latitude or a “margin of discretion” to do the same, applying the “manifestly without reasonable foundation” standard in such cases.

   139.   The “manifest” standard has been used in cases where the Court recognises that the originator of the impugned measure is better placed to assess the appropriate means to advance the legitimate aim espoused.  This has occurred in cases involving implementation of the legislature’s or executive’s political, social or economic policies but the principle is not confined to such cases.

   140.   The location of the standard in the spectrum of reasonableness depends on many factors relating principally to the significance and degree of interference with the right; the identity of the decision-maker; and the nature and features of the encroaching measure relevant to setting the margin of discretion.

   141. The difference between the two standards is one of degree, with the Court in both cases, scrutinising the circumstances of the case and the factual bases claimed for the incursion.’  (emphasis added)

6.37   Ribeiro PJ then held that this standard is to be applied to decisions of the Town Planning Board which are not flawed on traditional judicially reviewable grounds, but which imposed restrictions which encroach upon a land owner’s property rights :

‘ 142. No extant planning restrictions fall to be considered since the Board is to reconsider its decisions. In general terms, where the Board reaches decisions which are not flawed on traditional judicially reviewable grounds, any imposed restrictions which encroach upon a landowner’s property rights should be subject to constitutional review applying the “manifestly without reasonable foundation” standard. It is considered to be highly unlikely that Board decisions imposing planning restrictions arrived at lawfully and in conformity with the principles of traditional judicial review, would be susceptible to constitutional review unless the measures are exceptionally unreasonable.’

In my view the same reasoning applies to the legislative measures now under challenge.

(iii)   Consideration of the proportionality test

6.38   The real contention in this appeal is that of proportionality.  The Judge held that as the property rights were not engaged it was not necessary for him to consider the other arguments advanced by the parties which obviously included proportionality.  Accordingly, we do not have the benefit of the Judge’s input on this aspect of the case.  I will deal with the matter based on the submissions before us. 

(1)   Legitimate purpose and rationale connection

6.39   Mr Chan accepted that in respect of the first and second stage of the analysis, namely legitimate purpose and rational connection, the power to withhold consent to deal with suspected proceeds of crime without risk of potential criminal liability under OSCO, sections 25 and 25A are rationally connected to the legitimate aim of deterring criminal activity by restricting access to the proceeds of crime.

(2)   Examination of the Manual

6.40   I now examine whether the procedures set out in the manual are themselves so vague as to fall foul of the proportionality requirement. 

6.41   In my view, the absence of ‘temporal limit’ and lack of guideline arguments by the applicants must be rejected for the following reasons submitted by Mr McCoy :

(a)   The starting point is that there is an implied duty of all persons exercising public power such as the Police to act reasonably.  Mr McCoy correctly submitted that reasonable suspicion activates the right to arrest or to investigate and such an assessment can only be challenged on the basis that it is Wednesbury unreasonable, namely perverse.  This point is fully illustrated by Shaaban Bin Hussien and Others v Chong Fook Kam and another [1970] A.C. 942 where Lord Devlin dealing with the issue of arrest on suspicion stated that :

‘ Suspicion in its ordinary meaning is a state of conjecture or surmise where proof is lacking: “I suspect but I cannot prove.” Suspicion arises at or near the starting-point of an investigation of which the obtaining of prima facie proof is the end. When such proof has been obtained, the police case is complete; it is ready for trial and passes on to its next stage. It is indeed desirable as a general rule that an arrest should not be made until the case is complete. But if arrest before that were forbidden, it could seriously hamper the police. To give power to arrest on reasonable suspicion does not mean that it is always or even ordinarily to be exercised. It means that there is an executive discretion. In the exercise of it many factors have to be considered besides the strength of the case.’ (emphasis added)

See also Pang Yiu Hung v. Commissioner of Police & Another [2003] 2 HKLRD 125 and HKSAR v. Bian Zhenju, CACC 471/2012 (unreported, 23 December 2013).

(b)   In Hong Kong criminal law, there is no time frame imposed for the investigation of any criminal offence.  Section 26 of the Magistrates Ordinance, Cap. 227, of course, requires all summary offences to be charged or summonses to be laid, within six months of the date of the offence having occurred. However, that default provision is itself extended in a number of ordinances in relation to mere summary offences, where the underlying investigatory issues can be more complicated or involve international or Mainland elements, e.g. section 389(1) of the Securities and Futures Ordinance, Cap. 571, extends the time limit for prosecution (and therefore for potential investigation) for three years (after the commission of the offence).  Other examples are section 47 of the Dutiable Commodities Ordinance, Cap. 109; section 37 of the Import and Export Ordinance, Cap. 60; section 36D of the Prevention of Copyright Piracy Ordinance, Cap. 544; section 120A of the Copyright Ordinance, Cap. 528 which all create other variations to the default positons in the Magistrates Ordinance.

(c)   There is no time limit at common law for the prosecution of any indictable offence subject, of course, to the power of the Court to stay proceedings by reason that a fair trial could not take place because of delay.

(d)   Section 70 of the Interpretation and General Clauses Ordinance (Cap. 1) provides :

‘ Where no time is prescribed or allowed within which any thing shall be done, such thing shall be done without unreasonable delay, and as often as due occasion arises.’

The decision making process under the Manual must be subject to this express legislative provision.

(e)   The time and the method taken by the Police to investigate must necessarily depend on the complexity of the case (the present case being an example) and the way in which the person under investigation responds to the enquiries by the Police. 

(f)   The level of precision required of a law ‘must depend on the subject matter of the law in question’.  Hence, in Leung Kwok Hung :

‘ 28. There is an inevitable tension between requiring a law to be formulated with sufficient precision and the desirability of avoiding excessive rigidity in the law. The appropriate level of precision must depend on the subject matter of the law in question. See Shum Kwok Sher v HKSAR (2002) 5 HKCFAR 381 at para.64.

29.  A law which confers discretionary powers on public officials, the exercise of which may interfere with fundamental rights, must give an adequate indication of the scope of the discretion.  The degree of precision required of the law in this connection will depend upon the particular subject matter of the discretion. ….’

(g)   There are long established authorities that where the statute imposes an obligation on a public body to take a particular step, that does not normally import any requirement to take that step within a particular time and the general rule is that delay is controlled by the application of established public law principles (which include the Wednesbury test) and not by the Court reading in time limits: Engineers’ and Managers’ Association v Advisory Conciliation and Arbitration Service [1980] 1 WLR 302 at 318; R v Secretary of State for the Environment ex p Birmingham CC (1987) 27 RVR 53 at 55 and R v Children and Family Court Advisory and Support Service [2003] EWHC 235 Admin at [91(3)].

6.42   For these reasons, I reject the argument that the procedural steps in the Manual are so uncertain that they fall foul of the proportionality requirement.

(3)   Alternative measures?

6.43   Mr Chan then argues that the consent regime is disproportionate because it severely affects fundamental rights and there are less intrusive alternatives available.

6.44   I will first set out Mr Chan’s arguments :

(a)   The consent regime severely affects fundamental rights.  The indefinite freezing of accounts of unlimited value can critically damage individuals and businesses.  There is no right to compensation, even where there is complete innocence of wrongdoing.  Significantly, multiple Courts across multiple jurisdictions have characterised the power to withhold consent indefinitely as draconian and capable of causing ‘great hardship’ and ‘grave injustice’: Squirrel v National Westminster Bank [2006] 1 WLR 637, [7]; R (UMBS Online Ltd) v Serious Organised Crime Agency [2007] Bus LR 1317, [8]; Chief Officer of Jersey Police v Minwalla [2007] JRC 137, [9]; Gichuru v Walbrook Trustees (Jersey) Ltd [2008] JRC 68, [12].

(b)   The systemic risk of grave injustice from withheld consent cannot be effectively ameliorated by case-specific judicial review.  It is unlikely that customers can obtain sufficient information about the Police’s suspicions to initiate an effective challenge.  Since disclosure will likely prejudice an ongoing investigation into serious criminal activities, applications for specific discovery face rejection on grounds of public interest immunity: R (UMBS Online Ltd), [37].  It is difficult in law and in practice for customers to obtain relief even if wholly innocent of wrongdoing.  So long as the Police can show that it was not Wednesburyunreasonable for them to suspect the funds are proceeds of crime, judicial review is unlikely: Amalgamated Metal Trading v City of London Police [2003] 1 WLR 2711, [27]; Ani v Barclays Private Bank [2004] JRC 69, [22]; Garnet, [67].  Even if these hurdles are surmounted, it is likely to take a year or more before proceedings are finally resolved.  By then, the damage will have been done, in many cases irreversibly.

(c)   Likewise, a private law action against the bank for breach of contract (mentioned in authorities such as Garnet [58‑61]) is not a satisfactory solution to the constitutional problem.  It is again very difficult for customers to obtain relief even if wholly innocent.  The Courts imply into the banking contract a term that the bank is entitled to refuse to process payment instructions if it suspects that the transaction involves the proceeds of crime and the public authority does not grant consent: Shah v HSBC Private Bank [2013] 1 All ER (Comm) 72, [39-45].  So the customer can only succeed if it can prove bad faith or can otherwise cast doubt on the bank’s subjective suspicions: Shah v HSBC Private Bank [2010] 3 All ER 477, [17-22].  In any event, a private law action raises a host of practical problems.  The bank will not have the requisite knowledge, evidence or incentive to contest the customer’s case on the source of the funds.  The Police cannot intervene to assist the bank without revealing their hand in potential criminal proceedings against the customer.  The customer is also in an invidious position as he may incriminate himself by giving evidence on the source of the funds.  All these problems arise from the fact that disputes on the provenance of the funds ought to be resolved in criminal proceedings between the prosecution and the customer and a private law action is also likely to take years to resolve.

(d)   The right to seek compensation under OSCO, section 29 is also inadequate to protect the rights of innocent individuals.  The Court can only award compensation where there is serious default on the part of some person concerned in the investigation or prosecution and the individual has suffered loss as a result of the restraint order: section 29(2).  There is no right to compensation for ‘informal freezing’ of the property as such.

(e)   Mr Chan argued that sections 328 and 335 of the UK Proceeds of Crime Act 2002 and the section 43 of Bermudan Proceeds of Crime Act 1997 limit the period for which consent may be withheld.  The English courts have observed that these provisions strike a ‘precise’, ‘workable’ and ‘reasonable’ balance between the aim of deterring criminal activity and the rights/interests of the innocent individuals who may suffer harm as a result: K Ltd v National Westminster Bank [2007] 1 WLR 311, paragraph 22.

(f)   Jurisdictions such as Canada, Australia and New Zealand do not vest authorities with power to withhold consent to deal with customer funds.  The Courts can ring‑fence suspected proceeds of crime by granting a freezing/restraint order at the investigative stage.   For the offence of money laundering and the power to apply for restraint orders: see the Canadian Criminal Code, sections 462.31 and 462.33, and the useful summary of the Canadian regime in AG of Quebec v Laurent Laroche and Garage Cote [2002] 3 SCR 708 at paragraphs 23‑46.  For financial institutions’ disclosure/reporting obligations: see the Canadian Proceeds of Crime (Money Laundering) and Terrorist Financing Act, Part 1.  For the offence of money laundering: see Chapter 10, Division 400 of the Australian Criminal Code Act 1995.  For financial institutions’ reporting obligations: see the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006, Part 3.  For the power to apply for freezing orders and restraint orders: see the Australian Proceeds of Crime Act 2002, Chapter 2, particularly sections 15B, 18, 19 and 20A.  For the offence of money laundering: see the New Zealand Crimes Act 1961,sections 243-245.  For financial institutions’ reporting obligations: see the New Zealand Anti‑Money Laundering and Counter-Terrorism Financing Act 2009, sections 39A‑48.  For the power to apply for restraint orders: see the New Zealand Criminal Proceeds (Recovery) Act 2009, sections 5 and 18‑42.  Such a power is also available in Hong Kong.

(g)   There is nothing in the respondents’ evidence to explain why the significantly less intrusive alternatives mentioned above cannot be adopted without compromising the legitimate aims pursued.

(h)   The Jersey courts expressly invited the legislature to amend the analogous consent regime in the Proceeds of Crime (Jersey) Act 1999 by imposing time limits on the power to withhold consent: Minwalla, [74]; Gichuru v Walbrook Trustees (Jersey) Ltd [2008] JRC 068, [36-38].

(4)   My view on these arguments

6.45   I will deal with the issue of restraint order first because the other arguments advanced by Mr Chan can be dealt with together.  

(a)   Restraint order

6.46   Under OSCO section 14(2), the Court may grant a restraint order where satisfied that :

i)    a person is to be charged with a specified offence,

ii)    there is reasonable cause to believe he has committed the offence, and

iii)    there is reasonable cause to believe that he has benefited from that offence: Secretary for Justice v Wu Li Hui [2009] 1 HKLRD 78, paragraphs 17-19.

6.47   It is open to the Police to apply for a restraint order even before formal charges are laid.  Once a restraint order is granted, the person subject to it is restrained from dealing with property falling within its scope.  Breach of the restraint order is a criminal offence: OSCO, sections 15(1) and (16).  Like the consent regime, the restraint order regime allows the Police to preserve a person’s assets for confiscation if a conviction is eventually secured.

6.48   However, unlike the consent regime, the restraint order regime under OSCO, namely, sections 14 and 15 contains numerous procedural safeguards which can mitigate the harm caused by the freezing of assets.  For instance :

i)    The restraint order is time-limited: see section 14(4).

ii)   Persons affected have the right to be heard: see section 15(4)(c), (5) and (6).

iii)   The Court can impose measures to preserve the frozen property: see e.g. section 15(7) (appointment of receiver).

6.49   In my view, the comparison with the restraint order regime is not appropriate.  While a restraint order actually freezes the operation of the accounts, as discussed in Garnet, the consent regime does not freeze the bank account.  The freezing of the account is by the financial institution itself.  For example, if the bank reasonably suspects that the credit balance in an account are proceeds of crime, then it would be legally obliged under section 25 not to deal with it, whether the police has replied to its STR or not under the letter of consent regime. Conversely, if the bank subsequently determines that there are no reasonable grounds to believe that the money has that character, then it is free to deal with the account even though the police has, in response to the STR, issued a letter of no consent.  It is only in the context of constitutional protection that the property rights provisions are engaged as a result of the operation of the consent regime.  Furthermore, the consent regime only operates at the investigation stage while the restraint order regime only operates at the prosecution stage.  The standard of the granting of a ‘letter of no consent’ is based on a reasonable suspicion while the standard in relation to the restraint order regime is based on ‘reasonable cause to believe’.  The decision to apply for a restraint order is made by a prosecutor.  The availability of the restraint order regime at a later stage does not point towards a consent regime at an earlier stage being disproportionate, when investigations are ongoing.  In any event this must be an area where our legislative and executive authorities must be accorded with the margin of discretion on why they had chosen to adopt the measures in such a manner.

(b)   Other arguments

6.50   In respect of the other arguments raised by Mr Chan, namely, the consent regime affects the financial resources of a party, the practical difficulties of a successful judicial review challenge, the problem associated with a civil claim and the limited scope of the compensation provisions are recognised.  However, this being a constitutional challenge, the standard of assessment is whether it is ‘manifestly without reasonable foundation’.  Applying this standard, my view is that the measure is no more than necessary for the legitimate purpose and societal benefit of anti‑money laundering.  The consent regime is part and parcel of the measures used to combat organised crime in money laundering.  In my view, a reasonable balance has been struck between the societal benefits of the consent scheme and constitutionally protected rights of the individual.  It cannot be said that the pursuit of the societal interest results in an unacceptably harsh burden on the individual.

6.51   Likewise, a comparison with the anti‑money laundering provisions in other countries is not appropriate.  As Mr McCoy had submitted, it not helpful to refer to these provisions without an understanding of the vast landscape of powers available to those jurisdictions with anti‑money laundering and anti‑terrorist financing measures.  For example, the UK PCA 2002 is not the only measure available to law enforcement authorities to combat money‑laundering.  It is specifically supplemented by Schedule 7 of the Counter Terrorism Act 2008.  By paragraph 1; 3(1)(c); and 13(c), the Treasury can effectively direct the whole financial sector to cease transactions and relationships with a whole financial institution. 

6.52   More importantly again in my view this is where the margin of discretion comes into play, particularly where the Court recognises the legislative and executive branches who were the originators of the impugned measure as better placed to assess the appropriate means to advance the legitimate aim espoused.  I, therefore, reject the applicants’ argument that the encroachment on the property rights was disproportionate. 

B)  Fact‑specific challenge

(1)   The applicants’ case

6.53   The applicants have narrowed the fact‑specific challenge to one point only, namely the respondents acted unconstitutionally (or otherwise unfairly and unreasonably) against the applicants by using that power to bypass the procedural safeguards for restraint order applications under OSCO, section 15.  Mr Chan argued that in light of the far more balanced and closely supervised restraint order mechanism, it was clearly disproportionate and unreasonable for the respondents to choose not to apply for a restraint order until April 2015 (i.e. more than 500 days after the ‘No Consent Decision’), particularly when the applicants on multiple occasions alerted them to the severe economic and reputational loss they faced if their accounts continued to be frozen.  If, by mid to late 2014 (i.e. more than six months after the ‘No Consent Decision’), the respondents did not think they could prove there was reasonable cause to believe that the applicants committed a specified offence, they clearly had no rational basis to informally freeze the applicants’ funds by continuing to withhold consent from HSB.

(2)   My view

6.54   I had already dealt with the different roles of the consent regime and the restraint order regime.  As to the argument on the continuing withholding of consent and the delay in applying for a restraint order, I have already referred to the fact that where there is no express statutory time limit, reasonableness is not measured by the Court reading in time limits. 

6.55   Further where the decision maker has a discretion to defer enquiries for a period, the view of Lord Scarman in Engineers’ and Managers’ Association at page 318 F is pertinent :

‘ .... the exercise of its discretion is not reviewable by the courts unless [the decision maker] can be shown either to have misdirected itself in law; or to have failed to observe the requirements of natural justice, or to have failed to consider relevant matters; or to have conducted the reference in a way in which no reasonable advisory conciliation or arbitration service, paying due regard to the statute, could have conducted it.’

6.56   Adopting the formulation in Engineers’ and Managers’ Association, the crucial question is whether the decision maker has by the deferment in this case abdicated its statutory function to proceed with the ‘No Consent Decision’.  The Courts cannot intervene, unless satisfied that it has.  In this case no bad faith is alleged. Further, one must consider the complexity of the issues with cross-border elements involved.  Mr McCoy accepted that an obvious example of where the Police may be acting unreasonably or ultra vires in withholding consent is if the investigation had effectively been concluded and there was no reason to believe the property was proceeds of a crime.  This is not such a case.  The fact-specific challenge on Wednesbury unreasonableness is rejected.

2)   Access to Court rights

6.57   In the written submission of Mr Chan he argued that the right of access to the Courts under Article 35 of the Basic Law is engaged by a decision involving the exercise of judicial power.  Any exercise of judicial power other than by a court of law prima facie curtails that right and must be justified: Lee Yee Shing Jacky v Board of Review [2011] 6 HKC 307, paragraph 79.  The right to a fair hearing before a competent, independent and impartial tribunal established by law under HKBORO Article 10 is engaged if the decision involves determination of ‘rights and obligations in a suit at law’.  Those words bear the same meaning as the phrase ‘determination of civil rights and obligations’ under Article 6 of the ECHR and should be generously interpreted: Lam Siu Po v Commissioner of Police (2009) 12 HKCFAR 237, paragraphs 24, 62-65. 

6.58   He also argued that a ‘no consent’ letter also determines civil rights and obligations.  To protect banks from liability in performing obligations under OSCO, the Courts will imply into the banking contract a term that the bank is entitled to refuse to process payment instructions if it suspects the transaction involves the proceeds of crime, and the JFIU does not grant consent: Shah v HSBC Private Bank [2013] 1 All ER (Comm) 72, [39-45].  A decision to withhold consent therefore affects banks’ civil obligations vis‑à-vis their customers. 

6.59   Mr Chan did not press these two points when he was asked to elaborate on these rights.  My concern then was whether it is the applicants’ case that they ought to be afforded an opportunity to present their case before the authorised officer gave his decision. 

6.60   In my view the access to court rights have not been engaged because of the judicial remedies available to the applicants by way of judicial review and civil claim against the banks.

VII.   New evidence

7.1.   The respondents filed an application to adduce new evidence in respect of four affidavits, two of which came from the handling solicitor of the respondents exhibiting various correspondence between the parties.  Another affidavit is from Lai Yu-ho, acting superintendent of the Police for the purpose of informing the Court of various developments and statistics in respect of issues raised in the present appeal.  There is another affirmation from Cheng Sze-wai of the Commercial Crime Bureau filed ‘with a view to providing the Court of Appeal with updated additional relevant information to assist the Court in properly considering the key issues raised in the present appeal.’

7.1.   Mr Chan objected to the admission of this new evidence but agreed to have the new evidence considered by the Court on a provisional basis.  In my view, it is most exceptional in an appeal from a judicial review that new evidence should be introduced.  There is no proper basis for this new evidence to be included as part of the factual background of the case which was before the Judge and had been considered by him.  In my view, the background of the case as presented to the Judge is sufficient for the purpose of this appeal.  Accordingly, the application to adduce the new evidence is refused.

VIII.  Conclusion

8.  Accordingly, the appeal is dismissed.

IX.   Costs

9.  There will be a costs nisi that the respondents are to have the costs of the appeal save that the applicants’ costs relating to the application for new evidence is to be borne by the respondents.  I will grant certificate for two counsel.

Hon Yuen JA :

10.  I AGREE WITH THE JUDGMENTS OF CHEUNG JA AND G LAM J.

HON G LAM J :

11.1   I am in respectful broad agreement with the judgment of Cheung JA and would only add a few words of my own. As regards the “prescribed by law” point, I agree that the applicants should not be permitted to raise it for the first time in this court at the last minute. Whilst, as Mr Chan submitted, it is ultimately a point of law, the issue requires a “holistic” approach that takes into account all the requirements of the law including the common law in the light of all the circumstances: Hong Kong Television Network Ltd v Chief Executive in Council [2016] 2 HKLRD 1005, [96]. I am not satisfied that the respondents have been afforded a fair opportunity to respond to the argument given the way in which it was raised. Further, although the applicants’ proposed amendment (as set out in [6.30] above) attacks OSCO for lack of indication of the criteria relevant to the exercise of the discretion to withhold consent, the (UK) Proceeds of Crime Act 2002 on which the applicants place heavy reliance does not set out any criteria either.

11.2   11.2 The applicants’ main argument before us boils down to the contention that the consent regime found in ss 25 and 25A OSCO was deficient in not providing for an express fixed time limit after which the “informal freeze” would expire and cease. The applicants placed great store on the fact that there was such a time limit in UK legislation (Proceeds of Crime Act 2002, ss 328 and 335) and that the statutory scheme there had been described as striking a “precise and workable balance” between the conflicting interests: K Ltd v National Westminster Bank, supra, at [22]. It seems to me, however, that it is not helpful, and could indeed be potentially misleading, to compare aspects of the schemes in different jurisdictions in isolation. There are variations in other interlocking parts of the law providing for anti-money laundering and anti-terrorist financing measures in many jurisdictions. For example, under ss 40 and 41 of the (UK) Proceeds of Crime Act 2002, a restraint order may be granted as soon as a criminal investigation has commenced and where there are reasonable grounds to suspect the defendant has benefited from the offence, whereas in Hong Kong a restraint order can only be applied for where “proceedings have been instituted” (which is a significantly later stage than the commencement of investigation) and where there is reasonable cause to believe the defendant has benefited from the offence: see ss 2(15) and 14(1) OSCO.

11.3   11.3 It is true that OSCO does not lay down any express expiry time for the informal freeze. But equally it contains nothing that prevents the authorities from exercising their powers in a way that common law principles and respect for the property rights protected by Articles 6 and 105 of the Basic Law may require, or impedes the courts from giving relief where there is a failure by the authorities, in any particular case. The applicants have in my view failed to demonstrate that the consent regime systemically mandates a result that is incompatible with the Basic Law such that the relevant statutory provisions should be declared unconstitutional.