SECRETARY FOR JUSTICE v. S AND OTHERS

HCMP 2195/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2195 OF 2008

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and

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R U L I N G

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1.  The three Respondents (R1 and R3 are husband and wife, R2 is the sister of R1) are subject to a restraining/charging order made by this Court on the 6^th November 2008 on the ex parte application of the Secretary for Justice.  The order was made under sections 15 and 16 of the Organized and Serious Crimes Ordinance, Cap. 455 (OSCO).  The Respondents have been arrested in respect of alleged organised criminal activities but have not been charged.  The return date was fixed for the 9^th January 2009.  The date for disclosure required under the order was the 12^th December 2008.

2.  The respondents have applied for variation of the order and have filed affirmations in support.  They have appeared, represented by Mr. Marash SC and Mr. Steven Liu, on the 11^th December and by consent, the date for compliance with the disclosure aspects of the order has been postponed for 60 days from the 12^th December.

3.  The other aspects of the application for variation relate firstly to a request for the payment of a monthly allowance to R1 to cover his living expenses and to R1, R2 and R3 for sums to pay their legal expenses.  The affirmations in support have been answered by a further affirmation from the investigating officer which has only just been served.  I have adjourned that aspect of the case to the 22^nd December.  I have warned the Respondents, that the information disclosed by them thus far may be insufficient to justify the variation sought: for example, they disclose no employment either of themselves or, in the case of R2, her husband; or rents from property; and on the face of it, there is a huge volume of cash which has passed through bank accounts associated with them.  They retain the burden of proving that there is not somewhere a pool or a source of money which can satisfy their needs both as to living expenses and as to legal expenses.

4.  The next aspect of the application for variation, upon which I have heard argument and upon which I now rule, is as to aspects of the disclosure order which I shall summarise as:

(a)     the length of time in respect of which disclosure should be made, which is set at 6 years in the order;

(b)    whether the Respondents should be required to disclose the source of assets disclosed;

(c)     protection of the Respondents' privilege against self-incrimination.

5.  The purpose of restraint and charging orders made under sections 15 and 16 of OSCO is set out in section 19(2) of the Ordinance which can be paraphrased as follows:

"... the powers shall be exercised with a view to making available to satisfy... any confiscation order that may be made… the value for the time being of realisable property held by any person, by the realisation of such property".

6.  The power to make a confiscation order is set out in section 8 and the assessment of the proceeds of crime in section 9.

7.  I have been referred to various authorities relating to the making of these orders.  From Hong Kong, Cheung Kwok-kuen, HCMP55/2000 (26/4/2000); Choi Kong & Anr, HCMP2801/2002 (4/12/02); Cheung Kwok-kuen [No 2],  HCMP55/2000 (6/3/2001); Cheng Wai-keung & Ors, HCMP2801/2002 (8/3/2003); Yeung Chun-pong, HCMP 5021/2003; and from the English courts, Re O [1991] 2WLR 475; and Re C (The Times, 21/4/1995). 

8.  The thrust of the first part of Mr. Marash's argument is that the disclosure obligation is too wide both in the period covered, which he says ought to be 3 years, not 6 years; and as to the obligation to disclose the source of any assets revealed by the disclosure which, it is submitted, should be deleted from the order.

9.  It is worth noting that there a number of decided cases on the need for disclosure orders as a necessary adjunct of restraint/charging orders, directed, as they are, towards eventual confiscation.  The disclosure order is designed to support the restraint/charging order.  Lord Donaldson of Lymington, M.R., said in Re O that (as in the Hong Kong legislation, see section 15(4)(c) of OSCO) notice of the order has to be given to persons affected by it and there is power to appoint a receiver to manage realisable property; and

"... there is an obvious necessity to be able to police compliance with the order.  All these features dictate that there should be some means of identifying and ascertaining the whereabouts and the value of assets affected by the restraint order and this need is reinforced when it is realised that, whatever may be the position in an individual case, the legislative contemplation is that restraint orders will be made in circumstances in which it is thought that some of those having interests in the property may well be of a dishonest disposition." 

10.  Thus the power to make a disclosure order is a necessary consequence of the need to manage and enforce the power to make a restraint order in respect of all realisable property, whether identified in the order or not (see section 15(2) of OSCO).  Under section 9 of OSCO, the court may assess the value of the proceeds of crime from which a convicted person has benefited, in part by making assumptions relating to any property appearing to the court to have been transferred to him at any time in the 6 years preceding the commencement of proceedings.

11.  So the court may assess the value of any confiscation order by reference to assets which have come into the hands of the defendant (even if he has subsequently disposed of them).  This is part of the policing mechanism referred to in Re O, that is, identifying and ascertaining the whereabouts and value of realisable property affected by the restraint order.

12.  Under section 12 of OSCO, the realisable property which is the subject of any restraint order is defined as (a) property held by the defendant, (b) property held by a person to whom the defendant has made a gift (including a gift within the past 6 years - section 12(9)), and (c) property that is subject to the effective control of the defendant.

13.  In any case such as this, where, prima facie, huge sums of money have been deposited into and withdrawn from bank accounts associated with the Respondents, it is entirely proper that full disclosure should be made to determine whether these assets still exist and if so, where and in what form they exist, who holds them, and whether they were gifted to anyone; and, if they fall within the scope of the restraint/charging order, to determine how they might be managed or controlled pending the outcome of the criminal proceedings so that, in the event of conviction, an appropriate confiscation order can be made.

14.  I am satisfied that disclosure covering the 6 years up to the date of this order is in accordance with the scheme of the Ordinance and that it is, in all the circumstances, a reasonable period; that is to say, one in respect of which it ought to be possible for the Respondents to comply, especially as the Inland Revenue Department requires records to be kept for 7 years;  and one that is necessary to trace the disposal of assets by way of gift.

15.  As to whether the source of assets should be disclosed, Ms. Chan for the Secretary of Justice argues that it is crucial to any restraint order that the holders of any realisable property which is covered by the restraint/charging order, be notified of the order.  If there is a third party interest in the assets (for example, if they were received or held on trust for another person) then that third party is entitled to such notice.

16.  I accept that to be the case.  I would go further by reiterating that section 19(2) requires the powers of the court to be exercised "with a view to making [realisable property] available for satisfying the confiscation order", including gifts made by the defendant (section 12(9)) and property the subject of a section 9(2)(ii) assumption.  Such an assumption can be rebutted.  The Department of Justice is entitled to seek information which may touch upon any such rebuttal, so as to fulfil the section 19(2) function, for example, as to the determination of whether the assets are liable to confiscation because they were received by a respondent as his proceeds of organised crime (section 9(2)).

17.  I am satisfied that the obligation to reveal the source of assets received is within the scope of the legislation and is proper.  In the circumstances of this case, I decline to vary the term of the order relating both to the time in respect of which disclosure should be made or the source of any assets which are disclosed.

18.  Turning to the issue of the impact of the order on the privilege against self-incrimination, let me first recite the relevant clause of the ex parte order which is the subject of the complaint:

"5. No disclosure made in compliance with this order shall be used as evidence against the Respondents in any criminal prosecution of the Respondents who are required to make that disclosure, except in proceedings under the Organised and Serious Crimes Ordinance, Cap. 455 and that (sic) under section 31 of the Crimes Ordinance, Cap. 200."

19.  The reference to section 31 of the Crimes Ordinance relates to perjury and there is obviously no complaint about that.

20.  The argument is that this clause of the order allows the prosecution of the respondents under OSCO, based on material which the order obliges them to reveal.  This, it is submitted, impacts adversely on their privilege against incriminating themselves.

21.  The authorities, both in England and in Hong Kong, show a consistent resistance to any encroachment on the privilege against self-incrimination arising from this legislation.  I do not need to rehearse it all here.  It is sufficient to say that terms strictly limiting the use to be made of the disclosed material have been held to be appropriate.

22.  The Department of Justice says here that it is not their intention that the disclosure should result in prosecution based on the information disclosed under this order; and that, in any event, it is not the practice of the Department of Justice to disclose the information obtained to prosecuting counsel in any criminal proceedings.  Mr. Marash points out that the deponent in support of the application is the investigating officer of the case who will be engaged in any criminal trial.  He might also add that the Department of Justice would have to advise on a prosecution and, I say without irony, it is perhaps difficult to be sure that the left hand of the Department does not know what the right hand is doing.

23.  If the term presently drafted is meant to exclude all risk of prosecution on the basis of the information disclosed, other than for perjury, then it is ambiguous.  The cure is to follow the terms imposed by the courts in Re O and another case called Re T [1992] 1 WLR 949 which were held by Lugar-Mawson J in Cheung Kwok-kuen (26/4/00) to protect the respondent's right against self-incrimination.

24.  I am satisfied that the existing clause 5 of the order should be amended as follows:

"(5)  No disclosure made in compliance with this order shall be used as evidence against the Respondents in any criminal prosecution, except in proceedings under section 31 of the Crimes Ordinance, Cap. 200.

(6)   The information disclosed in compliance with this order shall not be used for any purpose other than these proceedings and confiscation proceedings, and shall not be disclosed or otherwise divulged to any third party without the leave of this court."

25.  I direct that the amendment should be made accordingly to the order which is to be continued for 60 days from the 12^th December 2008.  The return date of the 9^th January 2009 is vacated.  The applications for payment of living/legal expenses from the restraint of funds will be heard on the 22^nd December 2008.  By consent, the costs of this part of the application are reserved.