Re LAW KIN MAN

M.P. No. 1711/91

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The Applicant is one of 38 respondents in these proceedings. On 25th February 1992, Gall J. pursuant to sec 29 of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405 (the Ordinance) made an ex- parte order (the judge's order) registering two orders of the United States District Court, Eastern District of New York dated 17th October and 20th November 1991 respectively (the forfeiture orders). By summons dated 23rd February 1993 the Applicant seeks discharge of the judges' order notwithstanding that the time limited for doing so has expired. Time expired on 13th March 1992.

2. No grounds having been given in its summons, the Applicant further applies to amend the summons to include its grounds. The amended summons is now in its second or third draft.

3. The genesis of these proceedings lies with the first respondent, Law Kin-man (Mr. Law). Mr. Law is a drug trafficker. He and his activities were under investigation for many years. In December 1989 at the request of the U.S.A. authorities, he was arrested in Hong Kong. He was accused of trafficking in heroin, the total amounting to 380 kgs., between June and December 1987. After defended extradition proceedings, Mr. Law was extradited to U.S.A. in December 1992 where he was indicted on a number of counts. In June 1994 he pleaded guilty to possession of 26 kgs. of heroin in December 1987 with intent to distribute. He awaits a (presumably) lengthy sentence of imprisonment.

4. In the course of the hearing before me, the Attorney General (who obtained the judge's order and who is respondent to this application) led a great deal of evidence about Mr. Law's activities. I do not propose to re- examine it in this judgment. It is sufficient to say that it demonstrates overwhelmingly that Mr. Law has been up to his neck in the narcotics trade since the 1970s and has made a great deal of money out of it. This money he has laundered through bank accounts ostensibly owned by some of the other respondents, who are either family members or his dupes, and by the purchase of immovable property held by some of the respondents for him beneficially.

5. No explanation for the source of these funds has ever been forthcoming except, so I am told, that Mr. Law did claim to have made his money gambling. If that is so, it is surprising that Mr. Law has not applied for entry in the Guinness Book of Records as the world's most successful gambler. It is idle to pretend that the vast quantities of cash that have flowed through the various accounts or been used to purchase real property in Hong Kong have come other than from dealing in narcotics.

6. The applicant was set up by Mr. Law in 1983. Mr. Law provided cash, $890,000, to purchase a house at Wing Lung Road, Clear Water Bay (the house). The house was the Applicant's only asset. It is not in dispute that Mr. Law is the beneficial owner of the Applicant and therefore of the house. One of the directors of the Applicant was and is Lo Chak-man (Mr. Lo), Mr. Law's brother and the fourth respondent. Another director is Tsoi Sau-ngai (Mr. Tsoi), the sixth respondent. These two men face one count of money laundering under sec 25 of the Ordinance. Their trial is due to start shortly. Mr. Lo has made various affirmations in support of the Applicant's application to discharge.

7. The Applicant also held two accounts with the Heng Seng Bank (the accounts). The house and the accounts were included in the forfeiture orders registered here pursuant to the judges' order.

8. The U.S. authorities launched their attack on Mr. Law's assets even before he arrived in U.S.A. In June 1991 they commenced civil proceedings of an in rem nature against a mixture of bank accounts and real property situated in Hong Kong, seeking forfeiture thereof. They asserted that all this property represented the proceeds of Mr. Law's narcotics trafficking and, in addition, that the real property had been used for trafficking. It is important to note that, for the purpose of the proceedings in Hong Kong, the Attorney General relies only on the assertion by the U.S. authorities and acceptance by a U.S. Court that the real property represented the proceeds of trafficking.

9. On 19th June 1991, pursuant to the Drug Trafficking (Recovery of Proceeds) (Designated Countries and Territories) Order 1991 (the 1991 Order) Hooper J. made an order ex-parte restraining the respondents from dealing with their interest in the respective accounts and real properties. Meanwhile notice of the U.S. proceedings was given to the respondents, in particular to the Applicant on 17th August 1991. None of them and certainly not the Applicant took any action. Consequently, on 17th October 1991 Glasser J. sitting in the U.S. District Court made an order forfeiting and condemning to the use of the U.S.A. the real property. On 20th November 1991 the same Judge made a similar order in relation to the bank accounts. These two orders are the forfeiture orders registered as by Gall J. on 25th February 1992 pursuant to the Ordinance. The judge's order provided that any application to vary or set aside the registration must be made on or before 13th March 1992 and that the forfeiture orders would not be enforced prior to that date.

10. The Applicant's then solicitors were in fact served with the judge's order on 26th February. According to Mr. Lo, advice then given by those solicitors was that he could and should do nothing to set aside either the forfeiture orders in New York or the registration in Hong Kong. That advice, it is now recognized, was bad.

11. On 11th June 1992, the Attorney General applied to enforce the forfeiture order in relation to some real property owned at least legally by Mr. Tsoi. At the hearing, the point was taken on behalf of Mr. Tsoi that the Hong Kong courts have no jurisdiction to register and enforce an external confiscation order (ECO) of an in rem nature. The hearing was adjourned to enable Mr. Tsoi to make an appropriate application. He did not in fact do so.

12. In October 1992, the Attorney General commenced proceedings to recover another house, the subject of the first forfeiture order, which was owned by Mr. Law's sister, the third respondent, but occupied by Mr. Lo. Upon advice that the in rem point could be taken, both Mr. Lo and the Applicant applied to set aside the judge's order. Mr. Lo made an affirmation in support of his own application and another in support of the Applicant's. Both affirmations were pieces of appalling draftsmanship. It was hardly surprising in my view that on 8th July 1993 Mayo J., upon application by the Attorney General, dismissed both Mr. Lo's and the Applicant's summons on the basis that there was no locus standi. The Applicant appealed. The muddle as to whether Mr. Lo was trying to resist recovery of his sister's house, in which as bare licensee he had no interest, or was dealing with the Applicant's house having been clarified, the Court of Appeal allowed the appeal on 6th January 1994.

13. There was one final thing before the Applicant's summons came on before me. In July the Attorney General obtained an order against the Applicant for security for costs. It was not in dispute that the Applicant then had no assets. On 19th August the Court of Appeal "with considerable reluctance" allowed the Applicant's appeal. It is interesting to note that in relation to the substance of the Applicant's application, the Court of Appeal in January said, "a number of important questions of law were raised". In contrast, in August that Court said the merits of the Applicant's case "appeared to be jejune" although acknowledging that they would be a matter for the judge hearing the application!

14. During the hearing before me, Mr. Daniel Fung, QC, for the Applicant shifted ground somewhat. In the end, his submissions were that the judge's order should be discharged because

1) Hong Kong courts have no jurisdiction to register a forfeiture order made in U.S.A. that

a) purports to be in rem as well as extra-territorial in effect,

b) will give retrospective effect to the Ordinance or the 1991 Order,

c) was itself made without jurisdiction on the part of the U.S. court.

2)  a) There was material non-disclosure and misrepresentation.

b) It would be contrary to the interests of justice to register and enforce the forfeiture orders.

15. Ground 1 has been compendiously referred to as the jurisdiction point. It was Mr. Fung's contention that if any of the three sub-grounds are made out, the court has no discretion in the matter and is bound to discharge the judge's order. Ground 2 is the discretion point. It was not in dispute, I think, that the usual principles apply.

Ground 1(a) - Do the Hong Kong courts have jurisdiction to register foreign in rem orders?

16. To resolve this question, it is necessary to review the relevant legislation. It cannot be in dispute that both in Hong Kong and worldwide there has been widespread concern about the trade in narcotics and the obscene profits to be made therefrom. One method of punishing and, it is to be hoped, discouraging traffickers is by relieving them of the proceeds of their activities. In Hong Kong until 1989, there had been no effective way of achieving this. In 1989, the Ordinance substantially came into force on 1st September. Its long title is

"To provide for the tracing, confiscation and recovery of the proceeds of drug trafficking, to create the offence of assisting drug traffickers to retain those proceeds, and for incidental or related matters."

17. Section 2 is the interpretation section. In sub-section (1), it defines, inter alia, property to include both movable and immovable property within the meaning of sec. 3 of the Interpretation and General Clauses Ordinance, Cap 1. Sub-sections (3) and (4) read:

"(3) This Ordinance applies to property whether it is situated in Hong Kong or elsewhere.

(4) Reference in this Ordinance to offences include a reference to offences committed before the commencement of this Ordinance; but nothing in this Ordinance imposes any duty or confers any power on any court in or in connection with proceedings against a person for a drug trafficking offence instituted before the commencement of this Ordinance."

18. Part II is entitled "Confiscation of proceeds of drug trafficking."

19. It introduces a scheme whereby, after conviction and sentence, the court may after enquiry make an order that the person convicted pay a sum which reflects the benefits he has obtained from drug trafficking. Sec. 3(3) and (4) read:

"(3) The court shall then determine whether the person has benefited from drug trafficking.

(4) For the purposes of this Ordinance, a person who has at any time (whether before or after the commencement of this Ordinance) received any payment or other reward in connection with drug trafficking carried on by him or another has benefited from drug trafficking."

20. I note at this stage that sec. 2(4) and sec. 3(3) and (4) clearly demonstrate that the Ordinance is to have retrospective effect to the extent that benefits obtained at any time may be taken into account provided, of course, that the proceedings in which an order is made were commenced after the Ordinance came into force. Were it otherwise the Ordinance would be ineffectual for some years to come.

21. Any order under sec. 3 is in personam. No power is conferred on the courts to make an order directly affecting property. Indirectly, however, property may be attacked. Part III provides for enforcement of confiscation orders. First, sec. 10 empowers the court to make a restraint order which prohibits any person from dealing with realisable property which is defined in sec. 7(1) as any property held by the defendant or by a person to whom the defendant has directly or indirectly made a gift caught by the Ordinance. Such an order can be made before conviction, indeed even before a person is charged. It has been called the Crown's pre-emptive strike. It is comparable to a mareva injunction. It is a vital weapon.

22. Sec. 11 empowers the court to make a charging order in similar circumstances.

23. Once a confiscation order has been made, the Crown can enforce it, if the defendant does not pay, by application to the court under sec. 12 for the appointment of a receiver to realise the property.

24. Part IV is "Investigations into drug trafficking" and deals with matters such as search warrants. Part V is simply but perhaps unfortunately entitled "Miscellaneous". Sec. 25 creates an offence of assisting another to retain the benefit of drug trafficking, or put shortly, money laundering.

25. Sections 28 and 29 read,

"28. Enforcement of external orders

(1) The Governor in Council may, with the approval of the Legislative Council, by order -

(a) direct in relation to a country or territory outside Hong Kong designated by the order ('a designated country') that, subject to such modifications as may be specified, this Ordinance shall apply to external confiscation orders and to proceedings which have been or are to be instituted in the designated country and may result in an external confiscation order being made there;

(b) make -

(I) such provision in connection with the taking of action in the designated country with a view to satisfying a confiscation order; and

(ii) such provision as to evidence or proof of any matter for the purposes of this section and section 29; and

(iii) such incidental, consequential and transitional provision, as appears to him to be expedient; and

(c) without prejudice to the generality of this subsection, direct that in such circumstances as may be specified proceeds arising out of action taken in the designated country with a view to satisfying a confiscation order and which are retained there shall nevertheless be treated as reducing the amount payable under the order to such extent as may be specified.

(2) An order under this section may make different provision for different cases or classes of case.

(3) The power to make an order under this section includes power to modify this Ordinance in such a way as to confer power on a person to exercise a discretion.

(4) In this section and section 29 - 'external confiscation order' means an order made by a court in a designated country for the purpose of recovering payments or other rewards received in connection with drug trafficking or their value;

'modifications' includes additions, alterations and omissions.

29. Registration of external confiscation orders

(1) On an application made by or on behalf of the government of a designated country, the High Court may register an external confiscation order made there if -

(a) it is satisfied that at the time of registration the order is in force and not subject to appeal;

(b) it is satisfied, where the person against whom the order is made did not appear in the proceedings, that he received notice of the proceedings in sufficient time to enable him to defend them; and

(c) it is of the opinion that enforcing the order in Hong Kong would not be contrary to the interests of justice.

(2) In subsection (1) 'appeal' includes -

(a) any proceedings by way of discharging or setting aside a judgment; and

(b) an application for a new trial or a stay of execution.

(3) The High Court shall cancel the registration of an external confiscation order if it appears to the High court that the order has been satisfied by payment of the amount due under it or by the person against whom it was made serving imprisonment in default of payment or by any other means."

26. These provisions were plainly made with a view to affording co- operation in the international fight against the narcotics trade. On 28th November 1990, an agreement was made between Hong Kong and the U.S.A. "concerning the confiscation and forfeiture of the proceeds and instrumentalities of drug trafficking" (the treaty). Such agreements are useful and give rise to a good measure of co-operation between countries, e.g. between their respective police forces. They do not, however, become part of the domestic law until incorporated into or provided for in the statute book. Such provision was made by the 1991 Order, made by the Governor in Council, and which came into force on 18th January 1991.

27. Paragraph 3 of that Order reads,

"3. Designation of and application of the Ordinance to countries and territories

(1) Each of the countries and territories specified in Schedule 1 is designated for the purposes of sections 28 and 29 of the Ordinance.

(2) In relation to a designated country, the Ordinance shall apply, subject to the modifications specified in Schedule 2, to external confiscation orders and to proceedings which have been or are to be instituted in the designated country and which may result in an external confiscation order being made there, and, accordingly, in relation to such orders and such proceedings, the Ordinance shall have effect as set out in Schedule 3."

28. Paragraph 5(1)(c) reads,

"(1) For the purposes of sections 28 and 29 of the Ordinance, and of the other provisions of the Ordinance as applied under paragraph 3(2), a certificate purporting to be issued by or on behalf of the appropriate authority of a designated country stating -

(c) that all or a certain amount of the sum payable under an external confiscation order remains unpaid in the designated country, or that other property recoverable under an external confiscation order remains unrecovered there;"

29. The relevant provisions of the Ordinance as modified in Schedule 3 of the 1991 Order (the modified Ordinance) are,

"2. Interpretation

(11) Proceedings are instituted in a designated country when -

(a) under the law of the designated country concerned one of the steps specified in relation to that country in column 2 of Schedule 1A has been taken there in respect of alleged drug trafficking by the defendant; or

(b) an application has been made to a court in a designated country for an external confiscation order,

and where the application of this subsection would result in there being more than one time for the institution of proceedings, they shall be taken to have been instituted at the earliest of those times.

(12) Proceedings are concluded -

(a) when, disregarding any power of a court to grant leave to appeal out of time, there is no further possibility of an external confiscation order being made in the proceedings;

(b) on the satisfaction of an external confiscation order made in the proceedings (whether by the recovery of all property liable to be recovered, or the payment of any amount due, or otherwise)."

"3. External confiscation orders

(1) An order made by a court in a designated country for the purpose of recovering payments or other rewards received in connection with drug trafficking or their value is referred to in this Ordinance as an 'external confiscation order'.

(2) In subsection (1) the reference to an order includes any order, decree, direction or judgment, or any part thereof, however described."

"29. Registration of external confiscation orders

(1) On an application made by or on behalf of the government of a designated country, the High Court may register an external confiscation order made there if-

(a) it is satisfied that at the time of registration the order is in force and not subject to appeal;

(b) it is satisfied, where the person against whom the order is made did not appear in the proceedings, that he received notice of the proceedings in sufficient time to enable him to defend them; and

(c) it is of the opinion that enforcing the order in Hong Kong would not be contrary to the interests of justice.

(2) In subsection (1) 'appeal' includes -

(a) any proceedings by way of discharging or setting aside a judgment; and

(b) an application for a new trial or a stay of execution.

(3) The High Court shall cancel the registration of an external confiscation order if it appears to the High Court that the order has been satisfied by payment of the amount due under it or by the person against whom it was made serving imprisonment in default of payment of by any other means."

30. Mr. Fung's argument runs thus. The competency of the U.S. courts to adjudicate upon and make in rem orders in relation to movable and immovable property outside their jurisdiction must be judged according to Hong Kong law. At common law which applies in Hong Kong, a foreign court has jurisdiction to make in rem orders only if the property was in the country of that court at the time of the proceedings. See Dicey and Morris on The Conflict of Laws, 12th edition, Rule 40 and R. v. Cuthbertson [1981] A.C. 470, a decision of the House of Lords.

31. The common law, in fact, goes further. The courts do not have jurisdiction to enquire into title to or right to possession of foreign immovable property. See The British South African Co. v. The Campanhia de Mocambigue [1893] A.C. 602 and Hesperides Hotels Ltd. and another v. Muftizade [1979] A.C. 508. In the latter case, Lord Wilberforce made it plain that any revision of the common law rules should be by legislation rather than by judicial decision.

32. Dicey Rule 40 is explicitly recognised in sec. 4(2)(b) and (3)(a) of the Foreign Judgments (Reciprocal Enforcement) Act 1933 (the Act) which is now to be found in sec. 6 of Hong Kong's equivalent ordinance, the Foreign Judgments (Reciprocal Enforcement) Ordinance (FJO) enacted in 1960. The Act was considered by Widgery J. in Societe Sidmetal v. Titan International [1966] 1Q.B. 828 who had to decide whether it introduced a new procedure or principle. At page 847, he said,

"But, in the end, I do feel bound to take the view that one ought not to assume that this Act has made a substantial alteration in the common law approach to the enforcement of foreign judgments unless that intention can be found in express terms or by necessary implication. In my judgment the intention cannot be found, and ought not lightly to be assumed."

33. Mr. Fung emphasised that passage and said that continuity of practice should be assumed in the absence of clear words of departure.

34. He continued that at common law there was no power to forfeit any property, movable or immovable, used in connection with or representing the proceeds of any crime. In Hong Kong, the general power to forfeit property connected with criminal offences is contained in sec. 102 of the Criminal Procedure Ordinance, Cap. 221. Sec. 102(7), however, specifically excludes immovable property. In relation to drug offences, the statutory power of forfeiture is contained in sec. 56(1) of the Dangerous Drugs Ordinance, Cap. 134, which reads,

"(1) A court may (whether or not any person has been convicted of such offence) order to be forfeited to the Crown -

(a) any money or thing (other than premises, a ship exceeding 250 gross tons, an aircraft or a train) which has been used in the commission of or in connection with an offence under this Ordinance; and

(b) any money or other property received or possessed by any person as the result or product of an offence under this Ordinance."

35. Thus, the court's powers to make in rem or forfeiture orders were confined to money or other property received or possessed as the result or product of an offence under the Dangerous Drugs Ordinance, Cap. 134 pursuant to sec. 56 (1)(b). Property, as defined in Cap. 1, includes land. Otherwise property used or instrumental in an offence under Cap. 134 or representing the proceeds of trafficking generally was not liable to forfeiture.

The powers of the Hong Kong courts were then increased in 1989 with the enacting of the Ordinance which provided, as I have already set out, for a confiscation order in personam reflecting the proceeds of drug trafficking. However, property could only be realised by the Crown to the extent that any confiscation order made in personam against a convicted defendant was not paid. The Ordinance, while of application to all types of property, including that outside Hong Kong, does not confer powers on the court to forfeit that property.

36. The issue that arises, therefore, is whether the Ordinance has changed the common law relating to foreign judgments in rem and enlarged the jurisdiction of the Hong Kong courts. If so, argued Mr. Fung, the legislature should have said so in express terms. For example, sec. 30(1) of the Civil Jurisdiction and Judgments Act 1982, enacted to domesticate U.K.'s obligations under the Brussels Convention 1968, spelt out that the courts of England and Wales, or Northern Ireland could entertain proceedings for trespass in relation to foreign immovable property. The Hong Kong draftsman of the Ordinance, Mr. Fung suggested, would surely have had in mind existing statutory provisions concerning the enforcement of foreign judgments in the F.J.O. which limits the application of that Ordinance to judgments for a sum of money. Further, the legislature would surely have amended sec. 56 (1) of the Dangerous Drugs Ordinance to give Hong Kong courts the same jurisdiction domestically as that said to be conferred on a foreign court applying its own in rem forfeiture provisions in respect of foreign immovable property.

37. The need for express statutory provision is consistent with the principle that the law should not be subject to casual change or, as it has been put, by a sidewind. See Statutory Interpretation, 2nd edition, Bennion, sec. 269, where it is said at page 561.

"Section 269. Law should not be subject to casual change

(1)principle of legal policy that law should be altered It is a deliberately rather than casually, and that Parliament should not change either common law or statute law by a sidewind, but only by measured and considered provisions. In the case of common law, or Acts embodying common law, the principle is somewhat stronger than in other cases. It is also stronger the more fundamental the change is."

38. In contrast, however, at page 563, Bennion says,

"The presumption is weaker in the case of modern Acts. The common law is regarded by present-day legislative drafters as not significantly different to the body of surrounding statute law. Under the conditions of today, lex scripta and lex non scripta are equally law. Neither perhaps deserving of greater respect than the other, though lex scripta has overriding effect. The truth of this can be tested quite simply. Suppose a question arose as to whether an Act impliedly overruled some aspect of the law of criminal conspiracy. The question would be decided in exactly the same way whether the Act was passed before or after the partial codification of that offence by the Criminal Law Act 1977. The enormous output of legislation in the past two hundred years has meant that whole areas previously regulated by the common law are now the province of statute law, whether enacted by way of codification, development or replacement of common law rules.

There is thus little difference in quality between common law and enacted law. To suggest otherwise brings one within the range of Lord Radcliffe's condemnation of 'mystical' methods of discovering the law. All that can legitimately be said is that some common law rules have deeper roots in our law than some statutory rules. Judges still pay respect to 'our lady the common law'. Thus we continue to find dicta like that of Lord Reid when he said that Parliament 'can be presumed not to have altered the common law farther than was necessary'. It is submitted that the better view is that earlier expressed by Lord Wright extra-judicially when he said that the principle that an Act of Parliament should be construed so as not to change the common law more than seemed unavoidable is now discredited."

39. Mr. Fung also relied on sec. 278 of Bennion where in dealing with the principle against doubtful penalisation, Bennion said,

"Section 278.Statutory interference with economic interests

One aspect of the principle against doubtful penalisation is that by the exercise of state power the property or other economic interests of a person should not be taken away, impaired or endangered, except under clear authority of law."

40. Mr. Fung said that the court should not lightly assume that the British South African and Hesperides cases have been consigned to the dustbin.

41. Mr. Fung then turned to a consideration of an external confiscation order (ECO) which, as set out as above, is an order for the recovery of "payments or other rewards received in connection with drug trafficking or their value". Sec. 29(1) of the Ordinance permits registration of such an order on the terms set out. The 1991 Order provides the basis for registration of the forfeiture orders as it designates the U.S.A. The 1991 Order, however, does not, according to Mr. Fung, cover in rem confiscation orders in respect of immovable property in Hong Kong, nor movable property in Hong Kong, unless it was within the jurisdiction of the foreign court when proceedings were commenced there. To the extent that the 1991 Order purports to apply to such orders, it is ultra vires the Ordinance.

42. Mr. Fung submitted that the 1991 Order is a species of subsidiary legislation. That was not, I think, in dispute. A general principle of statutory interpretation is that subsidiary legislation may not be broader than the enabling legislation. Such a principle is given statutory effect in Hong Kong by sec. 28(b) of Cap. 1 which provides that no subsidiary legislation shall be inconsistent with the provisions of any ordinance. Further, any power that permits executive modification of legislation should be narrowly and strictly construed. See R v. Secretary of State for Social Security. ex-parte Britnell (1991) 1 W.L.R. 198 at page 204.

43. The question then, said Mr. Fung, is whether sec. 3(1) of the modified Ordinance can be interpreted to include the forfeiture orders. He contended that it cannot because to do so would confer on a foreign court jurisdiction in relation to property in Hong Kong. That is inconsistent with the common law as set out in Dicey Rule 40 and the Ordinance makes no clear and express provision for Hong Kong to defer to the jurisdiction of a foreign court. He referred to Societe Sidmetal and the judgment of Widgery J. which I have cited. He emphasised that that view has not been appealed or since doubted. The principle operates a fortiori in relation to subsidiary legislation. Further, sec. 56 (1) of the Dangerous Drugs Ordinance would have been amended to fit the new legal policy.

44. Therefore, said Mr. Fung, sec. 3(1) of the modified Ordinance can only be construed as referring to an order in personam and as such is consistent with the Ordinance. Such a construction would not render the 1991 Order nugatory because the evidence is that the U.S. courts have power to make in personam orders, orders which could not otherwise be registered in Hong Kong because U.S.A. is not a country within the provisions of the FJO.

45. Reference was made to sec. 29(1)(c) of the Ordinance and the modified Ordinance which, said Mr. Fung, contemplated enforcement of a foreign order elsewhere while an order relating to immovable property in Hong Kong can only ever be enforced here. I do not see that it helps the Applicant. If the 1991 Order covers in rem orders against both movable and immovable property, it would be open to the Hong Kong courts to refuse to register an order in personam if it felt enforcement properly lay elsewhere.

46. Next, Mr. Fung said, sec. 29(3) contemplates orders in personam because it refers to cancellation on payment of "the amount due" under the order and to a term of imprisonment "in default of payment". If an ECO operates in rem, this provision would be superfluous.

47. Mr. Fung referred to sec. 3(3) of the modified Ordinance which contemplates an ECO being made against a person. Sec. 3, Cap. 1 defines a person as including bodies of persons. It does not include things, therefore, section 3(3) cannot be interpreted to have effect in rem.

48. Finally, the 1991 Order does not disapply any part of the FJO which operates upon the basis of recognising judgments consistent with Hong Kong law. This is important because if, e.g. Australia, which is party to both the FJO and the 1991 Order, were to enact legislation providing for in rem forfeiture, an order made under such legislation could not be registered in Hong Kong. The FJO does not permit registration of such an order. This, said Mr. Fung, is an example of the principle "generalia specialibus non derogant". See Bennion, sec. 88. In my view, however, the position is the reverse. The Ordinance contains provision for registration of a particular type of order. It is a specific provision in contrast to the FJO which provides for registration of orders or judgments for sums of money generally. Accordingly, I see no impediment to Australia seeking registration of an order in rem in relation to drug trafficking in Hong Kong under the 1991 Order.

49. Having regard to his argument, Mr. Fung said that an ECO within the meaning of the Ordinance and the 1991 Order must, on usual principles of interpretation, be confined to orders in personam. To the extent that sec. 7(1) of the modified Ordinance goes beyond the Ordinance by re-defining realisable property so as to refer to specific property, it is ultra vires. Sec. 7(1) reads,

"(1) In this Ordinance, 'realisable property' means, subject to subsection (2) -

(a) any property held by the defendant; and

(b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Ordinance."

50. Subsection (2) does not affect the position.

51. Mr. Fung said that sec. 7(1) is inconsistent with the definition in the Ordinance because the scheme of the Ordinance is for forfeiture on the basis of an in personam order to reflect the ascertained benefits on drug trafficking. Sec. 28(b) of Cap. 1 applies. Sec. 31 of Cap. I also applies because it requires expressions used in subsidiary legislation to bear the same meaning as expressions in the parent ordinance.

52. Accordingly, Mr. Fung said, the correct approach for a judge hearing an application to register an ECO is two stage. First, he must satisfy himself that the foreign order is one relating to the proceeds of drug trafficking. Second, he must consider whether it is one which at common law the Hong Kong courts will recognise.

53. Mr. Barry Barlow, who appeared for the Attorney General, contended that a consideration of common law principles is irrelevant. He said that, like the FJO, the Ordinance created a statutory scheme which did not and could not exist at common law. This scheme was intended to replace the common law and confer new jurisdiction on the Hong Kong courts. He pointed out that the Ordinance did not itself domesticate the treaty. The 1991 Order was introduced to honour the pact with U.S.A.

54. With reference to the requirement for express language before any change to the common law can be assumed, Mr. Barlow emphasized the commentary to sec. 269 of Bennion which I have already set out. In any event he said, the Ordinance can hardly be considered a sidewind because it was enacted to supplant and replace the common law so far as it bears on drug trafficking with a new statutory scheme. Further, the terms of the Ordinance are clear and unequivocal. The statutory scheme is devised to enable confiscation of the proceeds of drug trafficking whether in Hong Kong or elsewhere as provided by sec. 2(2), and whether the proceeds are represented by property in Hong Kong or elsewhere, including immovable property pursuant to sec. 2(3).

55. Mr. Barlow said too much emphasis had been placed on the domestic scheme which, it had been implied, carried over into an ECO. He argued the two schemes are separate and distinct and not intended to mirror each other. It is necessary to focus on the scheme for an ECO. He said an ECO does not depend on a pre-existing conviction and the Ordinance, subject to modifications made by the Governor in Council and the conditions of sec. 29(1), permits registration of an order defined in sec. 29(4). The Ordinance contains no words of limitation as to the nature of the foreign order nor as to the procedure underlying the making of such an order. The words are clear, general and unlimited. There is no ambiguity and the courts should not engraft words of limitation in the guise of statutory interpretation.

56. In so far as there is any ambiguity, Mr. Barlow said that a starting point in the process of statutory construction is the identification of the object of the legislation. He relied on Johnson v. Moreton [1978] 3 W.L.R. 538 where at page 543, Lord Salmon said,

"1. 'If the language of a statute be plain, admitting of only one meaning, the legislature must be taken to have meant and intended what it has plainly expressed, and whatever it has in clear terms enacted must be enforced though it should lead to absurd or mischievous result.' Vacher & Sons Ltd. v. London Society of Compositors [1913] A.C. 107, per Lord Atkinson at p. 121.

2. The courts have no power to fill in a gap in a statute, even if satisfied that it had been overlooked by the legislature and that if the legislature had been aware of the gap, the legislature would have filled it in: Gladstone v. Bower [1960] 2 Q.B. 384; Brandling v. Barrington (1827) 6 B. & C. 467,per Lord Tenterden C.J. at p. 475.

3. If the words of a statute are capable, without being distorted, of more than one meaning, the courts should prefer the meaning which leads to a sensible and just result complying with the statutory objective and reject the meaning which leads to absurdity or injustice and is repugnant to the statutory objective."

57. Lord Salmon went on to cite authorities. At page 555, Lord Simon of Glaisdale said,

"the ascertainment of the parliamentary objective is an important - generally, an essential - part of the process of statutory interpretation."

58. The object of the legislation, said Mr. Barlow, is shown in the long title and sec. 2. Its purpose is worldwide. The legislation contains a local confiscatory scheme and, separately, machinery for the recognition and enforcement of orders made under the laws of other countries. To ensure effective recognition and enforcement, the legislature gave maximum flexibility to modify the Ordinance by way of order to meet the requirements of each country with which an agreement might be signed. Sec. 29 provides safeguards against procedural abuse in the foreign jurisdiction, safeguards which supplant those of the common law contained in Dicey Rules 40 - 45. An ECO is in wide terms to preserve flexibility and could not be put more generally. The whole scheme is to permit easy registration of all confiscatory orders of designated countries, where legal systems will differ from that of Hong Kong, and expedient enforcement of those orders. The scheme should not be hampered by introducing concepts of in personam and in rem or by addressing particular facets of foreign legal systems. The prevention of drug trafficking is served by as much co-operation as possible between countries. The object of the legislation will not be furthered by incorporating common law principles or by restricting an ECO to a carbon copy of the domestic regime.

59. Mr. Barlow pointed out that the Ordinance extends to orders in civil as well as criminal proceedings by sec. 28(2) and (4). But although the Ordinance deals exhaustively with the domestic scheme, it merely provides for registration of an ECO and empowers the Governor in Council to tailor the provisions of the Ordinance to suit countries with which treaties are signed.

60. The 1991 Order, said Mr. Barlow, clearly recognises orders in rem. He referred, particularly, to paragraph 5(1)(c) which makes provisions in relation to evidence and the reference to "other property recoverable". And to sec. 3 of the modified Ordinance. The words in sub-sec (1) "all their value" reflect an order of a substitutional kind available under the U.S. code. In sub-sec (3)(a), the words in parenthesis exclude in relation to the definition "person" an order in rem as contemplated by sec. 7(1)(a).

61. In spite of the curious arrangement of the Ordinance, where the important sections 28 and 29 are lumped in a part entitled "Miscellaneous" which creates other offences in Hong Kong, I accept that 2 separate and distinct schemes emerge. The first, the carefully formulated and restricted scheme for recovery in domestic proceedings of a sum calculated as a reflection of the proceeds of drug trafficking. The property of the person ordered to pay that sum, whatever and wherever that property may be, may consequentially be recovered to the extent that the sum is not paid. The second, with international co-operation in the fight against the drug trafficking in view, is a scheme designed to enforce an order, an ECO, of a court of a designated foreign country.

62. The second scheme is plainly not intended simply to mirror the domestic scheme. Had there been such an intention, it would have been easy for the legislature to have said so. It is not, however, so easy to discern how widely the legislature intended by sec. 28(4) to cast the net.

63. It is therefore legitimate in my view to refer to the 1991 Order as an aid to construction. Authority for such a course where power is given to amend the statute by regulation or where the meaning of a statute is ambiguous is to be found in Hanlon v. The Law Society [1981] A.C. 124. At

page 178, Lord Simon of Glaisdale in dealing with the judgment of Donaldson L.J. in the Court of Appeal, said,

"I think that he must have had in mind what was said in Kirkness v. John Hudson & Co. Ltd. [1955] A.C. 696, where it was laid down that, in the absence of ambiguity, it is not permissible to seek guidance from a later enactment for the construction of an earlier one. But section 9(6) opens with the words 'Except so far as regulations otherwise provide'; and, at the time of the passing of the Act, regulation 18(10)(c) of the Regulations of 1971 was in force; so the section and at least the 1971 regulation must be construed together. Regulation 18(10)(c) of 1971, even though less patently than the 1976 and 1977 amendments, also assumes that property the subject of an order under section 24(1)(a) may be 'property recovered or preserved in the proceedings' - otherwise it would be irrelevant to exempt it from the charge. But in any case I do not think that Kirkness v. John Hudson & Co. Ltd. applies: the words "Except so far as regulations otherwise provide" demand that the section should be construed together with the 1976/77 Regulations when they came into force, having (so to speak) this special statutory sanction."

At page 186, Lord Scarman said,

"As Harman L.J. recognised in Britt v. Buckinghamshire County Council [1964] 1 Q.B. 77, 88-89, where a statutory provision permits exceptions to be made to it by regulations, it is permissible to refer to the regulations as an aid to the interpretation of the provision."

64. Lord Lowry analysed the position in detail at page 193,

" A study of the cases and of the leading textbooks (Craies on Statute Law, 7th ed. (1971), p. 158, Maxwell on Interpretation of Statutes, 12th ed. (1969), pp. 74-75, Halsbury's Laws of England, 3rd ed., vol. 36 (1961), para. 606) appears to me to warrant the formulation of the following propositions:

(1) Subordinate legislation may be used in order to construe the parent Act, but only where power is given to amend the Act by regulations or where the meaning of the Act is ambiguous.

(2) Regulations made under the Act provide a Parliamentary or administrative contemporanea expositio of the Act but do not decide or control its meaning: to allow this would be to substitute the rule-making authority for the judges as interpreter and would disregard the possibility that the regulation relied on was misconceived or ultra vires.

(3) Regulations which are consistent with a certain interpretation of the Act tend to confirm that interpretation.

(4) Where the Act provides a framework built on by contemporaneously prepared regulations, the latter may be a reliable guide to the meaning of the former.

(5) The regulations are a clear guide, and may be decisive, when they are made in pursuance of a power to modify the Act, particularly if they come into operation on the same day as the Act which they modify.

(6) Clear guidance may also be obtained from regulations which are to have effect as if enacted in the parent Act."

65. This decision was followed by the Privy Council in Elvira Vergara and another v. A.G. [1989] I H.K.L.R. 233 on appeal from Hong Kong.

66. Sec. 28 of the Ordinance is ambiguous. Further, that section expressly provides for "additions, alterations and omissions" to the Ordinance in its application to an ECO. Although the 1991 Ordinance was made 18 months after the Ordinance was enacted rather than contemporaneously, the effect is not to deprive the modifications of any relevance but rather to reduce the potency that arises from proposition (5) of Lord Lowry. I acknowledge that subsidiary legislation can only provide a guide. The tail must not be allowed to wag the dog. Proposition (2) of Lord Lowry.

67. I also acknowledge the point made by Mr. Fung that sec. 7(1) of the modified Ordinance places a different definition on "realisable property" from that in the Ordinance. This, he said, is contrary to sec. 31 of Cap. I which provides "expressions used in subsidiary legislation shall have the same meaning as in the Ordinance conferring the power ......" and therefore inconsistent and ultra vires. I disagree. In my view, that section is of application where the same expression appears without more in subsidiary legislation. There is not, I think, any bar to refinement of meaning in subsidiary legislation. In any event, where the parent ordinance expressly confers powers to modify there cannot, in my judgment, be objection to modification of a definition provided that it does not go beyond the ambit of the parent.

68. The Ordinance was, as I have said, enacted to meet a growing and serious problem. Although, in its domestic operation, it is initially restricted in ambit to an order in personam and hedged with safeguards, it was nonetheless a revolutionary approach. The convicted drug trafficker is to be required to disgorge the benefits of his trafficking whenever the trafficking took place, whenever the benefits were obtained and wherever the property representing those benefits might be situated. Thus, a wide ranging enquiry is contemplated and one which will operate retrospectively. At the same time, the legislature wished to facilitate enforcement of foreign orders aimed at the proceeds of drug trafficking so that the drug trafficker would have as little room as possible for using Hong Kong as a haven for his benefits. Absent words restricting foreign orders to those of like nature to orders available in Hong Kong, it is implicit or inherent in sec. 28 that orders of a different or wider nature are contemplated.

69. By reference to the modified Ordinance, it can be seen from the provisions I set out earlier that, first, an ECO can arise independent of criminal proceedings, see sec. 2(11); and second, that such an order can embrace property, that is, in rem as well as in personam, see sec. 2(12) and sections 3 and 7. That confirms the wider meaning of sec. 28 of the Ordinance.

70. I am quite satisfied that it was the intention of the legislature to introduce a "fundamentally new principle" as Widgery J. put it. The legislature did not intend that the new procedure should be approached by reference to common law principles. Had it so intended, doubtless it would have made provision similar to that contained in sec. 6 of the FJO which, as I have already mentioned, in its English counterpart has been found not to have introduced a new procedure.

71. The legislature plainly had in mind and introduced the new and simple procedure set out in sec. 29. Provided the judge hearing the application is satisfied that the order sought to be registered is one which is aimed at the proceeds of drug trafficking; that where the order is against a person, that person had notice; and that generally registration is in the interests of justice, the order should be registered. There is no warrant, in my view, for the proposition that the judge has to embark upon a consideration of common law principles and the conflict of laws before registering an ECO.

72. Therefore I reject Mr. Fung's ground 1(a).

Ground 1(b) - Will registration and enforcement give retrospective effect to the Ordinance and the 1991 Order?

73. Although some argument was devoted to this topic, my impression was that Mr. Fung effectively abandoned this ground. As I have already said, the Ordinance is plainly retrospective in operation in that it attacks drug trafficking at any time and benefits and property acquired at any time.

74. I find nothing in this ground.

Ground 1(c) - Were the Forfeiture Orders made without jurisdiction?

75. I was taken to a considerable volume of expert evidence, case law and statutory material in relation to U.S. law. It is not necessary to rehearse it because the experts agreed that first, at the time the forfeiture orders were made, there was debate as to whether the U.S. courts had jurisdiction in rem over property outside the U.S.A. when proceedings are instituted. Second, that debate was settled in 1992 by the Supreme Court in Republic Bank of Miami v. U.S. which found, inter alia, that the court must have actual or constructive control of the res when in rem forfeiture proceedings are instituted.

76. The bank accounts and the house in question were not in U.S.A. at any time. Mr. Barlow, therefore, relied upon constructive control which he asserted the U.S. court had either through the Attorney General, who had earlier obtained a restraint order in relation to the property in domestic proceedings in Hong Kong, or through the owners of the property. I say no more than that either proposition is wholly untenable.

77. It follows, therefore, that the forfeiture orders were made without jurisdiction. Does that benefit the Applicant in the sense that the Applicant can properly impeach in Hong Kong those orders on the ground that the U.S. court was not competent.

78. Dicey Rule 42(2) reads,

"(2) A foreign judgment cannot, in general, be impeached on the ground that the court which gave it was not competent to do so according to the law of the foreign country concerned."

79. That rule is not as absolute as it appears. A line of cases including Castrique v. Imry [1870] L.R. 4 H.L. 414 Papadopoulos v. Papadopoulos [1930] P. 55 and Adams v. Adams [1971] P. 188 suggests that in relation to in rem proceedings, where a judgment affects not just the party but the whole world, the English or Hong Kong courts will investigate whether the foreign court had local competence and jurisdiction. The answer, in my view, is that the Hong Kong courts can have regard to jurisdiction in the narrower sense described by Lindley M.R. in Pemberton v. Hughes (1899) 1 Ch. 781 at page 790.

"If a judgment is pronounced by a foreign Court over persons within its jurisdiction and in a matter with which it is competent to deal, English Courts never investigate the propriety of the proceedings in the foreign Court, unless they offend against English views of substantial justice. Where no substantial justice, according to English notions, is offended, all that English Courts look to is the finality of the judgment and the jurisdiction of the Court, in this sense and to this extent - namely, its competence to entertain the sort of case which it did deal with, and its competence to require the defendant to appear before it. If the Court had jurisdiction in this sense and to this extent, the Courts of this country never inquire whether the jurisdiction has been properly or improperly exercised, provided always that no substantial injustice, according to English notions, has been committed.

There is no doubt that the Courts of this country will not enforce the decisions of foreign Courts which have no jurisdiction in the sense above explained - i.e., over the subject-matter or over the persons brought before them: Schibsby v. Westenholz (1); Rousillon v. Rousillon (2); Price v. Dewhurst (3); Buchanan v. Rucker (4); Sirdar Gurdyal Singh v. Rajah of Faridkote. (5) But the jurisdiction which alone is important in these matters is the competence of the Court in an international sense - i.e., its territorial competence over the subject-matter and over the defendant. Its competence or jurisdiction in any other sense is not regarded as material by the Courts of this country."

80. That passage was recently accepted by the Court of Appeal in Adams v. Cape Industries PLC [1990] 1 Ch. 433 at pages 514 and 558. There the issue was the competence of the U.S. court over the defendant based on presence of or consent to jurisdiction by that defendant.

81. The New York court which made the forfeiture orders plainly did not have competence over the res. It is therefore properly impeachable.

82. Mr. Fung also sought to impeach the forfeiture orders because it was alleged there was no link or tracing shown between the property and drug trafficking, whether drug trafficking as charged or generally in U.S.A. On the authority of Pemberton, that is plainly not a matter that falls to be considered. If there was an error, it was one of fact and/or law. It is not impeachable. See Dicey Rule 41.

83. In the circumstances, it is not necessary for me to give detailed consideration to the issue of burden of proof. Mr. Fung asserted the onus lay on the Attorney General to prove the competence of the U.S. court. He relied on Cape Industries where both the judge and the Court of Appeal held the plaintiff had to prove competence. In that case, however, the plaintiff was seeking to enforce a U.S. judgment by action in the English courts, the U.S. not being a country within the Act. It was not surprising that both courts found that a plaintiff seeking to enforce a foreign judgment should prove that court's competence in the narrow sense I have already described.

Does the court have any discretion

84. In the present proceedings, the Attorney General has had registered two orders which the Applicant seeks to set aside long after the time limited for doing so has expired. It is, in such circumstances, for the Applicant to establish grounds for setting aside.

85. The competence of the New York court having been impeached the question which arises is whether registration should be set aside ex debito or whether the matter remains discretionary. It was Mr. Fung's contention that no such discretion remains where the order complained of is a nullity. In effect, the inherent jurisdiction of the court is invoked.

86. I accept that there are cases where courts used words such as "bound" or "entitled" in relation to setting aside. In Anlaby v. Praetorious [1888] 20 Q.B.D. 764, Lopes L.J. said at page 770,

"I am, therefore, of opinion that a statement of claim was delivered within Order XXI., r. 6; and that the judgment entered by the plaintiff was premature and irregular.

I entirely agree that Order LXX., r. 1, does not apply here. It was meant to apply where a party had made some blunder in his proceedings, as by delivering a pleading too late; but the present case seems to me altogether outside the operation of r. 1, because the judgment was entered prematurely, without any right whatsoever. To obtain that judgment was a wrongful act, not an act done within any of the rules. The defendant is therefore entitled ex debito justitiae to have it set aside."

87. At page 769, however, Fry L.J. said,

"There is a strong distinction between setting aside a judgment for irregularity, in which case the Court has no discretion to refuse to set it aside, and setting it aside where the judgment, though regular, has been obtained through some slip or error on the part of the defendant, in which case the Court has a discretion to impose terms as a condition of granting the defendant relief. But although the Court is bound to set aside an irregular judgment ex debito justitiae, it has always exercised a discretion as to costs, and has imposed terms as a condition of the exercise of that discretion - a common term being that the defendant shall not bring any action."

88. The headnote to that case reflects the judgment as having been obtained irregularly. That case is no longer good law in Hong Kong, where "the victim of an irregular judgment only enjoys a confident expectation that it will be set aside" : Honour Finance Company Limited v. Tsui Mei Mei [1989] 2 H.K.L.R. 146.

89. In Lazard Brothers and Co. v. Banque Industrielle de Moscou [1932] 1 K.B. 617, a judgment against the bank, which had ceased to exist, was found upon application by a garnishee to be a nullity. At page 624, Scrutton L.J. said,

"Indeed, in my opinion, if it comes to the knowledge of the Court that it has entered judgment in default of appearance against a man who was at the time dead, or a company which was at the time dissolved, or non- existent according to the law of its country of origin, the Court is bound, after hearing the parties interested, of its own motion to set the judgment aside. Such a judgment is null and void."

90. On appeal to the House of Lords, Lord Wright also found the proceedings to be a nullity.

91. In Grafton Isaacs v. Emry Robertson [1985] 1 A.C. 97, the Privy Council was dealing with an order that could not have been made and reaffirmed that any order of a court of unlimited jurisdiction must be obeyed until set aside. At page 102, Lord Diplock said,

" Their Lordships would, however, take this opportunity to point out that in relation to orders of a court of unlimited jurisdiction it is misleading to seek to draw distinctions between orders that are "void" in the sense that they can be ignored with impunity by those persons to whom they are addressed, and orders that are "voidable" and may be enforced unless and until they are set aside. Dicta that refer to the possibility of there being such a distinction between orders to which the descriptions "void" and "voidable" respectively have been applied can be found in the opinions given by the Judicial Committee of the Privy Council in the appeals Marsh v. Marsh [1945] A.C. 271, 284 and MacFoy v. United Africa Co. Ltd. [1962] A.C. 152, 160; but in neither of those appeals nor in any other case to which counsel has been able to refer their Lordships has any order of a court of unlimited jurisdiction been held to fall into a category of court orders that can simply be ignored because they are void ipso factor without there being any need for proceedings to have them set aside. The cases that are referred to in these dicta do not support the proposition that there is any category of orders of a court of unlimited jurisdiction of this kind; what they do support is the quite different proposition that there is a category of orders of such a court which a person affected by the order is entitled to apply to have set aside ex debito justitiae in the exercise of the inherent jurisdiction of the court without his needing to have recourse to the rules that deal expressly with proceedings to set aside orders for irregularity and give to the judge a discretion as to the order he will make. The judges in the cases that have drawn the distinction between the two types of orders have cautiously refrained from seeking to lay down a comprehensive definition of defects that bring an order into the category that attracts ex debito justitiae the right to have it set aside, save that specifically it includes orders that have been obtained in breach of rules of natural justice.

The contrasting legal concepts of voidness and voidability form part of the English law of contract. They are inapplicable to orders made by a court of unlimited jurisdiction in the course of contentious litigation. Such an order is either irregular or regular. If it is irregular it can be set aside by the court that made it upon application to that court; if it is regular it can only be set aside by an appellate court upon appeal if there is one to which an appeal lies."

92. Mr. Fung submitted that on these authorities, there are three types of judgment:

(1) A nullity or "void", to be set aside ex debito.

(2) Irregular or "voidable" for procedural reasons, which may be set aside by the exercise of the court's discretion.

(3) Wrong, which may only be rectified on appeal.

93. Mr. Fung also sought comfort from the decision of the Court of Appeal in R. v. Ng Kit Yuen [1991] No. 18 (Criminal) dated 16 November 1993 (unreported), which arose out of failure by the Governor to give his consent to the prosecution. Penlington J.A. said :

" On the basis that no consent was given it seems to me that the position is then governed by the decision of the Court Appeal in R. v. Angel. 1968. Vol. 52. Crim. App. R. 280 for which I am indebted to Sears J. There a similar situation arose regarding consent by the Director of Public Prosecutions to a charge under the Sexual Offences Act 1967 which requires such consent. It was found that there was no such consent. Lord Parker L.C.J. said :

"In fact it has been ascertained that the consent of the director of Public Prosecutions was not obtained, and in the result the whole of the trial, including the committal proceedings, has been a complete nullity, having been instituted without that necessary consent. In the result, the Court has not alternative but to quash the conviction on the ground that the trial was a complete nullity, and accordingly will allow the appeal for that purpose."

It seems to me therefore that is the position here and I would allow this application for leave to appeal, treat this as the hearing of the appeal which should be allowed and the conviction quashed."

In contrast, Mortimer, J.A. said :

"The only question is whether after all this time this applicant should have leave to appeal; it is equally clear that this matter was totally overlooked by those who were representing him. He had no idea of the point now taken and justice requires that we should give him leave to appeal out of time as this is an appeal on a question of law."

94. Sears J. agreed for "the reason given by both my Lords."

95. Mr. Fung argued that it is clear that Penlington J.A. impliedly and rightly was of the view that, being a nullity, the conviction had to be quashed ex debito. He said that the exercise of discretion by Mortimer J.A. was an oversight and in error.

96. I drew attention to a recent decision of the Court of Appeal in R. v. Kwok Hing Man Magistracy Appeal No. 371 of 1994, dated 9 June 1994 (unreported), arising out the Privy Council's opinion in Attorney General v. Lee Kwong Kut [1993] A.C. 951 that s. 30 of the Summary Offences Ordinance had been repeated by the Bill of Rights. Having discussed the submission as to why leave should be given to apply out of time in the particular circumstances, being that the applicant could hardly have been expected to know he had had a ground of appeal at the time, Nazareth J.A. giving the judgment of the court continued:

"So far as the appeal itself was concerned, Mr. Sarony stressed that there was no question but that it must succeed. In that regard he referred to the judgment of Kempster J.A. (as he then was) in R v Currency Brokers (Hong Kong Ltd and Another [1987] HKLR 1136 at 1141E-F in which he quoted a judgment of Humphreys, J:

"The classic approach in this context was expressed by Viscount Caldecote, C.J. in R v Cullum (1943) 28 Cr. App. R. 150; quoting an earlier judgment of Humphreys, J:

"The rules are of importance. We have constantly refused applications for an extension of time within which to make an appeal when there have been no substantial merits brought to our notice which seems to justify the court in extending the time.'

There is other good authority that the merits, in the sense of the prospects of success if time were to be extended, should be taken into account."

While the dictum refers to the constant refusal of applications where there are no substantial merits brought to notice, it by no means suggests that exceptionally high or certain prospects of success demand that leave be given. Indeed, it has not been claimed before us that there is authority suggesting that an irrefutable ground of appeal is of itself sufficient to require or justify leave. Mr. Bailey for the Crown stresses that what this Court is concerned with is the application for leave, and not Kwok's conviction. he concedes, however, that if leave is granted, the appeal must succeed and that the merits of the appeal are a relevant factor in granting leave, but only one of several factors...."

" The same sort of question came before the Court of Appeal in R v Mitchell (see [1977] 753 pp 756H- 757B) where Geoffrey Lane L.J. said this:

"So the situation is this, the defendant has been sentenced to a term of imprisonment of three years for an offence which on the facts was not a crime. what does the court do? this is an application for an extension of time in which to appeal against conviction. It should be clearly understood, and this court wants to make it even more abundantly clear, that the fact that there has been an apparent change in the law or, to put it more precisely, that previous misconceptions about the meaning of a statute have been put right, does not afford a proper ground for allowing an extension of time in which to appeal against conviction."

While the removal of a misconception in law relied upon in a conviction bears some similarity to the repeal of an offence-creating statutory provision which is effected prior to the commission of the act charged, plainly the latter may materially differ in terms of the clarity and totality with which the basis of the relevant conviction is nullified."

97. Nazareth J.A. went on to refer to a Canadian case R. v. Thomas [1990] 75 C.R. (3d) 352 of which he said:

"We think that the relevant principle to be derived from it is best expressed in the last words of the report of R v Ramsden at p. 548, i.e. in the last analysis, it is in every case a matter of discretion for the court."

98. The court went on to exercise its discretion in favour of the applicant and concluded:

"we feel bound to say this, that where, as in this case, the resulting situation is that a person has been convicted of what can be plainly seen to have been unquestionably a non-existent offence, it is difficult to see how his application could be refused in the absence of some special circumstances e.g. a realistic possibility of the court substituting a conviction for a related offence, or an informed election not to appeal in the knowledge that the offence-creating statutory provision was likely to be struck down. Bearing in mind that such applications for leave will be a matter for the discretion of the particular court concerned, we have consulted the other members of this Court, each of whom has concurred in the foregoing approach."

99. I acknowledge Mr. Fung's criticism that the earlier authorities were not cited to or by the Court in the latter case. I also acknowledge his submission that jurisdiction, where it did not exist, cannot be conferred by judicial action.

100. I accept that the victim of an order shown to be a nullity, who applies timeously to the court that made the order, will succeed in having the order set aside ex debito. I reject, however, the notion that a person, like the Applicant, who having had notice of the proceedings has consistently declined to take part and failed to meet a time limit prescribed by the court, can come to court when it suits him and have an order set aside despite his default. There, it seems to me, the distinction lies between cases such as Lazard; Anlaby and R. v. Angel, and between the two recent decisions of the Court of Appeal. In the earlier cases, no question of time arose as far as I can discern. The Court of Appeal, however, was faced with late applications and had to canvas whether or not indulgence should be granted. Inevitably, the fact that the conviction was a nullity or that a person might serve a sentence for a non-existent offence would be an overwhelming consideration.

101. I do not regard Penlington J.A. as having accepted any contrary principle. It seems to me he was simply acknowledging that, in all the circumstances, indulgence would have to be given to the applicant.

102. In my judgment, this is a case where recourse needs to be had to the rules, in particular, Order 3 rule 5 as endorsed on the Applicant's summons. Order 3 rule 5, of course, reposes a discretion in a judge hearing an application for indulgence.

103. In the exercise of my discretion, the most powerful factor which I must take into account is the impeaching of the forfeiture orders on which the judge's order is based. Also, the loss to the Applicant of its property.

104. On the other side of the scale is the delay of almost one year in making the application. That has been explained on the basis of faulty advice and the fact that Mr. Lo had his own personal problems to deal with. Whether or not the Applicant had faulty advice is a matter the Applicant may have to take up with its then solicitors. It should be noted, however, that according to one of the affidavits of Mr. John Carlson, Crown Counsel who had the carriage of these proceedings in the Attorney General's Chambers, Mr. Carlson spoke to the solicitor representing Mr. Lo at the time and was told that Mr. Lo was advised of the steps that could be taken in both New York and Hong Kong. That solicitor also said that the Applicant's position was not discussed. So there is some confusion about to whom advice was given and the nature of that advice.

105. I do not think that it matters. It is clear that by June 1992, Mr. Lo, Mr. Tsoi and the Applicant were aware that ground 1(a) was available. Yet, no application was made by the Applicant until February next.

106. The delay in making this application has deprived the U.S. authorities of an alternative remedy. Had this application been made timeously, application could have been made in New York for orders in personam in substitution for the orders in rem. The time limited for making such an application expired in about February 1993.

107. I reject, however, the suggestion that this delay was a deliberate manipulation by Mr. Law in order to prevent the U.S. authorities from obtaining other orders.

108. Mr. Fung attempted to argue that if the judge's order is not set aside the Hong Kong Government, which in fact benefits from any proceeds derived from enforcement of an ECO, will be unjustly enriched because the house purchased in 1983 for $890,000 is now worth several million dollars. He said it is only the actual benefit received not any enhanced value that can be recovered. I reject that. The Ordinance makes plain that it is the current value of property held by a person that is to be reflected, not just its initial capital value.

109. In any event, if unjust enrichment is a consideration, I am satisfied that it operates against the Applicant. Given the object of the legislation, it would in my view be contrary to public policy to restore the property to the Applicant when the ultimate beneficiary will be the self-confessed drug trafficker, Mr. Law.

110. I am mindful, as I said, of the now impeached forfeiture orders. I am satisfied, however, that in all the circumstances I should not exercise my discretion in favour of the Applicant.

Ground 2(a) - Was there material non-disclosure or misrepresentation?

111. The complaint is that the Attorney General did not disclose to the judge at least that there was, at the time, debate in U.S.A. about whether in rem orders against foreign property could be made. There was in existence a recent decision by a court of co-ordinate jurisdiction that the U.S. courts had no jurisdiction to make such orders.

112. I accept that Mr. Carlson, who represented the Attorney General on the application for registration, had no knowledge of the position. It was, however, the U.S. Government making application by the agency of the Attorney General. The U.S. Government should, as any client, have put the Attorney General in possession of all material facts.

113. This fact was plainly material. If the judge had been apprised of it, he would doubtless have weighed it in the balance. He was not there as a rubber stamp. He had a discretion, not least under sec. 29(1)(c) of the Ordinance and modified Ordinance.

114. I find, therefore, that there was material non-disclosure. I have, however, already exercised my discretion. I would not exercise it in the other way on this ground.

Ground 2(b) - Is registration contrary to the interest of justice?

115. This ground is a reflection of sec. 29(1)(c). It effectively encompasses all that has gone before in relation to the U.S. proceedings. There was nothing which gives me any cause to think I should exercise my discretion in any other way.

116. Accordingly, I refuse the application to amend the summons and the summons is dismissed. I make an order nisi that the Attorney General should have his costs.