NEIL PRYDE LTD. and Another v. BRYAN CHAU and Others

Civil Appeal No. 91 of 1995

Headnote

Issue of search warrants - s. 50(7) Police Force Ordinance (Cap. 232)

Offence specified in warrant had not proceeded to completion. Whether issue of warrants nonetheless sustainable by reference to implicit attempted offence - ss. 101B, 101C Criminal Procedure Ordinance.

Official secrecy under s. 4 Inland Revenue Ordinance (Cap. 112)

Whether disclosure by Commissioner of Inland Revenue to Attorney General of information for purposes of prosecution is in breach of s. 4 - relevant scope of Commissioner's duties.

IN THE COURT OF APPEAL

1995, No. 91
(Civil)

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REASONS FOR JUDGMENT

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Nazareth, V.-P. :

1. Having heard counsel's submissions at the hearing, we dismissed the appeal, allowed the cross-appeal and awarded the respondents the costs of both. We stated that we would hand down our reasons in writing. We do so now.

2. On 30th January 1995 the appellants were granted leave, ex parte, by Jerome Chan J to apply for judicial review of the decisions of the respondents in issuing 10 search warrants of the premises of the appellants and their officers.

3. On 24th February 1995 the respondents took out a summons to set aside the ex parte leave granted by Jerome Chan J on 30th January 1995. It came before Jerome Chan J on 6th March 1995. The appellants had sought judicial review upon two grounds:

"1. That there was no material before the learned Magistrate from which it could have appeared to any reasonable magistrate, properly directing himself, that there was reasonable cause to suspect the commission of an offence contrary to S.18B(1)(c) of the Theft Ordinance by any of the Applicants and/or that any of the documents referred to in 'Annexure C' to the said Warrants were likely to be of value (whether by itself or together with anything else) to the investigation of any such offence by any of the Applicants.

2. Further or alternatively, in so far as the Information in support of the application to issue the Warrants was based on or referred to documents or information obtained by the Royal Hong Kong Police from officers of the Inland Revenue Department acting contrary to their obligations of official secrecy under Section 4 of the Inland Revenue Ordinance (Cap. 112), the application for the said Warrants was an abuse of the process of the Court."

Having heard counsel Jerome Chan J set aside the leave for judicial review on ground 1, but upheld leave for judicial review on ground 2.

4. On 16th March 1995 the appellants appealed to this Court against the order of Jerome Chan J to the extent that he ordered the leave he had earlier granted to be set aside. Likewise on 30th March 1995 the respondents cross-appealed against the order of Jerome Chan J to the extent that he ordered the leave he had granted on 10th January 1995 to continue.

5. In relation to the first ground, Mr Andrian Huggins QC, who appeared for the appellants with Mr Daniel Wong, contended that there was a manifest failure by the magistrates concerned to comply with the essential requirements of s.50(7) of the Police Force Ordinance, Cap. 232 when issuing the 10 search warrants.

6. The material provisions of s. 50 are as follows:

"50. Arrest, detention and bail of suspected persons and seizure of suspected property

...

(7) Whenever it appears to a magistrate upon the oath of any person that there is reasonable cause to suspect that there is in any ... place any ... article ... which is likely to be of value ... to the investigation of any offence that has been committed, or that is reasonably suspected to have been committed or to be about to be committed or to be intended to be committed, such magistrate may by warrant directed to any police officer empower him ... -

(a) to enter ... such place and to search for and take possession of any such ... article ... which may be found therein ...

(b) ...."

7. Each of the 10 search warrants in question contained the following words upon which Mr Huggins relied:

"To each and all of the police officers of Hong Kong

INFORMATION has this day been laid before the undersigned, a magistrate of Hong Kong by Detective Inspector... that there is reasonable cause to suspect that an offence contrary to Section 18B(1)C of Theft Ordinance, Cap. 210 namely Evasion of Liability By Deception has been committed or is reasonably suspected to have been committed by [the appellants ...] and that there is reasonable cause to suspect that certain articles, namely, as per attached which are likely to be of value to the investigation of the offence, are under the control of the occupant(s) ... at [specified premises] and an oath has now been made before me substantiating the matter of such information.

You are herewith empowered to enter ... the said place ... and to search for and take possession of such articles as aforesaid ..."

8. The material part of s.18B of the Theft Ordinance reads as follows:

"18B. Evasion of liability by deception

(1) ... where a person by any deception ... -

(a) ...

(b) ...

(c) dishonestly obtains any exemption from or abatement of liability to make a payment,

he shall be guilty of an offence ..."

The respondents' case was that the appellants had dishonestly obtained an exemption from liability to make a payment of tax. However, it became apparent and was not disputed that the appellants did not succeed in obtaining any such exemption. It was upon that basis that it was submitted to Jerome Chan J by the appellants that there was no evidence and therefore impossible for the magistrate to be satisfied that the offence specifically relied upon in the information had been committed. The respondents sought to rely upon IRC v Rossminster and others [1980] AC 952, but the judge rejected their submission stating that:

"... the distinction between the scenario in Rossminster and the present case is that there is clear and undisputed evidence before the court that the applicant could not have committed the particular offence for which the warrants were issued."

However, he went on to state that:

"I am satisfied the respondent has made out a valid case that the ex parte leave ought not have been granted in that the reference to a statutory offence in the information and the warrant would necessarily include a reference to an attempt to commit that offence."

He rested that conclusion upon ss. 101B and 101C of the Criminal Procedure Ordinance, Cap. 221 which in effect provide that references in ordinances to offences include references to attempts to commit those offences. It is not necessary to set out those provisions in detail, nor the interesting submissions we have heard upon and in relation to them, as Mr Huggins in the event very properly conceded that all the ingredients of an attempted offence contrary to s.18B(1)(c) would be included in the offence itself. Thus, although the magistrates could not have been satisfied that the appellants obtained the advantage of exemption, they must have been satisfied on the other ingredients of the substantive offence. That, as contended by Mr Warren Chan QC who, with Miss Phyllis Wong appeared for the respondents, effectively disposes of Mr Huggins's submissions on the first ground. It is not necessary to say any more on the other arguments skilfully deployed on the first ground. It clearly fails.

9. Turning then to the second ground, up to the hearing of this appeal, and indeed the conclusion of Mr Huggins's opening submissions, there had been no indication from the respondents as to how they had obtained the information upon which the warrants were sought. For the appellants it was argued with some force by Mr Huggins that such information could only have come from Inland Revenue Officers and been disclosed in breach of s.4 of the Inland Revenue Ordinance, Cap. 112. That section provides as follows:

"4. Official secrecy

(1) Except in the performance of his duties under this Ordinance, every person who has been appointed under or who is or has been employed in carrying out or in assisting any persons to carry out the provisions of this Ordinance shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Ordinance, and shall not communicate any such matter to any person other than the person to whom such matter relates ... nor suffer or permit any person to have access to any records in the possession, custody or control of the Commissioner."

10. It was revealed for the first time in Mr Warren Chan's submissions in reply, that the Commissioner of Inland Revenue in requesting the Attorney General to prosecute, imparted to him the relevant information and that it reached the police officers concerned when the Attorney General passed it on to them for the purpose of investigating the offences. Prior to that the respondents had resolutely declined to reveal the source of the information.

11. In addressing the matter the judge recognised the exception from the operation of s. 4 provided by reference to the performance of duties under the Inland Revenue Ordinance. However, he went on to say:

"There is a strong case that there may not be any duty imposed by the Ordinance upon the Commissioner to teach taxpayers who have unsuccessfully attempted to evade tax liability a lesson by instigating prosecution for their unsuccessful attempt. If the taxpayer makes objection to the tax demanded and his objection is rejected, he can appeal to the Board of Review in which case the Attorney General's chambers will almost invariably be involved to represent the Crown. Any information obtained by the Attorney General as a result of such an appeal from the papers placed before the Board would not have been covered by s.4. It would also appear that s.4 may not cover any communication with the Attorney General's chambers for legal advice on taxpayers' claims for exemption or reduction of tax liability. In the premises, there are various channels through which the police could have obtained information about a taxpayer's suspected criminal activities indirectly from the Commissioner of Inland Revenue via the Attorney General. It, therefore, does not appear to me that the authority is as helpless as the respondents contended. Perhaps, s.4 is nugatory and redundant in view of such indirect channels available to the police. It is clearly a matter that ought to be fully argued at a proper hearing. I am not satisfied that it is clearly a case that no leave ought to be granted to have the matter determined at a proper hearing. In the premises, I uphold the ex parte leave granted to judicial review the warrants upon ground (2)."

12. In the light of the source of the information revealed by Mr Warren Chan, Mr Huggins found himself in some difficulty in resisting Mr Chan's contention that the information was disclosed in the performance of duty. Although not expressly so provided in the Inland Revenue Ordinance, I have no difficulty in concluding from the general tenor of the Ordinance that it must be the duty of the Commissioner of Inland Revenue to collect and secure the collection of revenue, and in that context to request the Attorney General to prosecute particular cases of exemption or reduction of tax obtained by deception (and cases of unsuccessful attempts) and for that purpose to furnish to the Attorney General such information as he has in his possession. Upon that basis, the judge's reasons and conclusion in relation to ground 2 (which it is apparent he would not have reached had the source of the information been disclosed to him) cannot be supported. It is accordingly not necessary to address the respondents' other grounds of cross-appeal.

13. For those reasons, I concluded that the appeal had to be dismissed and the cross-appeal allowed.

Bokhary, J.A.:

14. I thank counsel on both sides for their most helpful submissions.

15. My reasons for dismissing the appeal and allowing the cross appeal can be stated with brevity.

16. As far as the appeal is concerned, I am of the view that there is no real potential for success in the argument that no reasonable magistrate properly directing himself could have issued the search warrants in question.

17. Search warrants bring the constable doing his duty face-to-face with the citizen asserting his rights. The law on search warrants must therefore be as free from subtlety as possible. It should of course lean in favour of the individual, but not to the point of becoming unrealistic.

18. Here no exemption from liability was obtained. But there is reasonable cause to believe that that was not for want of trying.

19. The magistrates issued search warrants in respect of the full offence of evasion of liability by deception, contrary to section 18B(1)(c) of the Theft Ordinance, Cap 210. In doing that, they must have taken - and were entitled to take - the view that there was reasonable cause to believe in the existence of facts which would constitute an attempt to commit that offence. The facts which constitute an offence includes those which constitute an attempt to commit it. In short, the greater includes the lesser.

20. As far as the cross appeal is concerned, I am of the view that there is no real potential for success in the argument that the search warrants were obtained on the strength of anything communicated in breach of section 4 of the Inland Revenue Ordinance, Cap. 112.

21. Subsection (1) of that section reads:-

" Except in the performance of his duties under this Ordinance, every person who has been appointed under or who is or has been employed in carrying out or in assisting any persons to carry out the provisions of this Ordinance shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Ordinance, and shall not communicate any such matter to any person other than the person to whom such matter relates or his executor or the authorized representative of such person or such executor, nor suffer or permit any person to have access to any records in the possession, custody or control of the Commissioner."

22. The Commissioner of Inland Revenue's primary duty is to collect revenue which is due. That task is assisted by the prosecution of those who evade or attempt to evade tax. Such persons include those who fraudulently obtain or attempt to obtain tax exemptions to which they are not entitled.

23. So when the Commissioner of Inland Revenue communicates to the Attorney General matters relevant to a prosecution of that kind or to a decision whether or not to bring such a prosecution, he does so in the performance of his duties under the Inland Revenue Ordinance.

24. It is true that tax evasion can lead to a prosecution under the provisions of the Inland Revenue Ordinance itself. I have in mind section 82 of that Ordinance.

25. But it is the deterrent effect of tax evasion prosecutions which assists the Commissioner of Inland Revenue's task of collecting revenue which is due. Accordingly, it is impossible to suggest that he is acting outside the scope of his duties under that Ordinance just because his communication is in contemplation of such a prosecution under the provisions of another Ordinance (such as section 18B(1)(c) of the Theft Ordinance) carrying penalties heavier than those carried by the penal provisions of the Inland Revenue Ordinance.

P. Chan, J.:

26. I agree with the reasons given by my Lords, the Vice President and Bokhary JA. There is nothing I can usefully add.