DEPARTMENT OF JUSTICE v. YEUNG CHUN PONG AND OTHERS

HCMP5021/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.5021 OF 2003

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J U D G M E N T

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Background

1. By an order dated 7 January 2004, the Secretary for Justice obtained a restraint order pursuant to section 15 of the Organized and Serious Crimes Ordinance, Cap.455 (hereinafter called the "OSCO"), against the assets of the four respondents. The said order was amended on 27 January 2004.

2. There are, in essence, three parts of the said order, namely, for restriction on disposal of property; charging orders in respect of certain properties; and order for disclosure of information.

3. By summons dated 3 February 2004, the respondents seek certain variation as particularized therein to the restraint order pursuant to section 15(5) of the OSCO. Basically they seek to vary or delete certain clauses in the restraint order relating to the disclosure of information.

Preliminary issue

4. The Secretary for Justice argued "issue estoppel" as a preliminary issue. It was submitted that the order dated 7 January 2004 was made by the court after extensive arguments by counsel for both parties. Therefore, the respondents were estopped from either arguing the same issues or issues which could have been ventilated on that occasions unless they could shown any change in circumstances. Mr Reading, SC, representing the Department of Justice, submitted that the summons for variation taken out by the respondents was simply to circumvent the appeal provisions and thus amounted to an abuse of process.

5. It is not disputed that the appeal period for the interlocutory order has expired by the time of the taking out of the summons.

6. Mr Bruce, SC, on behalf of the respondents, submitted that jurisdiction for variation is conferred by section 15 of the OSCO. He stressed that such jurisdiction as conferred is unqualified.

7. It was held in Re O [1991] 2 WLR 475 that the regime for restraint and charging orders as provided by legislation was both civil in character and collateral to the criminal regime. Restraint orders bear certain similarity to Mareva injunctions. Whilst it has been held that it is always open to the court to entertain an application to discharge an interlocutory injunction, courts will usually decline to entertain a second application where the same issue between the same parties had been distinctly put and had been solemnly and with certainty determined. 'Issue estoppel' is a particular application of the general rule of public policy that there should be finality in litigation. Generally, the court will not hear an application to discharge an injunction made after full inter partes hearing where it appears that justice between the parties can as readily be achieved by pursuing the right to appeal.

8. Mr Bruce submitted that privilege against self-incrimination was not fully ventilated before Gall J and was not done in a principled way. He further said that had the outlining principle been the subject of debate on the last occasion, the orders would have been carved differently and so the restraint order made by Gall J was made on a wrong basis of the law. In my view, if that is the case, the remedy lies on appeal instead of variation.

9. Section 15(5)(a) of the OSCO provides that a restraint order may be discharged or varied in relation to any property; section 15(6) provides that an application for the discharge or variation of a restraint order may be made by any person affected by it. The words "may be" used in the statute gives the court a discretion whether to vary a restraint order or not. However, the discretion has to be exercised judicially and it does not give a party an unqualified right to a variation of the restraint order. Whilst I accept issue estoppel do not apply to procedural interlocutory relief, the court is not powerless to deal with attempts to re-litigate issues already decided by it or issues which could have been raised in an earlier hearing dealing with substantially the same subject matter. The application for a variation of the restraint order is, in my view, always subject to control by the exercise of judicial discretion in determining whether it is frivolous, vexatious or otherwise an abuse of court process in all the circumstances then appearing.

10. I was informed that whilst the issue of privilege against self-incrimination was raised but not argued in a principled way, the issue of derivative use was not discussed at all. I consider that it behoves a party seeking to vary the order in the circumstances such as the present case at least to provide some sort of explanation as to why the issues were not ventilated or fully argued. It is quite a live possibility that the failure to raise the point in the earlier hearing is not a matter of negligence or dereliction of duty but was rather a deliberate decision. The points now raised by Mr Bruce were not alluded to in any affirmation filed on behalf of the respondents in support of this application for variation. I come to the conclusion that what was advanced by Mr Bruce did not constitute any material change in circumstances since the last hearing.

11. I entirely agree with Mr Reading that the respondents failed to establish any change in circumstances. This application to vary the order dated 27 January 2004 must fail, subject to the exception relating to motor vehicles, and I shall deal with this point later in this judgment.

The variations sought

12. If I were wrong on these findings, I shall now deal with the summons for variation. At the outset, it is worth noting that certain disclosures have already been made in accordance with the order. So what the respondents are seeking, by way of variation, is an order for 'selective disclosure' whilst stressing that such partial compliance are not to be construed as implying that they accept any legal requirement for disclosure as such.

13. Mr Bruce's arguments are twofold :

(1) that the order for disclosure violates rights to silence and to privacy;

(2) if there is an obligation to disclose, then the protection in paragraph 5 of the said order is insufficient to limit the scope of derivative use of the information or material.

14. Mr Bruce then applied those broad statement of principles to various clauses to which variations were sought. I shall only deal the general principles and do not propose to deal with each and every individual variation sought, except one or two clauses in particular.

15. Mr Bruce submitted that the privilege that is being encroached in this case are the following two types out of the others identified by Lord Mustill in R. v. Director of Serious Fraud Office ex-parte Smith [1993] AC 1 :

"(1) A general immunity, possessed by all persons and bodies, from being compelled on pain of punishment to answer question posed by other persons or bodies,

(2) A general immunity, possessed by all persons and bodies, from being compelled on pain of punishment to answer questions the answers to which may incriminate them."

16. Mr Reading submitted that the order for disclosure of information did not interfere with the respondents' rights to silence and to not being required to incriminate himself and that Clause 5 affords sufficient protection against direct use.

Privilege against self-incrimination and the right of silence

17. It is clear from the judgment in Re O [1991] 2 WLR 475 that in the absence of express jurisdiction, ancillary power to make a disclosure order is inherent in the Act to ensure the effectiveness of a restraint order. It further held that "it follows that the applicants would be entitled to refuse to comply with the disclosure order made in this case, if and in so far as to do so might tend to incriminate them".

18. By the same token, the OSCO does not exclude the privilege against self-incrimination. It is open to the respondents to refuse to comply with the order for disclosure on grounds that the answers might tend to incriminate them, although it is stated in the restraint order that failure to comply might result in criminal proceedings and contempt of court proceedings. Therefore, a respondent is entitled to rely on this privilege as a defence should criminal or contempt proceeding be instituted. Of course, they may be other effects of non-disclosure affecting the release of funds for personal or legal expenses as expressed by Deputy High Court Judge McMahon (as he then was), in Re Susanto Kam & anor, HCMP1692/2002 :

"... It may well be that by not divulging that information he is making his task in satisfying this court that he has no other assets from which to pay his expenses other than the restrained and charged assets all the harder...."

19. Re T [1992] 1 WLR 949 also held that the inclusion of provision against direct use of such information disclosed "removed any risk of self-incrimination".

20. I now turn to whether there is sufficient protection in the order. Clause 5 of the order says this :

"No disclosure made in compliance with this order shall be used as evidence against the respondents in any criminal prosecution of any of the respondents who are required to make that disclosure, except in proceedings under s.31 of the Crimes Ordinance, Cap. 200."

21. This paragraph is an undertaking against direct use of such information disclosed.

22. This point had been disposed of in the Secretary for Justice and Cheung Kwok Kuen & Another, HCMP55/2000. The court therein examined the proviso in Re O [1991] 2 WLR 475 and Re C (The Times, 21 April 1995).

23. The Re O proviso is as follows :

"No disclosure made in compliance with this order shall be used as evidence in the prosecution of an offence alleged to have been committed by the person required to make that disclosure or by any spouse of that person."

24. Re C added the following to the Re O proviso :

"and no use shall be made in any such prosecution against the defendant of evidence obtained as a direct result of such disclosure."

25. The two clauses that Lugar-Mawson J was concerned with in that Cheung Kwok Chuen's case were exactly the same as those in the present case. He found them to be clearly modeled on the Re O and Re C provisos and that they afforded sufficient protection to the respondent. Whilst the ruling and judgment of Lugar-Mawson J is only persuasive and not binding on me, I am not prepare to depart from that in any aspect despite the able argument of Mr Bruce on behalf of the respondents.

Disclosure of source and derivative use

26. It is submitted that there is no necessity to disclose the source

of the assets as it is the present assets which is of significance, how the respondent got those monies in question or assets are not of legitimate concern. Mr Bruce specifically addressed the court as to Clauses 4(II)(i) and 4(iv)(i) in respect of the 2nd and 4th respondents and submitted that these clauses unconscionably required the respondents to disclose the source of payments into assets held and derived from those accounts. He said that such disclosure would enable the police to obtain information which could be the subject of derivative use.

27. Mr Reading, however, submitted that the clauses were entirely appropriate as these were all "realizable property". These accounts were allegedly vehicles for the money laundering and they needed to trace the proceeds of crime, that being one of the objectives of a restraint order.

28. Section 15(2) of the OSCO provides that a restraint order may apply to all realizable property held by a specified person. Section 12 defines realizable property as :

(a) any property held by the defendant;

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

(c) any property that is subject to the effective control of the defendant.

29. In Choi Kong and Wong Lai Hung, HCMP2801/2002, Deputy High Court Judge McMahon (as he then was), examined in detail the purpose and structure of the OSCO under which restraint proceedings were brought. He noted the draconian nature of the legislation and that "it reflects the very public concern that persons involved in serious organized crime should not have the use of the profits of those activities once they are convicted."

30. In Mitchell Taylor & Talbot on Confiscation and the Proceeds of Crime, it is recognized that one of the purpose of provision for disclosure of assets in support of restraint orders to be "to enable the applicant/prosecutor to identify persons affected by the restraint of the defendant's assets".

31. Such being the underlying spirit of the OSCO and in particular the restraint order, the disclosure of information thus goes hand in hand with the restraint order in that the respondents will have to satisfy the court on balance that :

(1) all assets are disclosed;

(2) all such disclosed assets are subject to the restraint order.

32. Whilst the learned deputy judge recognized that usually a respondent is only required to disclose his present assets and not his whole financial history, he went on to say that there were cases where there were documents showing that the respondent in the recent past was in control of very large amounts of money or valuable assets "which had been disposed of to persons or places unknown and so the court needs to order disclosure of the source of such money or assets". This is the position in the present case. I find the clauses appropriate in the circumstances.

33. Clause 6 of the order states that :

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

34. It would seem that Mr Bruce's real complaint is against the derivative use of such information. It was submitted that the risk of the leaking out of information was more than apparent given that the officer in charge of the criminal proceedings being the same as the deponent in the restraint order proceedings suggests a dual interest.

35. According to Deputy Judge McMahon in Re Susanto Kam & anor, HCMP1692/2002 :

"Any suggestion that there may be some indirect way in which the prosecution could use any such information and in doing so successfully circumvent the provisions of the order is purely speculative."

36. I must say that I share the same view. In the exceptional circumstances that information so obtained is to be divulged to third parties, leave of the court is required. I am of the view that there is sufficient safeguard against misuse.

37. There are various clauses in the order requiring conversion of present assets into money to be paid into a designated account. (see Clause 4(III)(iii)) Clause 4(I)(vi) also requires the 1st respondent to use his best endeavours to make arrangements for the ongoing income derived from his interest in the two casinos to be paid into his bank account in Hong Kong. Mr Bruce submitted by virtue of these clauses, the respondents were asked to help the Secretary for Justice to collect assets when the primary concern of a restraint order should be to prevent dissipation.

38. I am of the view that this argument is misconceived. If one should revisit Deputy Judge McMahon's judgment in Choi Kong and Wong Lai Hung, HCMP2801/2002, and in particular, the passage quoted above, it is crystal clear that the purpose of a restraint order is to preserve assets, and to prevent dissipation in order to enable confiscation in the event of a conviction. The relevant clause enables closer monitor of the 1st respondent's assets so as to prevent dissipation.

39. There is nothing oppressive in the way that the clauses were drafted. In any event in respect of the 1st respondent, should he fail to do so upon best endeavours, the order provided flexibility to the extent that he can give full explanation with supporting documents. The clause requiring the motor vehicles to be sold also purports to preserve the value of such and to prevent future depreciation. I also note that whilst Mr Bruce objected to the principle behind such a clause, he felt no qualms about the mechanism as proposed by Mr Reading, namely, that should the sale of such fail to materialize within the time limit specified they would come back for variation to appoint a receiver.

40. I am not going to order the sale of another motor vehicle which was not made the subject of the order in lieu of the other two as specified in the order. However, now that it is the 3rd respondent's case that that private car had escaped the attention of the last application and both the Department of Justice and the 3rd respondent have no objection to an order for sale of that, I shall make an order in terms of paragraph 13 of the summons, and order that clause to be added as Clause 4(III)(iv).

41. Except this above-mentioned variation, I refuse all other variations sought.

Costs

42. I make an order nisi that the respondents are to pay costs of this summons to the Secretary for Justice with certificate for two counsel, to be taxed if not agreed.