SECRETARY FOR JUSTICE v. SHIN DONG KI AND OTHERS

CAMP 46/2023, [2023] HKCA 1021

On appeal from [2022] HKCFI 929

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 46 OF 2023

(ON AN INTENDED APPEAL FROM HCMP NO 1998 OF 2019)

IN THE MATTER OF THE

ORGANIZED AND SERIOUS CRIMES ORDINANCE (CAP 455)

AND

IN THE MATTER OF

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________________________

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  This is the respondents’ renewed application for leave to appeal against the decision of Johnny Chan J on 14 July 2022 (“Decision”)[1] dismissing their application for the discharge of a restraint order.

2.  Shin Dong Ki (“R1”) was convicted by the Seoul Central District Court of, inter alia, conspiracy to commit tax evasion. It was found that R1 and two others had caused dividends in the sum of US$10 million to be paid from CJ International Asia Limited to Tiger Galaxy Limited (“R7”; beneficially owned by R1) upon the instructions of Mr Lee Jae Hyun (“Lee”), and that R1 and Lee conspired to use R7 to transfer the sum to foreign countries to purchase art works, making it difficult for the Korean tax authority to track and reveal that the sum was beneficially owned by Lee. Lee evaded income tax in the sum of KRW2,354,660,000 in year 2011 and income tax amounting to KRW1,709,354,000 in the year 2012. The findings and convictions were affirmed by the Seoul High Court.

3.  Upon the application of the Secretary for Justice, a restraint order was granted against the 10 respondents on 13 November 2019 restraining them from removing from Hong Kong and in any way disposing of, dealing with, or diminishing the value of their property.

4.  On 9 September 2021, the respondents applied to discharge or vary the restraint order. By the Decision, the judge refused to discharge but varied the restraint order to the effect that the amount under restraint is reduced to approximately HK$77.5 million[2]. The judge found, among other things, that R1 has benefited to the extent of US$10 million deposited to R7’s bank account which he had legal and sole operation control[3].

5.  The respondents applied for leave to appeal against the Decision. On 20 January 2023, the judge granted leave on two out of the six grounds of appeal (“Leave Decision”)[4], namely: Ground 3 (whether the judge erred in finding there is evidence that R1 benefited from the alleged money laundering offence[5]) and Ground 4 (whether the judge erred in finding that the value of R1’s benefit is not the amount of tax evaded by Lee but the money transacted[6]).

6.  The respondents filed a renewed application for leave to appeal with the Court of Appeal on 3 February 2023, seeking leave to appeal for Grounds 1, 2, 5 and 6:

(1)  Ground 1: the judge erred in finding that R1 is an absconder under section 2 and section 8(1)(a)(ii) of the Organized and Serious Crimes Ordinance, Cap 455 (“OSCO[7]”)[8];

(2)  Ground 2: the judge erred in finding that it cannot be said that the US$10 million deposited to R7’s bank account did not represent proceeds of an indictable offence and it could not be said that R1 could not have been convicted of the offence of money laundering[9];

(3)  Ground 5: the judge erred in finding that it cannot be said that the prosecution of the money laundering offence in Hong Kong is based on the same or substantially the same facts as in the Korean proceedings[10];

(4)  Ground 6: the judge erred in finding that there would be no double recovery and it would not be disproportionate to make a confiscation order against R1[11].

Ground 1

7.  The respondents relied heavily on Campbell-Moffat J’s ruling in Tam Kit-I[12] to contend that “proceedings”[13] must have commenced against R1 before he left Hong Kong for Korea on 10 May 2013 for him to qualify as an absconder. Their solicitors have properly drawn this court’s attention to the judgment of the Court of Final Appeal in Secretary for Justice v Tam Kit I (2023) 26 HKCFAR 63, which was handed down on 29 March 2023 after submissions were lodged in this application.

8.  We agree with the judge for the reasons he gave in the Leave Decision that Ground 1 has no reasonable prospect of success.

9.  Further, the ruling of Campbell-Moffat J was considered incorrect by the Court of Final Appeal at §§67 to 76[14]. Although it was expressly stated in §73 that it would not be appropriate to attempt to define “absconding” as the court had not heard argument on the proper construction of that term, the Court of Final Appeal has reviewed Campbell-Moffat J’s reasoning and made these pertinent observations:

(1)  there is nothing in section 8(1)(a)(ii) to suggest that proceedings must have been instituted prior to the person’s act of absconding and there is no sensible reason for requiring proceedings to have been instituted before the defendant absconded (§§70, 71);

(2)  section 2(1) invites a broad approach to the term “absconded” and there is no obvious reason for requiring “abscond” to involve an act which is sudden and secretive (§73);

(3)  the essence of “absconded” in section 8(1)(a)(ii) involves the evasion of apprehension to face criminal proceedings for the offence concerned (§73).

10.  In the present case, R1 knew he was being investigated by the Hong Kong Police as early as August 2013[15] and a warrant of arrest was issued against him on 8 May 2014. He left Hong Kong for Korea, subsequently relocated to Vietnam and has no intention to return to Hong Kong.

11.  The judge’s determination that R1 is an absconder is in line with the decision of the Court of Final Appeal and the decision of the English Court of Appeal in R v Bestel[16] which stated that “the phrase ‘a defendant absconds’ implies that, at least, the defendant has sought to place himself beyond the reach of the court for the purpose of escaping judgment”.

Ground 2

12.  The definition of “a person’s proceeds of an offence” is set out in section 2(6)(a)[17]. On the true construction of section 2(6)(a), in HKSAR v Li Kwok Cheung George (2014) 17 HKCFAR 319 at §74, the Court of Final Appeal took the view that the payments in question must be “in the nature of a reward” received in connection with the commission of the “predicate offence” (ie the underlying indictable offence).

13.  The respondents submitted that the money laundering offence is a ‘parasitic’ offence predicated on the commission of another offence which yielded proceeds which then become the subject of the money laundering offence. The money laundering offence does not extend to a person’s intended use of property in connection with an offence, citing R v GH [2015] 1 WLR 2126 at §37. They contended that the US$10 million deposit to R7’s account is clean money which was not paid or received in the nature of a reward in connection with commission of the predicate offence, and does not qualify as the proceeds of an indictable offence and it was wrong to hold that it could not be said R1 could not have been convicted of money laundering, citing in support Li Kwok Cheung George.

14.  The judge has rejected the above contentions for the reasons in the Decision and the Leave Decision. But as he has granted leave for Ground 3 on the issue of whether R1 received a benefit from the alleged money laundering offence, we think it appropriate to grant leave for Ground 2 as well, since this involves consideration of whether R1 received the payment in the nature of a reward in connection with the commission of the predicate offence, on the aforesaid construction of section 2(6)(a).

Ground 5

15.  The respondents relied on the wider common law principle against double jeopardy to submit that the judge failed to hold it would be an abuse of process to try R1 of the alleged money laundering offence in Hong Kong which is based on the same or substantially the same facts as in the Korean proceedings.

16.  We agree with the judge for the reasons he gave in the Leave Decision this ground has no reasonable prospect of success.

17.  In any event, this ground is a nonstarter as stay of prosecution under the wider principle against double jeopardy is discretionary rather than automatic and the court will exercise its power to order a stay only in the most exceptional circumstances (Yeung Chun Pong & Others v Secretary for Justice [2008] 3 HKLRD 1 at §69). Furthermore, the proceedings relating to the restraint order would not amount to abuse of process in themselves as the court has to consider a number of facts (which include but not limited to whether R1 has absconded and whether he has benefited from the specified offence) in these proceedings, in addition to the facts relied on in the Korean proceedings even though the factual basis overlaps to a certain extent in the two proceedings.

Ground 6

18.  The respondents contended that stripping R1 of the alleged benefit of the money laundering offence when Lee has already restored the amount of tax evaded to the Korean tax authority amounts to double recovery and would be disproportionate. It was submitted that the judge had misapplied R v Fulton [2019] 4 WLR 123 and that Ground 6 is linked to Grounds 3 and 4 for which leave to appeal has been granted.

19.  The judge’s reasoning in §70 of the Leave Decision is plainly right. There is no reasonable prospect of success for this ground.

Conclusion and costs

20.  For the above reasons, leave to appeal is granted only for Ground 2.

21.  As the respondents have failed to obtain leave for three out of the four grounds of appeal, we make a costs order nisi that they do pay 75% of the applicant’s costs of this application and that the costs attributable to the leave application in respect of Ground 2 be in the cause of the appeal.