HKSAR v. SHING SIU MING AND OTHERS

HCCC 219/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO. 219 OF 1996

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J U D G M E N T

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Introduction

1. I believe that this is one of the few contested confiscation applications to have taken place in Hong Kong. I hope, therefore, that I will be forgiven for setting out the applicable law at length. I do this for two reasons: firstly because the substantial part of the three defendants' challenge to the prosecution's application has been based on the interpretation of the relevant legislation. And secondly in the hope that this decision will prove guidance to counsel, both for the prosecution and defence, in future applications.

2. In this judgement I use the term 'Ordinance' to refer to the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 and, unless otherwise stated, all section references are to sections in that Ordinance.

3. The Ordinance is based on provisions in English statutory law; in particular the Drug Trafficking Offences Act 1986 as amended by the Drug Trafficking Act 1994. The scheme of both the Hong Kong and the English legislation is virtually to the same effect.

4. The Ordinance and the English legislation have been rightly described as 'draconian' legislation. The Ordinance treats the money launderer as having benefited from drug trafficking, even where he may have passed on some or all of the proceeds of drug trafficking to the trafficker. See: R v Simons [1994] 98 CrAppR 100 at pages 103-104 and R v Simpson [1998] CrAppR(S) 111 at page 117.

Background

5. The three defendants were charged in an Indictment with the following drug trafficking offences: The 1st defendant, Shing Siu-ming, was charged with conspiracy to traffic in a dangerous drug -Count 1 - and dealing with property knowing or having reasonable grounds to believe represented the proceeds of drug trafficking, contrary to the present s.25(1) of the Ordinance - Count 4. The 2nd defendant, Kwong Po-yin, and 3rd defendant, Seng Yuet-fong, were charged in Counts 2 and 3, respectively, with being concerned in an arrangement whereby the retention or control by or on behalf of Shing's proceeds of drug trafficking was facilitated, knowing or having reasonable grounds to believe that Shing carried on, or had carried on, drug trafficking or had benefited from drug trafficking, contrary to the former s.25(1) of the Ordinance.

6. The defendants were tried in the High Court before Saied J. and a jury in May-June 1997 On 27 June 1997 they were convicted of the offences charged against them. On 4 July 1997, Shing was sentenced to 30 years imprisonment on Count 1 and 10 years imprisonment on Count 4, the sentences to be served concurrently and Kwong and Seng were each sentenced to 7 years imprisonment. On 4 July 1997, before they were sentenced, prosecuting counsel had made applications for confiscation orders against each defendant.

7. On 23 October 1998 the Court of Appeal dismissed the defendants' appeals against conviction. On 11 November 1998 the Court of Appeal dismissed Kwong and Seng's appeals against sentence. Shing by then had abandoned his appeal against sentence. On 1 February 1999 the Appeal Committee of the Court of Final Appeal dismissed Seng's application for leave to appeal.

Procedure

8. In proceedings for the making of a confiscation under the Ordinance the judge must determine the following matters -

* Did the defendant benefit from drug trafficking? [s.3(3)]

* If so, what is the value of benefit? [s.4(2) & s.5(l)]

* The amount of the confiscation order [s.6(1)], or the amount that might be realised for purposes of making certificate [s.6 (2)]

9. The judge must also -

* Fix a period of imprisonment in default of payment of the confiscation order [s.8(1)]

* Fix a period within which the confiscation order must be satisfied [s.8(1)(b) and s.114(1)(a) Criminal Procedure Ordinance Cap 221] and

* Deliver a judgment containing his findings.¹

Definition of terms

10. There are many terms used and defined in the Ordinance, including -

Drug trafficking

11. Before amendment on 1 September 1995 the phrase 'drug trafficking' was defined in s.2 as -

'drug trafficking' means doing or being concerned in, whether in Hong Kong or elsewhere, any act constituting -

(a) an offence specified in Schedule 1(other than an offence under section 25); or

(b) an offence punishable under a corresponding law,

and includes entering into, or being otherwise concerned in, an arrangement whereby -

(i) the retention or control by or on behalf of another person of that other person1s proceeds of drug trafficking is facilitated; or

(ii) the proceeds of drug trafficking by another person are used to secure that funds are placed at that other person's disposal or are used for that other person's benefit to acquire property by way of investment.

12. After amendment on 1 September 1995 the phrase is defined in s.2 as -

'drug trafficking' means doing or being concerned in, whether in Hong Kong or elsewhere, any act constituting -

(a) a drug trafficking offence; or

(b) an offence punishable under a corresponding law

and includes dealing, whether in Hong Kong or elsewhere, with any property which in whole or in part directly or indirectly represents any person's proceeds of drug trafficking.

Drug Trafficking Offence

The phrase 'drug trafficking offence' is defined in s.2 as -

(a) any of the offences specified in Schedule 1;

(b) conspiracy to commit any of those offences.

Schedule 1 of the Ordinance lists offences under the Dangerous Drugs Ordinance Cap. 134, including s.4(l) - trafficking in a dangerous drug, and s.25 of Cap. 405 - dealing with property known or believed to represent the proceeds of drug trafficking. Before 1 September 1995, Schedule 1 included the former s.25 offence - assisting another to retain the benefit of drug trafficking. Shing, Kwong and Seng have all been convicted of drug trafficking offences.

Proceeds of Drug Trafficking

13. Before amendment on 1 September 1995 the phrase 'proceeds of drug trafficking' was defined in s.4(1) as -

(1) For the purposes of this Ordinance -

(a) any payments or other rewards received by a person at any time (whether before or after the commencement of this Ordinance) carried on by him or another are his proceeds of drug trafficking; and

(b) the value of his proceeds of drug trafficking is the aggregate of the values of the payments or other rewards.

14. After amendment on 1 September 1995, the phrase is re-defined in s.4(1) as -

(1) For the purposes of this Ordinance a person's proceeds of drug trafficking are -

(i) any payments or other rewards received by him at any time (whether before or after 1 December 1989) in connection with drug trafficking carried on by him or another;

(ii) any property derived or realised, directly or indirectly, by him from any of the payments or other rewards; and

(iii) any pecuniary advantage obtained in connection with drug trafficking carried on by him or another; and

(b) the value of the person's proceeds of drug trafficking is the aggregate of the values of -

(i) the payments or other rewards;

(ii) that property; and

(iii) that pecuniary advantage.

Proceeds

15. The word 'proceeds' both in s.4(l) and in the present and former s.25(1) have the same meaning. See: Banks at page 115.

16. In England it has been held that the phrase 'any payments or other rewards' does not mean the profit to the drug trafficker, or money launderer.

17. In R v Osei [1988] Crim LR 775, the Court of Appeal considered the meaning of the phrase. In that case 'O' a Ghanaian visitor to Britain, held an amount of cash so as to 'legitimatize' her presence at Heathrow Airport as a visitor coming to England to show she had means of support for her stay. She was not to receive this money under the transaction she entered into but was to be paid a lesser sum for being a courier. The support money was to be handed back after her successful negotiation through customs of the shipment of dangerous drugs. The appellant contended that 'payment' with in the meaning of the Act meant payment by way of reward. The court disagreed and held the 'payment' meant any payment, whether by way of reward or in some other way in connection with drug trafficking. The words 'other reward' meant rewards in some form other than payment, for example, an air ticket with a view to a free holiday.

18. In Simons, S was convicted of drug trafficking offences. He had received payments from H and then made payments to G; funded by the money he had received from H. He had also received a reward of ￡40,000 from H for his assistance. On appeal it was argued that the ￡40,000 was the only 'payment' to the appellant. The court rejected that argument, Henry J. saying at page 104:

'As Parliament deprives drug dealers of the proceeds of their sale, namely the payments made to them and not profits made from them, there is no reasons why they should treat conduits any differently...The payments received by this appellant in connection with the drug trafficking carried on by him consisted of both the sums he paid on to Griffiths, and the sums he kept himself by way of profit',

19. In Simpson, it was said, at page 118:

'...a defendant's proceeds of drug trafficking are any payments or other rewards he received in connection with drug trafficking, regardless of whether he passed on the payments to another.'

20. In Hong Kong in R v Lo Chak-man & Anor CA 744/95 (unreported) at page 21 of the judgement Litton VP (as he then was) said -

"In our judgment, the construction contended for by the prosecution is the correct one. Both s.4 and the broad definition of "drug trafficking" in the Ordinance make it clear that the Ordinance is not only aimed at the drug trafficker himself: it seeks to include the proceeds of other drug trafficking activities within the net. The opening words of s.4 make it clear that the assessments referred to in the section are for the purposes of the Ordinance as a whole and do not simply for the purposes of s25(l): for instance, confiscations under s.6. To confine the words "other payments" in s4(1)(a) to payments m the nature of rewards, commissions etc. to the drug trafficker would seriously weaken its effect; it would be extremely difficult to determine what are rewards and what are not in the hands of the drug trafficker. This approach is entirely consistent with that of the English Court of Appeal."

21. Mr Watson Brown for Shing and Kwong argues that the interpretation given by the English courts defies both logic and the true meaning of the legislation. If the legislature had intended to catch all payments received by a conduit, the expression would have been "any payments or rewards received by him" - omitting the word "other". The use of the adjective "other" to qualify "rewards" implies no meaning to "payments", other than a payment by way of reward. That is the ordinary meaning of the expression - it is unambiguous and as it is unambiguous I am not entitled to interpret the expression. The expression can only mean that the payment must be by way of a reward.

22. Mr Watson-Brown's argument is that in Osei the English Court of Appeal acted in a wider manner than the case required and purported to take the case further to interpret "any payment" in isolation from "or other reward", when that was not necessary on the facts of the case.

23. Mr Watson-Brown argued that Litton VP in LO Chak-man in saying -

"To confine the words "other payments" in s.4(1)(a) to payments in the nature of rewards, commissions etc. to the drug trafficker would seriously weaken its effect; it would be extremely difficult to determine what are rewards and what are not in the hands of the drug trafficker."

- went further than necessary. He added the words "commissions etc." to the simple expression "rewards" found in the legislation. The word "reward" in its common meaning includes "recompense for a service", the payment does not have to pass and repass to be such a reward. The funds in Osei were a reward because the actual trafficker had no legal means of recovering the money from the courier. Any payment received by a conduit in a money laundering case belongs to that person at law. The trafficker has no recourse at law to recover the funds from him. While in the hands of the launderer the money may be seen as in the nature of a reward. But once the payment leaves the hands of the launderer, it is no longer a reward unless it is used to benefit the launderer directly, for example to buy a motor vehicle that the launderer has title to.

24. He also made the point that in his judgement Litton VP referred to "other payments" not "any payments", s4(1)(a) makes no reference to "other payments", The provision is "any payments or other rewards received by him at any time in connection with drug trafficking carried on by him or another;"

25. He also argued that in LO Chak-man Litton VP was dealing with s.4(1)(a) in a different context and consequently his comments are obiter dictum so far as this case is concerned. It would not be proper for me to apply the comments generally or, in particular, to this application.

26. Mr Watson-Brown argued that the Government's right to recover would not be lessened by giving these words their clear and proper meaning. The taking of a clear unambiguous meaning of the expression "any payments or other rewards received by him" would not reduce the theoretically recoverable money from the laundering chain.

27. He further argued that to widen the meaning in the draconian way contended for by the prosecution takes the law past its intended meaning and into conflict with the Basic Law. That is because Article 105 of the Basic Law of the HKSAR requires the Government of the HKSAR to protect, in accordance with the law, the right of individuals to the acquisition of property and their right to compensation for lawful deprivation of their property. The United Kingdom Parliament is not subject to any constitutional constraint with respect to the confiscation of private property and, provided that Parliament passes the law, it may impose draconian measures with impunity at law. The government and legislature of the Hong Kong Special Administrative Region are not vested with such wide power.

28. He accepts that it is proper and appropriate for the HKSAR Government to allow for matters such as forfeiture of property wrongfully gained through the process of a prohibited action such as drug trafficking and subsequent money laundering. But the Hong Kong Special Administrative Region must have regard to the rights of individuals and a broad-brush draconian approach is not appropriate. In other words, the reliance upon presumptions that are not founded in fact and an interpretation of the relevant legislation that fails to apply the common or ordinary meaning to the words used cannot be allowed in Hong Kong. To interpret s.4(1) otherwise than as suggested by the defendants would be to give the Government an arbitrary discretion. One that could be applied in one case and denied in another.

29. It was further Mr. Watson-Brown's argument that the s.4 assumptions offend Article 11(1) of the Hong Kong Bill of Rights Ordinance Cap. 383 as they place an onus upon a defendant to displace a presumption.

30. Mr Adonis Cheung for Seng also addressed me to similar effect - I hope he will forgive me for not setting his arguments out in full.

31. Attractive though Mr Watson-Brown and Mr Cheung's argument are, I do not accept them. The interpretation of the questioned phrase 'any payments or other rewards' is well established both in Hong Kong and England. Litton VP's observations in LO Chak-man technically may well have been obiter, but, not only do I agree with them, as they were delivered by a judge sitting in a court of superior jurisdiction I feel bound to follow them. The interpretation of legislation is not governed by the strict grammarian approach that Mr Watson-Brown contends for.

32. As to the application of Article 11(1) of the Hong Kong Bill of Rights, it was held in R v Ko Chi-yuen [Appeal] [1994] 2 HKCLR 65 at pages 67-68, by Bokhary JA, that:

"Does article 11(1) extend to confiscation proceedings such as these? Certainly, the presumption of innocence is capable of extending beyond conviction. It will so extend to reverse onus provisions which render a person convicted of one thing liable to be punished as if he had been guilty of something more than that. This Court so held in R v Wong Yan-fuk Mag. App. No.414/1993, 18.11.1993 (see (1993) 3 HKPLR 341). But that is not the situation here. What we have here are assumptions designed to make convicted and sentenced drug traffickers disgorge their ill-gotten gains. When a prison term in default is fixed, that is not to punish him for benefiting from drug trafficking. It is to enforce the court's order for payment. A person against whom a confiscation order is sought is not charged with benefiting from drug trafficking. There is no such offence known to the law. Article 11(1) does not extend to confiscation proceedings such as these. But if it did, then the s.4(2) and (3) assumptions would be justifiable exceptions to the normal principle that that the prosecution must prove the defendant's guilt beyond reasonable doubt."

33. The point has already been decided against Mr. Watson-Brown.

34. Having accepted that the phrase 'any payments or other rewards' is not interpreted any differently under Hong Kong's legislation, Kwong and Seng's proceeds of drug trafficking are the amounts particularized in Counts 2 and 3, respectively. And Shing's proceeds of drug trafficking is the aggregate gross value of the payments or other rewards received by him in connection with drug trafficking, together with any amounts determined by operation of the s.4(3) assumptions.

Benefited from Drug Trafficking

35. Both before and after 1 September 1995, s.3(4) defines the phrase 'benefited from drug trafficking' as -

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

36. The phrase is treated in accordance with the definition of "payment or other rewards" in s.4(1) as the aggregate value of the payments or other rewards made to a defendant in connection with drug trafficking. It is directed to gross payments, not profit. See: Banks, at page 116.

Onus of Proof

37. The onus is upon the prosecution to prove on a balance of probabilities that a defendant benefited from drug trafficking [s.3(12)].

Evidence

38. In determining whether a defendant benefited from drug trafficking and the amount of such benefit, the judge may have regard to

(a) The evidence in the trial

(b) The material in statements made by the prosecution and defence under s.5

(c) The s.4(3) assumptions

(d) The evidence led in the confiscation hearing.

See: R v Dickens [1990] 2 WLR 1384 at page 1389 and R v Ko Chi-yuen [Trial] [1993] 2 HKCLR 101 at page 106.

Section 5 Statement

39. Section 5(1) provides that the prosecutor may tender to the court a statement of matters relevant to whether a defendant benefited from drug trafficking [s.5(1)(b)] and assessing the value of the defendant's proceeds of drug trafficking [s.5(1)(c)]. In this case, the Prosecution tendered a s.5 Statement of Detective Chief Inspector John Burns.

40. Section 5(2) provides that where a defendant is required to indicate whether he accepts or denies the allegations of fact contained in the s.5 statement. If he accepts any allegation, the court may accept such allegation as conclusive.

41. Section 5(3) provides that if he fails to comply with such requirement in any respect, he may be treated for the purposes of s.5 as accepting every allegation in the statement, apart from any allegation that he has benefited from drug trafficking [s.5(3)(c)]. And any allegation that any payment or other reward was received by him in connection with drug trafficking carried or by him or another [s.5(3)(d)]. In this case, Shing, Kwong and Seng, have all filed statements in reply to Mr Burns' s.5 Statement.

Section 4(3) Assumptions

42. Section 4(2) provides that for the purpose of determining whether the defendant has benefited from drug trafficking, and - if he has - of assessing the value of his proceeds of drug trafficking, the court may make the assumptions in s.4(3). Except to the extent that the defendant shows that any of the assumptions are incorrect in his case.

43. Section 4(3) reads -

(3) Those assumptions are -

(a) that any property appearing to the court -

(i) to have been held by him at any time -

(A) since his conviction; ....or

(ii) to have been transferred to him at any time since the beginning of the period of 6 years ending when the proceedings were instituted against him,

was received by him, at the earliest time at which he appears to the court to have held it, as his proceeds of drug trafficking;

(b) that any expenditure of his since the beginning of that period was met out of his proceeds of drug trafficking; and

(c) that for the purpose of valuing any property received or assumed to have been received by him at any time as his proceeds of drug trafficking, he received the property free of any other interests in it.

44. The phrase "held by him...since his conviction" in s.4(3)(a)(i)(A) applies to any property held by a defendant on the date when he was convicted, irrespective of the date he began to hold the property. See: R v Clark and Bentham [1997] 2 CrAppR(S) 99 at page 105.

45. The assumptions are not ones the judge must make, they are ones that he may make when it is rational and realistic for him to make them in the context of the established facts. See: Ko Chi-yuen [Appeal], at page 68.

46. Section 4(3) says that the assumptions do not apply in respect of a s.25(1) money laundering offence. [s.4(4)]. Therefore, they do not apply in respect of the offences faced by Kwong (Count 2) and Seng (Count 3) or against Shing in respect of Count 4. However, because Shing has been convicted of conspiracy to traffic in dangerous drugs (Count 1) the assumptions in section 4(3)(a)(ii) can be applied against him. These assumptions include any assets owned by him in the six years prior to the institution of the proceedings against him.

47. Mr Watson-Brown argued that no evidence was adduced that links any of those assets to drug trafficking. It is his contention that a great deal of the evidence given by Shing and Kwong relating to this issue essentially went unchallenged at trial. The only challenge being of a very broad and all encompassing nature - to the effect that Shing was lying. It is his argument that the prosecutor should have directly and specifically challenged the evidence given by the witness and given him the opportunity of admitting or denying the challenge. It is insufficient to say to the witness words to the effect of "you are lying" as the undisputed answer will be "No, I am not."

48. This I am afraid is an old shibboleth and one that needs to be laid to rest. The position is this: if in a crucial part of the case the prosecution intend to ask the jury to disbelieve the evidence of a witness for the defence it is right and proper that the witness should be challenged while he is in the witness box; or that it is made plain, again while the witness is in the box, that his evidence is not accepted. See: R v. Hart [1932] 23 CrAppR 202. However, a prosecutor is, entitled to invite the jury to reject the evidence of a defence witness where he has adopted a "raised eyebrow" approach, but has not explicitly put to the witness that he is lying. See: R v. Lovelock [1997] Crim LR 821. What the law does not require is a ritualistic mantra of "puttings" and "denials".

Value of Benefit

49. In determining the value of a defendant's benefit the judge may apply the assumptions in s.4(3), where they are applicable. In addition, he may rely upon the s.5 statement, together with any statement filed by a defendant in reply [s.5(1)(c)], and the evidence at trial.

50. To assess the value of a defendant's proceeds of drug trafficking, the judge has to refer back to s.4(1), which defines the meaning of 'proceeds of drug trafficking'. That definition means that proceeds are the aggregate value of the payments or other rewards received by a person in connection with drug trafficking.

Amount of Confiscation Order

51. After the judge has determined that a defendant benefited from drug trafficking and the value of that benefit, he must, in accordance with s.6, determine the amount to be recovered in his case [s.3(5)]. The Judge must order the defendant pay that amount [s.3(6)(a)].

Section 6(1)

52. The onus is upon the prosecution to prove on a balance of probabilities the amount to be recovered by a confiscation order under s.6(1). [s.3(12)(b)]

53. Section 6(1) provides that the amount to be recovered under the confiscation order shall be the amount the judge assesses the value of the defendant's proceeds of drug trafficking to be. Subject to the provisions of s.6(3), the judge has no discretion to vary that amount.

54. For Shing, the value of his proceeds of drug trafficking is the aggregate value of the payments received by him, both directly and indirectly, in relation to his drug trafficking and money laundering and any amounts that I determine are his proceeds of drug trafficking by operation of the s.4(3) assumptions.

55. For Kwong and Seng, the value of their proceeds of drug trafficking is the aggregate value of the payments they each received (the Australian remittances) in relation to their money laundering activities. These amounts are particularised in Counts 2 and 3, respectively. They are treated no differently from Shing.

Section 6(3)

56. If the judge is satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount he assess the value of the defendant's proceeds of drug trafficking under s.6(1) to be, then s.6(3) provides that the amount to be recovered under the confiscation order is the amount that it appears to the judge might be realised.

57. It is for the defendant to prove, on a balance of probabilities, that the amount that might be realised under s.6(3) is less than the value of his proceeds of drug trafficking under s.6(1). See: R v. Comiskey [1991] 93 Cr App R 227 and R v. Ilsemann [1991] Crim L R 141. It was held in the Australian case of R v. Walbrook & Glasgow [1994] C L R 613, that the defendant should produce 'clear and cogent' evidence in order to discharge this burden. It is insufficient for a defendant to simply assert that he has no property other than that found by the Police. See: R v Lee [1996] 1 Cr App R (S) 135, at page 141.

58. Section s.6(3) refers to "the amount that might be realised". This phrase is defined narrowly in s.7(3) as -

'(3) For the purposes of this Ordinance the amount that might be realised at the time a confiscation order is made against the defendant is -

(a) the total of the values at that time of all the realisable property held by the defendant, less

(b) where there are obligations having priority at that time, the total amounts payable in pursuance of such obligations,

together with the total of the values at that time of all gifts caught by this Ordinance.'

59. The Ordinance gives definitions of the terms used in s.7 -

Realisable Property

60. Section 7(1) defines "realisable 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; and

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

Property

"Property" is held by the defendant or other person if he holds any interest in it [s.2(7)]. It is clear from the definition of "realisable property" in s.7(1)(a) that "realisable property" includes legitimately acquired property. There is no inference in the Ordinance limiting the definition to property acquired from proceeds of drug trafficking. See: Ko Chi-yuen [Trial], at page 111 and Banks, at page 116

Value of property

61. The term "value of property" is defined in s.7(4) as -

(4) Subject to the following subsections, for the purposes of this Ordinance the value of property (other than cash) in relation to any person holding the property -

(a) where any other person holds an interest in the property, is -

(i) the market value of the first mentioned person's beneficial interest in the property, less

(ii) the amount required to discharge any encumbrance (other than a charging order on that interest; and

(b) in any other case, is its market value.

When assessing the amount of a defendant's realisable property, the judge is involved in ascertaining matters which may not be certain; for example the market value of a property in which the defendant has an interest and the amount required to discharge any encumbrance on that interest. R v Harvey [1999] 1 All ER 710 at page 718. If the amount assessed by the court is greater than the amount realised, then the defendant may make an application under s.15(1) for a variation of the confiscation order.

Gift

62. "Gift" is defined in s.7(9) as -

(9) A gift (including a gift made before the commencement of this Ordinance) is caught by this Ordinance if -

it was made by the defendant at any time since the beginning of the period of 6 years ending when the proceedings were instituted against him; or

(b) it was made by the defendant at any time and was a gift of property -

(i) received by the defendant in connection with drug trafficking carried on by him or another; or

(ii) which in whole or in part directly or indirectly represented in the defendant's hands property received by him in that connection.

Effective Control

63. Section 7(11) sets out the circumstances under which a defendant's interest in property may be subject to his "effective control":

(11) For the purposes of subsection (1) -

(a) property, or an interest in property, may be subject to the effective control of the defendant whether or not the defendant has -

(I) a legal or equitable estate or interest in the property; or

(ii) a right, power or privilege in connection with the property;

(b) without limiting the generality of any other provision of this Ordinance, in determining -

(i) whether or not property, or an interest in property, is subject to the effective control of the defendant; or

(ii) whether or not there are reasonable grounds to believe that property, or an interest in property, is subject to the effective control of the defendant,

regard may be had to -

(A) shareholdings in, debentures over or directorships of a company that has an interest (whether direct or indirect) in the property;

(B) a trust that has a relationship to the property; and

(C) family, domestic and business relationships between persons having an interest in the property, or in companies of the kind referred to in sub-paragraph (A) or trusts of the kind referred to in sub-paragraph (B), and other persons.

Obligations having priority

64. The term "obligations having priority" in s.7(3)(b) is defined in s.7(7) to refer to orders made by the convicting court, or amounts that would be considered preferential debts under the Bankruptcy Ordinance, Cap 6, or the Companies Ordinance, Cap 32. Section 7(7) reads -

(7) For the purposes of subsection (3)' an obligation has priority at any time if it is an obligation of the defendant to -

(a) pay an amount due in respect of a fine, or other order of a court, imposed or made on conviction of an offence, where the fine was imposed or order made before the confiscation order; or

(b) pay any sum which, if the defendant had been adjudged bankrupt or was being wound up, would be among the preferential debts.

Certificate under section 6(2)

65. If the judge is satisfied as to any matter relevant for determining the amount that might be realised at the time the confiscation order is made, s.6(2) provides that he may issue a certificate giving his opinion as to the matters concerned. The judge must do so if he is satisfied under s.6(3) that the amount to be realised is less than the amount he assesses the defendant's proceeds of drug trafficking to be.

Imprisonment in default of payment

66. The judge must fix a term of imprisonment that the defendant must serve if any of the amount that he is liable to pay under the confiscation order is not paid or recovered [s.8(1) (a)]. This prison term is not to punish the defendant for benefiting from drug trafficking, it is to enforce the court's order for payment. The term is determined in accordance with the table set out in s.8(2). This sets out the maximum terms of imprisonment applicable by reference to given bands of the amounts of confiscation orders.

67. In setting the term the judge must ask himself: what period of imprisonment, not exceeding the statutory maximum, is necessary to coerce the defendant into realising his assets and paying the sum payable under the confiscation order? See: Clark and Bentham, at page 107. In R v. Szrajiber [1994] Crim L R 543, it was held that normally the appropriate term of imprisonment in default of payment would fall between the maximum of the band below and the maximum permitted by the table. The court in Szrajiber also held that it was not necessarily appropriate to approach the case on a simple mathematical basis.

Time to pay the Confiscation Order

68. The judge must fix a time in which the confiscation order is to be paid. Section 8(1)(b) states that s.114(1) of the Criminal Procedure Ordinance applies as if the amount of the order was a fine. That section permits a judge to allow time for payment of a fine. The period in which the order is to be paid must appear in the certificate. If the order is not paid within the time given, the Secretary for Justice may apply to the Court of First Instance for the appointment of a receiver to realise the property.

69. I turn now to the individual cases of the three defendants

Shing Siu-ming - 1st defendant

Benefit from Drug Trafficking

70. I am satisfied from the evidence that Shing benefited from drug trafficking. I am satisfied from the evidence that he was the principal organizer and beneficiary of the conspiracy.

Value of Benefit

71. In the period 29 November 1994 through to 13 November 1997 he received, directly and indirectly, $14,898,271.67. This is made up of HK$5,663,571.67 (A$986,727.56) of Australian remittances deposited into his Hang Seng Bank Foreign Currency Account No. 240-6-708582 and HK$9,234,700 from recipients of Australian remittances. (See: Para. 39 of Mr Burns' statement.)

In addition, he received HK$6,750,000 in cash that Seng withdrew from her Hang Seng Bank Foreign Currency Savings Account No. 368-0-700162 and gave to him. On 14 June 1999 Mr. Cheung, her counsel, confirmed that he had received this cash and Mr Watson-Brown, his counsel, did not dispute the claim.

Assumptions

72. In Shing's case the s.4(3) assumptions may apply to -

1. The $1 million loan to Seng in July - August 1992 to purchase the property in Sai Kung. (See: Mr Burns' statement at paras. 43- 44).

2. The $4,140,000 for his purchase of an interest Polymax Ltd in July - September 1992. (See: Mr Burn's statement at paras 49(a), (b), (c), (d) and (e)).

3. The $2,900,000 for the purchase of a property in Po King Lane in November 1992. (See: Mr Burns' statement at paras. 51-53).

73. If I find that the assumptions apply to these items, then there is an additional benefit from drug trafficking of $8,040,000.

74. I am not bound to apply the s.4(3) assumptions, I may do so if, in the circumstances of the case, it is "rational and realistic to make them in the context of the facts duly established". See: Ko Chi-yuen [Appeal], at page 68.

75. I have had regard to the following circumstances that existed at the time he incurred that expenditure in deciding whether the assumptions apply:

1. He had been released from prison in December 1989 after being convicted of a drug trafficking offence. (See: Mr Burns' statement at para. 20).

2. He claimed to be earning between $20,000 - $30,000 per month - (See: Mr Burns' statement at para. 23).

3. In 1991/92 and 1992/93 his declared taxable income was $73,500 and $71,500 per annum, respectively.

4. Other than his own assertions, there is no evidence to show that he was engaged in promoting dog breeding and dog fighting, or the sale of vehicles to the mainland.

76. I am satisfied that it is rational and realistic for me to apply the assumptions. I find that Shing has not proved, on a balance of probabilities, that they are incorrect.

Value of Drug Trafficking

77. I find that Shing's benefit from drug trafficking was $29,688,271.67.

Amount of the Confiscation Order

78. Under s.6(1) a confiscation order may be made for $29,688,271.67.

Amount that might be realised

79. As to the amount that might be realised, Shing has not accounted for his proceeds of drug trafficking. The current estimated value of his identified realisable property is approximately $19,434,276.98.

80. The Items of identified property are listed in Mr Burn's statement at paras. 58-70. The taxi and taxi licence DF139 were sold in November 1997. The net amount realised was deposited into Citibank NA Account No.13901273 and is subject to a restraint order.

81. Under s.6(3) the burden is upon Shing to prove, on a balance of probabilities, that the amount that might be realised is less than the value of his proceeds of drug trafficking. I bear in mind that at trial he was disbelieved by the jury.

Car trading

82. In his 2nd Affirmation of 11 May 1999 he said that he had business dealings with Chan Chung-kan trading in cars. At trial he said he was involved with Wong Wai-bor and Lee Cheung-wah and denied having business dealings with Chan Chung-kan.

A company in China

83. In para. 11 of his Affirmation of 27 February 1996 he said that he had a company in Mainland China and undertook to provide additional information about this when he had it. In para. 12 of the same Affirmation he said that he had no other property or valuable items.

84. In para. 2(a) of his Notice of Indication of 15 December 1997, he said that, as he was in custody, he did not have access to business records and diaries and was therefore unable to particularise the matters upon which he proposed to rely.

85. In his Affirmation of 11 May 1999 made in HCMP 3619/95, he stated in para. 8, that:

"The investigators have also not raised the question of my share in a China based company. I have no legal or equitable interest in any company formed in the People's Republic of China or in any other place that I have not previously disclosed to the investigations. The only interest of held that I did not disclose was Polymax."

86. In para. 2(d) of his "Notice of Indication" he stated that he failed to mention his claimed 20% interest in Polymax, because he did not regard it as relevant or significant and he was never questioned about it. I have no doubt that had the Police not discovered this property, I would not have known about it.

87. In relation to his interest in Polymax, his case is that, despite the evidence showing that he had a 60% interest in the company, his interest was only 20%. I do not accept that. When Polymax's land was sold in 1997, Kwong, on Shing's instructions, collected five cheques amounting to $4,300,000. She did not say that she paid the majority of this amount to Chan Chung-kan. In para. 2(b) of his Notice of Indication Shing said that Chan Chung-kan held 40% of the shares in Polymax, but in his 2nd Affirmation of 11 May 1999 he said in para. 3 that Lei Yue and Thompson each held 20%. There is no evidence from either Lei Yue or Thompson as to what their interest in Polymax was.

Jewellery

In para. 2(c) of his 'Notice of Indication" Shing claimed that the valuation of his jewellery at $722,170 at para. 69 Mr. Burns' statement was 20% to 30% undervalued. Accepting his claim, an average 25% increase gives the jewellery a value of $902,712. However the prosecution ask me to take the former valuation as the applicable figure, which I do.

Conclusion

88. I find that Shing has not proved, on a balance of probabilities, that the amount that might be realised is less than his benefit from drug trafficking. No credible evidence has been offered to explain what happened to the millions of dollars of proceeds of drug trafficking that he received. Neither has he put forward any credible evidence to prove, on a balance of probabilities, that the amount that might be realised is less than his proceeds from drug trafficking. A confiscation order is made against him in the amount that I find to be the value his benefit from drug trafficking - $29,688,272.67.

89. I have referred to the Table in s.8(2) in assessing the term of imprisonment that Shing must serve if he fails to make payment. The amount he is liable to pay falls into the sixth and highest band "An amount exceeding $10 million". Guided by the principles of Szrajiber, I set the term at seven years imprisonment. He is given 4 months from today's date to make payment.

Certificate

90. Under s.6(2) I have a discretion to make a certificate setting out my opinion as to amounts that might be realised. A certificate appears useful as an application will be made for a receiver to appointed under s.12(2) to realise any realisable property. I ask the prosecution to prepare a draft certificate for my approval.

Kwong Po-yin - 2nd defendant

Benefit from Drug Trafficking

91. I am satisfied from all the evidence that Kwong benefited from drug trafficking.

Value of Benefit

92. Her benefit from drug trafficking is $2,645,729.93. See: Para. 78 of Mr Burns' statement.

Amount of Confiscation Order

93. Under s.6(1) a confiscation order may be made for $2,644,729.93.

Amount that might be realised

94. The taxi and taxi licence EN 1339 referred to in para. 85(g) of Mr Burns' statement were sold in November 1997, and the net amount realised was deposited into Kwong's Citibank NA Account No. 13901265. It is subject to a restraint order. The current estimated value of her property is $5,306,397.41.

95. On the Prosecution's evidence she has property of a greater value then her proceeds of drug trafficking. She has not put forward any evidence to prove, on a balance of probabilities, that the amount that might be realised is less than the amount of her proceeds from drug trafficking. A confiscation order is made in the amount of her benefit from drug trafficking - $2,644,729.93.

Imprisonment in default

96. I have referred to the Table in s.8(2) in assessing the term of imprisonment that Kwong must serve if she fails to make payment. The amount she is liable to pay falls at the very lower end of the fifth band. It is just in that band by $144,729. I believe that in fairness I should set her term as if the fourth band applied in her case. Applying the principles of Szrajiber, I set the term at two and a half years imprisonment. She is given 4 months from today's date to make payment.

Certificate

97. I ask the prosecution to prepare a draft certificate for my approval.

Seng Yuet-fong - 3rd defendant

Benefit from Drug Trafficking

98. I am satisfied from the evidence that Seng benefited from drug trafficking. At the hearing on 14 June 1999 her counsel, Mr Cheung, confirmed that she had received the Australian remittances.

Value of Benefit

99. The value of Seng's proceeds of drug trafficking is $8,601,651.51 (AUD1,527,000). See: para. 92 of Mr Burns' statement.

Amount of the Confiscation Order

100. It is immaterial that she handed over most of the Australian remittances that were paid into her special purpose account to her brother, Shing. As I have demonstrated in my earlier discussion on the law, she received these sum in accordance with s.3(4) of the Ordinance, therefore, she benefited from drug trafficking.

101. Of the $8,601,651.51 paid into her special purpose money laundering account, $6,750,000 was withdrawn in cash. That represents 78% of the total amount received, it has not been accounted for.

102. As indicated earlier in my judgement, I must make the confiscation order in the amount of Seng's proceeds of drug trafficking unless the amount that might be realised is less, in which case I must make the confiscation order in that lesser amount.

Amount that might be realised

103. Seng has to establish on a balance of probabilities that the amount that might be realised is less than the $8,601,651.51 that represents the value of her benefit from drug trafficking. If after the realisation of her property, the amount realised is less than the amount of the confiscation order, then she many apply for a variation of the confiscation order under s.15(1).

104. The current estimated value of Seng's identified property, including her interest in the flat described as: "The 2nd floor and the Main Roof of Lot No. 800 in DD 227, Tai P0 Tsai, 88 Clear Water Bay Road, Sai Kung" (the Sai Kung property) is $2,141,291.46. It is irrelevant that the property may have been legitimately acquired. See: Banks, at page 112.

105. Of the items of property set out in para. 100 of Mr Burns' statement, Seng disputes the following three items.

Bank Account

106. In para. 4 of her second affirmation of 12 November 1997, Seng claims that Hang Seng Bank account no. 219-8-102952 is jointly held with her husband, Suen Ping-wan. The Prosecution accepts this. I assume that Seng and Suen each have a 50% interest in the money in the account. As the account balance on 15 June 1999 was $1,079.46, her interest is $539.73.

Gold taels

107. In para. 6 of her second affirmation, Seng claims that the 27 taels of gold found in her safe deposit box at the China State Bank belong to her father. The Prosecution does not dispute her claim, these items are deleted from the list of her identified property.

Real Property

108. Although in para. 7 of her second affirmation Seng accepts that she is one of the registered owners of the Sai Kung property, she claims and I quote, that: "...the beneficial interest belongs to my husband as he paid all the purchase price", the prosecution dispute this assertion.

109. In deciding the issue I have had regard to the following matters.

110. Section 2(7) provides that: "property is held by any person if he holds an interest in it". The fact Suen may have contributed more money than Seng towards the purchase of the Sai Kung property does not mean that she cannot hold a beneficial interest.

111. She is registered as the joint tenant of the property (see: Annex 26 to Mr Burns' statement) giving her a half legal interest in the property.

112. She has given conflicting accounts the nature of her interest in the Sai Kung Property. In para. 7 of her second affirmation she claimed:

"Although I am one of the registered owner in the Sai Kung property, the beneficial intrest belongs to my husband as he paid all the purchase price."

Her evidence however showed that she had no idea what a beneficial interest is. I strongly suspect that those words are her solicitors and not her own.

113. In her evidence she repeatedly used, "we" or, "my husband and I", when describing the transactions relating to their former property in Tuen Mun and the Sai Kung property. In his evidence her husband, Suen, also used these terms. I find this to be an indication of a joint interest in the properties.

114. In para. 9 of her second affirmation, she failed to mention that the $510,000 received from Suen's mother, which was used to purchase the Tuen Mun property, was first deposited into the joint account No. 219-8-102952 she held with Suen. Suen also made no reference to this.

115. In para. 10 of her second affirmation, she said that in or about June 1992 she had borrowed $904,500 from her brother, Shing. I ask myself: why would Shing lend Suen the money and not his sister, Seng? Her evidence at trial contradicts this assertion. At trial she said that in about 1992 she, herself, had borrowed $1,000,000 from Shing to purchase a property and had repaid it in about 1994. (See: Transcript, p. 402 M - O). Had Seng not borrowed this money from Shing, the Sai Kung property could not have been purchased. Shing is unlikely to have lent her the money unless he intended her to have a beneficial interest in the property.

116. On 24 and 25 July 1992, in order to purchase the Sai Kung property, she transferred two amounts - $50,000 and $550,000 - from her Hang Seng Bank Account No. 349-0-0039948 to Suen's Hang Seng Bank Account No. 219-067287-001. She said she held this account for Shing, but had she not made those transfers it would have been impossible for the purchase of the Sai Kung property to proceed.

117. The Hang Seng Bank Savings Account No. 219-8-102952 was opened in their joint names in May 1988. This was about 7 years before they married in September 1995.

118. In cross-examination she said that the purpose of the account was so that the two of them could save money. Suen in his evidence said that its purpose was: "...an expression of mutual trust - to make each other trust each other more. We intended to use it in [our] future marriage". Both said they deposited money into the account.

119. The evidence shows that the joint account was used both in the purchase and sale of the earlier Tuen Mun Property and the purchase of the Sai Kung property. A cashier's order for the loan of $510,000 from Suen's mother, was deposited into the joint account on 17 December 1990 and a like sum withdrawn on 19 December 1990, and transferred to Suen's Hang Seng Bank Account No. 219-067287-001. Suen said it was 'possible' that withdrawals from the Joint Account on 7 and 25 January 1991, by way of cheque, could have been used to purchase the Tuen Mun property. He said that the deposit of $30,000 for the Sai Kung property came from his Hang Seng Bank Account No. 219-067287-001 by way of a cheque and that, in order for the cheque to clear, $50,000 was deposited into the account on 24 June 1992 by way of a savings transfer. On 24 June 1992, $50,000 was withdrawn from the Joint Account by a transfer withdrawal. When asked whom the money belonged to? - Suen answered: "The money belonged to both of us." Suen said it might have been 'possible' that the withdrawal of $150,000 by cheque from his Hang Seng Bank Account No, 219-067287-001 could have been used to purchase the Sai Kung property. He agreed that in order to provide funds to meet the cheque a number of deposits into the account had to be made on 7 July 1992. On that day there was a transfer withdrawal of $110,000 from the joint account. The Tuen Mun property was sold in 1994, Seng agreed that the net proceeds of sale of $1,298,275 were deposited into the joint account.

120. Both Seng and Suen agreed that they never informed the solicitors acting for them in the purchase of the properties that they did not intend Seng to have a beneficial interest in either property. And both agreed that they did not tell their solicitors that Seng had not contributed money towards either purchase.

121. Suen said that Seng and he were registered as joint tenants of Tuen Mun property because, quote: "I wanted to give her the impression that we mutually trusted each other very much". When asked why they were registered as joint tenants of the Sai Kung property, he said: "I wanted both of us to have good mutual trust". To me this indicates that he intended Seng to have a beneficial interest in both of the properties, regardless of the amount of her financial contribution.

122. In cross-examination by Mr Blanchflower, Suen did not say that Seng had no interest in the Sai Kung property. The passage in the evidence is as follows:

"Q: It's your evidence today that Seng has no interest in the Sai Kung property?

A: No, I haven't said so.

Q: What interest do you say she has?

A: I don't know how to say. I have not thought of that."

123. On 26 June, in re-examination, Mr. Blanchflower returned to this point:

"Q: Did you at anytime think of giving any share or interest over property to your wife?

A: This issue never occurred to me. I simply thought of how to improve our mutual trust."

Not satisfied with that answer, Mr Blanchflower asked

"Q: Who did you regard having a share or interest in the Sai Kung property?

A: Because I have never thought of question, so now, I would say to be selfish, I have share."

124. The last answer I find to be at odds with his earlier evidence that he was a trusting and sharing husband.

125. Taking all these matters into account, I am satisfied that Seng has a 50% beneficial interest in the Sai Kung property.

126. I find the current estimated value of Seng's identified realisable property to be $2,141,291.46. This is less than the value of her proceeds of drug trafficking of $8,601,651.51. Applying s.6(3), I make the confiscation order against her in sum of $2,141,291.46.

127. Mr Cheung submitted that if a confiscation order is made against Seng it would result in a double penalty. In relation to this issue Lord Bingham CJ in Banks said at page 116 -

"So far as the double penalty argument is concerned, we can see no reason in principle why two penalties should not be imposed for the same unlawful act. As we read the legislation it is plain that Parliament intended both penalties to be imposed."

128. I follow the learned Chief Justice's reasoning.

Imprisonment in default

129. I have referred to the Table in s.8(2) in assessing the term of imprisonment that Seng must serve if she fails to make payment. The amount she is liable to pay falls at the upper end of the fourth band. Applying the principles of Szrajiber, I set the term at two and a half years imprisonment. She is given 4 months from today's date to make payment.

Certificate

130. I ask the prosecution to prepare a draft certificate for my consideration.

Costs

131. I will now hear from counsel on the question of costs.

(The prosecution made no application for costs.)

1 When making a confiscation order a court should give a succinct reasoned judgment setting out how it applied the law, what its findings were and the reasons for them in respect of disputed benefits and realisable property. See: R v Akengin (1995) 16 CrAppR(S) 499 at 501.