Re Kim Dotcom and Others

CAMP 123/2019

[2019] HKCA 885

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 123 OF 2019

(ON AN INTENDED APPEAL FROM HCMP NO 116 OF 2012)

_______________

_______________

_______________

________________

J U D G M E N T

________________

Hon Zervos JA (giving the Judgment of the Court):

1.This is an application for leave to appeal to the Court of Appeal in respect of the decision of P Li J (the Judge) refusing to discharge a restraint order.

2.The restraint order in question was first granted over the properties of the defendants on 18 January 2012 by V Bokhary J pursuant to section 27, and section 7 of Schedule 2 to the Mutual Legal Assistance in Criminal Matters Ordinance, Cap 525 (the MLAO).  The restraint order was subsequently varied, set aside and re-granted by a series of court orders, with the last order being a variation on 2 January 2019. 

3.A summons dated 2 November 2016 was taken out by the 1^st and 2^nd defendants seeking an order to discharge the restraint order, pursuant to section 7(6) of the MLAO.  The hearing of the application took place only very recently from 14 to 17 January 2019 before the Judge.  It appears the delay in dealing with this application was due to various requests by the parties, putting off the hearing for one reason or another.[1] In a judgment handed down on 29 March 2019, the Judge refused the application to discharge the restraint order (the Judgment).[2]  The 1^st and 2^nd defendants sought leave from the Judge to appeal against the decision by way of summons dated 12 April 2019, which he refused in his judgment dated 14 June 2019 (the Leave Judgment).[3] 

4.The 1^st and 2^nd defendants now seek leave to appeal in the Court of Appeal against the Judge’s decision of 29 March 2019 to refuse to discharge the restraint order. 

5.When this application came on before us on 5 August 2019, the challenge to the Judge’s decision was limited to the jurisdictional issue on which he ruled in favour of the applicant of the restraint order, the Secretary for Justice (the SJ), but was silent on the substantive issues to which the Judge had also ruled in favour of the SJ.  We granted the defendants leave to amend the grounds of appeal by adding a ground which challenged the Judge’s ruling on the substantive issues, as this would clearly have a bearing on whether leave to appeal should ultimately be granted.  A further hearing was fixed for the leave application on 6 September 2019, but it was vacated after the parties agreed that it be determined on the papers.

The case background

6.In 2012, the 1^st defendant and others were arrested in New Zealand pursuant to an Indictment filed on 5 January 2012 which was issued by a Grand Jury from the United States (US) District Court for the Eastern District of Virginia.  The charges set out in the Indictment consisted of conspiracy to commit racketeering (Count 1), conspiracy to commit copyright infringement on a commercial scale (Count 2), conspiracy to commit money-laundering (Count 3), criminal copyright infringement by distributing a copyrighted work being prepared for commercial distribution on a computer network and aiding and abetting of criminal copyright infringement (Count 4), and criminal copyright infringement by electronic means and aiding and abetting of criminal copyright infringement (Count 5).[4]  The Indictment also included a notice of forfeiture in relation to which the US District Court issued a restraint order in terms.  Additional charges were later included in a Superseding Indictment filed on February 2012, consisting of criminal copyright infringement by electronic means and aiding and abetting of criminal copyright infringement (Counts 6 to 8), and fraud by wire by devising a scheme to obtain money by deceiving copyright owners into believing that take down notices had been complied with and aiding and abetting of fraud by wire (Counts 9 to 13).[5]

7.The alleged conduct of the defendants is usefully set out in a related case before the New Zealand Court of Appeal of Ortmann v United States of America.[6]  In summary, it is alleged by the US authorities that the defendants provided URL (uniform resource locator) links to persons who were encouraged by a rewards program to upload copyrighted movies and other materials to the MegaUpload website.  These links could then be shared by those persons with other members of the public who wished to watch the movies.  By clicking onto the link, a member of the public would be redirected to MegaVideo and could watch 72 minutes of the movie for free, but thereafter would have to purchase a premium subscription to MegaVideo.  MegaUpload also earned revenue from advertising on MegaVideo. Multiple links were allocated to the same movie so that when MegaUpload received a takedown notice from copyright owners, other links to the same movie remained available for use.  The US authorities allege that MegaUpload was designed to encourage and profit from unlawful infringement of copyrighted works while sheltering under the pretence that it was a mere storage provider.  They also allege that substantial revenue was obtained by this systemic infringement of copyright which in turn resulted in substantial losses to the copyright owners.[7]

8.In January 2012, the US restraint order was registered in New Zealand pursuant to the Mutual Assistance in Criminal Matters Act 1992, and was given effect in relation to the defendants’ assets in New Zealand. 

9.At about the same time, the SJ applied to the Court of First Instance for a restraint order against the Hong Kong assets of the 1^st defendant and others pursuant to the MLAO, which was granted by V Bokhary J on 18 January 2012 and reaffirmed by a series of court orders.[8] 

10.The 2^nd defendant subsequently applied to have the restraint order set aside on the basis of material non-disclosure about difficulties of service of the proceedings on the 2^nd defendant which was heard by Deputy High Court Judge Tallentire (the Deputy Judge).  In his judgment dated 4 December 2014, the Deputy Judge granted the application and set aside the restraint order against the 2^nd defendant which he re-granted in its original terms, but subject to any further argument as to the conditions in view of the changed circumstances.  Whilst no point was made about this change of circumstances by the parties, the subject of this discharge application is the original restraint order which had been set aside as against the 2^nd defendant.  However, the original restraint order remained valid as against the other defendants, including the 1^st defendant, who is a party to this leave application.[9]  We note that the re-granted restraint order against the 2^nd defendant is basically in the same terms as the original one, so this application may have a bearing on the re-granted restraint order.

11.Following the arrest of the 1^st defendant in New Zealand, the US authorities sought his extradition in relation to the charges alleged against him which he contested.  He was found extraditable by the District Court and the High Court in New Zealand and his appeal against these decisions was dismissed by the New Zealand Court of Appeal on 5 July 2018.  He has appealed this decision to the New Zealand Supreme Court, which we understand has yet to be resolved.

12.We are informed that the US authorities had commenced civil forfeiture proceedings in the US against the property of the defendants held in New Zealand and Hong Kong in 2014, which led to the making of a US civil forfeiture order on 27 March 2015. The defendant subsequently appealed the civil forfeiture order to the US Court of Appeal which was dismissed on 12 August and 9 November 2016.  An appeal to the US Supreme Court was also refused on 2 October 2017.  This means that the US civil forfeiture order is now final.

The statutory regime

13.Before we address the application, it is necessary that we set out the relevant statutory provisions. 

14.The SJ’s power to enforce an external confiscation order or a potential external confiscation order[10] upon a request from another jurisdiction is provided by section 27 of the MLAO.  The section reads:

“27. Requests to Hong Kong for enforcement of external confiscation order

(1)  Where a place outside Hong Kong requests the Secretary for Justice to make arrangements—

(a) for the enforcement of an external confiscation order; or

(b) where an external confiscation order may be made in a proceeding which has been or is to be instituted in that place, to restrain dealing in any property against which the order may be enforced or which may be available to satisfy the order,

then the Secretary for Justice may, in relation to that request, act for that place under the provisions of Schedule 2.

(2)  A request under subsection (1) shall, unless the contrary is shown, be deemed to constitute the authority of the place outside Hong Kong concerned for the Secretary for Justice to act on its behalf in any proceedings in the Court of First Instance under section 28 or under any provision of Schedule 2.”

15.In summary, section 27(1) provides that where the SJ has received a request from a place outside Hong Kong to make arrangements (a) “for the enforcement of an external confiscation order” or (b) “where an external confiscation order may be made in a proceeding which has been or is to be instituted in that place, to restrain dealing in any property against which the order may be enforced or which may be available to satisfy the order”, the SJ may act for that place under the provisions of Schedule 2.

16.The power of the Court of First Instance to grant a restraint order for the purpose of enforcing an external confiscation order is set out in section 7 of Schedule 2 to the MLAO.  Under section 7(4)(a), it is provided that the Court of First Instance may grant a restraint order on an application by the SJ only or in a case where an external confiscation order has been registered by a receiver or the SJ.  The power to discharge or vary a restraint order is also specifically addressed under this section.  Section 7(5) provides that a restraint order may be discharged or varied in relation to any property and shall be discharged when the proceedings in relation to which the order was made are concluded. Section 7(6) provides that an application for the discharge or variation of a restraint order may be made by any person affected by it.  Furthermore, Order 115A of the Rules of the High Court (the RHC), which is to be read in conjunction with the MLAO, provides by rule 15 that any person or body on whom a restraint order is served may apply by summons to discharge or vary the order. 

17.A request for assistance in a criminal matter from a foreign jurisdiction can be refused for reasons or circumstances set out under section 5 of the MLAO, including where the SJ is of the opinion of the following matters under subsection (1), which reads:

“5. Refusal of assistance

(1) A request by a place outside Hong Kong for assistance under this Ordinance shall be refused if, in the opinion of the Secretary for Justice—

(a) the granting of the request would impair the sovereignty of the People’s Republic of China or the security or public order of the People’s Republic of China or any part thereof;

(b) the request relates to the prosecution or punishment of a person for an external offence that is, or is by reason of the circumstances in which it is alleged to have been committed or was committed, an offence of a political character;

(c) the request relates to the prosecution or punishment of a person in respect of an act or omission that, if it had occurred in Hong Kong, would have constituted an offence under the military law applicable in Hong Kong but not also under the ordinary criminal law of Hong Kong;

(d) there are substantial grounds for believing that the request was made for the purpose of prosecuting, punishing or otherwise causing prejudice to a person on account of the person’s race, religion, nationality or political opinions;

(e) the request relates to the prosecution of a person for an external offence in a case where the person has been convicted, acquitted or pardoned by a competent court or other authority in the place, or has undergone the punishment provided by the law of that place, in respect of that offence or of another external offence constituted by the same act or omission as that offence;

(f) the granting of the request would seriously impair the essential interests of Hong Kong; or

(g) the request relates to an act or omission that, if it had occurred in Hong Kong, would not have constituted a Hong Kong offence.”

18.Section 4 of the MLAO provides for the enactment of an order in relation to the arrangements for mutual legal assistance to which the Ordinance shall apply between Hong Kong and another jurisdiction, subject to any modifications that may be specified.  Such an order has been made in respect of the US, namely the Mutual Legal Assistance in Criminal Matters (United States of America) Order, Cap 525F (the MLA(US)O). 

19.As for the arrangements for mutual legal assistance between Hong Kong and the US, section 2 of the MLA(US)O provides:

“In relation to the arrangements for mutual legal assistance—

(a) which are applicable to the Government of Hong Kong and the Government of the United States of America; and

(b) a copy of which is annexed at Schedule 1,

it is hereby directed that the Ordinance shall, subject to the modifications to the Ordinance summarized in Schedule 2, apply as between Hong Kong and the United States of America.”

20.By Schedule 2 of the MLA(US)O, section 5(1)(g) of the MLAO is modified as follows:

“1. Section 5(1)(g) of the Ordinance shall be modified to read as follows—

‘(g) the request relates to an act or omission that—

(i) if it had occurred in Hong Kong, would not have constituted a Hong Kong offence; or

(ii) does not constitute an external offence described in the Annex to the arrangements for mutual legal assistance—

(A) which are applicable to the Government of Hong Kong and the Government of the United States of America; and

(B) a copy of which is annexed at Schedule 1 to the Mutual Legal Assistance in Criminal Matters (United States of America) Order’.” (Emphasis added)

21.By section 5(1)(g)(ii), an outside request shall be refused if, in the opinion of the SJ, the request relates to an act or omission that does not constitute an external offence described in the Annex to Schedule 1 to the MLA(US)O.

22.An external offence[11] as described in section 5(1)(g)(ii), as modified, (the exempted offence) is set out in the Annex to Schedule 1 to the MLA(US)O, which reads as follows:

“

ANNEX

The Parties recognize the importance of providing broad mutual legal assistance in relation to investigations, prosecutions, and proceedings concerning offences such as trafficking in narcotic drugs, hijacking and other terrorist offences, offences against the laws protecting intellectual property, and offences relating to illegal immigration. In addition, the Parties agree to provide assistance in investigations, prosecutions, and proceedings concerning the following offences without regard to whether the acts or omissions alleged to constitute the offence would constitute an offence under the laws of the Requested Party:

(1) offences against the laws relating to money laundering;

(2) fraud against the government, including behaviour that has the effect of depriving the government or its agencies of money, valuable property, or the ability to conduct its affairs free from false statements and deceit;

(3) offences covered by Article 1(3);

(4) offences against the laws relating to foreign corrupt practices;

(5) export control offences, including conduct tending to evade the laws controlling the export of goods or arms, and other offences against the laws relating to the control of exportation or importation of goods of any type;

(6) criminal exploitation of children, whether for sexual or other purposes, including commercial dealing in child pornography;

(7) offences against the laws relating to organized crime and racketeering; and

(8) such further offences as may from time to time be agreed upon by exchange of diplomatic notes following consultation between the Central Authorities.” (Emphasis added)

23.By the Annex, assistance will be provided in relation to the offences listed without regard to whether the acts or omissions alleged to constitute the offence would constitute an offence under the laws of the requested party.

24.As the alleged conduct of the defendants includes breaches of copyright works, the following offences under the Copyright Ordinance, Cap 528, should be noted:

“S 118. Offences in relation to making or dealing with infringing articles, etc.

(1) A person commits an offence if he, without the licence of the copyright owner of a copyright work—

…

(e)  exhibits in public or distributes an infringing copy of the work for the purpose of or in the course of any trade or business which consists of dealing in infringing copies of copyright works;

(f)  possesses an infringing copy of the work with a view to—

(i) its being sold or let for hire by any person for the purpose of or in the course of any trade or business; or

(ii) its being exhibited in public or distributed by any person for the purpose of or in the course of any trade or business which consists of dealing in infringing copies of copyright works; or

(g)  distributes an infringing copy of the work (otherwise than for the purpose of or in the course of any trade or business which consists of dealing in infringing copies of copyright works) to such an extent as to affect prejudicially the copyright owner.”

The application to discharge the restraint order

25.The 1^st and 2^nd defendants sought to discharge the restraint order on the grounds that (i) the SJ should have refused the request from the US for assistance under the MLAO; and (ii) the predicate alleged criminal copyright offences under the laws of the US do not constitute criminal copyright offences under the laws of Hong Kong. 

26.They also sought declarations that the civil forfeiture order dated 27 March 2015 violated Article 11(1) and (2) of the Hong Kong Bill of Rights Ordinance, Cap 383 (the BORO); and that the doctrine of fugitive disentitlement is unknown to the laws of Hong Kong.

27.The SJ submitted that the application should be refused because it was an abuse of process. It was argued, relying on Lau Wong Fat v AG[12] (Lau Wong Fat), that the SJ’s decision to assist is a statutory duty which could only be challenged by way of judicial review. 

28.The SJ also submitted that dual criminality was removed with respect to money-laundering and racketeering offences by virtue of Schedule 2 to the MLA(US)O.  In any event, dual criminality was satisfied as the conduct of both defendants was contrary to section 118(1)(e), (f) and (g) of the Copyright Ordinance, and conspiracy to commit such copyright offences as well as conspiracy to defraud at common law.  

The Judge’s decision on the abuse argument

29.The Judge agreed with the SJ’s submission that the application to discharge the restraint order should be refused on the ground that it was an abuse of process.[13]  He found the application to discharge was in substance a review of the decision of the SJ to act on the request from the US which was a performance of a statutory duty that came within the ambit of public law.  He held that where the right of an individual is infringed by a person exercising statutory duty, “he must challenge the decision by way of judicial review.”[14]  The Judge was of the view that this “exclusivity principle” was authoritatively expounded by Lord Diplock in O’Reilly v Mackman[15] (O’Reilly), who stated that it would be an abuse of process of the court, “to permit a person seeking to establish that a decision of a public authority infringed rights to which he was entitled to protection under public law to proceed by way of an ordinary action and by this means to evade the provisions of Order 53 for the protection of such authorities.”[16]

30.The Judge referred to Lau Wong Fat in which Godfrey JA, having cited the comments of Lord Diplock, noted however that it might be permissible to litigate public law issues in private law proceedings.  The Judge also acknowledged that the exclusivity principle had come under criticism, and that it was not rigidly applied in this case.[17]

The Judge’s decision on the grounds for discharge

31.Having refused the application on the ground that it was an abuse of process, the Judge nevertheless went on to deal with the two grounds for discharge.  The first was the SJ’s decision to act on the request from the US and whether she should have refused to do so in accordance with section 5 of the MLAO as modified by Schedule 2 of the MLA(US)O.  The second was the dual criminality requirement for the engagement of mutual legal assistance in obtaining a restraint order.

32.The two grounds essentially turned on an interpretation and application of section 5(1)(g), as modified in respect of mutual assistance between Hong Kong and the US by Schedule 2 and the Annex of the MLA(US)O. 

33.In addressing the issue of dual criminality, the Judge made the following findings:

“27. For the sake of completeness, I have the following observations on the dual criminality argument:

a. The wording of s.5(1)(g) is clear—SJ shall refuse a request for assistance if the request relates to an act or omission that, if it had occurred in Hong Kong, would not have constituted a Hong Kong offence—the emphasis is on the act or omission. Nothing in this subsection requires reciprocity or a corresponding offence.

b. Mr. McCoy urges this court to adopt a narrow construction on the meaning of s.5(1)(g) of MLAO. He relies on Aronson,which is an extradition case.

(i) In the United Kingdom, a fugitive would only be returned to the requesting country if he is accused or has been convicted of a ‘relevant offence’ as defined under s.3(1)(c) of the Fugitive Offenders Act 1967.

(ii) Under s.3(1)(c) of the Act, an offence is a ‘relevant offence’ if the act or omission constituting the offence …would constitute an offence against the law of the United Kingdom if it took place within the United Kingdom.

(iii) In Aronson, the House of Lords, by a majority of 3 to 2, held that the phrase ‘the act or omission constituting the offence’ must mean the ingredients of the offence (narrow construction), not the totality of the evidence relied upon to prove the offence (broad construction).

c. The wording of s.5(1)(g) is ‘an act or omission if it had occurred in Hong Kong…’ It is distinctly different from s.3(1)(c) of the Fugitive Offenders Act 1967. Mr. McCoy in effect invites this court to add the phrase ‘constituting the offence’ to S.5(1)(g). In my view, this is not justified.

d. In Re: Rafat Ali Rizvi and others, Deputy Judge Yau actually applied the broad approach when he said ‘no matter the offence was called corruption or any other names in the indictment, the allegations against the defendants are clearly offence of fraud/theft in the context of Hong Kong Law.’

e. Under the Fugitive Offenders Ordinance, Cap., 503, a person may be arrested and surrendered to a prescribed place if he is wanted for prosecution or imposition of a sentence in relation to a ‘relevant offence’.

(i) A ‘relevant offence’ is defined as an offence punishable by imprisonment for 12 months or more under the law of the prescribed place, and the acts or omissions constituting the conduct of the relevant offence, which if occurred in Hong Kong, would constitute an offence.

(ii) In Cosby v Chief Executive of the HKSAR, Stock J held that it was the conduct of the fugitive which should be considered. There was no need to match the foreign offence with a local offence.

(iii) The narrow construction in Aronson is not applicable in Hong Kong in relation to extradition law.

f. Art.3(1)(d) of MLAO/US uses the phrase ‘the acts or omissions alleged to constitute the criminal offence’. This must be read subject to s.5(1)(g) of the MLAO. In fact, s.2 MLAO/US clearly provides that the MLAO applies subject to any modification in Schedule 2. In my view, the clear meaning of s.5(1)(g) prevails in case of any doubt.

g. The Annex in Schedule 1 of MLAO/US provides that ‘In addition, the Parties agree to provide assistance in investigations, prosecutions, and proceedings concerning the following offences without regard to whether the acts or omissions alleged to constitute the offence would constitute an offence under the laws of the Requested Party…’ (emphasis added). Dual criminality is not a prerequisite for those offences listed in the Annex.

(i) The offences mentioned in the Annex include money laundering, racketeering and organized crimes.

(ii) There is no definition of ‘organized crime’ either in MLAO or MLAO/US. However, “organized crime’ under s. 2 of the Organized and Serious Crimes Ordinance Cap., 455, included Copyright Offences under s.118(1), (4) and (8) of the Copyright Ordinance Cap., 528. This meaning of ‘organized crime’ should be adopted. It covers the charges in relation to copyright offences in the Grand Jury Indictment.

(iii) All the charges alleged in the Grand Jury Indictment are within the Annex.” [18] (Footnotes omitted)

34.The Judge held that the restraint order was justified and rejected the grounds for discharge.

35.The Judge also refused to grant any declaratory relief with respect to the civil forfeiture order dated 27 March 2015.  This was because there was “no concrete decision” to register the order.[19]  As such, declaratory relief “would serve no useful purpose”.[20]  The Judge also held that the unregistered civil forfeiture order was not a “violation” or “threatened violation” of Articles 10 or 11 of the BORO.[21] 

The defendants’ application for leave to appeal before the Judge

36.The 1^st and 2^nd defendants applied for leave from the Judge to appeal against his decision to refuse to discharge the restraint order.  The Judge refused the application, reiterating that the decision of the SJ to provide assistance under the MLAO should have been challenged by way of judicial review.[22]  He noted that the defendants had not pursued judicial review and were “seriously out of time with no explanation whatsoever” if they had initiated such proceedings.[23]  He also noted that the SJ had a continuing duty to review her decision to provide assistance under section 5 of the MLAO, yet there were no significant change of circumstances requiring review in this case. 

37.In addition, the Judge found that an application for discharge of a restraint order under section 7(5) of Schedule 2 to the MLAO did not require a court to reconsider the factors under section 5.  He found this proposition to be consistent with the reasoning in Re: Rafat Ali Rizvi and others.[24] Lastly, the Judge found the narrow construction in Government of Canada v Aronson[25] (Aronson) was contrary to the plain meaning of section 5(1)(g) and that there were no issues of important public interest justifying granting leave under section 14AA(4)(b) of the High Court Ordinance. 

The defendants’ application for leave to appeal before the Court of Appeal

38.The defendants now seek leave to appeal to the Court of Appeal against the Judge’s decision of 29 March 2019.  They initially sought leave on three grounds but added a fourth ground at the last hearing that addresses the key issue as to whether there is any basis for complaint in the Judge’s decision on the substantive issues.  In our view, if the grounds for complaint on the substantive issues are not reasonably arguable, then it makes a grant of leave to the Court of Appeal a futile exercise, even if the jurisdictional issue was wrongly decided by the Judge.  It is also important to bear in mind that the underlying application seeks to discharge a restraint order which would still be valid as long as it is shown that on some of the charges there was a proper legal foundation to grant the restraint order on the terms and conditions as specified. 

39.By Ground 1, the defendants complain that the Judge was wrong in law to hold that the application to discharge the restraint order should be made by way of judicial review.  They argue that it is a fundamental principle that an application for discharge must first be made through the statutory schemes, with judicial review being a remedy of the last resort.  In support, the defendants refer to the judgment of Hartmann J (as he then was) in Berich Brokerage Limited v SFC[26](Berich Brokerage), who held that judicial review was a collateral process and whilst the existence of an alternative remedy did not per se act as a bar, the existence of an effective alternative remedy was invariably a factor in the court’s assessment of whether leave to apply for judicial review should be granted.  They also note the restraint order itself provides that the defendants “may apply to the Court at any time to vary or discharge” the order, which is consistent with Order 115A, rule 15 of the RHC and section 7(5) and (6) of Schedule 2 to the MLAO.  In addition, they point out that the High Court has inherent jurisdiction to set aside an order made ex parte pursuant to Order 32, rule 6 of the RHC.

40.The defendants further complain that the SJ’s position regarding judicial review is fallacious for the reason that, had the challenge to the section 5 of the MLAO been made within 3 months, the defendants would allegedly be required to make separate applications – thereby violating the rule against “proliferation of proceedings”.[27]

41.By Ground 2, the defendants challenge the Judge’s interpretation of section 5.  They note that it is common ground that section 5 imposes a continuing duty on the SJ to assess whether legal assistance should be provided to the requesting jurisdiction.  As such, they argue that it is inconsistent to apply the procedures and time limitations of judicial review.  This is because it would require the defendants to every so often “artificially” extend the time limit for judicial review by seeking a re-consideration of the SJ’s decision.

42.By Ground 3, the defendants contend that the narrower test of dual criminality as articulated in Aronson should be applied.  Moreover, they argue that the predicate offences of “reproduction”, “distribution” or “making available” of a work over the internet are not offences under the Copyright Ordinance or the Organized and Serious Crimes Ordinance, Cap 455.  They also argue that a request cannot circumvent section 5(1)(g) of the MLAO by wrongly characterising the offences as organized crime, money-laundering or racketeering. 

43.By Ground 4, the defendants contend that even though the Judge correctly ruled that dual criminality is not required to be demonstrated for offences of “money-laundering”, “racketeering” or “organized crime”, within Categories (1) and (7) of the Annex in Schedule 1 to the MLA(US)O, he implicitly wrongly ruled that dual criminality was not required to be established in relation to the predicate offences, namely, the underlying criminal copyright offences.  It is argued that the copyright offences in the US could not meet the dual criminality requirement because they plead as an averment “making available” copyright work, which is not a criminal offence in Hong Kong.

44.The defendants therefore submit that leave should be granted on the basis that the grounds have a reasonable prospect of success and that it would be in the interests of justice, particularly as the implications of this case transcend the interests of the parties.[28]

Discussion

Grounds 1 and 2: The abuse argument

45.The SJ categorises her decision-making power under section 5 as a statutory duty which can only be challenged by way of judicial review.  She further argues that there is no appeal mechanism under the MLAO and therefore a section 5 decision can only be challenged by way of judicial review.  She complains that the defendants failed to raise their challenge within the prescribed time for judicial review and are now seeking “a backdoor remedy”. 

46.The SJ distinguishes the case of Berich Brokerage from the present case, for the following reasons.  First, on the basis that the case did not involve restraint proceedings.  Secondly, it concerned a party seeking relief in proceedings before the Securities and Futures Commission Appeals Tribunal, whilst also pursuing relief in collateral proceedings by judicial review.  She argues this is a point of distinction, as the defendants in the present case could only ever have pursued judicial review.

47.The SJ agrees that she is subject to a continuing duty to assess whether legal assistance should be provided under the MLAO.  However, she argues there has been no change of circumstances to the dual criminality requirement since the restraint order was granted in 2012.  As such, this continuing duty is not inconsistent with the application for judicial review. 

48.There are two observations to make regarding the exclusivity principle.  First, it is questionable whether the exclusivity principle as a general rule is good law in light of the evolution of public law.  Even in the two cases of O’Reilly and Lau Wong Fat, it was acknowledged that this principle should be applied on a case-by-case basis because public law was at its formative stages and there could be exceptions to it.  Secondly, the situation in the present case is very different to what was under contemplation in the two cases mentioned.  Here, there is a statutory provision that specifically gives an affected person the right to make an application to discharge or vary the restraint order, for which there is no time bar.  There is nothing in the MLAO to suggest that the exclusive remedy for a person affected by a restraint order who seeks to have it discharged or varied is by way of judicial review.  There is also the principle that a judicial review is a remedy of last resort and should not be brought if there is an alternative remedy available.[29]

49.In light of the foregoing arguments and the statutory provisions to discharge a restraint order, we consider the abuse argument to be arguably misconceived and the defendants, particularly the 1^st defendant, should not have been denied jurisdiction in relation to this application. 

50.Although the Judge found that the application to discharge the restraint order was an abuse of process, he nevertheless went on to address the grounds of the application, which he rejected and consequently refused to discharge the restraint order.

Grounds 3 and 4: The requirement of dual criminality

51.In respect of the substantive challenge to the restraint order, the defendants advance their argument by questioning whether the conduct alleged in the charges of the Indictment fall within the offences exempted from the dual criminality requirement (exempted offences) in the Annex and, if not, whether they meet the dual criminality requirement. 

52.It seems clear that given the nature and scope of the allegations of the charges and the funds involved, particularly the conspiracy to commit money-laundering and the conspiracy to commit racketeering, if either or both were exempted offences, then that would be sufficient justification to grant the restraint order.

53.The defendants contend that on a reading of the Annex the first sentence is a reaffirmation of the need for dual criminality in relation to “laws protecting intellectual property”, amongst others mentioned, while simultaneously setting out in the second sentence “eight tabulated descriptors”, which are offences exempt from the dual criminality requirement.  It is argued that it could not have been the intention of a statute that expressly limits the exemptions to the requirement for dual criminality, to also provide a channel to circumvent it, by providing, for example, organized crime in which the particulars are all breaches of copyright that do not require dual criminality.

54.As we have already noted, section 5(1)(g) was modified by Schedule 2 to the MLA(US)O so that the request can relate to acts or omissions that constitutes “an external offence described in the Annex to the arrangement for mutual legal assistance …”.  The Annex states that the parties recognize the importance of providing broad mutual legal assistance in relation to investigations, prosecutions, and proceedings concerning a range of offences, and that such assistance is to be provided in relation to eight categories of offences without regard to whether the acts or omissions alleged to constitute the offence would constitute an offence under the laws of the requested party.  Including in the categories of offences are offences against the laws relating to “money-laundering”, and “organized crime and racketeering.”

55.Section 2(1) of the MLAO provides that an “external offence” means “an offence against the law of a place outside Hong Kong.” 

56.The exempted offences are determined by reference to the foreign offence, that is the “external offence”, and therefore the acts or omissions are referrable to the US offences, not to any equivalent Hong Kong offences.  The offences charged in the Indictment and Superseding Indictment include the exempted offences that had been listed and described in the Annex, namely offences relating to “money-laundering”, and “organized crime and racketeering”.  Such offences were therefore expressly exempted from the dual criminality requirement.  They were also external offences as defined by the MLAO, as the Indictment and the Superseding Indictment expressly pleaded that the offences in question were duly made out under US laws. 

57.The defendants further argue that because the charges in respect of conspiracy to commit racketeering (Count 1) and conspiracy to commit money-laundering (Count 3) are founded on the remaining charges of criminal copyright, which are not exempt from the dual criminality requirement, then the dual criminality requirement must apply to Counts 1 and 3, particularly to the money-laundering charge.

58.The SJ disagrees with this argument and submits that as a matter of elementary statutory construction, section 5(1)(g)(ii), as modified, imports no element of dual criminality to the exempted offences, and in fact expressly excludes it.  It is pointed out that the modified section refers only to the “acts or omissions” constituting the “external offence” and there is no basis for importing to the statutory provision any requirement that the acts or omissions underlining the external offences of racketeering and money-laundering must satisfy the dual criminality requirement in order for the external offences to qualify as exempted offences under the Annex.  It is submitted that such an argument undermines the purpose and effect of the exemption given by the Annex. 

59.The opening statement in the Annex highlights the importance of the parties providing broad mutual legal assistance to each other in relation to investigations, prosecutions and proceedings, and extends to exempting certain specified offences from the dual criminality requirement, which are broadly described as offences against the laws relating to money-laundering, and to organized crime and racketeering.  We accept from a plain reading of the Annex that offences that do not fall within the terms of the various categories of exempted offences would have to meet the dual criminality requirement, that is “the request” relates to an act or omission that if it had occurred in Hong Kong would constitute a Hong Kong offence.[30]

60.The SJ makes the point that whilst it is true that the offence of racketeering is unknown to Hong Kong law, requiring the underlying acts or omissions of the offence of racketeering to comply with the dual criminality requirement would render the express inclusion of it as an exempted offence meaningless.  The same reasoning applies to the offence of money-laundering, which is known to Hong Kong law.

61.It is also submitted by the SJ that the approach contended by the defendants would make the provision unworkable in practice.  In essence, such an approach would import a requirement of dual criminality when it has been specifically excluded for exempted offences.

62.It is finally pointed out by the SJ that a conviction for the US offences of racketeering and money-laundering (excluding the offences of criminal copyright) contained in the Indictment and the Superseding Indictment engage forfeiture and confiscation provisions under US law and these offences alone justified the restraint order in Hong Kong.

63.We see the force in the submissions of the SJ which primarily focus on a construction of the Annex in relation to exempted offences.  The first sentence in the Annex states that the parties recognise the importance of providing “broad mutual legal assistance in relation to investigations, prosecutions, or proceedings concerning offences” which is then highlighted by a range of criminal conduct or offences, including “protecting intellectual property”.  The second sentence then provides seven descriptors of offences or criminal conduct with provision to add further offences that may be agreed, in relation to which the parties agree to provide assistance “without regard to whether the acts or omissions alleged to constitute the offence would constitute an offence under the laws of the Requested Party.”

64.It is clear that exempted offences are determined by reference to the external offences which do not have to satisfy the dual criminality requirement.

65.It seems that the conspiracy to commit racketeering (Count 1) and conspiracy to commit money-laundering (Count 3) are distinct offences under US law, which although connected to breaches of copyright, do not have to be judged by reference to any equivalent Hong Kong offence. 

66.On the question as to whether the underlying or predicate offences (breaches of copyright) of the external offences of racketeering and money-laundering must satisfy the requirement of dual criminality is academic because the Judge correctly found in our view that the criminal copyright offences satisfy the dual criminality requirement.  It is somewhat unclear what is meant by the underlying or predicate offences in relation to the external offences in the context of this case.

67.The defendants also submit that a narrow test of dual criminality should be applied as laid out in Aronson.  In addressing this submission, we put aside the argument that there is a distinction between acting on an overseas request for assistance in relation to an investigation involving the restraint of property and the extradition of a fugitive.

68.The defendants argue that the approach that should be adopted when addressing dual criminality is set out in Aronson,which was concerned with an interpretation of section 3(1)(c) of the Fugitive Offenders Act 1967.  The Act was introduced in the United Kingdom to give effect to a scheme for the rendition of fugitive offenders of designated Commonwealth countries or United Kingdom dependencies in respect of “a relevant offence”.[31] So far as material, section 3(1)(c) read:

“in any case, the act or omission constituting the offence, or the equivalent act or omission, would constitute an offence against the law of the United Kingdom if it took place within the United Kingdom or, in the case of an extraterritorial offence, in corresponding circumstances outside the United Kingdom.”

69.By a majority for three to two, the House of Lords in Aronson held that a “relevant offence” for the purpose of the Act turned on the question whether the ingredients of the Commonwealth offence as particularised in the Commonwealth country’s warrant would, if proved against the fugitive, establish his guilt of a corresponding United Kingdom offence. 

70.The majority in construing the words “act or omission constituting the offence” placed a narrow construction on them so as to mean a corresponding offence because it was more favourable to the liberty of the subject.[32]  The minority on the other hand were of the view that the words were a reference to the conduct of the accused.[33]

71.This narrow approach was subsequently rejected in the context of Hong Kong in Cosby, where a more broad approach was taken.  This was set out in the judgment of Stock J (as he then was), who pointed out that the Fugitive Offenders Act 1967 was an enactment which provided for the return of the offenders in Commonwealth countries, and hence the limitations in the Act may have been acceptable in the context of an arrangement between regimes with similar legal systems.  He went on to explain that the Fugitive Offenders Ordinance, Cap 503, catered for cooperation with territories which embraced disparate legal concepts, and crimes framed quite differently from the way they were framed in Hong Kong.  He said that Hong Kong’s extradition legislation, as well as extradition agreements, therefore strived to minimise the circumstances in which either the executive or the courts are required to examine the law of the requesting jurisdiction and to minimise the emphasis on conduct which in Hong Kong would constitute a scheduled crime.  The approach said to be taken under the statutory regime of the Fugitive Offenders Ordinance was to examine the conduct of the fugitive as disclosed by the totality of the information that had been forwarded in respect of which surrender was sought by the requesting jurisdiction. 

72.The defendants argue that there are no criminal offences of “reproduction” or “making available” of a work over the internet under the Copyright Ordinance. As far as the offences charged in the US relate to “reproduction” or “make available”, there is no dual criminality.  They refer to Chan Nai Ming v HKSAR[34] where it was said that the Copyright Ordinance did not create a criminal offence “simply on” making available infringing copies.[35]  They contend that where the US charges aver “distribution by making available” (Counts 2(2) and 4), this relates to making available which is not a criminal offence in Hong Kong.

73.The defendants argue that the US charges which aver “distribution” only without the phrase “by making available” (Counts 2(1) and 5) are also not a criminal offence in Hong Kong.  They refer to the analysis of “distribution” in Chan Nai Ming,[36] where it was found that the uploading by the defendant of a copyright film that the defendant had in his possession to the defendant’s own computer to then allow for access to the film by BitTorrent users did not constitute distribution under the then section 118(f) of the Copyright Ordinance.

74.It is submitted by the SJ that dual criminality, though not required in the context of the US offences of money-laundering or racketeering, was demonstrated through various acts of possession and distribution of copyright material by the defendants.[37]

75.It is further submitted by the SJ that the defendants’ reliance on Chan Nai Ming for the proposition that there was only “distribution”, where the defendant uploaded the work himself and the recipient then took steps to download it was misconceived.  It is argued that Chan Nai Ming expressly rejected the argument that the word “distribute” should be construed as requiring active conduct on the distributor’s part throughout the process.  It was noted that “distribution”, in its ordinary meaning, was clearly capable of encompassing a process in which the distributor first takes necessary steps to make the item available and the recipient then takes steps of his own to obtain it.  The SJ explains that these requirements had been met in this case, notwithstanding the defendants’ claim that they were merely operating MegaUpload as an innocent internet service provider complying with all legal requirements including take down notices in relation to the copyright infringements.  It was noted by the SJ that this was contrary to the evidence and had been rejected by the courts both in the US and New Zealand.  As rightly pointed out by the SJ, this is ultimately an issue for trial when that takes place.  The SJ submits that on the conduct test, the alleged acts in this case would constitute offences contrary to section 118(e), (f) and (g) of the Copyright Ordinance and conspiracy to commit such copyright offences as well as conspiracy to defraud at common law. 

76.We agree with the SJ’s submissions that the US copyright offences satisfy the dual criminality requirement and we are therefore of the view that these grounds are not reasonably arguable.

77.We note that the SJ also submits that the Superseding Indictment includes an additional five counts of fraud which would satisfy the dual criminality requirement which could be taken into account if the issue of the restraint order were to be re-determined. Whilst there is force in this submission, it is not a matter we need to decide in light of our decision.

Conclusion

78.We find Grounds 1 and 2 (the abuse argument) reasonably arguable, however these grounds do not address the substantive issues advanced in seeking to discharge the restraint order. As for the other grounds, Grounds 3 and 4, which do address the substantive issues, we find that they are not reasonably arguable for the reasons given, which briefly stated are as follows.

79.Of Ground 3, we find that the Judge was correct in his reasoning to reject the narrow construction as suggested by Aronson of section 5(1)(g) of the MLAO and as modified by Schedule 2 of the MLA(US)O. 

80.Of Ground 4, no issue is taken by the defendants of the Judge’s ruling that dual criminality is not required to be demonstrated for offences relating to Categories (1) and (7).  They complain that dual criminality should be required to be established in relation to the predicate US copyright offences of the offences relating to Categories (1) and (7), and such requirement could not be met because of the averment “making available” a copy of a copyright work is not a criminal offence in Hong Kong.  We do not find this ground reasonably arguable.  The Judge was correct to find that the US copyright offences are covered by criminal offences under Hong Kong law.  Hence, there is no reason to disturb the restraint order.

81.It is for these reasons that the intended appeal does not have a reasonable prospect of success and the defendants’ application for leave to appeal is therefore refused. 

82.On the question of costs, we make an order nisi that there be no order as to costs because of our views on the merits of Grounds 1 and 2 on the one hand, and Grounds 3 and 4 on the other.

Mr Wayne Walsh, SC, Ms Ada Chan, SGC and Ms Natalie Sin, GC of the Department of Justice, for the Secretary for Justice

Mr Gerard McCoy, SC, Mr Douglas Clark (in respect of the Written Submission dated 16 August 2019) and Mr Albert N B Wong, instructed by Dentons Hong Kong LLP, for the 1^st and 2^nd defendants