Tam Sze Leung and Others v. Commissioner of Police
Read the full judgment text of HCAL 191/2021 on BabelCite. This High Court CFI judgment was delivered on 30 December 2021.
1. In Interush Ltd v Commissioner of Police [2019] HKCA 70 , [2019] 1 HKLRD 892 (“ Interush ”), the Court of Appeal rejected an application by way of judicial review for a declaration that sections 25(1) and 25A of the Organised Serious Crimes Ordinance Cap 455 (“OSCO”) are unconstitutional for being inconsistent with various protected rights under the Basic Law (“BL”) and/or the Hong Kong Bill of Rights Ordinance Cap 383 (“BOR”). The challenge arose in the context of so-called “letters of no c
Cited by 12 cases · Cites 11 cases
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HCAL 191/2021 [2021] HKCFI 3118 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 191 OF 2021 ________________________
________________ Before: Hon Coleman J in Court Dates of Hearing: 19-20 October 2021 Date of Judgment: 30 December 2021 _______________ J U D G M E N T _______________ A. Introduction 1.In Interush Ltd v Commissioner of Police [2019] HKCA 70, [2019] 1 HKLRD 892 (“Interush”), the Court of Appeal rejected an application by way of judicial review for a declaration that sections 25(1) and 25A of the Organised Serious Crimes Ordinance Cap 455 (“OSCO”) are unconstitutional for being inconsistent with various protected rights under the Basic Law (“BL”) and/or the Hong Kong Bill of Rights Ordinance Cap 383 (“BOR”). The challenge arose in the context of so-called “letters of no consent” (“LNCs”) issued by the Commissioner of Police (“Commissioner”) in the context of section 25A of OSCO. 2.In the present proceedings, the Applicants seek leave to apply for judicial review of (1) the Commissioner’s decision to issue and maintain certain LNCs, and (2) the Commissioner’s failure or refusal to consent to the withdrawal of any funds from their accounts which were effectively frozen by the LNCs. They expressly raise the question of the legality and constitutionality of the regime (“No Consent Regime”) under which LNCs are issued. 3.The Applicants assert that most of the grounds of challenge raised by them were not decided in Interush. It is, therefore, necessary to consider what Interush did and did not decide, and the extent to which binding decisions impact the current proceedings, including as to the particular facts which give rise to the current proceedings. 4.The intended challenge arises in the context of the important and undisputed need for provisions to combat money laundering and to facilitate the pursuit and confiscation of proceeds of crime. The broad contest has been vividly described elsewhere – see §§8 and 9 of R (UMBS Online Ltd) v Serious Organised Crime Agency [2007] Bus LR 1317 – as being between (a) legislation of which Dracon, the Athenian legislator, would have been proud, and (b) a sharp but essential modern weapon in the fight against organised crime which gives law enforcement bodies the ability to counter-attack, and then pursue and recover the proceeds of criminal activity. 5.The central question posed in these proceedings is whether, in seeking to protect the community in relation to money laundering and related crimes, the public has been left under-protected in terms of their fundamental right to use their own property in the form of funds held in a bank account. 6.The proceedings were commenced by a Notice in Form 86 dated 18 February 2021 (“Form 86”). By his Decision dated 8 March 2021, Chow J (as he then was) refused the Applicants’ request that they be granted anonymity in the proceedings, and he gave directions for the filing of evidence and for a ‘rolled up’ hearing of (1) the application for leave to apply for judicial review, and (2) the substantive application for judicial review. 7.The ‘rolled up’ hearing was heard by me on 19 and 20 October 2021. Following the filing of evidence by the Commissioner, a disclosure/production summons issued by the Applicants on 14 September 2021 was not further pursued at the hearing. 8.The Applicants were represented by Mr Abraham Chan SC, leading Mr Timothy Parker and Mr Geoffrey Yeung. Mr Chan argued this case with the advantage (or disadvantage) of having been leading Counsel for the applicant before the Court of Appeal in Interush. The Commissioner was represented by Mr Victor Dawes SC, leading Mr Peter Dong and Mr Stephen Siu. 9.As Mr Chan submitted, the grounds of review “have been developed in detail” in the Form 86. This should not happen: see my recent reminder (albeit post-dating the Form 86 in this case) in [2021] HKCFI 2427. Applicants for judicial review should bring appropriate procedural rigour to judicial review cases, including in the drafting of the Form 86. The recent culture in the context of judicial review proceedings for there to be excessive prolixity and complexity, in what are supposed to be concise grounds for judicial review, as often as not serves to conceal rather than illuminate the essence of the case being advanced. 10.In this case, the Form 86 comprised over 60 pages of closely typed description and argument, which enabled Mr Chan’s “skeleton submissions” to be fitted into only 46 pages (if one does not count the further 50 pages provided by way of Notes in reply). Mr Dawes’ “skeleton submissions” ran to 83 pages. I do not suggest that the written materials were not of assistance, because they were (and had the additional benefit of saving some note taking whilst listening to submissions). But I strongly tend to the view that just as much assistance could come from far fewer pages. 11.This is my reserved Judgment. B. The Facts 12.From the evidence, the following material factual matters can be seen. 13.The Applicants are Hong Kong permanent residents, and are members of the same family. Tam Sze Leung and Tam Chung Wai are brothers; Kong Chan is their mother; and Lee Ka Lo is Tam Chung Wai’s wife. They hold monies in a number of accounts (“Accounts”) held with various banks in Hong Kong (together, “Banks”), being The Hongkong and Shanghai Banking Corporation (“HSBC”), the Hang Sing Bank (“HSB”), the Bank of China Hong Kong (“BOCHK”) and the Bank of East Asia (“BEA”). 14.The combined total balance of the Accounts is substantial, apparently around HK$30 million to HK$40 million (including cash, and investments of fluctuating value). But, in December 2020, the Applicants discovered that the Accounts had become disabled, and they were unable to withdraw funds held in the Accounts. 15.Through their solicitors, Messrs O Tse & Co (“OTC”), the Applicants enquired with the Banks as to the reasons for the freezing and/or restriction of the Accounts. The replies from the Banks were not particularly informative. In short, the Banks identified that they were not in a position to accede to the request. 16.The Applicants and OTC inferred that LNCs had been issued by the Commissioner in respect of the Accounts. In particular, it was noted that all of the Accounts were believed to have become inoperable at or around the same time, and it was extremely improbable that four competing financial institutions would independently decide to freeze 12 accounts belonging to four different people at exactly the same time. Further, some responses to enquiries made of the Banks appeared standard ‘detail-free’ responses typical to LNC cases. 17.By a letter dated 8 December 2020, OTC asked the Police to confirm whether LNCs had been issued to the Banks in respect of the Accounts, and provide the legal basis, including the legal provisions relied upon, as well as the reasons (including what offence was alleged or suspected to have been committed and by whom and how it related to any or all of the Accounts), for issuing the LNCs. 18.By a letter dated 14 December 2020, the Commissioner informed OTC that the Applicants were “currently under investigation by Financial Investigations Division, Narcotics Bureau for a case of ‘Dealing with property known or believed to represent proceeds of indictable offence’”, and asked OTC to ask the Applicants to contact the Police. No further substantive reply was given by the Police despite further letters from OTC. Nor did the Applicants contact the Police as they had been invited to do. 19.In the Form 86, the Applicants stated that it may be inferred that the Commissioner:
20.The Form 86 also referred to searches conducted in 2019 and 2020 by the Securities and Futures Commission (“SFC”) at premises occupied and/or owned by the Applicants, in connection with what were said to be suspected offences contrary to sections 274, 275, 278, 295, 296, 299 and/or 300 of the Securities and Futures Ordinance Cap 571 (“SFO”). 21.Up to the date of the Form 86, the SFC had not invited any of the Applicants for interview again, or arrested the Applicants, or charged or commenced proceedings against them. Also, the Applicants did not know at that time whether the LNCs were related to the matters investigated by the SFC, though they must have had at least a strong suspicion that they were. 22.But the evidence since filed for the Commissioner in these proceedings has made the picture much clearer. 23.The matter does indeed arise out of the SFC’s investigation against the Applicants and others for suspected stock market manipulation (“pump and dump”) in Hong Kong between 2018 and 2020. 24.On 25 November 2020, the SFC referred the matter to the Police for investigation against the Applicants for the suspected offence of money laundering under section 25 of OSCO. As a result of that referral, on 27 November 2020 the Joint Financial Intelligence Unit (“JFIU”) alerted HSBC, BOCHK and BEA to the fact that investigations concerning suspected money-laundering activities were being conducted, and urged the Banks to file appropriate suspicious transaction reports (“STRs”). The relevant emails included clear statements that LNCs would be issued. As examples:
25.Accordingly, each of the Banks filed STRs to the JFIU in relation to the Accounts. They were provided to the Financial Investigation Division of the Police, which made written requests to the JFIU for LNCs to be issued against the Accounts on 1, 9 and 15 December 2020. Each of the requests contained a description of the “Funds to be subject to ‘No Consent’”, and an undertaking “to apply Restraint Order from court in due course”. 26.LNCs were issued to the Banks on 1, 10, 14 and 17 December 2020 against the Accounts. Each LNC was signed by the Superintendent of Police and Head of the JFIU and stated, inter alia:
27.One deponent for the Commissioner, responding to the Applicants’ suggestion that the Police had “coordinated” the filing of the STRs with the reporting institutions, offered the following statements “to clarify … the relationship between reporting entities and the JFIU on the filing of STR and issuance of LNCs”:
28.With respect, some parts of that offered clarification ignore the practical reality of the factual situation in this case at least. Clearly, prior to being contacted by the Police, none of the Banks appear to have had any reason to file an STR in relation to the Applicants or the Accounts. However, when specifically informed by the Police that the Police suspected unlawful activity, and when the Police at the same time requested the filing of STRs, it seems obvious that the Banks would all have reacted by filing STRs. Indeed, it was the contact from the Police which provided the Banks with a (in fact, the only) reason to consider the possibility of suspect activities. Not to have filed any STR in those circumstances would have been foolhardy. The idea that the Banks would nevertheless have made their own further investigations so as to decide whether or not to submit an STR seems far-fetched. Further, the STRs in this case were specifically requested by the Police so that they could issue LNCs. 29.Indeed, another of the deponents for the Commissioner also explained why the LNCs were issued. He stated in terms:
30.Whilst investigations continued, the LNCs were indeed maintained upon regular reviews, performed following the Police’s internal guidelines. Those guidelines are to be found in Chapter 27-19 of the Force Procedures Manual (“FPM”), which is headed “‘No consent’ Mechanism in respect of Property held by Financial Institutions”. In brief (but see further below), monthly reviews would be submitted to the Commanding Superintendent of the investigating unit, who is designated to review the monthly submissions in order to decide whether it would be fair and necessary in the circumstances of the case for the LNC to continue to be effective. The monthly reviews would be escalated to the Formation Commander of the investigating unit for LNCs already issued for over three months, to ensure that the LNC mechanism operates fairly. 31.On 4 March 2021, the Applicants were arrested for the offence of “money laundering” and detained for further enquiry by the Police. The Applicants remained silent under caution and refused to answer any questions related to the case. They were released on police bail in the sum of HK$100,000 each on 5 March 2021, with no charges laid. 32.In April 2021, production orders were obtained from the High Court and served on 29 entities including banks and securities firms. Over 10,000 pages of banking and trading records have been discovered. 33.On 11 October 2021, on an ex parte application to Yau J in HCMP 1555/2021, the Secretary for Justice obtained Restraint Orders against the Applicants and the Accounts. The Restraint Orders were made pursuant to section 15 of OSCO, and will remain in force up to and including 10 April 2022, unless before then there is any variation or discharge by a further order of the Court. The inter partes return date for the hearing was fixed for 13 December 2021, though there was express provision permitting the Applicants or any party affected by the Restraint Orders to apply to the Court at any time to vary or discharge them. The Restraint Orders were served on the Applicants on 12 October 2021. 34.As a result of the grant of the Restraint Orders, the LNCs against the Applicants have been withdrawn. The LNCs were therefore in place for a period of at least 300 days, roughly 10 months. C. Is the Intended Challenge Academic? 35.In light of the fact that the LNCs in this case have now been withdrawn, Mr Dawes submitted – albeit fairly lightly – that these proceedings have become academic. In response, Mr Chan submitted that the proceedings have not been rendered academic, and the withdrawing of the LNCs after the application for the Restraint Orders smacks of a ‘tactical manoeuvre’. 36.First, I reject the suggestion that the application for the Restraint Orders was a ‘tactical manoeuvre’. As indicated above, and as makes logical sense in the scheme of anti-money laundering activity, the Police always intended (indeed, undertook) to make an application to the Court for Restraint Orders in due course. 37.But, secondly, I accept that even if the proceedings seeking the relief of quashing the LNCs have become academic, the Court should exercise its discretion to determine the application, on the principles established in Chit Fai Motors v Commissioner for Transport [2004] 1 HKC 465 at §20. Indeed, as is often the case in public or administrative law cases, the duties of public bodies fall to be exercised on a continuing basis not only in relation to the parties before the Court, but other parties. The exercise of those duties under relevant powers may already have occurred, as well as may occur in the future. The present challenge seems to me to raise issues of real public importance in respect of a frequently operated regime with potential application to any bank account held in Hong Kong by any person or corporation. I have also been made aware of other cases where other parties indeed wish to challenge the No Consent Regime and other LNCs on similar grounds. 38.In this particular case, the parties are represented by teams of experienced Counsel who were fully prepared for the argument, having filed substantial written submissions, and the relevant costs had also been already substantially incurred. I specifically take into account that the Court of Appeal has considered and rejected the similar challenge in Interush. But what seem to me to be the different underlying factual averments and the differently formulated or extended arguments now deployed on behalf of the Applicants, justify proper consideration in this case. 39.Further, if there is merit in the intended challenge, appropriate relief can perhaps be provided in the form of declarations of the sort proposed by Mr Chan in his proposed amendments to the Form 86. D. Intended Grounds of Review 40.Six grounds of judicial review are raised in the Form 86. The grounds of challenge encompass both systemic ones that are directed at the constitutionality and legality of the Commissioner’s operation of the No Consent Regime, as well as grounds that are directed at the particular LNCs issued in the present case. In essence, the challenge deals with two main public law concerns, being (1) the true extent of the Commissioner’s powers to freeze funds held at banks, outside the statutory regime providing for obtaining restraint orders granted by the High Court, and (2) the sufficiency of safeguards over any such powers. 41.In summary, the six grounds are as follows: (1) The issue and maintenance of the LNCs are tainted by procedural impropriety and unfairness, in that there is a lack of notice (before or after the issue of the LNCs), no reasons have been provided, and there is no opportunity for a fair hearing or other opportunity to make meaningful representations. (2) The LNCs are ultra vires OSCO, which does not confer power on the Commissioner to operate a de facto property freezing regime by the use of such letters and attendant procedures. (3) The LNCs interfere with the Applicants’ constitutional rights under the BL and BOR – specifically to (i) the use of a person’s property under BL 6 and 105, (ii) a fair hearing under BOR 10, (iii) access to legal advice and to a court under BL 35 and BOR 10, and (iv) privacy and family under BOR 14 – and such interference is not ‘prescribed by law’. (4) The LNCs breach the Applicants’ right to a fair hearing. (5) The No Consent Regime and the LNCs disproportionately interfere with the Applicants’ property rights (under BL 6 and 105), and rights to privacy and family (under BOR 14). (6) The decisions to refuse even partial consent to release of funds are unlawful in that the LNCs cause a ‘blanket freeze’, without any distinction as to which assets are or could be alleged to represent the proceeds of crime and which assets could not. E. The Statutory Regime 42.Before looking at the Interush decision and turning to consider the individual grounds of challenge, I will identify the context of the relevant statutory provisions. 43.OSCO has a long title which specifies that its purpose is:
44.Obviously, as the long title identifies, one of the purposes of OSCO – see Part III ‘Confiscation of Proceeds of Crime’ – is to seek to prevent persons benefiting from proceeds of crime, ultimately by their confiscation, preferably before such proceeds have been either partly or completely dissipated. 45.To that end, Part IV ‘Enforcement, etc of Confiscation Orders’ makes provision, amongst other things, for the enforcement of confiscation orders, and for the preservation of assets, through restraint orders and charging orders in advance of an application for a confiscation order. These powers are triggered when an arrest warrant is issued or the defendant has been arrested, charged and/or indicted. 46.Sections 14, 15 and 16 of OSCO deal with restraint orders and charging orders, as follows:
47.As can be seen, those sections make provision for a careful and detailed regime, with the relevant powers conferred on and to be exercised by the Court of First Instance. In addition to the judicial oversight, amongst the features of note are that:
48.Whilst depriving perpetrators of crime of the proceeds of their conduct is one of the purposes of the legislative scheme, a second is to ensure that, under pain of penalty, those who know or even suspect that relevant monies constitute such proceeds will report that knowledge or suspicion to the authorities, to facilitate further investigation. 49.Hence, Part V ‘Miscellaneous’ creates various criminal offences including, as is material for present purposes, the offences of (1) dealing with proceeds of indictable offence (section 25), and (2) failing to disclose a suspicious transaction (section 25A). 50.In full, sections 25 and 25A of OSCO – the statutory provisions central to the current challenge – provide as follows:
51.Sections 25 and 25A are complimentary. As held in HKSAR v Pang Hung Fai (2014) 17 HKCFAR 778 at §36, two purposes stand out. First, by the identification of what has come to be called money-laundering, the legislative scheme deprives perpetrators of crime of the proceeds of their conduct. Secondly, the scheme ensures that under pain of penalty those who know, or even suspect, that relevant monies constitute such proceeds will report that knowledge or suspicion to the authorities, to facilitate further investigation. Reference can also be made to HKSAR v Yeung Ka Sing Carson (2016) 19 HKCFAR 279 at §§79-86. 52.Section 25 is designed to make it more difficult for those engaged in illegal activity to dispose of the proceeds of that activity without the transactions coming to the knowledge of the authorities. In the context of that offence of dealing, “reasonable grounds to believe” are established when any reasonable person who shared the defendant’s personal knowledge would be bound to believe that the property was the proceeds of crime. Section 25A deals with the requirement of disclosure to the authorities, which has always been a central feature of the legislative scheme. 53.Further, in section 25A(2)(a), there is a statutory immunity to the dealing offence, where the person concerned has reported a suspicious transaction and has obtained the consent of an authorised officer to deal with the property in question. As has been held elsewhere – see Chief Officer, Customs & Excise, Immigration & Nationality Service v Garnet Investments Ltd (Guernsey Court of Appeal, Judgment 19/2011, 6 July 2011) (“Garnet”) at §27, followed in Interush – the consent regime gives the police operational freedom to grant relief from criminal liability in circumstances where it is considered to be in the interests of law enforcement to do so, such as avoiding a suspected criminal becoming aware of the suspicions, or permitting a controlled transfer to take place so that funds can be traced for investigative purposes. On its face, the provision is one allowing law enforcement to permit (give “consent” to) property being dealt with, notwithstanding that the holder of the property knows or believes it to represent proceeds of crime. 54.Section 25A(2)(a) is the provision which has given rise to the No Consent Regime. 55.Reference can also be made to section 29 of OSCO which provides:
56.Hence, if an investigation has begun against the person for a specified offence and proceedings are instituted against him but do not result in his conviction, the Court of First Instance may, on application by a person who held realisable property, order compensation to be made by the Government to the applicant. However, the Court shall not order compensation unless satisfied (a) that there was some serious default on the part of any person concerned in the investigation or prosecution of the offence or offences concerned, and (b) that the applicant has suffered loss in consequence of anything done in relation to the property by or in pursuance of an order of the Court under sections 15 to 17. Therefore, section 29 also provides some further safeguard in the context of restraint orders and charging orders. 57.Before leaving the statutory context, it is helpful to keep in mind throughout that there is no challenge to sections 25 and 25A themselves, which sections have been previously held to be vital precisely because whether the relevant funds are in fact proceeds of crime is not a necessary element within the sections. Further, it is no part of the Court’s role to redesign the legislative framework under OSCO, and ordinarily the decision-maker will be thought better placed to decide the legitimacy of societal aims of the challenged measures and the means to achieve them. F. Interush 58.The constitutionality of the No Consent Regime – described in its decision as the ‘consent regime’ – was considered by the Court of Appeal in Interush. Mr Dawes submitted that, despite the Applicants’ attempt to repackage the grounds, the only ‘new’ aspect of the present case is the allegation that the No Consent Regime is ultra vires (Ground 2), and all other grounds have been raised and already rejected. 59.I am not sure that is correct. But, more importantly, there seems to me to be a fundamental difference between the case as presented to the Court of Appeal in Interush, and that now presented to me in these proceedings. 60.In his original written submissions, Mr Dawes stated that the starting premise of the present challenge is based on a misunderstanding of OSCO, in particular the effect of the money laundering offence under section 25 and the obligations for disclosure under section 25A. He drew specific attention to Interush at §6.49, where Cheung JA stated (italics in original):
61.It is in that context that Cheung JA stated later in the same paragraph that the availability of the restraint order regime at a later stage does not point towards a consent regime at an earlier stage being disproportionate, when investigations are ongoing. This is why Mr Dawes also originally made the submission that the “LNCs do not operate as if they were informal restraint orders”. That was clearly the stance taken by the Commissioner before the Court of Appeal in Interush. 62.However, in his oral submissions – and no doubt in proper reaction to the Commissioner’s evidence filed in these proceedings, which said in terms that the LNCs were put in place to prevent dissipation of assets – Mr Dawes recognised that the Commissioner is now saying that sections 25 and 25A of OSCO do create an “informal freezing regime” (his exact words), and are used by the Commissioner for that purpose. 63.Where there has been a shift in the purpose for which the Commissioner acted in exercising powers said to be granted under the statute, that changes the contours of the argument and its necessary consideration. Indeed, the Court of Appeal proceeded on the basis that neither the Police nor the No Consent Regime “cause the freezing of assets”, whereas the Commissioner now asserts that freezing assets was the deliberate object of his operation of the No Consent Regime. 64.As to other aspects of Interush, the Court of Appeal:
65.In the changed circumstances, I accept Mr Chan’s submission that it does not follow that I must or will reach the same conclusion on the facts and evidence in this case. As Mr Chan submitted, it is for example axiomatic that any proportionality analysis is holistic, turning on matters of fact and specific justification as considered in light of all the relevant circumstances which would include developments in understanding of the substance and real-world operation of the material policy. 66.In so far as it is necessary to consider further aspects of detail in the Interush decision, that can be done in the context of addressing the individual grounds of review. G. Ground 2: Ultra Vires 67.It is convenient to deal with the vires challenge first. 68.In SJ v Johnson Cynthia (No 1) (unreported, HCMP 1789/2016, 4 August 2016) at §16, Zervos J (as he then was) expressed a concern obiter about the No Consent Regime, saying “a regime has developed that possibly exceeds the language of the provision [ie. section 25A of OSCO]”. 69.The main thrust of Mr Chan’s submission on this ground is that this is indeed what has happened: whilst section 25A of OSCO was enacted for the purpose of providing to financial institutions a ‘shield’ against criminal liability for dealing with suspect property, it has been “re-purposed” or “weaponised” (Mr Chan’s words) by the Commissioner for the proactive freezing of assets. In my view, whilst perhaps they have been understandably deployed, those words risk addressing the relevant question starting with the answer. The more neutral and preferable approach is simply to focus on what powers exist, and whether the steps which have been taken by the Commissioner fall within or outside those powers. 70.Where any action taken by a public body, such as the Commissioner, must be justified by positive law or is otherwise unlawful, the starting point is to consider what are the powers which are provided by the relevant provisions. In that context, regard will be had to powers both express and implied. But, those powers will be identified and understood in line with the principle that the legislature will not be taken to have intended to restrict rights unless that has been provided for “unmistakably, expressly or by necessary implication”: see A v Commissioner of the Independent Commission Against Corruption (2012) 15 HKCFAR 263 at §71. 71.Where it can be seen that the statute does not contain any express words abrogating or restricting rights, the question becomes whether there is a necessary implication to that effect. However, a necessary implication is not the same as a reasonable implication, but one which necessarily follows from the express provisions of the statute construed in their context. A necessary implication is a matter of express language and logic, not interpretation. The distinction is between (a) what the legislature might sensibly and reasonably have included if it had thought about it, and (b) what it is clear that the express language of the statute must have included: see R v Special Commissioner of Income Tax, ex p Morgan Grenfell & Co Ltd [2003] 1 AC 563 at §45. As it was put by the CFA in HKSAR v Yeung Ka Sing Carson (2016) 19 HKCFAR 279 at §54, the Court must be satisfied that the legislature had its attention properly drawn to the abrogating provision and consciously enacted legislation to such effect. 72.Here, the No Consent Regime at least restricts access to property, or use of property, and engages BL 6 and BL 105: see Interush at §§6.5-6.20. As constitutional rights are at stake, the means by which the government may restrict those rights must be both clearly prescribed by law and proportionate: see, for example, Interush at §6.18. In other words, there is a high threshold to be met before the Court will find that it was the statutory intention for the No Consent Regime to be utilised as it has been used. 73.The starting point is that the immunity provision in section 25A(2)(a) presupposes – or necessarily implies – that an authorised officer is empowered to give consent to a transaction or transactions, if a suspicious transaction report has been made under section 25A(1). Further, the power to provide consent must necessarily imply a power to withhold consent. 74.But, it has been recognised as a practical reality that the issue of a LNC will itself cause the financial institution not to deal with the relevant funds. As was accepted in Interush at §6.19, where consent is withheld, the bank invariably errs on the side of caution and refuses to make the payment, so that the result is that the account is ‘informally frozen’ for so long as the bank has the relevant suspicion and the police do not consent: see also R (UMBS Online Ltd) v Serious Organised Crime Agency [2008] 1 All ER 465 at §5. 75.Further, it is now recognised on behalf of the Commissioner that his purpose in taking the step of issuing the LNC is to bring about the result that the recipient will refuse to deal with the relevant property, and that the property will be ‘informally frozen’. 76.As I have pointed out, in cases such as the present where the financial institution itself had no prior relevant suspicion, it is the contact from the police informing the financial institution of the pending investigation and the police’s suspicion (even without any express request for an STR) that will trigger the freezing. Indeed, where no other fact (except the fact of police investigation) was provided as might have permitted the financial institution to decide for itself whether it had “knowledge or reasonable grounds to believe” that the funds were tainted within the meaning of section 25(1), it is the LNC which is what causes the freeze of assets. 77.So the question is whether the Court is satisfied that the legislature had its attention properly drawn to how the abrogating provision would operate (or be operated) and consciously enacted legislation to such effect. Numerous features point to the opposite conclusion. 78.First, there is a stark contrast with the express asset freezing powers provided for in OSCO, with the numerous substantive and procedural safeguards I have identified above. As Mr Chan submits, given the clear legislative intent that such powers to restrain use of, or to place charges upon, a person’s property should be subject to specific protections, it is implausible that the legislature could have simultaneously “consciously enacted” a secret, informal and unregulated asset freezing power of the kind which the Commissioner now asserts he enjoys under section 25A(2)(a). 79.Rather than being a procedure subject to judicial oversight, and with the benefit of other express safeguards, the No Consent Regime (as operated) enables the Commissioner in effect to freeze property indefinitely, without having to satisfy any Court that the freezing is appropriate, and without having to meet expressly stated procedural safeguards. Looking just at the timing, in this case the Commissioner obtained an informal freezing of around 10 months, a period significantly in excess of the long-stop first 6-month period obtainable from the Court (and eventually obtained by way of the Restraint Order). 80.In Garnet, cited at length by the Court of Appeal in Interush, similar points were made. It was pointed out (at §§33-39) that consent provisions had been a feature of substantive money laundering offences in various enactments, and had been present as a feature before any developed legislative system permitting the restraint of funds during the investigation of crime. The legislative history was not suggestive that the consent provisions were intended to enable the regime of consent to be used informally in aid of the formal systems of restraint or confiscation. Where there were express lawful mechanisms for freezing suspected proceeds of crime, conferring powers on the Court, it was thought highly unlikely that the consent provisions were intended to confer unregulated and informal freezing powers on the police to be exercised before the courts are involved without any mechanism for review or limitations on the circumstances in which any informal freeze could be imposed. I agree. 81.In Interush at §§6.5-6.17, expressly adopting the analysis in Garnet, the Court of Appeal noted the close similarity between the Hong Kong and Guernsey provisions, and apparently agreed that the consent regime was not to create an informal mechanism for the police, in effect, to freeze funds. Although the Court of Appeal did not deal head on with an ultra vires point, it might be thought that identification of what was not the statutory purpose of, or not within the scope of, the statutory provisions goes a long way to deciding the ultra vires point. 82.Mr Chan also pointed to the legislative history of OSCO, from which he said it is evident that the legislature was conscious of the need to safeguard the rights at stake. Around the time of the enactment of OSCO in 1994, (a) the legislature was told that the prior provision was to provide “a defence” for someone who may give disclosure, and (b) the Ad Hoc Group formed for the bill was conscious of the need to ensure the right balance is struck between the need to combat organised and serious crime and the need to ensure that any powers given will be no more than absolutely needed. When, in 1995, the prior provision was replaced with the current sections 25 and 25A, the legislature’s attention was drawn only to the purpose of the provisions being to offer better protection to financial institutions against the risk of prosecution where they have reported suspicion. 83.Indeed, at the same time, the legislature considered a new power – now in Part IVA of DTRPO – for officers to seize and detain property suspected to be proceeds of drug trafficking, but subject to strict safeguards, such as the power to detain property only for some days before a court order is necessary for continued detention. When the legislature was scrutinising that power, amendments were proposed to reduce the period during which property may be detained without a court order. I agree with Mr Chan that tends to identify that the legislature was concerned with limiting executive powers to restrain property without court orders. 84.I accept Mr Dawes’ submission that the Commissioner has, as part of his common law duty, the ability to alert financial institutions to potential money-laundering offences, and to remind them of their obligation to submit disclosures under section 25A(1). That is part of the wider obligations and duties to take all steps which appear necessary for keeping the peace, preventing crime or for protecting property from criminal injury. Actually, no one is suggesting that it is not open to the Commissioner to express or report suspicions to financial institutions, arising from its ongoing investigations. But that does not address the real point. As Mr Dawes recognises, whether a particular incidental power is to be implied must be considered in the context of each case, and a power is not incidental merely because it is convenient or desirable or profitable. I do not see how the referenced common law duty somehow helps the Commissioner to pass the necessary test of showing that the legislature had its attention properly drawn to how the abrogating provision would operate (or be operated) and consciously enacted legislation to such effect. 85.I further acknowledge that the No Consent Regime is, or is likely to be, operated at a relatively early stage in investigations. It can provide a speedy means of in effect freezing funds, which might be vital when funds can disappear at the push of a button. But, Mr Dawes goes further and says that what is therefore contemplated is not just protection to the financial institution, but also the creation of an informal freezing regime to permit further investigation. As he put it, it is to provide a “temporary stop-gap measure” to ensure that the money “is still there for a sections 14 and 15 restraint order to bite”. 86.That may well be desirable, but again it does not address the real question. I reject Mr Dawes’ submission that the overall question is whether the legislature intended to curtail the police’s powers to detect and prevent crime. As he says, the obvious answer to that is “no”. But the real question to be answered is whether the power to operate the informal asset freezing No Consent Regime put forward by the Commissioner is necessarily implied in the provisions of sections 25 and 25A of OSCO. 87.Reference can be made to the FPM Chapter 29-19 (last amended in 2017), headed “‘No Consent’ Mechanism in respect of Property held by Financial Institutions”. Some of its provisions were set out in the Interush decision, at §§3.5-3.7, but they appear to differ from the version placed in evidence in this case. Material paragraphs are as follows:
88.As described in the Commissioner’s evidence, once an STR has been received, the JFIU and the relevant investigation unit follow the procedures set out in the FPM, and an outline of the mechanism based on the FPM is posted on the JFIU’s website. Both the FPM and the outline identify the considerations in deciding whether to issue an LNC, and the actions to be taken by the Police after the issue of an LNC. I accept that the mechanism adopted is intended to provide some form of safeguard to the operation of the No Consent Regime. It is also fair to say that the mechanism envisages covering the time between the emergence of suspicion and the point at which a Restraint Order can be sought. But, where the period in question is envisaged potentially to last as long as six months, and in “exceptional circumstances” even longer, that does not leap out as a “temporary stop-gap measure” (in contrast to, for example, the 7-day initial period and 31-day moratorium period found in section 355 the UK Proceeds of Crime Act 2002). 89.I note that the FPM mechanism was also considered in the Interush decision, but only in the context of the proportionality assessment, where it was ultimately held that the procedures set out in the FPM are not so uncertain that they fall foul of the proportionality requirement. I agree that it is logical to place consideration of the FPM in that context, or in the ‘prescribed by law’ context; the administrative mechanism cannot be relevant to determining whether the steps which have been taken by the Commissioner fall within or outside the powers in section 25A. 90.Of course, I also accept that the No Consent Regime as operated – including by the application of the FPM – might be said to contribute to the overall objectives of the legislation. It might even be said that the legislature would have been content to put in place some equivalent regime, had it expressly thought about. But that does not meet the necessary test when considering whether the No Consent Regime as operated is ultra vires the statute. 91.Ultimately, in conclusion, I agree that there is no basis for a necessary implication of the power the Commissioner now says he has, and has operated. Nothing in the language or purpose of section 25A(2)(a) necessitates the implication of the relevant power, looking at that provision in context and against the legislative history. 92.I also tend to agree with Mr Chan’s alternative submission based on the principle to be found in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 at 1030. To use the express provision relating to consent in section 25A(2)(a) for the purpose of securing an informal, unregulated freezing of assets is to use that power for a purpose other than that for which it was supplied. 93.The No Consent Regime as operated by the Commissioner is ultra vires. H. Ground 3: Prescribed by Law 94.Mr Chan submitted that, as an alternative to Ground 2, even if the No Consent Regime is intra vires section 25A, it does not satisfy the requirement of being ‘prescribed by law’. (It will be recalled that a similar argument, sought to be raised before the Court of Appeal in Interush, was not permitted for the reasons there explained: see §§6.28-6.32.) 95.Mr Chan and Mr Dawes agreed that the approach to the prescribed by law requirement is now well established, and can be found set out in Chee Fei Ming v Director of Food Environmental Hygiene [2020] 1 HKLRD 373 at §§23-28, 35-44, and 55-57. 96.There are two requirements flowing from the concept ‘prescribed by law’:
97.As regards the first limb, a holistic approach should be adopted, where the Court should have regard not only to the statutory provision in question but also to the common law and published policy and guidelines. The Court should also take into account how the law is actually administered, including the effectiveness of judicial supervision through judicial review. As a matter of general principle, there is no requirement that all statutory discretions must contain explicit limitations upon them. 98.As regards the second limb, the level of precision required of domestic legislation cannot in any case provide for every eventuality and depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed. 99.A norm must be formulated with sufficient precision to enable a citizen to regulate his conduct so that he is able, with legal advice if necessary, to foresee the consequences which a course of action will entail. Therefore, if a citizen consults a lawyer and such lawyer is able to tell him that the discretionary power can be exercised within a certain scope and in a particular manner and there are safeguards against abuse, the requirement of foreseeability is satisfied. The crucial question in the relevant context is whether there is sufficient clarity as to the scope of the power and the manner of its exercise and whether the law provides adequate effective safeguards against abuse. 100.In Leung Kwok Hing v HKSAR (2005) 8 HKCFAR 229 at §29, it was stated:
101.Ultimately, the question is answered by whether the law is able to annunciate some boundaries which create an area of risk. There will be conduct which falls along the boundaries of the area of risk for which no definite prediction or answer can be given in advance; but the identification of the area of risk will provide guidance to citizens and that suffices for the purpose of certainty. I also accept that the application of the ‘prescribed by law’ requirement must be realistic. It is enough that the law lays down principles which are capable of being predictably applied to any situation, although with the infinite variety of situations in which issue of compliance may arise and the inevitable element of judgment involved in assessing them, complete codification is impossible. 102.It is also important to remember that there is a distinction between the test for whether interference is ‘prescribed by law’ and the test relating to proportionality. The former is a prior question that does not subsume the issue of proportionality. 103.Mr Chan submitted that OSCO sets out no limits or safeguards at all against the power to issue LNCs. This is because it contains: (1) no objective threshold for the exercise of the power; (2) no indication as to the scope of the power; (3) no limit as to the duration that the power can be exercised; (4) no independent reviewing body; and (5) no procedural safeguards – all in contrast to the clear evidential threshold, scope, time limit, judicial oversight and procedures specified in sections 14 and 15. Therefore, Mr Chan submits that the power to issue LNCs is left to uncharted administrative discretion, such that the No Consent Regime is liable to abuse, the very vice which the ‘prescribed by law’ requirement outlaws. 104.Mr Chan also submitted that it is not open to the Commissioner to rely on the internal administrative guidelines in the FPM to provide safeguards or ensure fairness. First, he points out that prior to these proceedings the guidelines were not accessible to the public, even though a summary or reformulation has now been uploaded to the JFIU website. If not published, they could not assist in the question of whether the power is prescribed by law. Further, what is sufficient is a contextual question, which will depend amongst other things on the potential severity of the regime in question with regard to the individuals/rights and interests. 105.Of course, looking forward, the FPM has now been published – including the substance of it in this Judgment. So, leaving aside the position beforehand, I do not think it would be correct to regard it now as purely internal. 106.But, Mr Chan submitted that not only is the FPM changeable at the discretion of the Commissioner, even on its face the FPM contains no objective threshold as to when and what property can be subject to LNCs, no independent reviewing body, and no procedural safeguards. He further submitted that, in any event, the Police did not adhere to the procedures stipulated in the FPM. Amongst other things, nothing shows that, after the issuance of the LNCs, the investigating units had made their best endeavour to obtain a restraint or confiscation order as soon as practicable, and even the supposedly monthly reviews were not carried out timeously and do not contain more than a general description of the investigation process or any reasoning why the LNCs should be maintained. Nor do the later monthly reviews document the Formation Commander’s decision that “exceptional circumstances” exist to justify the LNCs going beyond six months, or his reasoning in that regard. 107.Mr Chan went on to submit that the availability of judicial review could not remedy the situation, when the breadth of the power means that it is unduly difficult to show that it was exercised improperly. 108.In response, Mr Dawes submitted that the No Consent Regime is not only prescribed by law, but any person in the position of the Applicants would be able to seek legal advice on the requirements which govern each and every step of the process. First, LNCs are not issued in secret, as suspects who are subject to the LNCs are provided with the contact details of the relevant police officer (and in this case the police had actively sought the assistance of the Applicants). Secondly, as in any comparable powers of the police, there must be an element of unpredictability involved. Mr Dawes submitted that the Court should take into account: (1) the overall statutory scheme of OSCO, including section 25 (money laundering offence) sections 25A(1) and 25A(2)(a) (obligation for disclosure, and the power to withhold consent), and the restrictions on disclosure as provided in sections 25A(5) and 26; (2) the common law authorities interpreting the mental element required for the offences, and the evidential threshold for an LNC to be issued under section 25A(2)(a); (3) the criteria and procedures for issuing and maintaining LNCs published on the JFIU website, as replicating the substance of the FPM used internally; and (4) the FPM itself, which has been disclosed in previous judicial proceedings as well as the present proceedings. 109.Mr Dawes sought to emphasise that, according to the published guidelines and those in the FPM: (1) the underlying principle in issuing an LNC is that it be necessary, proportionate and reasonable; (2) the investigating unit should make best endeavours to obtain a restraint or confiscation order as soon as practicable; (3) there will be monthly reviews; (4) an LNC should normally last no more than six months, unless there are exceptional circumstances. Further, where a person seeks to challenge the propriety of an LNC or otherwise unfreeze the relevant account, he may either challenge the proprietary of the LNC by way of judicial review, or issue civil proceedings against the bank for failure to comply with instructions. As such, a lawyer would be able to advise on each and every step of the LNC regime. Therefore, it is not correct to suggest that the discretion is left to uncharted administrative decision. 110.Mr Dawes also emphasised that the particular failures in following the FPM in this case do not mean a systemic failure. Indeed, I accept that proof of a systemic failure is not to be equated with proof of a series of individual failures. There is an obvious but important difference between a scheme or system which is inherently bad and unlawful on that account, and one which is being badly operated. The issue in the present proceedings is whether the No Consent Regime is inherently bad and unlawful, not whether it has been operated in accordance with the FPM. Further, I accept Mr Dawes’ submission that some of the criticisms of the monthly reviews is probably unfair when, for example, the person conducting the monthly review would have the latest investigation findings, progress, evidence and collected from the officer in charge of the case and there is no requirement for the Formation Commander to record exceptional circumstances in a separate document, but rather to review the case critically and to decide whether there are such exceptional circumstances that justify the LNC. Though it may not fully meet the criticism, I also accept that there is no evidence that the Police had unreasonably delayed the investigation against the Applicants or the process of seeking the Restraint Orders. 111.But, my acceptance of those individual points, does not seem to me to answer the core issue on the ‘prescribed by law’ question. 112.Indeed, it is not just a forensic flourish for Mr Chan to have asked rhetorically, if here there is a divergence or major development in the Commission’s own understanding on something as fundamental as the true source, nature and extent of the Police’s powers under the regime (from the stance taken at the time of Interush until that now taken), how can it possibly be said that there is adequate legal certainty for the wider public on this very issue? The particular concern is to ensure that ordinary citizens can have access to and, if necessary with appropriate legal advice, understand in a way that is clear and certain the state machinery which affects their rights. 113.I have some doubt as to whether judicial review provides an appropriate judicial safeguard to the No Consent Regime as operated to provide the necessary ex post facto safeguards. I take Mr Chan’s points made by reference to Lam Siu Po v Commissioner of Police (2009) 12 HKCFAR 237 at §§131-132, that whether judicial review suffices depends on the subject matter of the challenge decision, the manner in which it was arrived at, its content and the proposed grounds of challenge, and that judicial review is more likely to be sufficient where there are safeguards in the administrative process itself to ensure that it is fair and impartial. 114.But I must take into account what was said by G Lam J (as he then was) sitting as a member of the Court of Appeal in the Interush case, at §11.2. There, he pointed out that the applicants’ main argument before the Court boiled down to the contention that the ‘consent regime’ found in sections 25 and 25A was deficient in not providing for an express fixed time limit after which the “informal freeze” would expire and cease. He noted reliance placed on the comparison made with the UK legislation in sections 328 and 335 of the Proceeds of Crime Act 2002, which had been held in the UK court to strike a precise and workable balance between conflicting interests. But he did not think it was helpful, and could indeed be potentially misleading, to compare aspects of the schemes in different jurisdictions in isolation. His conclusion in §11.3 was:
115.Those comments appear to me to have been made in further support of G Lam J’s agreement with the judgment of Cheung JA, expressed in §11.1, that the applicants should not be permitted to raise the ‘prescribed by law’ point for the first time in the Court of Appeal at the last minute. But it also fits what was said by Cheung JA at §6.60, and in Garnet at §42, that the refusal of consent does not preclude judicial oversight by the courts, either by way of private law claims against banks or by way of judicial review. 116.For myself, I wonder whether commencing civil proceedings against the bank provides an appropriate remedy, not least where most banks/customer contracts will permit the bank to refuse to operate the customer’s account where it has suspicions relating to money laundering or proceeds of crime. Such a remedy is also unlikely to be achieved expeditiously. 117.Ultimately, I am persuaded that the No Consent Regime as operated is not ‘prescribed by law’. There is no clarity or certainty to be found in OSCO itself (though this is perhaps also simply a reflection of the fact that the regime as operated is ultra vires the statute), and the FPM suffers from the same vices. In passing, I have not lost sight of the point that G Lam J in Interush at §11.1 noted that indication of the criteria relevant to the exercise of the discretion to withhold consent is not to be found in the UK Act either. But, to answer the crucial question in the relevant present context as to whether there is sufficient clarity as to the scope of the power and the manner of its exercise and whether the law provides adequate effective safeguards against abuse, I think there is not. Further, though there is a proper distinction between systemic unfairness and individual failures, the failures in this case are to my mind indicative of the systemic problems. 118.The No Consent Regime as operated by the Commissioner is not ‘prescribed by law’. I. Grounds 1: Procedural Fairness 119.In his submissions, Mr Chan dealt with Grounds 1 and 4 together, on the basis that the grounds concern procedural rights at common law (Ground 1) and under the constitutional right to a fair hearing (Ground 4). But I think it more straightforward to consider them separately, as they were separately formulated in the Form 86. 120.I accept that there is an assumption that an administrative power conferred by statute is intended to be exercised fairly, where the duty to act fairly is flexible. Indeed, there is no dispute that what fairness requires is always specific to the context. In this case, that context is the exercise of discretion under section 25A in providing or withholding consent. 121.In general, fairness will often require the right to notice of a decision, the right to make worthwhile representations and the right to disclosure of at least the gist of the case which the affected person has to answer. Fairness often also requires adequate reasons to be given for a decision. On the other hand, it is not enough to argue that some procedure other than the one adopted by the decision-maker would be better or fairer; rather, what must be shown is that the procedure adopted is actually unfair. Importantly, natural justice does not require the courts to supplement statutory procedures by requiring additional steps which would frustrate the statutory purpose. 122.Mr Chan submitted that the procedural unfairness in this case lies in the failure to meet, as he put it, even the most basic common law fairness requirements. In particular, whether before or after issuing the LNCs, the Commissioner failed to: (1) give any notice, or even confirm that he had issued LNCs; (2) supply any reasons, even in gist, or other relevant information the Applicants would require in order to make meaningful representations on the LNCs; and/or (3) accord the Applicants a fair hearing (or any hearing). 123.As elaborated in the Form 86, the relevant aspects of context are said to include: (1) the significance of the rights and interests at stake, where the right to use one’s property is a fundamental right; (2) the decision-maker is neither independent nor impartial; (3) LNCs are imposed on the basis of specific factual allegations concerning alleged criminal offending, which persons affected should be given a fair chance to answer; (4) a person affected has a strong interest in being given a fair opportunity either to set aside the LNC or to have it modified; (5) nothing in OSCO expressly or impliedly excludes common law procedural fairness guarantees. It is said that on the facts, no procedural rights were afforded in relation to the Commission’s decision to issue and/or maintain the LNCs. 124.Mr Chan submitted that, even if such rights could not be given prior to the issuance of the LNCs for fear of dissipation of assets or other legitimate law enforcement interests, there is no reason why they could not be given afterwards when the property would already be frozen. 125.However, in the Form 86, reference was made to the Garnet case, where it was recognised at §§72-74 that there will be many circumstances in which it will not be possible to give reasons for a consent decision without running the risk of tipping off suspects or revealing sensitive details of the state of police enquiries – even though if the police are able to give reasons, there are obvious policy and practical reasons for that to be done, such as allowing persons affected to understand why the consent decision has been made and put them in a position to take meaningful advice on what remedies may be open to them. 126.Therefore, I agree with Mr Dawes that in the relevant context, as a matter of general principle, there should be no requirement for disclosure of anything which is material in a pending prosecution, and that it would be contrary to public interests in almost all cases for the grounds of an officer’s suspicions to be disclosed while the prior investigation is in progress. He referred to §37 of the UMBS case, where it was stated:
127.I agree that it must be clear that the requirement of notice is completely contrary to the statutory framework under OSCO, as well as common sense. Indeed, telling a customer why an account has been blocked would itself constitute prohibited disclosure under OSCO. Of course, on the facts of this case, and with the benefit of legal advice, the Applicants clearly understood that LNCs had been issued against the Accounts as soon as they received letters from BOCHK and BEA directing them to contact the named police officer. Subsequently, it was also made clear to the Applicants on 16 December 2020 that they were the subjects of investigations concerning money-laundering offences – though the “neither confirm nor deny” approach to whether LNCs had in fact been issued was rather unhelpful. But, I agree with Mr Dawes that the Applicant’s claim to unfairness is based on their own subjective assumption that the police were not prepared to hear any representations on the LNCs, which is self-serving, when the Applicants have made no attempt to contact the police when specifically requested to do so. I do not accept Mr Chan’s attempted distinction between assisting the police with the investigation and making representations as to the LNCs, when they are obviously linked. Of course the Applicants were entitled to exercise their right to silence, and their right against self-incrimination, but if they choose to exercise that right they seem to me to be giving up the opportunity to make relevant representations. 128.I also agree that giving reasons is contrary to the purpose of OSCO, and the well-established principles against disclosure of such materials. The reference has been made to Garnet (see above), Mr Dawes is correct when he said that the Applicants have not been able to explain how the Commissioner would be able to give detailed reasons as to why the LNCs were issued without ignoring the obvious public interest against disclosure of such reasons. 129.Further, even in light of the evidence which has been filed in these proceedings, the Applicants have not attempted to dispel any suspicions, either when requested to contact the Police, or in the evidence filed in these proceedings, or when interviewed after arrest. I accept that it would be straightforward in most cases for someone asserting the monies used by him or her in the past derive from a source which is untainted by criminal conduct. In the absence of any attempted explanation or the provision of any further information by the Applicants so as to dispel the suspicions entertained by the police, the police were entitled to continue to view those funds as suspicious: see Garnet at §62. 130.I also note the view of Tomlinson J in Amalgamated Metal Trading Ltd v City of London Police Financial Investigation Unit [2003] EWHC 703 (Comm) at §27, when he stated (in relation to comparable consent provisions) that there can be no obligation on the police to justify the withholding of consent, where it seems clear from the section as a whole that the existence of a suspicion is sufficient to ground a proper refusal of consent. He said (emphasis in original):
131.These points go also to the complaint about a lack of hearing. Further, the question of whether the assets in the Accounts represent proceeds of crime do not allow for an ‘interim’ determination, and should be finally determined in the proper forum. That might be by way of a private claim against the Banks, or it might be in criminal proceedings, if and when they are instituted. 132.Taken as an independent Ground, there was no procedural unfairness. J. Ground 4: Right to Fair Hearing 133.As is evident from Mr Chan’s linking them in argument, Ground 4 has some overlap with Ground 1. But, Ground 4 specifically proceeds on the premises that: (1) the issue of a LNC engages BOR 10; (2) consequently, persons the subject of LNCs are constitutionally entitled to a fair hearing before an independent and impartial tribunal, to prior notice or notice shortly after the fact, to disclosure of the case they are required to meet, and to the opportunity to make worthwhile representations. 134.The engagement of BOR 10 is said to arise because the issuance of a LNC involves a determination of rights and obligations in a suit at law, where a suit at law can include non-judicial matters such as the taking of private property and measures taken outside the context of court proceedings where they have a permanent impact and/or could cause irreversible prejudice that is incapable of remedy in later substantive proceedings. 135.This point can be disposed of shortly because in Interush at §6.60 the Court of Appeal held that access to court rights have not been engaged because of the judicial remedies available to the applicants by way of judicial review and civil claim against the banks. Though the argument was primarily put forward by Mr Chan in Interush with a focus on BL 35, there was specific reference at §6.57 to the right to a fair hearing before a competent, independent and impartial tribunal established by law under BOR 8 and BOR 10. I do not think it can be said that BOR 10 not tested in Interush. 136.In any event, what was said in Interush at §6.60 would be the answer to the BOR 10 challenge. If BOR 10 is engaged, it would not be breached where there is the right to commence judicial review on the propriety of the LNC, to issue a civil claim against the Banks, and to seek compensation from the Government for serious default in the prosecution or investigation process pursuant to section 29 of OSCO. The Court in judicial review proceedings can exercise supervisory jurisdiction over the propriety and legality of the decision to issue the LNC. Relief in a civil action against the Banks can be obtained by questioning whether Banks could establish that they had the requisite suspicion that the funds with the proceeds of crime and to prove that the provenance of the funds was not so tainted. The provisions of section 29 of OSCO have been set out above. 137.Mr Chan has submitted that access to judicial review does not “cure” the fundamental procedural flaws in the No Consent Regime. But I think I am bound by the Court of Appeal’s contrary view. 138.I also accept Mr Dawes’ submission that the independence of the prosecution as controlled by the Department of Justice in Hong Kong is enshrined in BL 63, and the Courts have consistently refused to intervene absent any dishonesty, bad faith or some other exceptional circumstances. Therefore, the submission continues, if the court should rarely interfere with prosecution decisions, the court must be even more reluctant to review the investigation process, unless wholly exceptional circumstances are present. Reference was made to R (C) v Chief Constable of “A” Police [2006] EWHC 2352 at §33, where – in the context of a police investigation where the claimant had not been excluded – it was stated that:
139.Reference was also made to R (Soma Oil and Gas Ltd) v Director of the Serious Fraud Office [2016] EWHC 2471 at §§21-30. Amongst other points there made, it was pointed out that it is even more difficult to challenge the decisions of investigators then to challenge the decisions of prosecutors, and that it is well understood as to why courts are very slow to interfere. First, the powers in question are entrusted to the offices identified, and to no one else. No other authority may exercise these powers, or make the judgements on which such exercise must depend. Secondly, the courts have recognised the poly centric character of official decision-making in such matters including policy and public interest considerations which are not susceptible of judicial review because it is within neither the constitutional function or the practical competence of the courts to assess their merits. Thirdly, the powers conferred in very broad and undescriptive terms. Nevertheless, it was also underlined that the Director’s discretion was not unfettered, because he must seek to exercise his powers so as to promote the statutory purpose for which he is given them. He must direct himself correctly in law. He must act lawfully. He must do his best to exercise an objective judgment on the relevant material available to him. He must exercise his powers in good faith, uninfluenced by any ulterior motive, preselection or prejudice. It seems to me that the same fetters lie on the exercise of the Commissioner’s discretion and powers. 140.I see some force in Mr Chan’s submission that the legislature has recognised that fairness demands that there be a right to notice of a decision to freeze assets and a right to make representations to an independent and impartial tribunal, namely the Court, to vary or discharge it: see sections 14 and 15 of OSCO. Such rights are afforded under the restraint order regime, even though the order might have been made while the case is still under investigation and no prosecution has yet been brought. So, it might be said there is no reason why fairness would not demand the same procedural rights to be given for asset freezes under LNCs. But, that does not seem to me to mean that, where judicial review is available, some other form of hearing is necessary for there to be a fair hearing. On the principles set out above, a higher standard of review than that permitted in judicial review would not be appropriate. 141.Taken as an independent Ground, there was no failure to afford a fair hearing. K. Ground 5: Proportionality 142.By way of overview, and contrary to the suggestion made by Mr Dawes, I think that Mr Chan’s submission clearly identifies that the Applicants are not seeking to remove the ‘shield’ for financial institutions provided under section 25A, nor are they saying that the power to consent or withhold consent to deal is necessarily unlawful. The Applicants’ case is that the power to withhold consent as deployed in the No Consent Regime results in indefinite and disproportionate interference with fundamental rights, lacks a clear scope of power, and most critically lacks proper safeguards against abuse. 143.The proportionality concept has been explained in Hysan Development Co Ltd v Town Planning Board (2016) 5 HKCFAR 372, as summarised at §§133-134. Essentially, where an encroachment on a relevant right is established, the extent, if any, of the encroaching measure’s validity is determined by a proportionality analysis. The assessment involves a four-step process of asking: (1) whether the intrusive measure pursues a legitimate aim; (2) if so, whether it is rationally connected with advancing that aim; (3) whether the measure is no more than necessary for that purpose; and, if the encroaching measure passes the first three steps, (4) whether a reasonable balance has been struck between the societal benefits of the encroachment and the inroads made into the constitutionally protected rights of the individual, asking in particular whether pursuit of the societal interest results in an unacceptably harsh burden on the individual. 144.As to the heightened standard of review at the third step, the two main standards applied are the standard of “no more than necessary” and “manifestly without reasonable foundation”. However, both of these standards are points on a continuous spectrum of “reasonableness”, as explained in Hysan at §§119-12. That there is such a spectrum identifies why the authorities sometimes speak of the “intensity” of judicial scrutiny, rather than a “standard”. The difference between these two standards is one of degree, with the Court in both cases, scrutinising the circumstances of the case and the factual bases claimed for the incursion. 145.In the Form 86, this Ground 5 was stated to be reserved for argument should the matter proceed to a higher court, on the basis that the proportionality challenge failed before the Court of Appeal in Interush. However, partly in light of the Commissioner’s change of stance, the matter was fully argued, and I think it is open to me to visit the question of proportionality on the materials now before this Court. The assessment of proportionality is holistic, factual and contextual. 146.As Mr Chan submits, where fundamental rights are engaged, the Court has a constitutional duty of review. The particular fundamental rights asserted are the right to property (or at least the use of property) under BL 105 and the right to privacy and family life under BOR 14. As already indicated, the Court of Appeal in Interush held that BL 105 is engaged: see §§6.18-6.20. But it did not assess legality by reference to BOR 14, as that was not any part of the focus of the appeal, which was on property rights: see §4.2. 147.In support of the proposition that freezing a person’s assets involves an interference with BOR 14 rights, particularly where the freeze is substantial or total, Mr Chan referred to C v HM Treasury [2016] EWHC 2039 (Admin) at §§86-87 and Ahmed v HM Treasury (Justice intervening) (Nos 1 and 2) [2010] 2 AC 534 at §§137, 196 and 241. In Ahmed, it was suggested that the consequences of a freezing order, not merely on the enjoyment of property, but upon the enjoyment of private and family life, are dire, and the specific restriction applicable to the case was one which was said severely to curtail personal and family life on an indefinite basis, without affording any means of judicial recourse to test the underlying premise of the restriction. 148.However, Ahmed at §38 identified the context for such a view, because the effect of the relevant regimes was that every transaction, however small, which involves the making of any payments or the passing of funds or economic resources whatever directly or indirectly for the benefit of a designated person is criminalised. That was said to affect all aspects of his life, including his ability to move around at will by any means of private or public transport, and the overall result was described as very burdensome on all members of the designated person’s family. Even the ameliorating effects on third parties left a regime which, overall, remained to a high degree restrictive and, so far as the designated person himself is concerned, just as paralysing. 149.I do not think the No Consent Regime is equivalent in its restrictive effect. Nor do I think the assessment of proportionality is to be conducted by reference to the most extreme circumstances that one can conceive as being a consequence capable of occurring. Indeed, the underlying premise of the complaint that the LNC imposes an indiscriminate freeze on the Applicants’ assets is not correct. Rather, the evidence shows that the LNCs were issued upon the reasonable suspicion of the Commissioner that the Applicants had transferred their illegal profits from their “pump and dump” scheme to various bank accounts, including the Accounts. Therefore, I accept Mr Dawes’ submission that there is no basis for the Applicants to claim that the No Consent Regime would in a legally significant number of cases affect all or substantially all of a person’s realisable assets such that their private life would be affected. As he says, it seems most unlikely that there would be a case where there is a reasonable suspicion that all, or substantially all, of a person’s realisable assets are proceeds of crime. There is also considerable force in the submission that even freezing a substantial amount of assets does not necessarily mean that right to family and private life would be infringed in a significant manner, as the present case seems to demonstrate: despite repeated claims that funds be released to meet basic needs, the Applicants have adduced no evidence of any hardship, and have apparently found funds otherwise to live their lives and have managed to instruct solicitors and three Counsel to present and argue the present case. 150.Whilst acknowledging the engagement of BL 105, I do not, therefore, accept that BOR 14 is engaged. But, in any event, looking at which rights are engaged is not some ‘box-taking’ exercise, and the analysis must be a matter of overall substance. I take into account that the nature of the relevant property in this context is money, and the limitation of its use potentially has wide effects. But, I also do not think it is fair for Mr Chan to suggest that the ‘wide catch’ of the No Consent Regime – the fact that anyone holding an account with a financial institution in Hong Kong could be caught by it – was not factored into the balance in Interush. The point is so blatantly obvious that it needs no statement of it, and it is difficult to believe the Court of Appeal would not have had this factor well in mind. 151.As to the correct approach, Mr Chan also referred to Junior Police Officers’ Association of Hong Kong Police Force v Electoral Affairs Commission (No 2) [2020] 3 HKLRD 39, in particular §§30-31, 68, 75-76 and 96. At §68 it was pointed out that the Court was not asked to formulate the precise criteria or to set up a mechanism for the exercise of the particular regime under review, and it was not the function of the Court to lay down the scope of any exceptions, in part because the Court should accord a margin of discretion to the relevant authorities and the legislature. At §69, Lam VP (as he then was) stated the Court was concerned with whether a fair balance is struck in the “overall scheme of things”. At §§74-76, the Lam VP stated:
152.Having pointed out that there was no intention of prescribing that the Hong Kong system must follow a particular model practised elsewhere, and that it was not the function of the Court to formulate (in that case) electoral policy or to devise a particular electoral system, Lam VP went on to say, at §96:
153.Tailoring to this case the submissions that he had himself made in that case, Mr Chan submitted that the crucial issue in the application of the proportionality test is to ask to what extent the value of the No Consent Regime would be eroded if made subject to all or some of what he described as seemingly obvious safeguards which are lacking. The crux question is not whether the scheme as a whole serves a noble aim, but whether the scheme without those safeguards is reasonably necessary or manifestly without reasonable foundation (depending on the intensity of review taken from the “reasonableness” spectrum). 154.Mr Chan said that the Commissioner has failed to show why the regime could not function without the simple safeguards of set default temporal limits on freezing orders (which might be extended upon application to the Court or some other independent body), or any of the other obvious safeguards provided under the restraint order regime. He pointed in particular to the evidently effective functioning of such safeguards not just in the restraint order regime but also in overseas jurisdictions with comparable freezing powers: see, for example, K Ltd v National Westminster Bank plc [2007] 1 WLR 311 at §22, where by reference to the UK legislation it was said:
155.Applying the four-stage test in Hysan, there is no difficulty in satisfying the first two stages. There is an obvious legitimate purpose and a rational connection to the legitimate purpose of deterring criminal activity by restricting access to the proceeds of crime. As to the third stage, and as did the Court of Appeal in Interush at §§6.36-6.37, I think the appropriate standard or intensity of review is that of “manifestly without reasonable foundation”. Applying that standard, the Court allows the decision-maker latitude to adopt one of a relatively wide range of possible alternatives in fashioning the impugned measure which encroaches upon the protected right. But it is also correct that where the first two stages have been satisfied, the Court will ordinarily be astute not to insist on a potentially less intrusive measure, but intervene only to strike down the measure as unconstitutional if the option chosen is clearly beyond the spectrum of reasonable options. 156.Applying that standard, Mr Dawes submitted that the No Consent Regime is not beyond the spectrum of reasonable options. He said that to allow the police to carry out their duties to detect and prevent money laundering is plainly within the spectrum of reasonable options, rather than to adopt a “completely passive approach” (his phrase) which would allow money-laundering to take place even if the police have information which would give rise to reasonable submissions. 157.However, I tend to agree with Mr Chan’s submission that the relevant alternative is not simply to adopt a passive approach. There are myriad alternatives for the Commissioner to take on a proactive role in tackling money laundering at an early stage of investigation, albeit with clearly defined powers and safeguards. 158.As to Mr Dawes’ submission which asked rhetorically what the point would be of independent scrutiny if the suspect is merely going to remain silent, I think the answer is that which I offered during argument. Suspects may be reluctant to offer explanation for reasons of privilege, which would suggest that judicial scrutiny is all the more important in that context. Judges are used to dealing with questions of privilege, and will understand the sensitivities. 159.In particular by reference to the fact that that the regime can operate, and is operated, without temporal limitation yet with only internal intermittent review of justification, itself apparently lacking any proportionality assessment the longer the period of operation continues, I do not think that a reasonable balance has been struck between the societal benefits of the encroachment and the inroads made into the constitutionally protected rights of the individual, asking in particular whether pursuit of the societal interest results in an unacceptably harsh burden on the individual. 160.After careful reflection, and in light of the Commissioner’s stance taken in these proceedings that he has the power to and does operate the No Consent Regime precisely to effect an informal freezing of bank accounts, it seems to me that the regime fails the proportionality assessment. L. Ground 6: Fact-Specific Challenge 161.Mr Chan submitted that even if the No Consent Regime is systemically constitutional, a fact-specific challenge remains open to the Applicants. 162.At the fact-specific level, Mr Chan submitted that the significance and extent of intrusion into fundamental rights in the present case – where (almost) all bank accounts of four individuals are frozen – is far greater than in Interush. 163.I am not sure that comparing the facts of one case with the facts of another necessarily leads to an answer to the relevant question. In this case, there was no “blanket freeze”, and it is clear that the LNCs say nothing about dealings with any property other than funds in the Accounts. Albeit that there may be some legitimate concern about the length of time during which the LNCs were maintained, there is no basis in the evidence to suggest any delay by the investigator or the prosecutor, and the Applicants have not adduced much evidence of actual hardship suffered, and have chosen not to seek to dispel submissions that the funds in the Accounts are the proceeds of crime. 164.In the circumstances, I would not find in favour of the Applicants on Ground 6. M. Summary 165.My summary of the findings on the six Grounds is:
166.Though these matters have been dealt with at a rolled-up hearing, I see little point in identifying whether, on those Grounds which I have held not made out, I would nevertheless have granted leave to apply for judicial review but refused the substantive application. Further, obviously where I have found the Grounds to be made out, I would have granted leave to apply for judicial review as well as to grant the substantive application. N. Relief 167.Any relief granted would be non-prescriptive as to how the constitutional problems I have identified should be removed or resolved. 168.But Mr Chan and Mr Dawes are in agreement that there can usefully be a further round of submissions on relief, once the parties have had the opportunity to consider this Judgment. At the same time, I can deal with any other consequential matters as might arise. 169.I anticipate short written submissions followed by a short oral hearing, the timetable for which can no doubt be agreed between Counsel, subject to the approval of the Court. 170.I will also reserve the question of costs to written submissions.
Mr Abraham Chan SC, Mr Timothy Parker and Mr Geoffrey Yeung, instructed by O Tse & Co., for the applicants Mr Victor Dawes SC, Mr Peter Dong and Mr Stephen Siu, instructed by the Department of Justice, for the putative respondent | |||||||||||||||||||||||
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