Re Law Kin Man
Read the full judgment text of on BabelCite. was delivered on 10 October 1994.
1. The Applicant is one of 38 respondents in these proceedings. On 25th February 1992, Gall J. pursuant to sec 29 of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405 (the Ordinance) made an ex- parte order (the judge's order) registering two orders of the United States District Court, Eastern District of New York dated 17th October and 20th November 1991 respectively (the forfeiture orders). By summons dated 23rd February 1993 the Applicant seeks discharge of the judges' order not
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M.P. No. 1711/91 IN THE SUPREME COURT OF HONG KONG HIGH COURT ____________
____________ Coram: The Hon. Mr. Justice Barnett in Chambers Dates of hearing: 5 to 9, 12, 13 and 28 September 1994 Date of delivery of judgment: 10 October 1994 _______________ J U D G M E N T _______________ 1. The Applicant is one of 38 respondents in these proceedings. On 25th February 1992, Gall J. pursuant to sec 29 of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405 (the Ordinance) made an ex- parte order (the judge's order) registering two orders of the United States District Court, Eastern District of New York dated 17th October and 20th November 1991 respectively (the forfeiture orders). By summons dated 23rd February 1993 the Applicant seeks discharge of the judges' order notwithstanding that the time limited for doing so has expired. Time expired on 13th March 1992. 2. No grounds having been given in its summons, the Applicant further applies to amend the summons to include its grounds. The amended summons is now in its second or third draft. 3. The genesis of these proceedings lies with the first respondent, Law Kin-man (Mr. Law). Mr. Law is a drug trafficker. He and his activities were under investigation for many years. In December 1989 at the request of the U.S.A. authorities, he was arrested in Hong Kong. He was accused of trafficking in heroin, the total amounting to 380 kgs., between June and December 1987. After defended extradition proceedings, Mr. Law was extradited to U.S.A. in December 1992 where he was indicted on a number of counts. In June 1994 he pleaded guilty to possession of 26 kgs. of heroin in December 1987 with intent to distribute. He awaits a (presumably) lengthy sentence of imprisonment. 4. In the course of the hearing before me, the Attorney General (who obtained the judge's order and who is respondent to this application) led a great deal of evidence about Mr. Law's activities. I do not propose to re- examine it in this judgment. It is sufficient to say that it demonstrates overwhelmingly that Mr. Law has been up to his neck in the narcotics trade since the 1970s and has made a great deal of money out of it. This money he has laundered through bank accounts ostensibly owned by some of the other respondents, who are either family members or his dupes, and by the purchase of immovable property held by some of the respondents for him beneficially. 5. No explanation for the source of these funds has ever been forthcoming except, so I am told, that Mr. Law did claim to have made his money gambling. If that is so, it is surprising that Mr. Law has not applied for entry in the Guinness Book of Records as the world's most successful gambler. It is idle to pretend that the vast quantities of cash that have flowed through the various accounts or been used to purchase real property in Hong Kong have come other than from dealing in narcotics. 6. The applicant was set up by Mr. Law in 1983. Mr. Law provided cash, $890,000, to purchase a house at Wing Lung Road, Clear Water Bay (the house). The house was the Applicant's only asset. It is not in dispute that Mr. Law is the beneficial owner of the Applicant and therefore of the house. One of the directors of the Applicant was and is Lo Chak-man (Mr. Lo), Mr. Law's brother and the fourth respondent. Another director is Tsoi Sau-ngai (Mr. Tsoi), the sixth respondent. These two men face one count of money laundering under sec 25 of the Ordinance. Their trial is due to start shortly. Mr. Lo has made various affirmations in support of the Applicant's application to discharge. 7. The Applicant also held two accounts with the Heng Seng Bank (the accounts). The house and the accounts were included in the forfeiture orders registered here pursuant to the judges' order. 8. The U.S. authorities launched their attack on Mr. Law's assets even before he arrived in U.S.A. In June 1991 they commenced civil proceedings of an in rem nature against a mixture of bank accounts and real property situated in Hong Kong, seeking forfeiture thereof. They asserted that all this property represented the proceeds of Mr. Law's narcotics trafficking and, in addition, that the real property had been used for trafficking. It is important to note that, for the purpose of the proceedings in Hong Kong, the Attorney General relies only on the assertion by the U.S. authorities and acceptance by a U.S. Court that the real property represented the proceeds of trafficking. 9. On 19th June 1991, pursuant to the Drug Trafficking (Recovery of Proceeds) (Designated Countries and Territories) Order 1991 (the 1991 Order) Hooper J. made an order ex-parte restraining the respondents from dealing with their interest in the respective accounts and real properties. Meanwhile notice of the U.S. proceedings was given to the respondents, in particular to the Applicant on 17th August 1991. None of them and certainly not the Applicant took any action. Consequently, on 17th October 1991 Glasser J. sitting in the U.S. District Court made an order forfeiting and condemning to the use of the U.S.A. the real property. On 20th November 1991 the same Judge made a similar order in relation to the bank accounts. These two orders are the forfeiture orders registered as by Gall J. on 25th February 1992 pursuant to the Ordinance. The judge's order provided that any application to vary or set aside the registration must be made on or before 13th March 1992 and that the forfeiture orders would not be enforced prior to that date. 10. The Applicant's then solicitors were in fact served with the judge's order on 26th February. According to Mr. Lo, advice then given by those solicitors was that he could and should do nothing to set aside either the forfeiture orders in New York or the registration in Hong Kong. That advice, it is now recognized, was bad. 11. On 11th June 1992, the Attorney General applied to enforce the forfeiture order in relation to some real property owned at least legally by Mr. Tsoi. At the hearing, the point was taken on behalf of Mr. Tsoi that the Hong Kong courts have no jurisdiction to register and enforce an external confiscation order (ECO) of an in rem nature. The hearing was adjourned to enable Mr. Tsoi to make an appropriate application. He did not in fact do so. 12. In October 1992, the Attorney General commenced proceedings to recover another house, the subject of the first forfeiture order, which was owned by Mr. Law's sister, the third respondent, but occupied by Mr. Lo. Upon advice that the in rem point could be taken, both Mr. Lo and the Applicant applied to set aside the judge's order. Mr. Lo made an affirmation in support of his own application and another in support of the Applicant's. Both affirmations were pieces of appalling draftsmanship. It was hardly surprising in my view that on 8th July 1993 Mayo J., upon application by the Attorney General, dismissed both Mr. Lo's and the Applicant's summons on the basis that there was no locus standi. The Applicant appealed. The muddle as to whether Mr. Lo was trying to resist recovery of his sister's house, in which as bare licensee he had no interest, or was dealing with the Applicant's house having been clarified, the Court of Appeal allowed the appeal on 6th January 1994. 13. There was one final thing before the Applicant's summons came on before me. In July the Attorney General obtained an order against the Applicant for security for costs. It was not in dispute that the Applicant then had no assets. On 19th August the Court of Appeal "with considerable reluctance" allowed the Applicant's appeal. It is interesting to note that in relation to the substance of the Applicant's application, the Court of Appeal in January said, "a number of important questions of law were raised". In contrast, in August that Court said the merits of the Applicant's case "appeared to be jejune" although acknowledging that they would be a matter for the judge hearing the application! 14. During the hearing before me, Mr. Daniel Fung, QC, for the Applicant shifted ground somewhat. In the end, his submissions were that the judge's order should be discharged because
15. Ground 1 has been compendiously referred to as the jurisdiction point. It was Mr. Fung's contention that if any of the three sub-grounds are made out, the court has no discretion in the matter and is bound to discharge the judge's order. Ground 2 is the discretion point. It was not in dispute, I think, that the usual principles apply. Ground 1(a) - Do the Hong Kong courts have jurisdiction to register foreign in rem orders? 16. To resolve this question, it is necessary to review the relevant legislation. It cannot be in dispute that both in Hong Kong and worldwide there has been widespread concern about the trade in narcotics and the obscene profits to be made therefrom. One method of punishing and, it is to be hoped, discouraging traffickers is by relieving them of the proceeds of their activities. In Hong Kong until 1989, there had been no effective way of achieving this. In 1989, the Ordinance substantially came into force on 1st September. Its long title is
17. Section 2 is the interpretation section. In sub-section (1), it defines, inter alia, property to include both movable and immovable property within the meaning of sec. 3 of the Interpretation and General Clauses Ordinance, Cap 1. Sub-sections (3) and (4) read:
18. Part II is entitled "Confiscation of proceeds of drug trafficking." 19. It introduces a scheme whereby, after conviction and sentence, the court may after enquiry make an order that the person convicted pay a sum which reflects the benefits he has obtained from drug trafficking. Sec. 3(3) and (4) read:
20. I note at this stage that sec. 2(4) and sec. 3(3) and (4) clearly demonstrate that the Ordinance is to have retrospective effect to the extent that benefits obtained at any time may be taken into account provided, of course, that the proceedings in which an order is made were commenced after the Ordinance came into force. Were it otherwise the Ordinance would be ineffectual for some years to come. 21. Any order under sec. 3 is in personam. No power is conferred on the courts to make an order directly affecting property. Indirectly, however, property may be attacked. Part III provides for enforcement of confiscation orders. First, sec. 10 empowers the court to make a restraint order which prohibits any person from dealing with realisable property which is defined in sec. 7(1) as any property held by the defendant or by a person to whom the defendant has directly or indirectly made a gift caught by the Ordinance. Such an order can be made before conviction, indeed even before a person is charged. It has been called the Crown's pre-emptive strike. It is comparable to a mareva injunction. It is a vital weapon. 22. Sec. 11 empowers the court to make a charging order in similar circumstances. 23. Once a confiscation order has been made, the Crown can enforce it, if the defendant does not pay, by application to the court under sec. 12 for the appointment of a receiver to realise the property. 24. Part IV is "Investigations into drug trafficking" and deals with matters such as search warrants. Part V is simply but perhaps unfortunately entitled "Miscellaneous". Sec. 25 creates an offence of assisting another to retain the benefit of drug trafficking, or put shortly, money laundering. 25. Sections 28 and 29 read,
26. These provisions were plainly made with a view to affording co- operation in the international fight against the narcotics trade. On 28th November 1990, an agreement was made between Hong Kong and the U.S.A. "concerning the confiscation and forfeiture of the proceeds and instrumentalities of drug trafficking" (the treaty). Such agreements are useful and give rise to a good measure of co-operation between countries, e.g. between their respective police forces. They do not, however, become part of the domestic law until incorporated into or provided for in the statute book. Such provision was made by the 1991 Order, made by the Governor in Council, and which came into force on 18th January 1991. 27. Paragraph 3 of that Order reads,
28. Paragraph 5(1)(c) reads,
29. The relevant provisions of the Ordinance as modified in Schedule 3 of the 1991 Order (the modified Ordinance) are,
30. Mr. Fung's argument runs thus. The competency of the U.S. courts to adjudicate upon and make in rem orders in relation to movable and immovable property outside their jurisdiction must be judged according to Hong Kong law. At common law which applies in Hong Kong, a foreign court has jurisdiction to make in rem orders only if the property was in the country of that court at the time of the proceedings. See Dicey and Morris on The Conflict of Laws, 12th edition, Rule 40 and R. v. Cuthbertson [1981] A.C. 470, a decision of the House of Lords. 31. The common law, in fact, goes further. The courts do not have jurisdiction to enquire into title to or right to possession of foreign immovable property. See The British South African Co. v. The Campanhia de Mocambigue [1893] A.C. 602 and Hesperides Hotels Ltd. and another v. Muftizade [1979] A.C. 508. In the latter case, Lord Wilberforce made it plain that any revision of the common law rules should be by legislation rather than by judicial decision. 32. Dicey Rule 40 is explicitly recognised in sec. 4(2)(b) and (3)(a) of the Foreign Judgments (Reciprocal Enforcement) Act 1933 (the Act) which is now to be found in sec. 6 of Hong Kong's equivalent ordinance, the Foreign Judgments (Reciprocal Enforcement) Ordinance (FJO) enacted in 1960. The Act was considered by Widgery J. in Societe Sidmetal v. Titan International [1966] 1Q.B. 828 who had to decide whether it introduced a new procedure or principle. At page 847, he said,
33. Mr. Fung emphasised that passage and said that continuity of practice should be assumed in the absence of clear words of departure. 34. He continued that at common law there was no power to forfeit any property, movable or immovable, used in connection with or representing the proceeds of any crime. In Hong Kong, the general power to forfeit property connected with criminal offences is contained in sec. 102 of the Criminal Procedure Ordinance, Cap. 221. Sec. 102(7), however, specifically excludes immovable property. In relation to drug offences, the statutory power of forfeiture is contained in sec. 56(1) of the Dangerous Drugs Ordinance, Cap. 134, which reads,
35. Thus, the court's powers to make in rem or forfeiture orders were confined to money or other property received or possessed as the result or product of an offence under the Dangerous Drugs Ordinance, Cap. 134 pursuant to sec. 56 (1)(b). Property, as defined in Cap. 1, includes land. Otherwise property used or instrumental in an offence under Cap. 134 or representing the proceeds of trafficking generally was not liable to forfeiture. The powers of the Hong Kong courts were then increased in 1989 with the enacting of the Ordinance which provided, as I have already set out, for a confiscation order in personam reflecting the proceeds of drug trafficking. However, property could only be realised by the Crown to the extent that any confiscation order made in personam against a convicted defendant was not paid. The Ordinance, while of application to all types of property, including that outside Hong Kong, does not confer powers on the court to forfeit that property. 36. The issue that arises, therefore, is whether the Ordinance has changed the common law relating to foreign judgments in rem and enlarged the jurisdiction of the Hong Kong courts. If so, argued Mr. Fung, the legislature should have said so in express terms. For example, sec. 30(1) of the Civil Jurisdiction and Judgments Act 1982, enacted to domesticate U.K.'s obligations under the Brussels Convention 1968, spelt out that the courts of England and Wales, or Northern Ireland could entertain proceedings for trespass in relation to foreign immovable property. The Hong Kong draftsman of the Ordinance, Mr. Fung suggested, would surely have had in mind existing statutory provisions concerning the enforcement of foreign judgments in the F.J.O. which limits the application of that Ordinance to judgments for a sum of money. Further, the legislature would surely have amended sec. 56 (1) of the Dangerous Drugs Ordinance to give Hong Kong courts the same jurisdiction domestically as that said to be conferred on a foreign court applying its own in rem forfeiture provisions in respect of foreign immovable property. 37. The need for express statutory provision is consistent with the principle that the law should not be subject to casual change or, as it has been put, by a sidewind. See Statutory Interpretation, 2nd edition, Bennion, sec. 269, where it is said at page 561.
38. In contrast, however, at page 563, Bennion says,
39. Mr. Fung also relied on sec. 278 of Bennion where in dealing with the principle against doubtful penalisation, Bennion said,
40. Mr. Fung said that the court should not lightly assume that the British South African and Hesperides cases have been consigned to the dustbin. 41. Mr. Fung then turned to a consideration of an external confiscation order (ECO) which, as set out as above, is an order for the recovery of "payments or other rewards received in connection with drug trafficking or their value". Sec. 29(1) of the Ordinance permits registration of such an order on the terms set out. The 1991 Order provides the basis for registration of the forfeiture orders as it designates the U.S.A. The 1991 Order, however, does not, according to Mr. Fung, cover in rem confiscation orders in respect of immovable property in Hong Kong, nor movable property in Hong Kong, unless it was within the jurisdiction of the foreign court when proceedings were commenced there. To the extent that the 1991 Order purports to apply to such orders, it is ultra vires the Ordinance. 42. Mr. Fung submitted that the 1991 Order is a species of subsidiary legislation. That was not, I think, in dispute. A general principle of statutory interpretation is that subsidiary legislation may not be broader than the enabling legislation. Such a principle is given statutory effect in Hong Kong by sec. 28(b) of Cap. 1 which provides that no subsidiary legislation shall be inconsistent with the provisions of any ordinance. Further, any power that permits executive modification of legislation should be narrowly and strictly construed. See R v. Secretary of State for Social Security. ex-parte Britnell (1991) 1 W.L.R. 198 at page 204. 43. The question then, said Mr. Fung, is whether sec. 3(1) of the modified Ordinance can be interpreted to include the forfeiture orders. He contended that it cannot because to do so would confer on a foreign court jurisdiction in relation to property in Hong Kong. That is inconsistent with the common law as set out in Dicey Rule 40 and the Ordinance makes no clear and express provision for Hong Kong to defer to the jurisdiction of a foreign court. He referred to Societe Sidmetal and the judgment of Widgery J. which I have cited. He emphasised that that view has not been appealed or since doubted. The principle operates a fortiori in relation to subsidiary legislation. Further, sec. 56 (1) of the Dangerous Drugs Ordinance would have been amended to fit the new legal policy. 44. Therefore, said Mr. Fung, sec. 3(1) of the modified Ordinance can only be construed as referring to an order in personam and as such is consistent with the Ordinance. Such a construction would not render the 1991 Order nugatory because the evidence is that the U.S. courts have power to make in personam orders, orders which could not otherwise be registered in Hong Kong because U.S.A. is not a country within the provisions of the FJO. 45. Reference was made to sec. 29(1)(c) of the Ordinance and the modified Ordinance which, said Mr. Fung, contemplated enforcement of a foreign order elsewhere while an order relating to immovable property in Hong Kong can only ever be enforced here. I do not see that it helps the Applicant. If the 1991 Order covers in rem orders against both movable and immovable property, it would be open to the Hong Kong courts to refuse to register an order in personam if it felt enforcement properly lay elsewhere. 46. Next, Mr. Fung said, sec. 29(3) contemplates orders in personam because it refers to cancellation on payment of "the amount due" under the order and to a term of imprisonment "in default of payment". If an ECO operates in rem, this provision would be superfluous. 47. Mr. Fung referred to sec. 3(3) of the modified Ordinance which contemplates an ECO being made against a person. Sec. 3, Cap. 1 defines a person as including bodies of persons. It does not include things, therefore, section 3(3) cannot be interpreted to have effect in rem. 48. Finally, the 1991 Order does not disapply any part of the FJO which operates upon the basis of recognising judgments consistent with Hong Kong law. This is important because if, e.g. Australia, which is party to both the FJO and the 1991 Order, were to enact legislation providing for in rem forfeiture, an order made under such legislation could not be registered in Hong Kong. The FJO does not permit registration of such an order. This, said Mr. Fung, is an example of the principle "generalia specialibus non derogant". See Bennion, sec. 88. In my view, however, the position is the reverse. The Ordinance contains provision for registration of a particular type of order. It is a specific provision in contrast to the FJO which provides for registration of orders or judgments for sums of money generally. Accordingly, I see no impediment to Australia seeking registration of an order in rem in relation to drug trafficking in Hong Kong under the 1991 Order. 49. Having regard to his argument, Mr. Fung said that an ECO within the meaning of the Ordinance and the 1991 Order must, on usual principles of interpretation, be confined to orders in personam. To the extent that sec. 7(1) of the modified Ordinance goes beyond the Ordinance by re-defining realisable property so as to refer to specific property, it is ultra vires. Sec. 7(1) reads,
50. Subsection (2) does not affect the position. 51. Mr. Fung said that sec. 7(1) is inconsistent with the definition in the Ordinance because the scheme of the Ordinance is for forfeiture on the basis of an in personam order to reflect the ascertained benefits on drug trafficking. Sec. 28(b) of Cap. 1 applies. Sec. 31 of Cap. I also applies because it requires expressions used in subsidiary legislation to bear the same meaning as expressions in the parent ordinance. 52. Accordingly, Mr. Fung said, the correct approach for a judge hearing an application to register an ECO is two stage. First, he must satisfy himself that the foreign order is one relating to the proceeds of drug trafficking. Second, he must consider whether it is one which at common law the Hong Kong courts will recognise. 53. Mr. Barry Barlow, who appeared for the Attorney General, contended that a consideration of common law principles is irrelevant. He said that, like the FJO, the Ordinance created a statutory scheme which did not and could not exist at common law. This scheme was intended to replace the common law and confer new jurisdiction on the Hong Kong courts. He pointed out that the Ordinance did not itself domesticate the treaty. The 1991 Order was introduced to honour the pact with U.S.A. 54. With reference to the requirement for express language before any change to the common law can be assumed, Mr. Barlow emphasized the commentary to sec. 269 of Bennion which I have already set out. In any event he said, the Ordinance can hardly be considered a sidewind because it was enacted to supplant and replace the common law so far as it bears on drug trafficking with a new statutory scheme. Further, the terms of the Ordinance are clear and unequivocal. The statutory scheme is devised to enable confiscation of the proceeds of drug trafficking whether in Hong Kong or elsewhere as provided by sec. 2(2), and whether the proceeds are represented by property in Hong Kong or elsewhere, including immovable property pursuant to sec. 2(3). 55. Mr. Barlow said too much emphasis had been placed on the domestic scheme which, it had been implied, carried over into an ECO. He argued the two schemes are separate and distinct and not intended to mirror each other. It is necessary to focus on the scheme for an ECO. He said an ECO does not depend on a pre-existing conviction and the Ordinance, subject to modifications made by the Governor in Council and the conditions of sec. 29(1), permits registration of an order defined in sec. 29(4). The Ordinance contains no words of limitation as to the nature of the foreign order nor as to the procedure underlying the making of such an order. The words are clear, general and unlimited. There is no ambiguity and the courts should not engraft words of limitation in the guise of statutory interpretation. 56. In so far as there is any ambiguity, Mr. Barlow said that a starting point in the process of statutory construction is the identification of the object of the legislation. He relied on Johnson v. Moreton [1978] 3 W.L.R. 538 where at page 543, Lord Salmon said,
57. Lord Salmon went on to cite authorities. At page 555, Lord Simon of Glaisdale said,
58. The object of the legislation, said Mr. Barlow, is shown in the long title and sec. 2. Its purpose is worldwide. The legislation contains a local confiscatory scheme and, separately, machinery for the recognition and enforcement of orders made under the laws of other countries. To ensure effective recognition and enforcement, the legislature gave maximum flexibility to modify the Ordinance by way of order to meet the requirements of each country with which an agreement might be signed. Sec. 29 provides safeguards against procedural abuse in the foreign jurisdiction, safeguards which supplant those of the common law contained in Dicey Rules 40 - 45. An ECO is in wide terms to preserve flexibility and could not be put more generally. The whole scheme is to permit easy registration of all confiscatory orders of designated countries, where legal systems will differ from that of Hong Kong, and expedient enforcement of those orders. The scheme should not be hampered by introducing concepts of in personam and in rem or by addressing particular facets of foreign legal systems. The prevention of drug trafficking is served by as much co-operation as possible between countries. The object of the legislation will not be furthered by incorporating common law principles or by restricting an ECO to a carbon copy of the domestic regime. 59. Mr. Barlow pointed out that the Ordinance extends to orders in civil as well as criminal proceedings by sec. 28(2) and (4). But although the Ordinance deals exhaustively with the domestic scheme, it merely provides for registration of an ECO and empowers the Governor in Council to tailor the provisions of the Ordinance to suit countries with which treaties are signed. 60. The 1991 Order, said Mr. Barlow, clearly recognises orders in rem. He referred, particularly, to paragraph 5(1)(c) which makes provisions in relation to evidence and the reference to "other property recoverable". And to sec. 3 of the modified Ordinance. The words in sub-sec (1) "all their value" reflect an order of a substitutional kind available under the U.S. code. In sub-sec (3)(a), the words in parenthesis exclude in relation to the definition "person" an order in rem as contemplated by sec. 7(1)(a). 61. In spite of the curious arrangement of the Ordinance, where the important sections 28 and 29 are lumped in a part entitled "Miscellaneous" which creates other offences in Hong Kong, I accept that 2 separate and distinct schemes emerge. The first, the carefully formulated and restricted scheme for recovery in domestic proceedings of a sum calculated as a reflection of the proceeds of drug trafficking. The property of the person ordered to pay that sum, whatever and wherever that property may be, may consequentially be recovered to the extent that the sum is not paid. The second, with international co-operation in the fight against the drug trafficking in view, is a scheme designed to enforce an order, an ECO, of a court of a designated foreign country. 62. The second scheme is plainly not intended simply to mirror the domestic scheme. Had there been such an intention, it would have been easy for the legislature to have said so. It is not, however, so easy to discern how widely the legislature intended by sec. 28(4) to cast the net. 63. It is therefore legitimate in my view to refer to the 1991 Order as an aid to construction. Authority for such a course where power is given to amend the statute by regulation or where the meaning of a statute is ambiguous is to be found in Hanlon v. The Law Society [1981] A.C. 124. At page 178, Lord Simon of Glaisdale in dealing with the judgment of Donaldson L.J. in the Court of Appeal, said,
At page 186, Lord Scarman said,
64. Lord Lowry analysed the position in detail at page 193,
65. This decision was followed by the Privy Council in Elvira Vergara and another v. A.G. [1989] I H.K.L.R. 233 on appeal from Hong Kong. 66. Sec. 28 of the Ordinance is ambiguous. Further, that section expressly provides for "additions, alterations and omissions" to the Ordinance in its application to an ECO. Although the 1991 Ordinance was made 18 months after the Ordinance was enacted rather than contemporaneously, the effect is not to deprive the modifications of any relevance but rather to reduce the potency that arises from proposition (5) of Lord Lowry. I acknowledge that subsidiary legislation can only provide a guide. The tail must not be allowed to wag the dog. Proposition (2) of Lord Lowry. 67. I also acknowledge the point made by Mr. Fung that sec. 7(1) of the modified Ordinance places a different definition on "realisable property" from that in the Ordinance. This, he said, is contrary to sec. 31 of Cap. I which provides "expressions used in subsidiary legislation shall have the same meaning as in the Ordinance conferring the power ......" and therefore inconsistent and ultra vires. I disagree. In my view, that section is of application where the same expression appears without more in subsidiary legislation. There is not, I think, any bar to refinement of meaning in subsidiary legislation. In any event, where the parent ordinance expressly confers powers to modify there cannot, in my judgment, be objection to modification of a definition provided that it does not go beyond the ambit of the parent. 68. The Ordinance was, as I have said, enacted to meet a growing and serious problem. Although, in its domestic operation, it is initially restricted in ambit to an order in personam and hedged with safeguards, it was nonetheless a revolutionary approach. The convicted drug trafficker is to be required to disgorge the benefits of his trafficking whenever the trafficking took place, whenever the benefits were obtained and wherever the property representing those benefits might be situated. Thus, a wide ranging enquiry is contemplated and one which will operate retrospectively. At the same time, the legislature wished to facilitate enforcement of foreign orders aimed at the proceeds of drug trafficking so that the drug trafficker would have as little room as possible for using Hong Kong as a haven for his benefits. Absent words restricting foreign orders to those of like nature to orders available in Hong Kong, it is implicit or inherent in sec. 28 that orders of a different or wider nature are contemplated. 69. By reference to the modified Ordinance, it can be seen from the provisions I set out earlier that, first, an ECO can arise independent of criminal proceedings, see sec. 2(11); and second, that such an order can embrace property, that is, in rem as well as in personam, see sec. 2(12) and sections 3 and 7. That confirms the wider meaning of sec. 28 of the Ordinance. 70. I am quite satisfied that it was the intention of the legislature to introduce a "fundamentally new principle" as Widgery J. put it. The legislature did not intend that the new procedure should be approached by reference to common law principles. Had it so intended, doubtless it would have made provision similar to that contained in sec. 6 of the FJO which, as I have already mentioned, in its English counterpart has been found not to have introduced a new procedure. 71. The legislature plainly had in mind and introduced the new and simple procedure set out in sec. 29. Provided the judge hearing the application is satisfied that the order sought to be registered is one which is aimed at the proceeds of drug trafficking; that where the order is against a person, that person had notice; and that generally registration is in the interests of justice, the order should be registered. There is no warrant, in my view, for the proposition that the judge has to embark upon a consideration of common law principles and the conflict of laws before registering an ECO. 72. Therefore I reject Mr. Fung's ground 1(a). Ground 1(b) - Will registration and enforcement give retrospective effect to the Ordinance and the 1991 Order? 73. Although some argument was devoted to this topic, my impression was that Mr. Fung effectively abandoned this ground. As I have already said, the Ordinance is plainly retrospective in operation in that it attacks drug trafficking at any time and benefits and property acquired at any time. 74. I find nothing in this ground. Ground 1(c) - Were the Forfeiture Orders made without jurisdiction? 75. I was taken to a considerable volume of expert evidence, case law and statutory material in relation to U.S. law. It is not necessary to rehearse it because the experts agreed that first, at the time the forfeiture orders were made, there was debate as to whether the U.S. courts had jurisdiction in rem over property outside the U.S.A. when proceedings are instituted. Second, that debate was settled in 1992 by the Supreme Court in Republic Bank of Miami v. U.S. which found, inter alia, that the court must have actual or constructive control of the res when in rem forfeiture proceedings are instituted. 76. The bank accounts and the house in question were not in U.S.A. at any time. Mr. Barlow, therefore, relied upon constructive control which he asserted the U.S. court had either through the Attorney General, who had earlier obtained a restraint order in relation to the property in domestic proceedings in Hong Kong, or through the owners of the property. I say no more than that either proposition is wholly untenable. 77. It follows, therefore, that the forfeiture orders were made without jurisdiction. Does that benefit the Applicant in the sense that the Applicant can properly impeach in Hong Kong those orders on the ground that the U.S. court was not competent. 78. Dicey Rule 42(2) reads,
79. That rule is not as absolute as it appears. A line of cases including Castrique v. Imry [1870] L.R. 4 H.L. 414 Papadopoulos v. Papadopoulos [1930] P. 55 and Adams v. Adams [1971] P. 188 suggests that in relation to in rem proceedings, where a judgment affects not just the party but the whole world, the English or Hong Kong courts will investigate whether the foreign court had local competence and jurisdiction. The answer, in my view, is that the Hong Kong courts can have regard to jurisdiction in the narrower sense described by Lindley M.R. in Pemberton v. Hughes (1899) 1 Ch. 781 at page 790.
80. That passage was recently accepted by the Court of Appeal in Adams v. Cape Industries PLC [1990] 1 Ch. 433 at pages 514 and 558. There the issue was the competence of the U.S. court over the defendant based on presence of or consent to jurisdiction by that defendant. 81. The New York court which made the forfeiture orders plainly did not have competence over the res. It is therefore properly impeachable. 82. Mr. Fung also sought to impeach the forfeiture orders because it was alleged there was no link or tracing shown between the property and drug trafficking, whether drug trafficking as charged or generally in U.S.A. On the authority of Pemberton, that is plainly not a matter that falls to be considered. If there was an error, it was one of fact and/or law. It is not impeachable. See Dicey Rule 41. 83. In the circumstances, it is not necessary for me to give detailed consideration to the issue of burden of proof. Mr. Fung asserted the onus lay on the Attorney General to prove the competence of the U.S. court. He relied on Cape Industries where both the judge and the Court of Appeal held the plaintiff had to prove competence. In that case, however, the plaintiff was seeking to enforce a U.S. judgment by action in the English courts, the U.S. not being a country within the Act. It was not surprising that both courts found that a plaintiff seeking to enforce a foreign judgment should prove that court's competence in the narrow sense I have already described. Does the court have any discretion 84. In the present proceedings, the Attorney General has had registered two orders which the Applicant seeks to set aside long after the time limited for doing so has expired. It is, in such circumstances, for the Applicant to establish grounds for setting aside. 85. The competence of the New York court having been impeached the question which arises is whether registration should be set aside ex debito or whether the matter remains discretionary. It was Mr. Fung's contention that no such discretion remains where the order complained of is a nullity. In effect, the inherent jurisdiction of the court is invoked. 86. I accept that there are cases where courts used words such as "bound" or "entitled" in relation to setting aside. In Anlaby v. Praetorious [1888] 20 Q.B.D. 764, Lopes L.J. said at page 770,
87. At page 769, however, Fry L.J. said,
88. The headnote to that case reflects the judgment as having been obtained irregularly. That case is no longer good law in Hong Kong, where "the victim of an irregular judgment only enjoys a confident expectation that it will be set aside" : Honour Finance Company Limited v. Tsui Mei Mei [1989] 2 H.K.L.R. 146. 89. In Lazard Brothers and Co. v. Banque Industrielle de Moscou [1932] 1 K.B. 617, a judgment against the bank, which had ceased to exist, was found upon application by a garnishee to be a nullity. At page 624, Scrutton L.J. said,
90. On appeal to the House of Lords, Lord Wright also found the proceedings to be a nullity. 91. In Grafton Isaacs v. Emry Robertson [1985] 1 A.C. 97, the Privy Council was dealing with an order that could not have been made and reaffirmed that any order of a court of unlimited jurisdiction must be obeyed until set aside. At page 102, Lord Diplock said,
92. Mr. Fung submitted that on these authorities, there are three types of judgment:
93. Mr. Fung also sought comfort from the decision of the Court of Appeal in R. v. Ng Kit Yuen [1991] No. 18 (Criminal) dated 16 November 1993 (unreported), which arose out of failure by the Governor to give his consent to the prosecution. Penlington J.A. said :
In contrast, Mortimer, J.A. said :
94. Sears J. agreed for "the reason given by both my Lords." 95. Mr. Fung argued that it is clear that Penlington J.A. impliedly and rightly was of the view that, being a nullity, the conviction had to be quashed ex debito. He said that the exercise of discretion by Mortimer J.A. was an oversight and in error. 96. I drew attention to a recent decision of the Court of Appeal in R. v. Kwok Hing Man Magistracy Appeal No. 371 of 1994, dated 9 June 1994 (unreported), arising out the Privy Council's opinion in Attorney General v. Lee Kwong Kut [1993] A.C. 951 that s. 30 of the Summary Offences Ordinance had been repeated by the Bill of Rights. Having discussed the submission as to why leave should be given to apply out of time in the particular circumstances, being that the applicant could hardly have been expected to know he had had a ground of appeal at the time, Nazareth J.A. giving the judgment of the court continued:
97. Nazareth J.A. went on to refer to a Canadian case R. v. Thomas [1990] 75 C.R. (3d) 352 of which he said:
98. The court went on to exercise its discretion in favour of the applicant and concluded:
99. I acknowledge Mr. Fung's criticism that the earlier authorities were not cited to or by the Court in the latter case. I also acknowledge his submission that jurisdiction, where it did not exist, cannot be conferred by judicial action. 100. I accept that the victim of an order shown to be a nullity, who applies timeously to the court that made the order, will succeed in having the order set aside ex debito. I reject, however, the notion that a person, like the Applicant, who having had notice of the proceedings has consistently declined to take part and failed to meet a time limit prescribed by the court, can come to court when it suits him and have an order set aside despite his default. There, it seems to me, the distinction lies between cases such as Lazard; Anlaby and R. v. Angel, and between the two recent decisions of the Court of Appeal. In the earlier cases, no question of time arose as far as I can discern. The Court of Appeal, however, was faced with late applications and had to canvas whether or not indulgence should be granted. Inevitably, the fact that the conviction was a nullity or that a person might serve a sentence for a non-existent offence would be an overwhelming consideration. 101. I do not regard Penlington J.A. as having accepted any contrary principle. It seems to me he was simply acknowledging that, in all the circumstances, indulgence would have to be given to the applicant. 102. In my judgment, this is a case where recourse needs to be had to the rules, in particular, Order 3 rule 5 as endorsed on the Applicant's summons. Order 3 rule 5, of course, reposes a discretion in a judge hearing an application for indulgence. 103. In the exercise of my discretion, the most powerful factor which I must take into account is the impeaching of the forfeiture orders on which the judge's order is based. Also, the loss to the Applicant of its property. 104. On the other side of the scale is the delay of almost one year in making the application. That has been explained on the basis of faulty advice and the fact that Mr. Lo had his own personal problems to deal with. Whether or not the Applicant had faulty advice is a matter the Applicant may have to take up with its then solicitors. It should be noted, however, that according to one of the affidavits of Mr. John Carlson, Crown Counsel who had the carriage of these proceedings in the Attorney General's Chambers, Mr. Carlson spoke to the solicitor representing Mr. Lo at the time and was told that Mr. Lo was advised of the steps that could be taken in both New York and Hong Kong. That solicitor also said that the Applicant's position was not discussed. So there is some confusion about to whom advice was given and the nature of that advice. 105. I do not think that it matters. It is clear that by June 1992, Mr. Lo, Mr. Tsoi and the Applicant were aware that ground 1(a) was available. Yet, no application was made by the Applicant until February next. 106. The delay in making this application has deprived the U.S. authorities of an alternative remedy. Had this application been made timeously, application could have been made in New York for orders in personam in substitution for the orders in rem. The time limited for making such an application expired in about February 1993. 107. I reject, however, the suggestion that this delay was a deliberate manipulation by Mr. Law in order to prevent the U.S. authorities from obtaining other orders. 108. Mr. Fung attempted to argue that if the judge's order is not set aside the Hong Kong Government, which in fact benefits from any proceeds derived from enforcement of an ECO, will be unjustly enriched because the house purchased in 1983 for $890,000 is now worth several million dollars. He said it is only the actual benefit received not any enhanced value that can be recovered. I reject that. The Ordinance makes plain that it is the current value of property held by a person that is to be reflected, not just its initial capital value. 109. In any event, if unjust enrichment is a consideration, I am satisfied that it operates against the Applicant. Given the object of the legislation, it would in my view be contrary to public policy to restore the property to the Applicant when the ultimate beneficiary will be the self-confessed drug trafficker, Mr. Law. 110. I am mindful, as I said, of the now impeached forfeiture orders. I am satisfied, however, that in all the circumstances I should not exercise my discretion in favour of the Applicant. Ground 2(a) - Was there material non-disclosure or misrepresentation? 111. The complaint is that the Attorney General did not disclose to the judge at least that there was, at the time, debate in U.S.A. about whether in rem orders against foreign property could be made. There was in existence a recent decision by a court of co-ordinate jurisdiction that the U.S. courts had no jurisdiction to make such orders. 112. I accept that Mr. Carlson, who represented the Attorney General on the application for registration, had no knowledge of the position. It was, however, the U.S. Government making application by the agency of the Attorney General. The U.S. Government should, as any client, have put the Attorney General in possession of all material facts. 113. This fact was plainly material. If the judge had been apprised of it, he would doubtless have weighed it in the balance. He was not there as a rubber stamp. He had a discretion, not least under sec. 29(1)(c) of the Ordinance and modified Ordinance. 114. I find, therefore, that there was material non-disclosure. I have, however, already exercised my discretion. I would not exercise it in the other way on this ground. Ground 2(b) - Is registration contrary to the interest of justice? 115. This ground is a reflection of sec. 29(1)(c). It effectively encompasses all that has gone before in relation to the U.S. proceedings. There was nothing which gives me any cause to think I should exercise my discretion in any other way. 116. Accordingly, I refuse the application to amend the summons and the summons is dismissed. I make an order nisi that the Attorney General should have his costs.
Representation: Mr. B. Barlow; instructed by Crown Solicitor. M/s. D. Fung, Q.C. and P. Dykes, instructed by Lo, Wong & Tsui for the 15th Respondent. |