Attorney General v. Lui Lok

HCA000025A/1978

No. 25 of 1978

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: The Hon. Mr. Justice Hunter.

Dates of Hearing: 26 - 30 March, 2, 3, 5, 6, 9 April 1984

Date of Delivery: 3 May 1984

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JUDGMENT

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1. On 9th December 1940 the defendant joined the Royal Hong Kong Police Force as a constable. Save for an enforced break during the Japanese occupation, when he returned to his birth place in China, Luk King Village, Hoi Fung, he served continuously until he retired on 16th May 1969. He was then a detective staff sergeant grade I stationed at C.I.D. H.Q. Kowloon. He held the rank of detective staff sergeant for about 11 years before his retirement, having been promoted to this rank in grade II on 1st February 1958 and to grade I on 1st April 1962. On 18th April 1962 he was posted to C.I.D. H.Q. Hong Kong; and on 1st April 1967 to his final position in Kowloon. The Crown now asserts that during his service, more particularly the latter part, and especially during his tour of duty in Kowloon, the defendant was an exceedingly corrupt policeman. This contention is based upon two classes of evidence namely:-

I shall consider these two classes in turn.

Direct Evidence

2. In 1975 Ng Sik Ho was convicted of conspiring to traffic in dangerous drugs and sentenced to a term of 30 years imprisonment which he is still serving. I have therefore treated him as in effect an accomplice, and looked at his evidence with some circumspection. So viewed, it carried a chilling authenticity, not least with he summed up the effect of his dealings with the defendant in these words: "law did exist: police enforcing it did not: ..... my money did it". I accept his account and in particular that:-

3. I have no hesitation in finding that the defendant was totally corrupt. For a greater insight into the amount of money involved and the size of his corrupt returns I turn to the indirect evidence.

Indirect Evidence

4. Throughout his entire service with the Police the defendant's total net earnings did not exceed $176,500 making a reasonable estimation for the period when no records exist. A very modest sum might reasonably be added to this to cover allowances received but not recorded. A grand total of $180,000 would probably be generous. The modesty of the defendant's total earnings is confirmed by his successful application in January 1953 for a loan of $96 from the Police Welfare Fund repayable by 5 instalments deducted from salary. In addition the defendant has not pointed to, or attempted to assert, any other source of legitimate income during his period of police service. As will be seen his defence only adopts some of the allegations advanced by his father.

5. By contrast I have had put before me the pass-sheets of six bank accounts successively operated at the Kowloon branch of the Wing On Bank. Between 14th October 1961 and 14th May 1969 the cash deposits alone credited to these accounts exceeded $12.5 million. The bare particulars of these accounts are as follows:

I.

No. 4153

6. The particular features of these accounts are:-

7. The first question is who was this controller. There are only two possibilities. Mother had no known assets. Both sons were at the material time still engaged in whole time education in Sydney, Australia. The eldest son described himself as a student, when on 14th May 1970, at the age of 23, he applied for a passport. The third son gave the same description on an application dated 10th January 1968. Although I am aware of no obstacle to their giving evidence, neither was called nor has advanced any claim to the funds at one time standing in their names. The defendant in his defence pleaded that the monies in accounts III, V and VI were the property of father. Father repeated this in his written statement which I admitted in evidence under the Evidence Ordinance. It was therefore common ground that one person was in control of these nominee account holders, the issue being whether it was the defendant or father.

8. The pleaded case was that the monies in these three bank accounts represented the capital and accumulated profits of a business carried on by the defendant and father between 1941 and 1945 or 1946. The business was described thus: "the defendant purchased in Hong Kong goods that were in demand in China, and he took such goods personally to Waichow China, and there sold them at a profit. He then purchased in Waichow goods that were in demand in Hong Kong and he took such goods back to Hong Kong to be sold at a profit". These accumulated profits were said to have amounted to $3 million at the end of this period and to belong entirely to father.

9. The pleading did not attempt to stem the gap between 1946 and 1967/1969, or to explain how this initial "capital" produced the massive deposits recorded in the bank accounts. This was attempted in father's statement. There he asserted that he gave two million dollars to his other two younger sons born in 1927 and 1929 respectively, and to his godson, to establish a jewellery business in Bangkok. The capital and profits of this business, he said were his. He received in cash over an unspecified period $20,000 a month. In 1967 he decided to emigrate and called for the return of his capital from Bangkok. This "was brought back to Hong Kong in cash" by the godson prior to his death on 17th October 1967 or "his frields or associates in numerous instalments".  These monies were paid into accounts III, V and VI. This story has only to be read, to be seen to be wholly superficial, totally lacking in any convincing detail, and literally beyond belief.

10. In September 1967 father applied for a certificate of naturalization. The note taken by his interviewer on 29th December 1967 survives, and records what father then said about his past and his assets. This was that:-

11. Two elderly Lui clansmen were called before me. Lui Ho Ng who was an elder in Luk King Village, Hoi Fung during the war told me about the family.  Father, he said, had formerly had a small business in the village selling dumplings. During the war he conducted no business and lived in a state of hardship. The defendant was employed by him as a security guard in the village.  Father, he added, first became a rich man some time in the 1950s after the defendant became a police officer. Lui Shing told me that when father returned to Hong Kong in 1946, he lived in humble circumstances. He pulled a rickshaw, and his wife had to work as a labourer when the family did not have enough income. I accept this evidence as being substantially correct. I reject the account given by father in his statement as pure fiction.

12. Conversely there is a body of documentary evidence connecting the control of these bank accounts with the defendant.

13. In these circumstances there is no room for doubt that the creator and controller of these accounts was the defendant. He used the names of his family as nominees both in respect of these accounts and of the remittances abroad in an attempt to conceal his identity as controller. The overwhelming inference from the documents, coupled with the direct evidence, is that these accounts were created by the defendant for the receipt, concealment and accumulation, pending remittance abroad, of monies which he ought not to have received. My conclusion and finding on the facts therefore is that in the absence of any explanation or evidence to the contrary in relation to particular credit items, prima facie all the monies paid into these accounts were corruptly obtained or received by the defendant.

The Pleadings

14. On what was called a fair reading of the Statement of Claim the Crown claimed to be entitled to relief under three heads namely:-

15. To this Mr. Martin Lee, Q.C. for the defendant replies that the plaintiff is limited by his pleading to the specific claim. There is, he says, no room for an account, and no sufficient plea that the properties were bought with tainted monias.  I disagree. The Statement of Claim in paragraph 3 contained a broad general allegation. Paragraphs 4 and 5 were in substance particulars of this, and fore-shadowed the two branches of the present claim; direct evidence under paragraph 4; inference from accumulated wealth under paragraph 5.  At the time the pleader had no direct evidence, so when particulars were requested, those given under paragraph 4 said that the plaintiff would rely upon "the inference that (the defendant's) property and pecuniary resources were the proceeds of corrupt activities".  Particulars of the property and pecuniary resources referred to were given under paragraph 5, not by way of any alleged total but by way of illustration.  The defendant it was said was liable to account for the specific sum produced by this illustration, and "for such other sums as he may have received".  This was because it is notorious in this type of case that only the recipient of the bribes knows the full figure. I cannot regard the striking out of paragraph 4 as a striking out of the explanatory particulars thereunder (which of course led to the making of that order) any more, than it precluded the later delivery of voluntary particulars under paragraph 3 and the calling of direct evidence.

16. In my judgment the plaintiff is entitled to maintain these three heads of claim.  It may be cumbersome to invite the court to order a general account and then in substance to take part of it, but it is a stance that the plaintiff is entitled to adopt. I shall consider these three claims separately in this order namely:-

(1) The Account

17. It is not and cannot be disputed that a servant or agent is obliged to account to his principal for any secret commissions bribes or benefits received.  In Reading v. Attorney General (1950) 1 A.C. 507 Lord Normand summarised the position in these words: "In consequence ..... all profits and advantages gained by the use or abuse of his military (in that case) status are to be for the benefit of the Crown" p. 517. In Attorney General v. Goddard (1929), 98 L.J.K.B. 734, a case likewise concerning a corrupt police officer, Rowlatt J. held that the basis of the obligation was a fiduciary relationship, and a duty not to misuse the confidential information the police officer received in the course of his duties. This analysis is particularly apt to the present facts. It therefore necessarily follows from my findings of fact that the defendant must be ordered to account generally for the bribes and secret commissions he has received.

(2) The Specific Claim

18. This is substance requires me to take one side of the account namely the payments credited to Accounts III, V and VI. Since it is impossible sensibly, or on the figures, to exclude it I shall cover Account IV as well. On my findings there can be no doubt that the cash receipts were corrupt.  I shall therefore consider separately in respect of each account the credits other than cash. My approach to these will be that since the monies have been paid into what I regard as basically corrupt accounts, the onus is upon the defendant to show that they were legitimate receipts. This is particularly true where the receipt is itself so large as to give rise to suspicion.

Account III No. 5985

19. I exclude:-

20. On this account the corrupt receipts between 20th February to 5th September 1968 are:-

Account IV No. 6148

21. I exclude:-

The remaining credits are all cash so the corrupt total is $950,000.

Account V No. 6201

22. I exclude:-

Account VI No. 6149

23. I exclude:-

24. The cash receipts were all corrupt and totalled $558,730.

25. Upon my calculations the total corrupt receipts between 20th February 1968 and 21st May 1969 were $8,553,879.65 of which $6,817,017.60 was actually received and paid in during this period. These appalling figures speak for themselves. During the last 15 months of his service the defendant's corrupt receipts were 37 times greater than his total legitimate service earnings and averaged over $450,000 a month. Subject to the checking of my arithmentic, I am of the opinion that the plaintiff is entitled to judgment for this total sum, less the credit of $61,773 namely $8,492,106.65.

(3) The Proprietary Claim

26. I am quite satisfied that the total price of the properties of $718,650 was provided by the defendant out of monies corruptly received; in part identifiably from Account I, and as to the balance either from that account or from other corrupt cash in his possession. On those findings it is not in dispute that this sum could properly be added to any money judgment. But the Crown wishes to go further.  It can be assumed that the properties have increased in value since their purchase.  This increase is part of the defendant's profit from his illicit activities.  The Crown claims this profit by means either of an order for the transfer of the properties, or a direction that the account to be taken should extend to an account of profits.

27. The defendant's answer to this is founded upon the decision of the Court of Appeal in England in Lister v. Stubbs (1890) 45 Ch. D.1. That decision, says Mr. Lee, establishes that the relationship between the plaintiff and the defendant is that of creditor and debtor not trustee and beneficiary: that the defendant's sole obligation is to account for the money in fact received when it was received, and perhaps with interest: but that the money is not the plaintiff's money and the plaintiff has no valid proprietary claim or any claim to profits earned after receipt of the money. The decision, he points out, was followed again by the Court of Appeal in Powell & Thomas v. Evan Jones (1905) 1 K.B. 11, and was cited with approval by Lord Wright in Regal (Hastings) Limited v. Gulliver, a 1942 decision noted in 1967 2 A.C. 134 at p.156. The decision itself, in its result, may have lost its authority by reason of what can be described as the Mareva injunction cases; but he submits the authority of its underlying principle has not been impaired. It stands despite the criticisms of it in Goff & Jones Law of Restitution 2nd edition page 510.

28. I have found this a formidable argument but in the end am unable to accept it. I cannot disregard Lister v. Stubbs as Mr. Graham invited me to do, but I do not think it precisely covers this case. In both Lister and the case which preceded it, Metropolitan Bank v. Heiron 5 Ex.D. 319, the corrupt agent received nothing which the court could regard as the principal's property; and per Lindley L.J. in Lister at p.15 ownership and obligation were not to be confused.  But there is another line of the highest authority including two recent decisions of the House of Lords namely Regal (Hastings) (supra) and Boardman v. Phipps (1967) 2 A.C. 46. Both cases concerned agents who were in a fiduciary position and who used to their advantage information they had obtained by reason of such position. In Boardman v. Phipps the House was divided on this issue. The majority were of the opinion that information emanating out of a fiduciary relationship could constitute trust property, the question whether it did so being one of fact and degree in every case; see Lord Cohen p.102, Lord Hodson p.107 and Lord Guest p.115. Lord Upjohn dissenting, regarded this approach as too wide, and was of the opinion that information could not constitute trust property unless it was confidential and given to the agent in circumstances which "would make it a breach of confidence for him to communicate to anyone", P.129.

29. The narrower proposition suffices here. The defendant was in a fiduciary position in the sense that that phrase was used in Readings case both in the House of Lords, and in the Court of Appeal (1949) 2 K.B. 232, 236.  He was in a position analogous to that of a trustee and subject to analogous fiduciary obligations in relation to confidential information obtained in the course of his duties. Rowlatt J.'s analysis in Goddard is directly applicable.  The information the defendant possessed about forthcoming raids was highly confidential. In equity it was the property of the Crown. This information the defendant converted to his own profit to an alarming extent. These illicit proceeds likewise belong in equity to, and can be traced by the Crown. The defendant holds any properties purchased therewith, and especially the properties, for the Crown on a resulting trust. The plaintiff is accordingly in my judgment entitled to the transfer order sought.  This result seems to me directly to follow from the observations of Lord Denning in Phipps v. Boardman in the Court of Appeal (1965) 1 All E.R. 849 pps. 856-7.

30. I therefore agree with the suggestion in Goff and Jones at page 510 that Lister v. Stubbs has no application "if the fiduciary obtains the bribe from the use of the beneficiaries' property". I would also have been prepared to have reached the same conclusion by the broader path advocated by these authors upon the authority of the cases collected particularly at pps. 46-48.  There seems to me to be ample authority for the proposition that a pre-existing equitable proprietary right is not an essential pre-condition to the grant of proprietary relief. A constructive trust is "imposed by law whenever justice and good conscience require it" in the words of Lord Denning M.R. in Hussey v. Palmer (1972) 3 All E.R. 744; 747. "I do not think that the categories of fiduciary relationships which give rise to a constructive trusteeship should be regarded as falling into a limited number of strait-jackets or as being necessarily closed. They are, after all, no more than formulae for equitable relief": said Slade J. in English v. Dedham Vale Properties Limited (1978) 1 All E.R. 382, 398. The same judge went on to cite with approval from the judgment of Ungoed Thomas J. in Selangor United Rubber Estates Limited v. Cradock (1968) 1 W.L.R. 1555 at 1582 where he said: "The Court of Equity says that the defendant shall be liable in equity, as though he were a trustee.  He is made liable in equity as trustee by the imposition or construction of the Court of Equity.  This is done because in accordance with equitable principles applied by the Court of Equity, it is equitable that he should be held liable as though he were a trustee". If, as I accept, these are true statements of principle, one could hardly have a clearer case calling for the implementation of equitable principles and for equitable relief.

31. Lord Wright's speech in Regal (Hastings) seems to me not to stand in the way of this conclusion but rather to support it.  The only claim in that case which was pursued in the House of Lords was for money had and received, see Lord Porter at p.158. The result was a money judgment in the terms proposed by Lord Russell at p.152. On my reading of his speech Lord Wright was at pains to show that the same conclusion in this field was reached "both in law and equity" p.154F. His basic question was posed in wide terms which embraced both jurisdictions and was "whether an agent, a director, a trustee or other person in an analogous fiduciary position, when a demand was made upon him by the person to whom he stands in the fiduciary position to account for profits acquired by him by reason of his fiduciary position" in substance had any defence other than consent.  His answer was negative.  But from his reference to such cases as Boston Deep Sea Fishing Co. v. Ansell (1888) 39 Ch.D. 339 and Lister v. Stubbs, as examples of fiduciary relationships giving rise to an obligation to account, I think that he saw this obligation arising at common law in an agent who was not in truth a trustee but rather a debtor.  But for my part I can see no reason to limit Lord Wright's formulation, or any of the other general formulations in the authorities where such phrases as "any profits" or "all benefits" are used, to the initial sum received, thus leaving the agent free to retain any consequential profits or benefits. Where information is used in breach of a duty of confidence "it follows as a matter of right that the (injured parties) are entitled at their option to claim damages ..... or alternatively an account of the profits made ..... in invasion of their rights" per Pennycuick J. in Peter Pan Manufacturing Corporation v. Corsets Silhouette Limited (1963) 3 All E.R. 402 at p.411.  The gravity of the offence decides which form of relief the court in its discretion grants, Seager v. Copydex (1967) 2 All E.R. 415. If I had not felt able to order the transfer of the properties, I would have directed the defendant to account for his profit thereon, measured by their present value, which is as far as the plaintiff invited me to go.

32. Two final observations.  As I have had to look closely at the figures, and have taken part of the account, I am, if requested, prepared to retain this case and take the balance of the account myself in chambers. Secondly in the light of my conclusion on proprietary relief, I am also, if requested, prepared to direct and conduct an inquiry into the defendant's dealings with, and expenditure of, corrupt monies, and into the existence of any properties or assets acquired therewith.

Representation:

Mr. Peter Graham, Mr. Jimmy Siu, Mr. Dixon Tang of Legal Department for Plaintiff.

Mr. Martin Lee, Q.C., Mr. Patrick Fung instructed by M/s Oscar Lai & Ho for Defendant.