Re Chu Wai Ha
Read the full judgment text of HCB 19401/2003 on BabelCite. This HCB judgment was delivered on 10 December 2004.
1. By a report dated 13 August 2004, the Official Receiver applied under Section 138 of the Bankruptcy Ordinance for an order in respect of the prosecution of Chu Wai Ha, the Bankrupt for some offences under the Bankruptcy Ordinance.
Cited by 2 cases · Cites 6 cases
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HCB 19401/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE IN BANKRUPCTY PROCEEDINGS NO. 19401 OF 2003 ____________
____________ Before: Hon Lam J in Chambers Dates of Hearing: 2 December 2004 Date of Judgment: 10 December 2004 _______________ J U D G M E N T _______________ The application 1.By a report dated 13 August 2004, the Official Receiver applied under Section 138 of the Bankruptcy Ordinance for an order in respect of the prosecution of Chu Wai Ha, the Bankrupt for some offences under the Bankruptcy Ordinance. 2.The current practice is that an application of this nature is usually made to a judge ex parte and it would usually be dealt with on paper. The bankrupt concerned would not be notified of the application and he or she does not have any opportunity to make any representation to the court. This had not always been so. Prior to the decision in Ex parte Marsden (1876) 2 Ch D 786, there were cases in the law reports where submissions were advanced on behalf of a bankrupt in an application for an order to prosecute. 3.Section 138 reads as follows,
My concerns 4.Before the court makes an order for the prosecution of a bankrupt, the section requires the court to consider whether there is a reasonable probability that the bankrupt will be convicted and whether the circumstances are such as to render a prosecution desirable. These seem to be similar to the considerations that a prosecutor must consider in deciding whether to prosecute under the Statement of Prosecution Policy and Practice issued by the Director of Public Prosecution although it is debatable whether the second limb is the same as the public interest criteria set out in that statement. Does the court thereby assume a prosecutorial role in making an order under Section 138? Further, is the court equipped to carry out such a function bearing in mind the current practice as to the processing of these applications on ex parte basis? How could the court assess whether it is desirable to prosecute when it may not have the necessary information relevant to the assessment of the public interest criteria under Section 9 of the Statement of Prosecution Policy and Practice? If the court were to apply another set of criteria, what should be the outcome when a different conclusion is reached as compared with that arrived under Section 9? 5.These bring out other problems. Is the decision by the court under Section 138 a judicial act or just an administrative act? If it is a judicial act, is it open to challenge by way of appeal? If it is a judicial act, can a bankrupt challenge it? Can a bankrupt demand a right to be heard? Is the court obliged to give reasons for its decision? If reasons were given for holding that the court is not satisfied there is a reasonable probability that the bankrupt will be convicted, could a second application be made after the defects pinpointed by the court have been addressed? If that were permissible, would it tantamount to the court giving advice to the prosecution as to how the case should be prepared? Would that give rise to an impression that the court is advising the prosecution? 6.Moreover, it is not clear to whom would the order address. In this connection, there is a difference in the English legislations. Since the Bankruptcy Act 1883, it had been provided that when an order was made for prosecution, the duty to prosecute rested upon the Director of Public Prosecution, see Section 166 of the 1883 Act and Section 165 of the Bankruptcy Act 1914. In contrast, there is no such provision in our Bankruptcy Ordinance. Hence, an order under Section 138 cannot be an order directing the Director of Public Prosecution or Secretary for Justice to prosecute since they are not party to these proceedings. But they might be affected by such an order under the principle of AG v Newspaper Publishing plc [1997] 1 WLR 926 and Section 110 of the Bankruptcy Ordinance. However, under Article 63 of the Basic Law, the Department of Justice shall control criminal prosecutions, free from any interference. Would an order under Section 138, reading together with Section 110, constitute interference in criminal prosecution? Separation of powers: not the function of the court to supervise prosecutorial discretion 7.The involvement of the judiciary in a decision to prosecute is prima facie a confusion of two different roles in the administration of criminal justice, (1) the prosecutor and (2) the judge. The principles of separation of powers and judicial independence would be compromised by such confusion. Although the court will not participate in the actual prosecution in terms of conduct of the case in the criminal trial, an order under Section 138 does play a part in the overall decision to prosecute. In Director of Public Prosecutions v Humphrys [1977] AC 1 at p.26D, Viscount Dilhorne highlighted the spirit of these principles,
Wouldn’t it be more so if a judge were to order a prosecution? 8.Similar principles were adverted to in the judgment of the majority of the Supreme Court of Canada in R v Power [1994] 1 RCS 601. L’Heureux-Dube J said at p.621,
At p.622, His Lordship cited the following passage with approval from an article by Donna C Morgan,
At p.623, a passage from another article by J A Ramsay was cited,
Another useful citation was from the judgment of Monnin CJ in Re Balderstone v The Queen (1983) 8 CCC (3d) 532 at p.539,
9.I will also cite two further passages from the judgment of L’Heureux-Dube J on this point, At p.627,
At p.628,
10.It is clear from the above dicta that it is a necessary corollary from the principle of independence of judiciary and separation of powers that the court should not play any part in the prosecutorial decision. It would be wholly inconsistent with these fundamental principles that the court were to play a supervisory or advisory role in the exercise of prosecutorial discretion. 11.In the more recent decision of the Supreme Court of Canada in Krieger v Law Society of Alberta [2002] 3 SCR 372, the principles in R v Power were applied. Iacobucci and Major JJ identified certain matters as the core elements of prosecutorial discretion at Para.[46],
And Their Lordships continued at Para.[47],
Then, it was said at Para.[49],
12.In my judgment, these fundamental constitutional principles are equally applicable in Hong Kong and one could readily find dicta supporting the same in the judgments of our courts, see Cheung Sou Yat v The Queen [1979] HKLR 630; Tang Yee Chun v. Attorney General [1988] 2 HKLR 408 Keung Siu Wah v. Attorney General, Civil Appeal 112 of 1989; The Queen v Christopher Harris CACC 72 of 1990 [1991] 1 HKLR 389. The jurisprudence of stay of criminal proceedings on the ground of abuse of process is premised on these underlying principles (see George Tan v His Honour Judge Cameron [1992] 1 HKLR 254). Further, they are enshrined in Articles 63, 80 and 85 of the Basic Law. Although the doctrine of separation of powers has not been explicitly spelt out in those articles, it is a concept embedded in those articles. The bankruptcy legislations and bankruptcy offences 13.In England, the equivalent of Section 138 was Section 161 of the Bankruptcy Act 1914. As early as 1957, the Blagden Committee Report recommended the abolition of this procedure in Paragraph 153,
14.The Cork Committee Report 1982 dealt with the issue in Paras.1892 to 1894. The recommendation was that in place of an order for prosecution from the court, there should be consent of the Department of Trade or Director of Public Prosecution for prosecution of offences under the Insolvency Act. 15.Thus, the English position was changed in 1986. Under the Insolvency Act 1986 Section 350(5), the court no longer plays any part in prosecution of bankruptcy offences. The decision was left with the Secretary of State or the Director of Public Prosecutions. 16.In the context of corporate insolvency, the prosecution of delinquent officers and members of a company that has been wound up for criminal offence in relation to the company rests with the Secretary for Justice, see Section 277 of the Companies Ordinance. The court’s role is confined to directing the liquidator to report or refer the matter to the Secretary. 17.Another curious feature in Section 138 is that it expressly stipulates that a court order under Section 138 is not a condition antecedent to any prosecution of bankruptcy offences. Although these words cannot be found in the English statutes, it seems that it was also regarded in England that such order was not a necessary prerequisite for prosecution (at least in respect of private prosecution) unless there was specific requirement to that effect in the offence creating sections (see the discussions in Paras.153 and 198 of the Blagden Committee Report). In other words, prosecution could still be brought if the court refused to make an order. There are reported English cases where prosecution was undertaken without an order from the court, see R v Thomas (1884) 22 LT 138, 11 Cox 535; Ex parte Priestley (1878) 10 Ch D 774 and Ex parte White [1902] 2 KB 290. On the other hand, it is not clear whether the prosecuting authority is bound to prosecute if an order is made. Mr Shiu submitted that the prosecuting authority is not so bound and the Department of Justice retains ultimate control over the decision to prosecute. 18.Counsel have researched into the position in other common law jurisdictions. Australia does not appear to have any procedure similar to Section 138, see Part XIV of the Bankruptcy Act 1966. In Canada, the relevant provisions can be found in Section 205 of the Bankruptcy and Insolvency Act 1985 sub-sections (3) and (4),
19.It should be noted that the Canadian statute refers to the court “authorizes the trustee” to initiate proceedings. Two points arise from there. First, the order of the court is carefully worded as one conferring authority on the trustee instead of ordering the trustee to prosecute. Second, it provides for prosecution by the trustee. Reading that together with sub-section (4), it seems to me that it is dealing with a private prosecution as opposed to public prosecution. This distinction is important in view of what I said below. Further, the threshold that the court needs to be satisfied is “there is ground to believe that any person is guilty of an offence”. The wordings are different from those in Section 138. Also, by the use of the word “may”, the court has a general discretion in deciding whether to give the authorization. 20.There is no Canadian case in which Section 205 has been challenged as being inconsistent with the principle of judicial non-interference with prosecutorial discretion. In my view, this is probably explainable by reference to the matters mentioned in Paragraph 19 above. 21.The present application is in respect of offences contrary to Sections 129(1)(e), 132(b) and (c) of the Bankruptcy Ordinance. They are in the following terms, Section 129(1)(e),
following be guilty of an offence-
Section 132(b) and (c),
22.On a casual consideration, there seems to be a certain element of retroactivity in the offences under Sections 129(1)(e) and 132(c). At the time when the relevant act was committed, the bankrupt might not know that a bankruptcy petition would be presented against him within the next 12 months or that a judgment would be entered against him within the next 2 months. Depending on the facts of each case, he might not even foresee that. However, Mr Shiu and Mr Ho drew my attention to the distinction between legal certainty and factual certainty. The case R v Muhamad [2003] QB 1031 seems to be directly on point. I need to say no more on the topic. The role of the Official Receiver in this application 23.In the present case, the Official Receiver was not appointed as trustee in bankruptcy. Hence, the present application is not an application by the trustee in bankruptcy and there is no question of funds in the estate of the bankrupt being used to finance the prosecution. The Official Receiver has made it clear to this court the intended prosecution will be brought by way of public prosecution. In other words, it would be funded by public money. 24.I was also told by Mr Shiu that as far as the Department of Justice and the Official Receiver could ascertain, there has not been any private prosecution in Hong Kong pursuant to an order made under Section 138 although this is theoretically possible. 25.Under Section 77 of the Bankruptcy Ordinance, the Official Receiver has certain statutory duties regarding investigation of the conduct of a bankrupt and the prosecution of any fraudulent bankrupt. Section 77(a) specifically provides that the Official Receiver has a duty to report to the court stating whether there is reason to believe that the bankrupt has committed any act which constitutes an indictable offence. 26.Although it may be possible (at least theoretically) for the Official Receiver to conduct the prosecution of a bankrupt for bankruptcy offences by way of private prosecution, this is not the situation I am dealing with. According to what I was told, the current practice is that the Official Receiver acts pursuant to authorization given by the Secretary for Justice under Sections 12 and 13 of the Magistrates Ordinance Cap 227. 27.In other words, the Official Receiver will be prosecuting as the agent of the Secretary for Justice. 28.In view of the last part of Section 138, there is no reason why the Official Receiver cannot launch a prosecution right away without any court order. 29.In the light of the foregoing, I shall confine myself to discussing the application in the context of a public prosecution. The hearing 30.Mindful of these backgrounds and the issues mentioned, with the consent of the Official Receiver, I granted leave to the Secretary for Justice to intervene and directed a hearing so that all these points can be canvassed properly. Mr Ho SC was appointed as amicus to assist this court. I am grateful for the assistance rendered by him as well as that of Mr Shiu and Ms Lee (who appeared on behalf of the Official Receiver). 31.Mr Ho has helpfully taken this court through a learned excursion into the history of how the English equivalent of Section 138 had developed over the years. The earliest piece of legislation counsel referred to is the Bankruptcy Act 1861, Sections 221 to 225. Thereafter, the relevant sections can be found in Sections 16 and 17 of the Debtors Act 1869, Sections 163 to 167 of the Bankruptcy Act 1883, Sections 161 to 165 of the Bankruptcy Act 1914 and Section 350 of the Insolvency Act 1986. Mr Shiu also invited this court to the historical survey set out in Paragraphs 35 to 48 of Cork Committee Report 1982. I also derived much assistance from the learned discussions in the Cork Committee Report about the office of the Official Receiver and the bankruptcy offences. 32.It appears that historically, the following are the relevant background to these statutory provisions,
33.The legislative history in Hong Kong follows broadly the English model. There was no equivalent of Section 138 in the Bankruptcy Ordinance 1864. Section 84 of the Bankruptcy Ordinance 1891 was a hybrid between the Bankruptcy Act 1861 and the Debtors Act 1869. Section 140 of the Bankruptcy Ordinance 1931 was basically the same as the current Section 138. Discussion 34.Based on the historical background, counsel have suggested the following as rationale for getting a court order to prosecute a bankrupt,
35.Irrespective of the position in the past, I come to the clear conclusion that under our present system of administration of justice, with a strong independent and highly professional public prosecution service in the Department of Justice, none of these could be relied upon to sustain the constitutionality of Section 138 which is prima facie inconsistent with the fundamental principles set out in Paragraphs 7 to 12 above. 36.In my view, considerations (a) and (b) should firmly be regarded as lying within the sole province of the Director of Public Prosecution. It should not be the function of this court to intermeddle into these matters. Otherwise, the court would be trespassing into a territory outside its constitutional role and at serious risk of undertaking a task inconsistent with its proper role for reasons set out above. I see no justification for having an exception in this regard for prosecution of bankruptcy offences. As mentioned, under the Companies Ordinance, court order is not required for the prosecution of delinquent officers and members of a company that has been wound up. I do not see any valid ground for singling out bankruptcy offences. It is wholly inappropriate to ask the court to play a filtering role in relation to any decision to prosecute. Of course, the court can entertain submissions by a defendant in a criminal case in committal proceedings and in an application for stay on the ground of abuse of process. But those applications are part of the criminal process and the court plays the strict role of an adjudicator in an inter parte hearings. They are plainly different from a Section 138 application. 37.Further, under Section 138, the court cannot function as a filter for the simple reason that it expressly provides that an order to prosecute shall not be a condition antecedent to any prosecution. The only effective filter is the control exercised by the Director of Public Prosecution over public prosecution and the power to enter nolle prosequi in relation to private prosecution. 38.As regards (c), whilst it is correct that the OfficialReceiver is subject to the supervision of the court in the administration of the estate of the bankrupt, such supervision should not be extended to a decision to prosecute. The duty of the Official Receiver under the Bankruptcy Ordinance does not go so far as imposing a statutory duty on him to conduct a prosecution. Instead, when a prosecution is conducted by the Official Receiver, in practice he acts as the agent of the Secretary for Justice. Ms Lee informed this court that the costs of the prosecution are borne by the Department of Justice instead of the Official Receiver’s office. If the court were to supervise the Official Receiver in matters pertaining to a decision to prosecute, this would in substance be a judicial supervision of a public prosecuting authority. This is in direct conflict with the fundamental principles on separation of powers set out above. 39.How about the position in respect of a private prosecution by the Official Receiver or a trustee in bankruptcy? Since Section 138 has no bearing on private prosecution funded by private individuals (and for reasons given above, it could not be the purpose of Section 138 to control that kind of prosecution), we only need to consider the scenario where a trustee applies for direction to fund a private prosecution by the estate of a bankrupt. For reasons set out above, I am not dealing with such scenario here. I would therefore be circumscribed in my discussion in this regard. 40.It would be rare indeed where the proving creditors are willing to deplete the estate by pursuing a private prosecution when the Official Receiver does not feel advisable to pursue a public prosecution. Should that question arise, it may be that the trustee should abide by the wish of the creditors’ committee and reliance could be placed on Section 61(b) of the Bankruptcy Ordinance without applying to court. In a very unusual case, the trustee can apply under Section 61A for direction. Ex parte White [1902] 2 KB 290 could be relevant on this point. However, in that case, Wright J did not appear to consider the doctrine of separation of powers. Neither did His Lordship give any reason why a prosecution could not be approved by the creditors’ committee. Thesecomments also apply to consideration (d). 41.I also take into account of the relevance of a bankrupt’s conviction for bankruptcy offences in the discharge of a bankrupt under Section 30A(4)(g). To that extent, the court bankruptcy should be informed about the prosecution of a bankrupt. However, it does not follow that the court should have a role to play in the prosecutorial decision. 42.Mr Shiu emphasized that one objective of the bankruptcy regime is the prevention of bankruptcy and improvement of commercial morality. As I said, I have the benefit of reading the discussion in the Cork Committee Report as to the rationale behind the bankruptcy offences. I have no problem with them. However, it does not mean that all the roles pertaining to those objectives have to be undertaken by the bankruptcy court. The point is simply that by reason of our adherence to the doctrine of separation of powers, the court’s role should not be confused with that of a prosecutor. I am quite confident that our Department of Justice with the assistance of the Official Receiver will be up to the task in deciding whether to launch a prosecution. 43.Mr Ho contended that an order made under Section 138 operates only as the granting of leave to prosecute. According to him, an order under Section 138 is permissive in nature instead of mandatory. He submitted that this is apparent from the dicta in several English authorities and the historical background to the English legislations. Attractive though that argument was, I am unable to accept it. First, I have a conceptual difficulty with that construction. Since the section expressly stipulates that an order for prosecution shall not be condition antecedent to any prosecution, it is difficult to characterize such order as leave. To me, leave is something one needs to obtain before one could pursue a course of action. Second, to obtain leave from the court in order to prosecute a bankrupt seems to me to be inconsistent with the principles set out in Paragraphs 7 to 12 above. Third, given that the court is specifically directed to consider the prospect of conviction and the desirability of prosecution, I am driven to the conclusion that in substance, the court’s opinion is sought on matters which should be left to the prosecuting authority to decide, no matter how one formulates the threshold. Fourth, I cannot find satisfactory answers to all the concerns I raised in Paragraph 5 above. In particular, even if this might not be the intention of the Official Receiver in making an application under Section 138, the effect is that a second opinion is sought from the court as to how prosecutorial discretion should be exercised. 44.Mr Shiu contended that the making of an order under Section 138 is not part of the prosecution process. He adopted the submission of Mr Ho as to the permissive nature of such an order. It is contended that after the making of such an order, the Official Receiver and the Director of Public Prosecution could still lawfully decide not to launch or not to proceed with a prosecution if the circumstances so warrant without further reference to this Court. Whilst there are cases showing that prosecution could still be launched even if a court refused to make an order (see cases cited in Paragraph 17 above), I could not find any case where the Director of Public Prosecution declined to proceed with a prosecution after an order had been made. This might not be conclusive since it is unlikely that someone would have sufficient interest to pursue the matter in such circumstances. Further, in England, the statutes expressly provided that when an order was made, the Director of Public Prosecution was under a duty to prosecute. In Hong Kong, we do not have such statutory provision. But I have difficulty in accepting that the court’s jurisdiction could be evoked for no practical purposes whatsoever. Yet this would be the result if I were to accept the submission as to the non-binding nature of an order under Section 138. I must therefore reject this contention. 45.It seems to me even if I were wrong on the nature of an order under Section 138 and if the permissive ordersubmission is correct, the court is still being asked to proffer an opinion on matters relevant to the exercise of the prosecution discretion. As such, it impinges on the doctrine of separation of powers. 46.In so holding, I am not suggesting that it would never be appropriate for a court to refer a case to the Department of Justice for consideration as to whether an offence has been committed and someone involved should be prosecuted. But Section 138 is worded in such a manner that the court is required to do something more than the mere making of a referral. The court has to come to a conclusion on the prospect of conviction and desirability of prosecution. The fact that a refusal by the court to make an order under Section 138 could be the subject matter of an appeal (as in Ex parte Priestley (1878) 10 Ch D 774, Ex parte Marsden (1876) Ch D 786, Ex parte Stallard (1868) LR 3 Ch App 408 and In re Dunn [1902] 1 KB 107) entails that reasons must be given by a court for refusing the application. Those reasons would have to cover the two statutory criteria which the section directs the court to consider. The court’s opinion could be subject to analysis on an appeal. This shows that such an orderis more than a mere referral. 47.The matter can be tested by reference to a case where a court refuses to make an order under Section 138 on the ground that it does not appear reasonably probable that there will be a conviction. The reasoned decision of the court must have a material impact on the Director of Public Prosecution in assessing whether a public prosecution should be launched. 48.In my judgment, notwithstanding the very able arguments of counsel, Section 138 is inconsistent with the fundamental principles in our system for the administration of criminal justice enshrined under Articles 63, 80 and 85 of the Basic Law. Hence, it is the duty of this court to give effect to those Articles instead of proceeding under Section 138. 49.I must say I come to this conclusion not without some hesitation. After all, Section 138 and its equivalent have been in the statute book for quite some time without any challenge. However, such a challenge is only possible after the Basic Law came into operation. Given the ex parte nature of these applications, I am not surprised that the point has not been argued before. Whilst Section 138 and its English equivalent might have a historical justification for its existence, it is quite apparent that it has no place in the legal system of modern Hong Kong at least as far as public prosecution is concerned. 50.As indicated earlier, due to the circumstances of the present case and the current practice of the Official Receiver, I do not propose to express any conclusion on the constitutionality of Section 138 with respect to private prosecution in this judgment. That question has to be decided on another occasion. I therefore express no view on Mr Shiu’s interesting argument based on Gurung Kesh Bahadur v Director of Immigration [2002] 2 HKLRD 775. 51.For these reasons, I dismiss the application by the Official Receiver.
Mr Gavin Shiu, SADPP & Miss Ada Chan, SGC, of Department of Justice Miss Fiona Lee, APS of Official Reciever Mr Ambrose Ho, SC, act as Amicus Curiae Appeal allowed: see CACV405/2004 and CACV406/2004 dated 28 September 2006 |
Cases cited in this judgment
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Further hearings and rulings under HCB 19401/2003