HKSAR v. Lo Wai Man and Others
Read the full judgment text of CACC 411/2009 on BabelCite. This Court of Appeal judgment was delivered on 5 September 2011.
1. This is an application for leave to appeal by the applicants against a confiscation order imposed by Deputy Judge Woodcock pursuant to section 8 of the Organised and Serious Crimes Ordinance (‘ OSCO ’) (Cap. 455).
Cited by 1 case · Cites 4 cases
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CACC 411/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 411 OF 2009 (On Appeal From District Court Criminal Case No. 882 of 2004) ________________________ BETWEEN
________________________ Before : Hon Cheung, Hartmann JJA and Lunn J in Court Date of Hearing : 14 June 2011 Date of further written submission from the Respondent : 29 June 2011 Date of further written submission from the 3rd Applicant : 4 July 2011 Date of Judgment : 5 September 2011 ________________________ J U D G M E N T ________________________ Hon Cheung JA (giving judgment of the Court) : Appeal against confiscation order 1.This is an application for leave to appeal by the applicants against a confiscation order imposed by Deputy Judge Woodcock pursuant to section 8 of the Organised and Serious Crimes Ordinance (‘OSCO’) (Cap. 455). 2.The applicants were convicted after trial of the offences of keeping a vice establishment contrary to section 139(1)(a) of the Crimes Ordinance (Cap. 200) and conspiracy to deal with a property known or reasonably believed to represent proceeds of an indictable offence, contrary to section 25 of OSCO (Cap. 455) and section 159A of the Crimes Ordinance. The Judge had determined that the offences of which the applicants were convicted were organised crimes. 3.The 1st applicant together with the 2nd to 4th applicants managed five nightclubs and two cyber cafés that were vice establishments and also dealt with the proceeds arising from the income of the vice establishments. 4.The applicants were first arrested and charged in March 2004. Realisable properties 5.The Judge first found that the applicants had benefited from their crime and had properties to the following value :
6.The Judge then found that the realisable properties of the applicants and their value for the purpose of the confiscation order to be as follows : 1st applicant
2nd applicant
3rd applicant
4th applicant
The order 7.The Judge imposed a confiscation order on each of the four applicants in respect of the realisable properties. The Judge imposed a six-month period for the applicants to comply with the order. In default of compliance the Judge ordered the following terms of imprisonment to be imposed :
Statutory scheme 8.The relevant statutory scheme for the issuance of a confiscation order is set out in sections 8 and 11 of OSCO. Regard must also be made to the definitions contained in sections 2 and 12. The relevant scheme can be summarised as follows :
Applicable principles 9.1) Section 8 of OSCO introduced confiscation orders designed to catch the profits of major crime. Similar provisions are contained in section 3 of the Drug Trafficking (Recovery of Proceeds) Ordinance (‘DTROP’) (Cap. 405). Hence assistance can be gathered from cases dealing with both legislations.
Issues of this appeal 10.In the Court below the applicants did not challenge that they had benefited from organised crime or the amount of the benefit. The challenge below was on the realised amount. This remains to be the position in this appeal. 1st applicant 1) Beverly Villas 11.The 1st applicant’s appeal is focused on the property known as Beverly Villas and a car park thereof. This property was purchased in April 2003 for $5.45 million and registered in the name of Madam Chan Wai Han, the wife of the 1st applicant. The 1st applicant’s case is that the purchase of this property was funded by his wife’s sister Madam Chan Wai Yin who became the beneficial owner of the property and that neither he nor his wife has beneficial interest in the property. 12.The prosecution showed that payment for the down payment and stamp duty of the property and the monthly mortgage payment from June 2003 to March 2004 came from the wife’s bank account. She had no income of her own. 13.There were deposits of $2.5 million into the wife’s account on 29 April 2003 :
14.Between 1 February 2002 and 29 April 2003, $2.95 million was withdrawn from the 1st applicant’s account. The prosecution contended the deposits of $2.5 million came from the 1st applicant. 15.Between 29 April 2003 and 26 May 2003, the wife transferred $1,881,500 out of her account. 16.The 1st applicant’s case is that the wife’s sister lent him $1.7 million cash for his business. He repaid $1 million in cash in January 2003. The remaining $700,000 was repaid in March 2003. 17.The wife’s sister wished to buy the property and had it registered in the name of the wife in order to hide it from her estranged husband who had separated from her. At her direction, the 1st applicant deposited the repayment of $700,000 into the wife’s account. The wife’s sister then deposited $1.8 million cash into the wife’s account representing a total of $2.5 million deposited in the wife account. 18.The Judge rejected this explanation. We agree and we cannot see how she could be faulted.
2) Cash and jewellery in two safe deposit boxes in HSBC 19.The two safe deposit boxes were No. 22546 and 22666 in HSBC. They were opened on 14 November 2002 in the name of the 1st applicant’s brother with the 1st applicant’s wife as his deputy. 20.Inside each box was found $1 million cash together with jewellery. On 14 November 2002, when the two boxes were opened, the 1st applicant had also withdrawn cash of $4.5 million from the same branch of HSBC where the boxes were kept. This large amount of money was bound with HSBC bank straps when they were given to the 1st applicant. 21.The 1st applicant’s case is that the $1 million cash in Box No. 22546 was the $1 million he had repaid the wife’s sister in January 2003. The sister told the wife to keep it for her in the safety box. This $1 million was found to be bound in HSBC bank straps. The bank record showed that these bank notes were first delivered to the bank on 11 November 2002. 22.The 1st applicant said that the other $1 million cash in Box No. 22666, belonged to the wife. She had accumulated the money from her business in the Mainland in partnership with the sister. She said the 1st applicant was not aware of the money. 23.In our view the Judge rightly rejected the 1st applicant’s explanation.
24.The wife claimed that the 16 pieces of jewellery in Box No. 22666 belonged to her. They were gifts from family and friends or purchased by herself. She also claimed that the jewellery found in another safety box in Bank of China also belonged to her. It was submitted that some of the jewellery were wedding gifts to the wife. The Judge rejected the explanation that the jewellery belonged to the wife. The Judge had seen photographs of the jewellery. Obviously she was not satisfied that the jewellery was traditional wedding jewellery that was given by the wife’s family. We are not in a position to come to a different view. Ultimately it is a question of the 1st applicant not being to discharge his onus of showing that the items were not realisable properties. The 2nd applicant 25.The 2nd applicant only challenged the sum of $78,556.34 kept in the Bank of China savings account of Oriental Pearl Karaoke Nightclub. The 2nd applicant was one of the signatories of the bank account. This nightclub was not connected to the charges at the trial. 26.The Judge held that under section 12, realisable property does not need to be related to any criminal activities. The evidence adduced by the prosecution in respect of the present proceedings showed that the transactions involved a current account and the savings account. The accounts were opened by a male named Fong Yun-wah Kenneth (‘Fong’) on 30 December 2003. The account could be operated by either of the signature of Fong or the 2nd applicant. 27.Except for the initial cash deposit, most of the deposits into the savings account were transferred from BOC Credit Card Company. All of these funds were then either withdrawn by the 2nd applicant in cash or transferred to the current account. After the funds had been transferred to the current account, the funds were then dissipated by cheque withdrawals. The cheques were all signed by the 2nd applicant. It is apparent that the current and savings accounts were solely controlled by the 2nd applicant. This comes within the definition of realisable property under section 12(1)(c) of OSCO, namely, property subject to the effective control of the 2nd applicant. The Judge was correct to include the amount in the confiscation order. The 3rd applicant
28.The 3rd applicant and his wife jointly purchased a property at Parc Royale, Shatin in 1996 for $5.58 million. There was a mortgage of $3.9 million from HSBC. Monthly mortgage instalments came from the 3rd applicant’s personal account, HSBC 580-818722-888. In the 6-year period that ran from March 1998 it was analysed that a total of $47 million-odd was deposited in this account. 29.The Parc Royale property was repossessed by HSBC on 25 August 2006 and sold in March 2007. The net sales proceeds, after deducting the outstanding loan, were deposited into a temporary joint account with a balance at May 2008 of $1,412,072.48. This amount is subject to a restraint order. There was no application by the 3rd applicant or his wife for variation of the restraint order for the release of the sales proceeds to the wife. 30.The 3rd applicant contended that the wife had contributed to the purchase both by way of down payment and mortgage and she should have a share in the proceeds of sale. This was, however, contradicted by the wife who said in her witness statement to the police that the property was purchased and paid for by the 3rd applicant. He paid all the mortgage instalments. She did not work and had no income and was a full time housewife. 31.The Judge found that the wife did not have the financial means to contribute towards the purchase. Her interest in the property was subject to the effective control of the 3rd applicant or that such interests can be construed as a gift to her from the 3rd applicant and is caught by the OSCO. The Judge held that the property and the proceeds of sale thereof were part of the 3rd applicant’s realisable property. 32.Mr. Wu, counsel for the 3rd applicant, relied on two English cases, namely, Steven Richard Holah (1989) 11 Cr.App.R.(S) 282 and Peter John Taigel [1998] 1 Cr.App.R.(S) 328 which dealt with the enforcement of compensation orders by the disposal of a family home under the English legislation. 33.In Holah, Farquharson J held at 284 that
34.In Taigel, Smedley J referred to cases including Holah, and held at page 332 that,
35.These two cases are dealing with different legislative schemes and they pre-supposed that the wife has an interest in the matrimonial home. These cases are not identical to the issue that this Court has to decide. Presumption of joint interest 36.After the hearing the Court carried out its own research and came across the recent case of Gibson v. Revenue and Customs Prosecutions Office [2009] QB 348 which referred to the House of Lord’s decision of Stack v. Dowden [2007] 2 AC 432 which dealt with the question of a woman’s interest in a family home purchased in the joint names of a man and woman who were not married but who lived in the property together as husband and wife. In the light of these cases the Court invited further written submissions from the parties which the Court had now received. 37.Parc Royale was in the joint names of the 3rd applicant and his wife. They were married in 1977. The property was purchased in 1996 the parties lived there until it was repossessed by the Bank in 2006. Where a property is acquired in joint names, prima facie, the parties are entitled to equal legal and beneficial interests in the property. The rationale is based on the common intention to own the property : see Stack per Baroness Hale of Richmond :
Presumption of advancement 38.In the Court below arguments were raised on the presumption of advancement of Parc Royale in favour of the wife since it was the 3rd applicant who financed the purchase. The presumption of advancement, however, is no longer the legal basis for holding the equal interest of spouses in a joint property. Arden LJ held in Gibson at 356 that,
Anti-gift provisions 39.As pointed out earlier the definition of a realisable property includes any property held by a person to whom the defendant has directly or indirectly made a gift caught by the OSCO (section 12(1)(b) of OSCO). The definition in section 12(9) of a gift caught by OSCO is, of course, extremely wide. However, if the presumption of advancement is no longer the proper basis for considering the wife’s interest in the property, then the argument that the 3rd applicant had made a gift to his wife which was caught by section 12(9) of the OSCO could not stand. In any event, as conceded by Ms Chan, counsel for the respondent, it is wrong to say that the gift was caught by the OSCO because the date of the acquisition (hence the gift to the wife) was outside the six year period under section 12(9). Hence the section does not apply. 40.Ms Chan, however, argued that the wife has no beneficial interest in the property by the following reasons :
Our view on Parc Royale 41.We are unable to accept Ms Chan’s arguments. We are here dealing with the matrimonial home of a married couple and not properties registered in joint names in general. More often than not the acquisition of a matrimonial home is financed by the husband who earns. It does not mean that the wife who is a housewife and who has made no financial contribution will not acquire any interest in the property. The consideration paid by the wife is usually in the form of bringing up the children and looking after the home. This is recognized in Gibson at paragraph 10. In any event, when a couple are joint owners of the home and are jointly liable for the mortgage, the inferences to be drawn from who pays for what may be different from the inferences to be drawn when one is an owner of the home (Stack at paragraph 69). Stack, which is not a married couple case, reaffirms the principle that joint owners are intended to have joint legal and beneficial interest. The position must be even stronger in the case of a married couple. Baroness Hale said in Stack at paragraph 66 that,
42.A matrimonial home plays a significant role in a married couple’s life. In family law, a spouse’s interest in the matrimonial home is well recognized : see the Court of Final Appeal’s judgment in DD v. LKW [2010] 6 HKC 528 which established, among other things, the principle of equality of a couple’s interest in the matrimonial home (irrespective whether it is in sole or joint names). Proceeding on the basis that the property in question was in joint names and bearing in mind that the parties have been married for a long time since 1977 and had been living in the matrimonial home for about ten years before it was repossessed, this course of conduct clearly reinforced the 3rd applicant’s case that the shared intention of the parties in respect of the property was indeed that each would have an equal share in it. It has been pointed out in Stack at paragraph 8 that a full inquiry in joint name cases is unlikely to lead to a different result unless the facts are very unusual. There are no unusual features in this case and there is no evidence to suggest that the parties’ intention had subsequently changed. 43.In Gibson, the defendant was convicted of a drug trafficking offence and a confiscation order was made against him under the Drug Trafficking Act 1994. A receiver was appointed in respect of the defendant’s realisable assets which included the matrimonial home acquired in 1990, three endowment policies effected to support the mortgage on the house and two bank accounts, all of which were in joint names with the defendant’s wife. In enforcement proceedings in the High Court to which the wife was joined, she claimed a half interest in the assets held in joint names. The judge found that the wife had known that from 1993 money used to pay the mortgage and to make payments under the endowment policies had not been legitimately earned. He held that although there was no provision in the 1994 Act which could deprive the wife of her 50% interest in the disputed property, public policy required that her guilty knowledge should be taken into account against her and he accordingly declared that the disputed property was held by the defendant as to 87.5% and the wife as to 12.5%. 44.The English Court of Appeal allowed the wife’s appeal and held that the wife was entitled to a 50% share in the disputed property. It applied Stack. Wall LJ held that, on the facts of the instant case, the property was in joint names, and there was nothing to displace the presumption of equal beneficial ownership described in Stack. 45.As to the question of public policy in the light of the wife’s knowledge that the money used to pay the mortgage was not legitimately earned, the Court of Appeal rejected the notion of a free-standing public policy which would deprive the wife of her interest in the property. May LJ held that,
46.In my view the observation of the English Court of Appeal on public policy is equally applicable to the present case even without relying on human rights provisions. If the half beneficial interest of the 3rd applicant’s wife had been acquired from the time of the acquisition because of the shared intention of the parties which had not been changed subsequently, the public policy consideration that those who traffic unlawfully in drugs should be deprived of the proceeds does not provide the basis for confiscating her interest. In any event, there was no evidence of knowledge in the 3rd applicant’s wife of the illegitimate provenance of the monies. 47.Ms Chan further argued that in any event, the 3rd applicant controlled the property under section 12(1). 48.In our view, the 3rd applicant obviously had effective control of his 50% interest of the property. However, we do not see any additional factor in this case which indicates that he has effective control over the wife’s share as well. We do not consider that just because the wife had not actively intervened in the proceedings and asserted an interest in the property, it could be an indication of the 3rd applicant’s control. Costs implications and the wife’s knowledge of the right to intervene must also be considered. 49.We further do not see how the factors referred to in section 12(11)(b), namely, ‘shareholdings’ and ‘a trust that has a relationship to the property’ have any application to the present case. As to the factor of ‘family, domestic and business relationship between persons having an interest in the property’, again it does not add anything to the existing position at all. 50.In our view, in respect of the confiscation order, the 3rd applicant had discharged the burden (even assuming he bears it on the joint names issue) by showing that in respect of the proceeds of sale of Parc Royale, only 50% of his share is realisable property and that the other 50% belongs to his wife. Others 51.The Judge also made a confiscation order of the cash and jewellery found in the safe at the Parc Royale property. The wife had a key to the safe but she said that the safe was mainly used by the 3rd applicant. 52.The Judge found that the wife had no income of her own and she had not explained the origin of the jewellery. The Judge found that the cash and jewellery inside the safe were realisable properties of the 3rd applicant. We agree with her finding. The 4th applicant 53.In the Court below it was accepted by counsel for the 4th applicant that the $518,622.73 in the bank account was realisable property. This represented the proceeds of sale of a property in Sai Kung bought by the 4th applicant. This point cannot be reopened again. 54.We are also satisfied that the Judge’s decision on the $318,432.82 being the amount in various bank accounts in the names of vice establishments were realisable property. 55.In respect of the car and watch they were properties held by the 4th applicant and under his effective control and we agree that they were realisable properties. Casa Paradizo 56.The only issue that calls for discussion is the proceeds of sale of a property known as Casa Paradizo. The property which was registered in the joint names of the 4th applicant and his wife was purchased in June/July 1998 for $4.6 million. The 4th applicant paid the initial deposit of $300,000 and down payment of $1.2 million. A mortgage loan of $3.4 million was obtained from a finance company. The 4th applicant was found living at the property when he was arrested. The 4th applicant and his wife had no children. It is not disputed that the property was the matrimonial home of the parties. Due to default in repayment of the mortgage loan, the finance company sold the property in December 2006 at a price of $3.8 million. The net proceeds of sale of $66,817.53 have been kept in the finance company. 57.Ms Chan repeated her arguments that she had advanced in the 3rd applicant’s case and relied on the same factors relating to the payment for the acquisition of the property, namely, the relevant payment was made by the 4th applicant. 58.In the light of what we said about the 3rd applicant’s case, we have to reject Ms Chan’s submission. 59.Ms Chan further seeks to distinguish Gibson by saying that the wife there had provided consideration. As apparent from paragraph 10 of the judgment, the consideration that the English Court of Appeal held the wife had provided for was bringing up the children and looking after the home. It was by no means financial consideration. Absence of financial contribution by the wife towards the purchase of a matrimonial home in joint names cannot be fatal to the wife’s interest. 60.Ms Chan further argued that in respect of the 4th applicant, if his wife’s interest in the property was to be regarded as a gift, then it was a gift caught by section 12(9)(1) in that the gift was made within the six-year period (the property was bought in July 1998 and the charge against the 4th applicant was laid in March 2004). In the Court below, counsel for the 4th applicant accepted that if the presumption of advancement applies, then the wife’s interest in the property was a gift caught by section 12(9)(1). 61.As we have discussed in relation to the 3rd applicant, the wife’s interest in the property was acquired not by way of presumption of advancement, therefore the issue of gift does not arise at all irrespective whether it was caught by the relevant section or not because of the time factor. When counsel made the concession below, clearly he was not aware of the recent development of the law which was only raised by the Court. In any event, counsel for the 4th applicant had first submitted below that the wife was entitled to a 50% interest because she was a joint owner of the property. This submission was clearly sustainable in the light of Stack and Gibson. In the circumstances we do not consider that this point is not open to the 4th applicant. Applying the same reasoning as in the case of the 3rd applicant, we found that the 4th applicant’s wife had a 50% interest in Casa Paradizo which is now in the form of the proceeds of sale upon its realisation. Conclusion 62.1) Accordingly we will dismiss the application of the 1st and 2nd applicants.
Ms Denise Chan, SPP of Department of Justice, for the Respondent Mr. Paul K N Wu, instructed by Messrs Damien Shea & Co., assigned by the Director of Legal Aid, for the 1st to 3rd Applicants 4th Applicant : in person, present |
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