Secretary for Justice on behalf of the Government of the United Mexican States v. Zhenly Ye Gon and Another

CACV 174/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 174 OF 2011

(ON APPEAL FROM HCMP NO. 2649 OF 2009)

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BETWEEN

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Before: Hon Hartmann JA, Fok JA and Lam J in Court

Date of Hearing: 24 February 2012

Date of Handing Down Judgment: 9 March 2012

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J U D G M E N T

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Hon Hartmann JA:

Introduction

1.The Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405, gives the power to the Court of First Instance to place under restraint the property of persons who are reasonably suspected of committing drug trafficking offences so that such property may be safeguarded until criminal proceedings are concluded.

2.S. 28 of the Ordinance gives the power to the Chief Executive in Council, with the approval of the Legislative Council, to order that, in respect of property found in Hong Kong, the Court of First Instance, with the necessary modifications, may exercise the same powers of restraint under the Ordinance at the request of designated foreign jurisdictions.

3.The Drug Trafficking (Recovery of Proceeds) (Designated Countries and Territories) Order has been made pursuant to s. 28.  Under the Order, the United Mexican States (‘Mexico’) is a designated country.

4.In early 2007, the federal authorities in Mexico commenced a criminal investigation into the affairs of the first defendant.  They did so on the basis that the first defendant had in four different shipments – the last one being intercepted by the authorities – smuggled large quantities of chemical precursors into Mexico: some 70 tonnes being imported between December 2005 and July 2006.  The purpose, it seems, was, as part of an organized criminal venture, to use, or sell on, the precursors for the clandestine manufacture and distribution of dangerous drugs.

5.Pursuant to the criminal investigation, the residence of the first defendant in Mexico City was searched.  The search revealed huge amounts of cash including more than US$205 million together with military firearms and ammunition.

6.The cash and weaponry were among many assets restrained on the basis that, subject to the conviction of the first defendant, they were liable to confiscation.  The assets restrained included cash of all kinds, property, jewellery, vehicles, machinery and equipment.

7.During the course of investigations, the federal authorities discovered that the first defendant held funds with the Bank of China in Hong Kong.  There were five accounts in the name of the first defendant and two further accounts in the name of the second defendant, a company controlled by the first defendant.  The accounts held a total of approximately US$10.217 million.  

8.On 22 December 2009, acting upon the request of the Government of Mexico, the Secretary for Justice made an ex parte application for an order restraining the first and second defendants from dealing with any of the funds in the accounts with the Bank of China.  In an affidavit supporting that application, it was said that the authorised representative of Mexico had certified the following:

(i)   that the first defendant was to be the subject of criminal proceedings to be instituted in Mexico charging him with various offences under the Federal Criminal Code including offences of organised crime, trafficking in dangerous drugs and money laundering.

(ii)  That there were reasonable grounds to believe that the criminal proceedings, if successful, would result in the making of an external confiscation order, that is, an order confiscating the property of the first and second defendants held by the Bank of China in Hong Kong.

9.S. 9 of the Order gives jurisdiction to the Court of First Instance to make orders of restraint (subject to such conditions and exceptions as the Court may specify) where –

“(a) proceedings have been instituted in a designated country;

(b) the proceedings have not been concluded; and

(c) either an external confiscation order has been made in the proceedings or it appears to the Court of First Instance that there are reasonable grounds for believing that an external confiscation order may be made in them.”

10.On 29 December 2009, Wright J, sitting in the Court of First Instance, made an ex parte order of restraint in terms of the application.

11.Several months later, in July 2011, Wright J heard applications made by the first and second defendants for a discharge of the order or, in the alternative, for orders of variation permitting certain of the restrained funds to be used to pay the legal costs of the first defendant and to meet the expense of maintaining his family.

12.In a judgment dated 10 August 2011, Wright J dismissed each of the applications for discharge or variation, directing that the order remain in full force and effect until further order.

13.The defendants appealed that judgment.

The circumstances of the first defendant and his wife

14.Before looking to the grounds of appeal, it is to be noted that at all times material to these proceedings the first defendant has been in custody in the United States of America, first, resisting criminal proceedings brought against him in that jurisdiction and, second, resisting extradition proceedings to return him to Mexico.  His wife, it appears, was arrested in Mexico and remains in custody.

The principal ground of appeal: the restraint order is superfluous

15.The principal ground of appeal was based on the assertion that, in applying through the Secretary for Justice for the restraint of the Hong Kong assets, the Mexican authorities sought to restrain more assets than its allegations of wrongdoing against the first defendant would bear.  That being the case, the order that was sought (and obtained) constituted an excessive, and thereby oppressive, interference in the property rights of the first and second defendants in the Hong Kong assets.

16.The assertion was based on matters of evidence said to have arisen in the proceedings to date, including proceedings against the first defendant in the United States of America.

17.First, it was said that there was evidence supplied by the prosecuting authorities of Mexico as to the estimated value of assets belonging to the first defendant that had already been restrained in Mexico.  These assets – given a very approximate value in US dollars – included US$207.168 million in cash in various denominations; property valued at US$2.476 million; plant and equipment valued at US$4.675 million and vehicles valued at US$1.135 million: the total value being some US$215.454 million.

18.Second, by way of contrast, in proceedings against the first defendant in the United States of America, expert evidence had been given that the first defendant’s alleged criminal conduct would have generated proceeds of approximately US$188.064 million.

19.Accordingly, so it was submitted, an examination of the evidential material already produced in respect of the criminal proceedings revealed that the value of the assets seized in Mexico exceeded the value of the proceeds of the first defendant’s alleged criminal conduct by more than US$27 million.  If the Hong Kong assets were added to this figure, it would increase the excess by another US$10.217 million.

20.At first instance, it was submitted that in restraint proceedings under the Order, in order to avoid an oppressive interference with third-party property rights, an applicant must put before the court sufficient information to enable the court to be able to assess the likely quantum of any potential forfeiture order.  As Wright J noted, the submission however was a qualified one:

“Mr Bruce [counsel for the applicants] accepted, realistically, that when proceedings of this nature are first instituted it may not be possible for an applicant to say with any real degree of accuracy just what sums may be involved. He contended, however, that the duty to make a meaningful assessment exists as a facet of the necessity for the prosecuting authority to make full and frank disclosure to the court, which is a continuing one, the result being that it imposes upon an applicant the duty to monitor developments in an investigation and, if necessary, to return to court of its own volition to seek the release of excess funds from the amount initially restrained.”

21.As to the relevant factual circumstances of the application then before him, Wright J further noted:

“It was [Mr Bruce’s] contention that, in the context of these proceedings, a significant feature is that the investigation of the defendant’s conduct began in Mexico fully four years ago and that, no matter what the position may have been at time the investigation commenced, Mexico must now be in a position to realistically assess what amounts may be subject to confiscation. He points to the fact that Mexico has made detailed responses to [defence] affidavits which included the results of extensive investigations into the financial position and assets of, in particular, the first defendant.”

22.Assuming, but without in any way deciding, that in applications under the Order a burden is placed on an applicant to demonstrate, and on the court to find, that the amount sought to be restrained was not excessive, Wright J was of the view that the submission made on behalf of the first and second defendants had lost sight of two factors.

23.The first factor was that, as to confiscation of the proceeds of crime, Art. 4 of the Mexican Federal Law Against Organized Crime provided that, if convicted of an offence under that Law (which included drug trafficking offences) all the property of the convicted person was liable to seizure as the proceeds of the proven criminal conduct unless the convicted person was able to demonstrate that the property had a ‘legal origin’.  In this regard, Wright J said:

“The effect of the provision is to shift to the defendants the burden of proving, in Mexico for it is there that the decision in regard to confiscation will be made, the legality of the origin of the moneys in the accounts [in the Bank of China] failing which the properties are subject to forfeiture.

In the circumstances, Mexico is justified, in my judgment, in taking the stance that it is entitled to seek the restraint of all of the property of the defendants as being potentially subject to confiscation: it is then for the defendants, in order to prevent a forfeiture order being made, to demonstrate, to the extent that they are able, at the appropriate stage of proceedings, that the property is of legal origin.

Once there is demonstrable potential for Mexico to seize all of the property of the defendants, then it cannot be contended sensibly that it needs to quantify the potential confiscation.  This, alone, is sufficient in my judgment to dispose of the argument.”

24.The second factor was that, in respect of the assertion that since the commencement of the criminal investigation the Mexican authorities must have had ample opportunity to quantify the proceeds of the first defendant’s criminal conduct, what was ignored was that –

“… it is the conduct of the first defendant which is delaying any decision concerning forfeiture. I assume that the situation in Mexico is as it is here – that the first defendant needs to be physically within its jurisdiction for proceedings to commence. The first defendant is resisting his return to Mexico for trial and has indicated that he intends to pursue every remedy possibly available to him, as he is so entitled. No criticism may be made of such an approach.

That said, it hardly lies in his mouth then to complain about delay either by way of suggesting that (a) past delay has afforded Mexico sufficient time to quantify its claim against him and that his failure to do so justifies the discharge of the ex parte order …”

25.Before us, Mr Bruce SC, for the applicant, submitted that, in respect of the application made by the first and second defendants for the discharge of the restraint order, the judge at first instance had fallen into error in failing to find:

(i)   that, in seeking a continuance of the restraint order, Mexico had an obligation to disclose whether or not assets restrained outside of Hong Kong were sufficient to meet any order for confiscation of the proceeds of the first defendant’s criminal conduct should he be convicted, and

(ii)  before granting a continuance of the restraint order, it was necessary for the judge himself to conclude on the evidence before him that assets restrained outside of Hong Kong were insufficient to meet any such anticipated order.

26.In short, Mr Bruce submitted that, by the time the first and second defendants made their application for the discharge of the restraint order, Mexico (by then) was required to justify continued restraint by reference to whether assets restrained outside of Hong Kong were or were not sufficient to meet any eventual order of confiscation and the court itself was required to determine that assets restrained outside of Hong Kong were insufficient to meet any such anticipated order.  If the court determined, on the evidence before it, that sufficient assets were restrained elsewhere it was obliged to discharge the Hong Kong order.

27.Mr Bruce constructed his argument as follows.

28.The Court of First Instance had a discretion whether to grant an order of restraint and, if so, whether to do so subject to conditions.  In this regard, s. 10(1) of the Order provides that upon a request from a designated country –

“The Court of First Instance may by order (in this Ordinance referred to as a ‘restraint order’) prohibit any person from dealing with any realisable property, subject to such conditions and exceptions as may be specified in the order.”

29.Fundamental to the exercise of the Court’s discretion was recognition of the fact that a restraint order constituted a substantial interference with important incidents of the right to hold and enjoy private property, that right being protected under art. 6 of the Basic Law.

30.Accordingly, any interference with property rights in terms of the Ordinance and Order must be in strict compliance with the requirements of the two instruments and must be only to the extent to which such interference is necessary.

31.In looking to what is necessary, the court had to bear in mind that the sole object of the Hong Kong legislation is to meet a future external confiscation order should one be made.  If an order of restraint was not necessary to meet that objective, for example, if it was superfluous to meeting that objective, it followed that the order should not be made.

32.That being the case, it followed that, before any order could be made, the court had to receive a reasonably based estimate of how much is, or may be, required to meet any lawfully imposed confiscation order.  Without such information, Mr Bruce submitted, the court would be unable to balance the competing interests of the applicant and the person whose property was sought to be restrained.

33.In the present case, Mr Bruce argued, the Mexican authorities had had a number of years in which to calculate and present a reasonably based estimate of the overall value of any final confiscation orders.  It had not done so.  In such circumstances, the Court of First Instance ought not to have permitted the continuance of the order.

34.In support of his submissions, Mr Bruce placed reliance on the following passage from Millington and Sutherland Williams on ‘The Proceeds of Crime’, Oxford University Press, 3^rd Edition, where the authors state at 2.49 (page 27):

“Restraint orders are often obtained at an early stage of an investigation or prosecution before the full extent of the defendant’s realisable property is known, but when restraint action is considered appropriate to prevent dissipation…. The prosecutor must not, however, seek a restraint order over assets having a value substantially in excess of the amount by which the defendant is alleged to have benefited. By way of example, if it is suggested that a defendant has benefited from a crime to the extent of £1 million it would clearly be oppressive for the order to restrain assets worth over £5 million.”

35.I do not dispute Mr Bruce’s submission that, in terms of s. 10 of the Order, the Court of First Instance is given the discretion to refuse to make an order of restraint or to do so subject to conditions.  

36.Nor do I dispute the submission that there may be cases where the clear and uncontested evidence is such that the Court of First Instance may refuse to restrain property substantially in excess of the amount by which a defendant, who is the subject of criminal proceedings in a foreign jurisdiction, is alleged to have benefited.

37.I do not agree, however, that in the present case, in seeking a continuance of the restraint order, Mexico was under an obligation to present some form of ‘profit and loss account’ demonstrating that the value of property already restrained was insufficient to meet any anticipated order of confiscation.  Nor do I agree that the Court of First Instance was under any form of mirror obligation to satisfy itself as to the insufficiency of such assets.

38.In my judgment, Wright J was correct to have regard to the statutory assumption contained in the Mexican legislation, art. 4 of the Federal Law Against Organized Crime directing that, in addition to financial penalties and penalties of imprisonment –

“The objects, instruments or proceeds of crime, and the properties of the convicted person, as well as those properties of the convicted person used as owner shall be seized, in any of the cases provided herein, if the convicted person does not prove that such properties have a legal origin.”

39.On an ordinary reading of the provision, all the property of a convicted person is liable to be confiscated unless the convicted person, the burden being on him, is able to show that the property, or any part of it, is not in any way the proceeds of criminal conduct.

40.If all the property of a convicted person is deemed to constitute the proceeds of criminal conduct unless he is able to demonstrate that it is not so, it must follow that all the property of a person being investigated for crimes constituting organized criminal conduct must be subject to restraint as being potentially subject to confiscation.  As Wright J said, once it is demonstrated that under Mexican law all the property of the first and second defendants is potentially subject to confiscation, the need to provide what I have described as a ‘profit and loss account’ falls away.

41.That restraint proceedings properly may anticipate the statutory assumptions to be used in later confiscation proceedings has been recognised by the English Court of Appeal.

42.In Re K and Others [2005] EWCA Crim 619, it was contended before the Court of Appeal that, the maximum benefit of which there was prima facie evidence being £477,000, the judge at first instance had been wrong to make an order covering a greater amount. The judge at first instance had made an order unlimited in amount, his reasoning being –

“If matters stood there I would be inclined to take the … £477,000 as my base figure and to allow for the possibility that further investigation would justify a higher figure. On that basis I would have been looking at limiting this order to something around the £1 million mark. However matters go further than that, because Mr Barnard, on behalf of the Crown, relies upon the assumptions in relation to criminal lifestyle in s. 10 of the 2002 Act and the provisions relating to that, which are in s. 75. He urges on me ... that the amount of money which will fall to be caught by a restraint order as opposed to the confiscation order is the amount which follows from the application of the s. 10 assumptions. That is to say, any property held by the defendant at any time during a period of six years ending with the day when proceedings for the offences were started. At the moment it is quite impossible to say what that figure is, but it is the figure on which I must work.”[my emphasis]

43.The Court of Appeal, per Laws LJ, said:

“… in our view, the judge’s reasoning demonstrates a common sense approach to the facts and we see no reason why this Court should interfere with it.

…

It seems to us that the judge was perfectly justified in look to these assumptions as a feature of the case that might very well be in play at the later stage.  The reality here is, in our judgment, that the stage at which the judge was dealing with the matter in January 2005, and in the light of such information as he then had, he was entitled to make an order unlimited in amount.”

44.For the reasons given, I am satisfied that no burden rested on Mexico to present the kind of quantitative exercise advocated by Mr Bruce nor did any burden rest on the judge at first instance to conduct any form of mirror consideration.

45.In any event, in light of the Mexican legislation, it seems to me that requiring a purely quantitative analysis oversimplifies matters and thus distorts them.  Under the Mexican code, not just the value but the inherent nature of the assets restrained is of critical importance.  This is because, if the first defendant is convicted, it will be open to him to identify specific assets by way of their provenance, their value in many respects being incidental, and, by reason of their provenance, to demonstrate that they are not in any way the proceeds of proven criminal conduct.  This being the case, demonstrating a sufficiency of restrained property by way of their value only is rendered almost irrelevant.

46.Central to Mr Bruce’s submissions, both at first instance and before us, was that a period of more than four years has now passed since the Mexican authorities commenced their criminal investigation, more than sufficient time, he said, for the authorities to be able to come to a reasonable estimate of the value of the proceeds of the first defendant’s alleged crimes.

47.However, as the judge at first instance observed, during this period of time the first defendant has been in the United States of America, first resisting criminal proceedings brought against him in that jurisdiction and latterly resisting his extradition to Mexico.

48.In my view, there was substance in the observation of Mr Walsh, for the Secretary for Justice, that, until the first defendant is returned to Mexico, it cannot be known with any certainty with what offences he will be charged and what the alleged proceeds of the conduct under those charges will be calculated to be.  Until the first applicant is returned, for all practical purposes matters remain at the investigation stage.

49.In such circumstances, I fail to see how the judge at first instance can be criticised for holding that it is premature to find that sufficient time has passed to enable the Mexican authorities to draw up a detailed (and accurate) balance sheet that puts to one side the nature of his conduct and puts to the other side both the value and nature of the proceeds generated by way of that conduct.  Mexico does not adhere to a common law system of criminal justice but whatever the system I believe it can be said with some certainty that, if and when the first defendant is returned to Mexico and trial proceedings commence, what may then be admitted by way of evidence and what may then be contested may well change the complexion of the criminal proceedings.

50.In any event, as I have said, at the heart of the Mexican legislation is the opportunity given to the first defendant, if he is convicted, of demonstrating that all or part of the property restrained (whatever its value) is of ‘legal origin’ and is therefore not subject to confiscation.  That opportunity, however, will only arise if and when the first defendant is returned to Mexico and, after trial, is convicted.

51.For the reasons given, I am satisfied therefore that the judge at first instance was correct to hold that there was no need for him to be presented with evidence of an insufficiency of property calculated by value only nor any need for him to make a finding in that regard.

The secondary ground of appeal: a reduction in the amount restrained

52.It was Mr Bruce’s submission that, if the restraint order was not to be discharged, it should at least be reduced by a sum of US$1.937 million.

53.Mr Bruce accepted that most of the US$10.217 million placed under restraint was paid into the Bank of China accounts during the period when, according to the Mexican authorities, the first defendant conducted his criminal activities.  However, the evidence showed that, of that sum, an amount of US$1.937 million was received into the accounts before December 2005 and therefore before the first shipment of chemical precursors was allegedly smuggled into Mexico.  Accordingly, said Mr Bruce, that sum fell outside any alleged period of criminal activity and should not be subject to restraint.

54.The exact source of the US$1.937 million is (at this time) uncertain.  It appears that it may in part constitute compensation for the purchase by the first or second defendants of Lehman minibonds.  If that is correct, the evidence suggests that the minibonds themselves were purchased before December 2005 but I am told that is still to be confirmed.

55.When dealing with the same submission at first instance, Wright J held that, although there may have been transfers into and out of the Bank of China accounts prior to December 2005, all of the funds were caught by the provisions of Art. 4 of the Mexican Federal Law Against Organized Crime.  He said:

“At the risk of repetition, the consequence of a conviction is that it is the defendants who have to prove that any property found in their possession is of lawful origin. That applies equally to all the funds found in the [Bank of China] accounts. A confiscation order may be made in respect of all and any property found in the possession of the defendants regardless of the date when it came into their possession: once property may be the subject of a confiscation order, then it is proper for this Court to exercise its discretion to make a restraint order.”

56.I agree.  I would add that, in my judgment, having regard to the breadth and general complexity of the allegations of criminal conduct made against the first defendant and taking into account the fact that, pending the return of the first defendant to Mexico, the criminal proceedings against him remain at the investigation stage, it is artificial at this time to draw too fine a line in the alleged chronology of the first defendant’s criminal conduct.  Steps preliminary to the first successful importation of chemical precursors in December 2005 must have been undertaken, those steps being integral to the alleged criminal conduct.  Such steps may well have included the movement of funds.  These are the sort of matters that remain to be resolved in Mexico by the Mexican courts if the first defendant is convicted.

Seeking to withdraw funds to meet personal expenses

57.Before the Court of First Instance, application was made to permit payment out of the restrained funds to meet the first defendant’s continuing legal costs and to provide for his family’s support.  Wright J refused that application.  He did so on the basis that the first defendant had failed to make full and frank disclosure of his financial position, the burden being on him to demonstrate that he had no other assets available to him.

58.The first defendant sought sums not exceeding HK$810,000 to meet his local legal costs, US$2 million to meet his extradition litigation in the United States of America plus an additional US$600,000 to meet his and his wife’s legal costs of trial in Mexico should he be returned to that country.

59.In respect of maintenance for his children, the first defendant sought a monthly sum of US$10,000 for each child and a sum of US$300,000 to be set aside to meet their longer term maintenance requirements, for example future school and college fees.  In addition, the first defendant sought a lump sum of US$200,000 for the maintenance of his parents.

60.In refusing the application for the release of these funds, Wright J looked to well-settled authority governing the principles to be applied in the exercise of the court’s discretion in domestic restraint proceedings.  Correctly, in my view, he was of the opinion that the same principles should apply in respect of the application made in the present proceedings.

61.A fundamental principle is that, when an application is made to vary a restraint order to meet legal costs and living expenses, the burden is on the applicant to show that he has no other assets available to him to meet those expenses: see Re Chun Yeung (HCMP 305/1994, unreported) per Patrick Chan J.

62.See in addition A and Another v C and Others (No 2) [1981] 1 QB 961 per Goff J, in respect of an application to release funds held under a Mareva injunction:

“In the present case, I have had to consider the position where the defendant has, or may have, other assets from which the relevant payment may be made. I have still to apply the basic principle, i.e. that I can only permit a qualification to the injunction if the defendant satisfies the Court that the money is required for a purpose which does not conflict with the policy underlying the Mareva injunction.”

63.See also M Corp and B Inc and Another [1986] HKLR 657, at 660H per Power J in respect of an application to release funds held under a Mareva injunction, the judge citing with approval the dictum of Goff J (above) and stating that the policy underlying the Mareva injunction was to prevent the plaintiff being cheated out of the proceeds of his action, should it be successful, by the defendant either transferring his assets abroad or dissipating his assets within the jurisdiction.

64.In Re Kam Susanto [2003] 1 HKLRD 612, at 616, it was held that the same policy underscored restraint orders made in criminal proceedings and that the Court must therefore be alert to the possibility that an application made to withdraw funds is used to preserve other undisclosed assets in or outside the jurisdiction.

65.In the present case, Wright J had regard to exactly that issue:

“It seems to me that a full and frank disclosure by the first defendant is particularly important in the context of this matter given the evidence not only of his undoubted ability to move very substantial sums of money internationally, and to do so over an extended period, but also because of the discovery of the concealed funds in his residence.”

66.On the evidence before him, Wright J concluded that there had been an extensive failure on the part of the first defendant to make full and frank disclosure.  He said:

“The first defendant has failed to disclose his worldwide financial resources in the affidavits: even when referring to his acknowledged assets in the United States he is coy, simply referring to “my U.S. funds” and not providing even the barest of details of them.”

67.Understandably, no attempt was made to criticise the judge for misreading the evidence.  Although the first defendant sought to remove from the assets under restraint a sum well in excess of US$3 million, there was a woeful failure on his part to attempt to demonstrate the extent of funds available to him elsewhere in the world and why it was that he had to seek such a large release of funds from the money restrained in this jurisdiction.

68.In the circumstances, the judge at first instance was compelled to the decision that he made, that is, to refuse the application.

69.For the reasons given, I would dismiss this appeal.

Hon Fok JA:

70.I have had the benefit of reading in draft the judgment of Hartmann JA and the additional observations of Lam J.  I respectfully agree with both and, for the reasons they have given, I too would dismiss this appeal.

Hon Lam J:

71.I agree with the judgment of Hartmann JA and the dismissal of the appeal.  I only wish to add a few observations.  The primary statutory provision to which a court in Hong Kong must have regard in the exercise of the power to make a restraint order is Section 3 of Schedule 2 to the Drug Trafficking (Recovery of Proceeds) (Designated Countries and Territories) Order.  That section defines what come within the meaning of “external confiscation orders”.  Sub-section (1) reads,

“An order made by a court in a designated country for the purpose of –

(a) recovering (including forfeiting and confiscating) –

(i) payments or other rewards received in connection with drug trafficking or their value;

(ii) property derived or realised, directly or indirectly, from payments or other rewards received in connection with drug trafficking or the value of such property; or

(iii) property used or intended to be used in connection with drug trafficking or the value of such property; or

(b) depriving a person of a pecuniary advantage obtained in connection with drug trafficking,

and whether the proceedings which gave rise to the order are criminal or civil in nature, and whether those proceedings are in the form of proceedings against a person or property, is referred to in this Ordinance as an "external confiscation order" (外地沒收令).”

72.It should be noted that at the end of each sub-head under sub-section (a), there is a reference to the “value” of the preceding subject matter.  This means, as submitted by Mr Walsh that, at this stage, there is no need for the Hong Kong court to be able to trace the funds or properties confiscated or forfeited back to the actual proceeds of drug trafficking or properties purchased or derived from such proceeds or properties being used in connection with drug trafficking.  To borrow a concept which may be more familiar to a civil practitioner, the amount to be confiscated or forfeited can loosely be regarded as being akin to a debt assessed by reference to the values of these subject matters.  Once this is appreciated, Mr Bruce’s submission regarding the sum of US$1.937 million cannot be sustained.

73.Secondly, the subject matters within subsection (a) extends far beyond the actual proceeds of drug trafficking which is covered by sub-subsection (i).  Sub-subsection (ii) extends to property derived or realised, directly or indirectly, from such proceeds.  And such properties could, over the years, appreciate in values substantially.  Sub-section (iii) extends to property used or intended to be used in connection with drug trafficking.  It can cover, for example, the buildings, plants and machinery used in connection with drug trafficking.  Thus, the total amount confiscated could be much higher than the actual proceeds of drug trafficking.  Once this is appreciated, Mr Bruce’s submission that US$188.064 million is the maximum sum to be confiscated must be rejected.

74.Though Art. 4 of the Mexican Federal Law Against Organized Crime does cast a wide net, having regard to the above analysis, and taking into account of the impediment to the proper investigation by the Mexican authority caused by the 1^st Defendant’s absence from Mexico, I agree with my Lord that it has not been shown that the learned judge below was wrong to dismiss the applications.

Hon Hartmann JA:

Conclusion

75.For the reasons given, the appeal is dismissed.  Costs are reserved.

Mr Wayne Walsh, Deputy Law Officer and Ms Rebecca Drake, SGC, of the Department of Justice, for the Plaintiff/Respondent

Mr Andrew Bruce SC, instructed by Angela Wang & Co. for the 1^st and 2^nd Defendants/Appellants