Re Yeung Ka-sing Carson and Others

CACV 8/2012 & HCMP 2595/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 8 OF 2012 AND

MISCELLANEOUS PROCEEDINGS NO. 2595 OF 2011

(ON APPEAL FROM HCMP NO. 1254 OF 2011)

____________

IN THE MATTER of
The Organized and Serious Crimes Ordinance (Cap. 455)

and

IN THE MATTER of

Before: Hon Tang VP and Fok JA in Court

Date of Hearing: 15 May 2012

Date of Judgment: 28 May 2012

____________

JUDGMENT

____________

Hon Tang VP:

1.On 29 June 2011, Mr Carson Yeung Ka-sing (the 1^st Respondent) was arrested for and charged with 5 counts of "dealing with property known or believed to represent proceeds of indictable offence" under section 25(1) and (3) of the Organized and Serious Crimes Ordinance (Cap 455) ("OSCO").  5 bank accounts were involved, they are:

	Account No 020-606-202-2754-2 in Wing Lung Bank Limited ("Wing Lung Bank")
	Amount	HK$347,310,098
	Account No 020-606-000-7770-9 also with the Wing Lung Bank
	Amount	HK$254,303,959
	Account No 062-0-082719 with Hong Kong and Shanghai Banking Corporation
	Amount	HK$31,188,121
	Account No 020-606-000-8325-0 with the Wing Lung Bank
	Amount	HK$6,659,000
	Account No 020-606-202-4941-0 with the Wing Lung Bank
	Amount	HK$81,826,428
	Total Amount involved	HK$721,287,606

2.The first 3 accounts are in the name of the 1^st Respondent.  The 4^th and 5^th accounts are in the name of his father, Yeung Chung, the 2^nd Respondent.  It is the prosecution's case that the 1^st Respondent controlled these accounts as well.

3.The charges covered the period between January 2001 and December 2007.

4.On 30 June 2011, an arrest warrant was issued against the 2^nd Respondent, who apparently had left Hong Kong for the Mainland on 8 July 2008, and had not returned to Hong Kong.  His whereabouts is unknown. 

5.On 6 July 2011, on an ex parte application by the police V Bokhary J

(i)ordered that the Respondents must not:

(a)  remove from Hong Kong any of the property which is located in Hong Kong, whether in their own names or not, and whether solely or jointly owned; and

(b)  in any way dispose of, or deal with, or diminish the value of any of the properties, which is located within Hong Kong or outside Hong Kong, whether in their own names or not, and whether solely or jointly owned. 

(ii)  made charging orders in relation to a house at Barker Road registered in the name of Success Orient Investment Limited, the 4^th Respondent, which was said to be controlled by the 1^st Respondent, and a flat at Breezy Path, which was jointly owned by the 1^st Respondent and his wife, the 3^rd Respondent. 

6.The order of 6 July 2011 was varied on 29 July 2011, and the order of 6 July 2011 as varied will hereinafter be referred to as the Order.

7.The 1^st and 4^th Respondents applied by summons dated 22 August 2011 for an order that the Order be discharged on, inter alia, the grounds

"(1) there had been material non-disclosure; and

(2) there is no reasonable cause to believe that the Respondents have or had benefited from a or any specified offence."

8.Alternatively, that the Order be varied, so that the amount caught by the Order is limited to such an amount as the court thinks just in all the circumstances.

9.This summons was heard before V Bokhary J on 30 November 2011.  At the conclusion of the hearing (which had occupied the entire day) the learned judge dismissed[1] the Respondents' application and said:

"1. It is important to take care to avoid saying anything that might prejudice future proceedings in this case.  It is possible to avoid doing so because each side's arguments are outlined in its written skeleton submissions and supplemental submissions.  I do not propose to recite or summarise those submissions or anything which either leading counsel said in the course of oral arguments.

2.On the question of whether the restraint order should be discharged, I accept the Secretary for Justice's arguments.  I also accept the Secretary for Justice's arguments on the question of whether a cap should be placed on the extent of the assets to be frozen by the restraint order.  Therefore I dismiss the application for discharge and I dismiss the application for capping."

10.By a summons filed on 15 December 2011, the 1^st and 4^th Respondents applied to this Court for leave to appeal.  The Draft Notice of Appeal attached to the summons dated 14 December 2011 contained 6 grounds.

11.On 4 January 2012, Tang VP gave leave to appeal in relation to the 6^th ground, namely, that, even if the Order were to be continued, the learned judge should have imposed, but failed to impose, a cap on the extent of the assets of the 1^st and 4^th Respondents to be frozen.

12.Tang VP directed that the appeal and the oral hearing for leave in relation to the other grounds of appeals should be heard on the same occasion; and that if leave in relation to the other grounds or some of them were granted, the appeal would be heard on the same occasion.

13.The hearing took place before us on 15 May 2012. The 1^st and 4^th Respondents were represented by Mr Philip Dykes, SC, together with Mr Jose Antonio-Maurellet & Mr Adrian Lai.  The Secretary for Justice was represented by Mr Adrian Bell, SC and Ms Denise Chan, SPP.

14.Mr Dykes' oral submission before us concentrated on material non-disclosure and the failure to impose a cap.  Mr Dykes also submitted that the reasons given by the learned judge were inadequate.

Capping

15.According to the 1^st and 4^th Respondents, the maximum amount which should be subject to the Order is HK$452,725,143[2]. Mr Dykes explained that the practical consequence of capping the Order is that assets in excess of the cap should be free of any restraint and released to these Respondents.

16.According to Mr Bell, the police's latest estimated value of the identified realizable assets is about HK$500 million.  It appears that the bulk of such value is in the house at Barker Road, which has a market value of HK$353 million (as at 23 September 2011)[3]. The other property is a flat at Breezy Path, purchased in the joint names of the 1^st and 3^rd Respondents, purchased on 25 July 1996 for HK$5,346,660, valued at HK$8.6 million at 24 January 2011 and HK$8.9 million as at 23 September 2011.

17.The power to make restraint orders and charging orders can be found in sections 15 and 16 of OSCO respectively.  Section 19(2) states that the powers to make such orders:

"… shall be exercised with a view to making (realisable property) available for satisfying (a future) confiscation order …".

18.However, as The Proceeds of Crime (3^rd ed) (Millington and Sutherland Williams) explains:

"2.49    … 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. …"

19.The learned authors went on to say because restraint orders are often obtained at an early stage of an investigation or prosecution,

"… the prosecutor must be entitled to some latitude during the early stages of a case because it may not be possible to quantify the full extent of the defendant's benefit. …"

20.Confiscation of proceeds of crime is dealt with in Part III of OSCO.  For the present purpose, it is sufficient to state that under section 8 the court may, in the event of conviction, order the 1^st and/or 4^th Respondents to pay the amount of the benefit which they or either of them had obtained from any of the specific offences.  For the purpose of OSCO, a person has benefited from the specified offence if he has at any time received any payment or reward in connection with the commission of the offence.  (Section 2(8))  Also under section 2(6):

"(a) a person's proceeds of an offence are-

(i) any payments or other rewards received by him at any time … in connection with the commission of that offence;

(ii) any property derived or realised, directly or indirectly, by him from any of the payments or other rewards; and

(iii) any pecuniary advantage obtained in connection with the commission of that offence;"

21.However, if the proceeds of an offence had been invested in an asset or had contributed to the purchase price of an asset, and the asset had increased in value, the accretion in value is a benefit which is liable to confiscation. 

22.In para 15 above, I mentioned that according to the 1^st and 4^th Respondents, the maximum amount to be restrained should be HK$452,725,143, and not HK$721 million.  Mr Dykes submitted that the amount of HK$721 million is incorrect, because this sum has included various items which by their nature could not be regarded as payment or other reward in connection with the commission of an offence under section 2(8) and therefore should be excluded.  Mr Dykes relied on the following calculation:

23.Mr Dykes further submitted that even if he is wrong about the exclusion of "(5) Deposits resulting from R1's investment", the maximum should only be HK$491,694,357.

24.I will not decide whether any of these items should be disregarded for the purpose of section 2(8).  I will assume so in favour of these Respondents.  But it does not follow that the confiscation order should be limited as a result. 

25.The 1^st Respondent has disclosed by his 5^th affirmation various BVI companies as well as debts owed to him.  I agree with Mr Bell that if at the confiscation proceedings, the trial judge, having considered all available evidence adduced at trial and information produced at that stage, found that the assets of the BVI companies and other debts owed to the 1^st Respondent were contributed to by the 1^st Respondent's proceeds of the specified offence charges, the trial judge will be entitled to regard their updated aggregated value as the benefit to the 1^st Respondent.  That new amount, which cannot be quantified at the present stage, could be greater than the amount quantified under the charges, and this greater amount could be the amount ordered against the 1^st Respondent under the confiscation order.  The same is true in relation to the charged properties.  For example, the Barker Road property carries an updated value of HK$353 million although it was purchased for HK$146 million[4].  In the event of confiscation proceedings the amount to be confiscated may be increased by the accretion in value since its purchase.

26.Re K [2006] BCC 362, a decision of the English Court of Appeal provides an illustration.  There, the Court of Appeal upheld an order refusing to make a limited order because according to the judge:

"… At the moment, it is quite impossible to say what that figure is, …"[5]

27.Laws LJ said at page 369:

"33. … In our judgment, it would have been artificial for the judge to conclude that the realisable assets were to be treated as strictly limited to the ill-gotten gains that were expressly demonstrated."

28.For the reasons stated above, I do not believe this is a case where the learned judge could be faulted for not imposing a cap.

29.Of course, even in the absence of a cap, the Respondents are entitled to, and indeed have applied for payments out of the assets seized for living and legal expenses.  Any hardship caused by the Order could be ameliorated[6].

Lack of Reasons

30.Mr Dykes also submitted that the reasons given by the learned judge were inadequate and that the parties had been left in real doubt about her reasons. 

31.Mr Dykes has referred us to Flannery and Another v Halifax Estate Agencies Ltd [2000] 1 WLR 377.  There, the English Court of Appeal regarded as inadequate, where in determining a conflict of reasoned expert opinion, the trial judge simply stated:

"I have had the advantage not only of hearing the various witnesses give evidence but also of seeing the way in which they reacted to the questions that they were asked.  Having done so, I prefer the expert evidence that was given for the defendants to that which was given for the plaintiffs. …"[7] 

32.As Li CJ said in Oriental Daily Publisher Ltd v Commissioner for Television and Entertainment Licensing Authority [1997-98] 1 HKCFAR 279 at 290J-291A,

"… What would amount to adequate reasons for a decision would depend on the context in which the decision maker is operating and the circumstances of the case in question."

33.That explains, why, for example, in Flannery, Henry LJ when giving the judgment of the Court also said:

"… when the court, in a case without documents depending on eye-witness accounts is faced with two irreconcilable accounts, there may be little to say other than that the witnesses for one side were more credible …"[8]

34.Here, V Bohkary J had had the benefit of substantial written submissions as well as oral submissions which had occupied an entire day.  The issues were clear cut.  Her reasons were delivered immediately after the hearing.  Whilst I would have preferred fuller reasons, I cannot agree with Mr Dykes that the parties had been left in any real doubt about her reasons.

35.In any event, I do not think the Respondents have been prejudiced by the absence of fuller reasons.

Material non-disclosure

36.Mr Dykes submitted that the Order ought to have been discharged because of material non-disclosure. 

37.Detective Senior Inspector Lam Cheuk Ho ("DSI Lam") in his 1^st affirmation dated 5 July 2011, made in support of the ex parte application, said that an expert, Mr Roderick John Sutton ("Mr Sutton"), had been appointed to prepare a forensic accounting report and opine whether the funds flows of the 5 bank accounts bear any hallmark of money laundering.  DSI Lam then said:

"30. On 7^th December 2010, Mr. Roderick John Sutton completed the Forensic Accounting Report and identified the following hallmarks of money laundering activities in the five bank accounts of R1 and R2.

30.1 A significant number and value of cash transactions were noted.

30.2 A number of high value cash transactions were conducted through the accounts with no apparent cause.

30.3 The accounts had been used as a repository for funds and funds were transferred out in a very short period of time.

30.4  Cash was deposited into the accounts to cover requests for cashier order to hide the real source of funds.

30.5  Multiple bank transfers within a day to conceal the significance of the total value involved in the transaction.

30.6  Cash was deposited to the accounts and then transferred to securities firms to hide the real source of funds.

30.7  The accounts show significant deposits received, however, the income declared in the tax returns is not commensurate with the deposits received."

38.It was on such basis that the police applied for and obtained the order of 6 July 2011.

39.Mr Sutton's report[9] (Mr Sutton's report) was not exhibited to the 1^st affirmation.  It was only disclosed by the 2^nd affirmation of DSI Lam filed on 19 July 2011, in response to a request from disclosure made on 14 July 2011 by Ong & Chung (solicitors for the Respondents).  Mr Dykes submitted that Mr Sutton's report should have been produced in the 1^st affirmation.

40.Mr Bell submitted that the opinions of Mr Sutton had been succinctly and accurately set out in DSI Lam's 1^st affirmation.  He has reminded us that in the National Bank of Sharjah v Dellborg and Ors (The Times Law Reports, 24 December 1922), Lloyd LJ said that there was a confusion of the obligation to disclose material facts on the ex parte application with the obligation to give discovery of relevant documents in the course of preparation for the trial, the place to disclose the facts, both favourable and adverse, was in the affidavit and not in the exhibits, although it would usually be convenient to exhibit a few key documents where it was necessary to do so to explain the case.  But the tendency to overload the case at the ex parte stage and to burden the judge with masses of documents in case something was left out ought to be firmly resisted.

41.Mr Dykes did not accept that Mr Sutton's report had been succinctly and accurately summarised by DSI Lam.  Mr Dykes submitted that had Mr Sutton's report been produced the learned judge would have noticed that Mr Sutton's report was a qualified one.  Indeed, Mr Mark Pulvirenti, an expert for the Respondents, said in his report dated 22 August 2011 that throughout Mr Sutton's report, he acknowledged:

"… the lack of information/documentation available to him on 33 occasions."[10]

42.Mr Pulvirenti listed all 23 occasions.  The following is sufficient to illustrate Mr Pulvirenti's point:

"(i)  '... the Police are unable to provide me with all the information related to the case at this stage.' (FTI Report, Section 2.1.4)

(ii)   'I understand from the Police that the banks have not provided the supporting documents (e.g. pay slips, withdrawal slips, debit notes etc) for certain transactions.' (FTI Report, Section 2.3.4)

(iii)  '... Police have not requested the missing information from the banks at this stage.  I therefore make my conclusions based on the available information.' (FTI Report, Section 2.3.5) (my emphasis)

(iv)  'I have not been provided with all the information in relation to the case.' (FTI Report, Section 2.4.1)

(v)   'Without all the information, my report will not be able to cover all aspects of the money laundering activities conducted in the Subject Bank Accounts by the Related Individuals [R1/R2], if any.' (FTI Report, Section 2.4.2) (my emphasis)

(vi)  'Should I be provided with further documents and information at a later stage, I reserve the right to amend my opinion, if necessary.' (FTI Report, Section 2.4.4)"

43.In Mr Sutton's supplemental expert report of 26 October 2011, he responded to the report of Mr Pulvirenti in some detail.  I would note, in particular, the following statements:

"5.1.7   Mr Pulvirenti asserts that, before concluding whether a transaction recorded in the Subject Bank accounts can be described as 'suspicious' or 'unusual', one must have access to all evidence in the matter (para 4.2.9 above).  This ignores the basic premise in money laundering activities that cash transactions by their nature limit or restrict the ability to trace the funds to the original source."

5.1.8    The principal purpose of money laundering is to conceal or disguise the illicit or illegal source of funds, so as to leave little or no audit trail. …"

44.Mr Sutton went on to say:

"5.1.20     I remain of the opinion based on my analysis that certain transactions in the Subject Bank Accounts bare the hallmarks of money laundering.  Mr Pulvirenti's report does not change my view."

45.I also note that in Mr Sutton's report Mr Sutton had said:

"Despite the above missing information, I am of a view that there are certain hallmarks of money laundering activities in the Subject Bank Accounts as follows: …"[11]

46.Having read Mr Sutton's report[12] carefully.  I cannot agree that his report was a qualified one, I also believe DSI Lam had provided a sufficiently accurate summary of Mr Sutton's report.  The production of Mr Sutton's report would not have assisted the learned judge.  It would not have advanced or undermined the prosecution's case.  I am of the view the failure to produce his report cannot be regarded as material non-disclosure. 

Duty of the Applicant

47.We were told that in the ex parte application before V Bokhary J no skeleton submission was supplied.  That is not satisfactory.  Except in cases of the utmost urgency, an ex parte mareva injunction would be supported by a skeleton submission.  The prosecution should do no less.  Draconian orders under OSCO should not be regarded as routine.  The prosecution should held the words of Hughes LJ in In re Stanford International Bank Ltd (CA) [2011] Ch 33 at 109:

"191.  Whilst I respectfully agree with the view expressed by Slade LJ in Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350 that it can be all too easy for an objector to a freezing order to fall into the belief that almost any failure of disclosure is a passport to setting aside, it is essential that the duty of candour laid upon any applicant for an order without notice is fully understood and complied with.  It is not limited to an obligation not to misrepresent.  It consists in a duty to consider what any other interested person would, if present, wish to adduce by way of fact, or to say in answer to the application, and to place that material before the judge.  That duty applies to an applicant for a restraint order under POCA in exactly the same way as to any other applicant for an order without notice.  Even in relatively small value cases, the potential of a restraint order to disrupt other commercial or personal dealings is considerable.  The prosecutor may believe that the defendant is a criminal, and he may turn out to be right, but that has yet to be proved.  An application for a restraint order is emphatically not a routine matter of form, with the expectation that it will routinely be granted.  The fact that the initial application is likely to be forced into a busy list, with very limited time for the judge to deal with it, is a yet further reason for the obligation of disclosure to be taken very seriously.  In effect a prosecutor seeking an ex parte order must put on his defence hat and ask himself what, if he were representing the defendant or a third party with a relevant interest, he would be saying to the judge, and, having answered that question, that is what he must tell the judge.  This application is a clear example of the duty either being ignored, or at least simply not being understood.  This application came close to being treated as routine and to taking the court for granted.  It may well not be the only example."

Other arguments

48.Although Mr Dykes, in his written submissions, also relied on other arguments, for example, that the application amounted to an abuse of process, or that there is really no serious question to be tried, he had not in my view, rightly, pressed those points in his oral submissions. 

Disposition

49.For the above reasons, I would dismiss the appeal, and refuse leave to appeal.  I will also make an order nisi that the prosecution should have the cost of this application, with certificate for two counsel.

Hon Fok JA:

50.I agree with the judgment of Tang VP and there is nothing further I wish to add.

Mr Philip Dykes, SC, Mr Jose Antonio-Maurellet & Mr Adrian Lai instructed by Ong & Chung for the 1^st & 4^th Respondents

Mr Adrian Bell, SC instructed by and Ms Denise Chan, SPP of Department of Justice for the Secretary for Justice

[1] She also refused leave to appeal on 1 December 2011.

[2] At para 22 below I will deal with this in greater detail.

[3] The Barker Road House was purchased by the 4th Respondent on 7 February 2005 for HK$146,000,000.  As at 24 January 2011, its market value was $288 million.  It appears that the 1st Respondent had taken out some loans (about $80 million) in respect of this property in March 2011, so its net value, may be lower.

[4] I will not consider, for the present purpose, whether the encumbrances created over this property (as to which see footnote 3 above) should be disregarded or not.

[5] para 28 at 368

[6] I understand that these proceedings have not proceeded. 

[7] At page 380B

[8] At page 381D

[9] dated 7 December 2010

[10] At para 6.3.2

[11] At para 6.2, Mr Sutton then set out what he called "hallmarks of money laundering activities" which have been faithfully rendered by DSI Lam in para 30 of his 1^st affirmation and quoted in para 37 above.

[12] It is 215 pages long inclusive of annexures.