|
CACV 230/2015
[2019] HKCA 70
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 230 OF 2015
(ON APPEAL FROM HCAL NO. 167 OF 2014)
________________________
| |
IN THE MATTER of an application by the applicant for leave to apply for judicial review by INTERUSH LIMITED AND INTERUSH (SINGAPORE) PTE LIMITED pursuant to Order 53, rule 3 of the Rules of the High Court, Cap. 4A |
________________________
|
BETWEEN
|
INTERUSH LIMITED
|
1st Applicant
|
INTERUSH (SINGAPORE) PTE LIMITED
|
2nd Applicant
|
and
|
THE COMMISSIONER OF POLICE
|
1st Respondent
|
THE COMMISSIONER OF CUSTOMS & EXCISE
|
2nd Respondent
|
MAK WING YIP CYRIL,
SUPERINTENDENT OF POLICE
|
3rd Respondent
|
________________________
| Before: |
Hon Cheung, Yuen JJA and G Lam J in Court |
| Dates of Hearing: |
19 and 22 October 2018 |
| Date of Judgment: |
17 January 2019 |
________________________
J U D G M E N T
________________________
Hon Cheung JA :
I. Appeal from judicial review
1.1 The applicants applied by way of judicial review for a declaration that sections 25(1) and 25A of the Organized and Serious Crimes Ordinance (‘OSCO’) (Cap. 455) are unconstitutional for being inconsistent with the protected property rights under Articles 6 and 105 of the Basic Law, access to court rights under Articles 35 and 80 of the Basic Law and Article 10 of the Hong Kong Bill of Rights. They also asked for, among other things, a declaration that the following decisions were null and void and of no legal effect :
1) The 3rd respondent’s decision (made on behalf of the 1st respondent (‘Police’) and 2nd respondent (‘Customs & Excise) not to give consent to Hang Seng Bank, Limited (‘HSB’) to deal with funds in the 1st and 2nd applicants’ accounts with HSB made on 6 November 2013 (the ‘No Consent Decision’).
2) The Commercial Crime Bureau of the Police (‘CCB’)’s continuing decision (made on behalf of the Police and Customs & Excise) to maintain the No Consent Decision (the ‘Continuing No Consent Decision’); and
3) The Joint Financial Intelligence Unit’s (‘JFIU’) and the CCB’s decisions, if any (made on behalf of the Police and Customs & Excise), to withhold consent from HSB and the Bank of East Asia, Limited (‘BEA’) to deal with funds in the 1st and 2nd applicants’ HSB accounts and the 1st applicant’s Merchant Service account with the BEA (the ‘BEA account’).
1.2 Patrick Li J refused the judicial review. The applicants now appeal.
II. Background
2.1 The background of this case has been summarised by the Judge in paragraphs 4 to 14 of his judgment as follows.
2.2 On 1 November 2013, alerted by newspaper coverage, officers of CCB started an investigation into the 1st applicant for promoting an alleged pyramid scheme (‘the pyramid scheme’) contrary to Pyramid Schemes Prohibition Ordinance, Cap. 617 (‘PSPO’).
2.3 The main features of the scheme were the following :
1) The 1st applicant offered cloud based Internet services at a monthly charge of $800.
2) There was an initial membership fee of $390.
3) If a member subscribed to three sets of identical services at $2,400 per month and recruited new members, he might be entitled to monthly bonus up to $234,000.
4) The 1st applicant would pay dividend to members when it was publicly listed in Hong Kong.
2.4 On the same day, BEA suspended the account of the 1st applicant as their investigation since June 2013 revealed that the account might be used in connection with illegal activities.
2.5 On 4 November 2013, further investigation by CCB revealed that a large number of individuals in Mainland China had been arranged to come to Hong Kong and had attended the office of the 1st applicant for registration. According to some individuals interviewed by CCB officers, they only joined the scheme with a view to earning the bonus. They had no knowledge of the underlying services.
2.6 On the same day, HSB had suspicion about the accounts of the 1st and 2nd applicants. HSB filed a ‘Suspicious Transaction Report’ (‘STR’), to the JFIU.
2.7 On 6 November 2013, CCB officers searched the office of the 1st applicant and found about 50,000 completed registration forms. Five members of the senior management of the 1st applicant were arrested for the offence of ‘Promoting a pyramid scheme’.
2.8 In the meantime, the JFIU issued a ‘no consent’ letter to HSB covering the accounts of the 1st and 2nd applicants.
2.9 Two days after the search, the Chief Executive Officer of both applicants, Mr MJ Matthews, surrendered to the Police. He was also arrested for the same offence.
2.10 On 6 February 2014, Mr MJ Matthews was further interviewed and cautioned for the offence of ‘Dealing with property representing proceeds of an indictable offence’.
2.11 Financial analysis revealed that between 2012 and 2013, there were 2,040 deposits totalling HK$680 million and 1,926 withdrawals totalling HK$497 million through the accounts of the 1st applicant held in HSB. The majority of the sources and destinations of these transactions were outside Hong Kong.
2.12 On9April2015, a restraint order was granted against the accounts of both applicants in HSB and Bank of America.
2.13 The Judge elaborated on the suspension of the BEA and HSB accounts as follows :
‘ 40. For BEA, they had signed merchant agreements in March 2010 with the 1stapplicant which set out the rights and obligations of the parties. Since January 2013, BEA noticed sharp increase in the balance of the accounts of the 1st applicant. Staff of BEA sought to meet the 1st applicant to ascertain the reasons for this growth but with limited progress. On 1 November 2013, BEA noticed the newspaper coverage. It suspected that there might be a pyramid scheme. It decided to suspend the account of the 1st applicant on the ground that there were breaches of the merchant agreements.
41. On 2 July 2014, BEA terminated the merchant agreements and withheld the balance in the accounts of the 1st applicant. BEA also made a report to the police.
42. In the case of HSB, the accounts of both applicants were opened in 2007. Detailed terms and conditions were set out in the Integrated Business Solution accounts agreements.
43. On 1 November 2013, HSB noticed the newspaper coverage which triggered off their internal investigation into the accounts of the 1st applicant. HSB suspected that the 1st applicant was involved in a pyramid scheme. HSB found that from August 2013 to October 2013, there were huge sums deposited into the 1st applicant’s account and substantial transfer out to the account of a company overseas. During this period, the account of the 2nd applicant was inactive.’
2.14 The Judge also referred to the evidence produced by the Police that there were about 49,000 applicants for membership of the scheme. They were from different provinces of China. The main ones were Guangdong, Guangxi and Zhejiang.
2.15 The Judge also recorded that Mr MJ Matthews was formally charged with ‘Conspiracy to deal with property knownor believed to represent proceeds of indictable offence’ contrary to section 25(1) on 31 March 2015. It is common ground that he was acquitted on 31 May 2017 after trial.
2.16 The applicants had on 7 July 2014 commenced civil proceedings against HSB and BEA in HCMP 1626/2014. The proceedings are currently stayed by the parties’ own agreement pending the outcome of this appeal.
III. The Statutory Regime
1) Organized and Serious Crimes Ordinance
3.1. Section 25(1) of OSCO creates the offence of dealing with property known or believed to represent proceeds of crime, commonly known as the ‘money laundering’ offence :
‘25. Dealing with property known or believed to represent proceeds of indictable offence
(1) Subject to section 25A, a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.’
3.2 Section 25A(1) and (7) creates an offence where a person fails to disclose suspicious transactions relating to property known or believed to represent proceeds of crime. Section 25A(2)(a) provides a defence for that person to continue dealing with those proceeds when an authorised officer has given his consent (‘the consent regime’) :
‘ 25A. Disclosure of knowledge or suspicion that property represents proceeds, etc. of indictable offence
(1) Where a person knows or suspects that any property—
(a) in whole or in part directly or indirectly represents any person’s proceeds of;
(b) was used in connection with; or
(c) is intended to be used in connection with,
an indictable offence, he shall as soon as it is reasonable for him to do so disclose that knowledge or suspicion, together with any matter on which that knowledge or suspicion is based, to an authorized officer.
(2) If a person who has made a disclosure referred to in subsection (1) does any act in contravention of section 25(1) (whether before or after such disclosure), and the disclosure relates to that act, he does not commit an offence under that section if—
(a) that disclosure is made before he does that act and he does that act with the consent of an authorized officer; or
....
(7) A person who contravenes subsection (1) commits an offence and is liable on conviction to a fine at level 5 and to imprisonment for 3 months.’
3.3 Section 15 of OSCO empowers the Court of First Instance to impose a restraint order on application by the prosecutor prohibiting any person from dealing with any realisable property.
3.4 Section 29 of OSCO deals with compensation. It provides, among other...
| 
