Courts function best when genuine cases are filed, logical decisions are made, and clear, concise judgments are issued.
But the Hong Kong legal system has unfortunately caught a worrying habit associated with the west’s human rights industry: the appearance of “confected” (elaborately constructed) cases or judicial reviews based on a legal point that is not only obscure, but is often political in nature – and usually goes on for scores of pages.
One such case ended up seeming to create difficulties for police investigating serious crime. In other, phantom issues raised in a money laundering case created a legal nightmare.
But many such examples leave us with a question: Why are people spending money on lawyers to handle these complex cases when they literally nothing to gain?
Henry Litton reviews cases illustrating this problem.
FAR TOO OFTEN, courts rush in to deal with confected legal issues before the underlying facts are properly understood. This is a weakness in the court process which the human rights industry has only too readily learned to exploit.
One approach is to turn the Basic Law into a weapon of mass destruction, to attack established public institutions. This malevolent process first began some 20 years ago and became more extreme as time went on.
One example is the Court of Final Appeal’s judgment in Hysan Development Co Ltd v Town Planning Board which overturned the long-established balance between private property rights over land and the common interest in the use of such land. It did this by an artificial interpretation of Articles 6 and 105 of the Basic Law: the terms of which will be set out later on.
For present purposes, the question posed is this: Has the court’s leaning gone so far as to allow confected legal arguments concerning private property rights to prejudice police investigation into serious organised crime?
The case in question is Tam Sze Leung & 3 Others v Commissioner of Police [ HCAL 191/2021 ] which concerned an investigation involving the processes in Part V, sections 25(1) and 25A of the Organised and Serious Crimes Ordinance, Cap 455.
Those constitute the statutory framework under which arrangements are made between the police and the banks in relation to money and assets held by suspects in bank accounts, at an early stage of an investigation.
The arrangements as such came under attack in purported violation of Articles 6 and 105 of the Basic Law, in judicial review proceedings brought by the suspects against the Commissioner of Police. It ended in a voluminous judgment from Coleman J (79 ages).
The applicants were four family members, suspected of market manipulation by the Securities and Futures Commission, engaged in the practice called “pump and dump”. The matter was taken up by the police.
In February 2021 the applicants sought leave ex parte in the High Court to bring proceedings against the Commissioner of Police. The statutory form which initiated that process – Form 86 – comprised “over 60 pages of closely typed description and argument”, according to Coleman J who eventually dealt with the case at an inter partes hearing in October 2021. Form 86, setting out the grounds for application and the reliefs sought, should not have taken up more than one sheet of A4 paper, “closely typed” or not.
There were, according to Coleman J, six grounds of review to be gleaned from Form 86. That, alone, is astonishing. If there was one good and valid ground, why were five more necessary? There, staring the judge in the face, was abuse of process; but he nevertheless soldiered on, complaining at the same time in these terms ( para 9 ):
“The recent culture in the context of judicial review proceedings for there to be excessive prolixity and complexity, in what are supposed to be concise grounds for judicial review, are as often as not serves to conceal rather than illuminate the essence of the case being advanced”.
“Conceal rather than illuminate” indeed! It is no wonder that the judge got into such a muddle.
In the result he held: ( a ) that s. 25(1) and 25A did not authorise the police to make those practical arrangements: the police acted “improperly” and ultra vires: that is to say, beyond their lawful powers, and ( b ) those arrangements violated Articles 6 and 105 of the Basic Law in that they were not “prescribed by law” and were “disproportionate”.
But the judge was unable to formulate an appropriate order in consequence of his findings. The matter was left to further submissions by counsel, resulting in the determinations set out above.
JUDGE’S DETERMINATIONS QUASHED
The respondent took the matter to the Court of Appeal, where the judge’s determinations were quashed. Not one of the six “grounds” for judicial review as confected by counsel justified Coleman J’s intervention. The 79-page judgment came to nothing.
MONEY LAUNDERING
Money-laundering is a process used by organisers of serious crime to hide their proceeds of crime. This is done by filtering those proceeds through accounts held by proxies in banks and other financial institutions. It is a worldwide problem. The UN Office on Drugs and Crime estimates the amount of money laundered globally is 2-5% of world GDP; that is, US$800billions to US$2trillions annually.
To combat this menace, most developed countries have adopted means similar to Part V of Cap 455. In essence, these enlist the cooperation of banks and other financial institutions by ( 1 ) requiring them, when they “know or suspect” that assets held in an account represent the proceeds of crime, to disclose that knowledge or suspicion to an authorized officer and ( 2 ) criminalise those institutions if, having such knowledge or suspicion, they deal with those proceeds without consent from the authority.
LIAISON PROCESS
Sometimes, the process begins with the police contacting the bank when, from external sources, they have reason to believe that there were suspicious accounts held by that bank. The bank is invited to lodge a suspicious transaction report ( STR ). Sometimes, the process is initiated by the bank itself making an STR to the authority.
As part of the mechanism in its investigative process, the Hong Kong police have set up a unit called the Joint Financial Intelligence Unit ( JFIU ) to work with the banks. The head of that unit is an “authorised officer” for the purposes of disclosure under s.25A of the Ordinance.
The relationship between a bank and the JFIU is a delicate one. Their priorities differ. As regards the police, their focus is on the criminals involved; perhaps a kingpin overseas, operating behind a local account holder, acting as his proxy. But for the bank, its main concern would be the contractual relationship with its customer.
At the beginning of an investigation, the bank would have far more knowledge of an account holder’s business than the police, who have no access to the bank records concerning the customer. When the police receives an STR from the bank, its action will vary, depending on the circumstances.
Even if its suspicions are confirmed it may, for operational reasons, consent to the account being operated. As the judge said ( para 53 ) “the consent regime gives the police operational freedom to grant relief from criminal liability in circumstances where it is considered to be in the interests of law enforcement to do so, such as avoiding a suspected criminal becoming aware of the suspicions, or permitting a controlled transfer to take place so that funds can be traced for investigative purposes.”
But the bank is in a different position. It has contractual obligations to the customer. At the same time it may incur criminal liability under Part V of Cap 455 if it dealt with the money in the account without consent from the authority, such as transferring it overseas on the instructions of the customer. So an informal arrangement is set up whereby “consent” is given, thus relieving the bank from the possibility of criminal liability, until such time as a “letter of no consent” ( LNC ) is received.
How the bank might then react would, again, depend on the circumstances. It may not necessarily suspend the account. The management might take the view that the police is mistaken; that the customer is a highly respectable person; or it is a case of mistaken identity. Cap 455 makes provisions for compensation to be paid where the suspect is ultimately acquitted: s. 29.
By its very nature, an investigation is an ongoing process; one clue may lead to another. It is difficult to see where there is room for judicial intervention. But in Tam Sze Leung the judge rushed in, purportedly to deal with “issues of real public importance” ( para 37 ) without fully understanding the underlying facts. He chased after phantom issues confected by counsel, creating a legal nightmare as a result.
POLICE INTERNAL GUIDELINES
To assist officers involved in these arrangements, the police has internal guidelines called “No Consent mechanism in respect of Property held by Financial Institutions”, part of Force Procedures Manual. Every LNC must be reviewed monthly by the Superintendent in charge of the JFIU; and after three months by a higher officer. Before the expiry of six months the relevant file must be submitted to the Department of Justice to see if, for instance, charges should be laid, or a restraint order under s. 15 of the Ordinance sought from the court, thus terminating in effect the LNC arrangement. Unless there were exceptional circumstances the LNC would lapse after six months, and the JFIU would send out a consent letter to the financial institution.
These guidelines ensure that relations between the police and the banks run smoothly. But they came under detailed analysis in the judgment, dealing with argument and counter-argument by counsel, as if they somehow imposed legal obligations on the police, muddying the waters.
‘COMMISSIONER’S POWER TO FREEZE FUNDS’
The judge repeatedly used the expression “No Consent Regime”, with emphasis on the word “Regime”, investing the informal arrangements between the banks and the police with legal consequences which they simply cannot bear. Out of the mountain of irrelevancies, the judge took the “challenge” brought by the applicants as being “two main public law concerns, being ( 1 ) the true extent of the Commissioner’s powers to freeze funds held at banks, outside the statutory regime providing for obtaining restraint orders granted by the High Court, and ( 2 ) the sufficiency of safeguards over any such powers” ( para 40 ).
He spoke of the Commissioner exercising a “secret, informal and unregulated asset freezing power”.
But the simple truth is that the police is not exercising power to “freeze” an account when it issues an LNC. It is not exercising power of any kind. It is simply giving a warning to the bank. If operation of the account is stopped, it would be the bank that did the “freezing”. In fact, banks often have written agreements which allow them to suspend the operation of an account to protect their own interests, without notification from the police.
Take, for instance, para 78 of the judgment where the judge spoke of the “unregulated asset-freezing power which the Commissioner now asserts he enjoys under s.25A …”.
It is difficult to see where such alleged “assertion” comes from.
As the Court of Appeal said:
“The freezing of the account is by the financial institution itself” ( para 60 ), quoting Cheung JA in an earlier case Interush v Commissioner of Police where he said that an LNC “does not by itself freeze the accounts”.
From this one fundamental error came the six so-called grounds of challenge confected by counsel.
Articles 6 & 105 Basic Law
Article 6 says “The HKSAR shall protect the right of private ownership of property in accordance with law”.
It is impossible to see how this general statement of principle – which underpins the “capitalist system and way of life” in Article 5 – can have the least relevance in this case.
Article 105 elaborates on Article 6. It says:
“The HKSAR shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property.
Such compensation shall correspond to the real value of the property concerned at the time and shall be freely convertible and paid without undue delay.
The ownership of enterprises and the investments from outside the Region shall be protected by law”.
It is absurd to suggest that, in regard to the sending out of an LNC, Articles 6 and 105 were engaged; and, being engaged, rendered unlawful the arrangement between the police and the banks in implementing the statutory scheme in s. 25(1) and 25A of the Ordinance.
FUTILITY OF THE PROCEEDINGS
The applicants lodged their Form 86 on 18 February 2021, challenging the issue of LNCs on six grounds as mentioned earlier. On 4 March, the applicants were arrested, and released on bail. In April production orders obtained by the police and served on various institutions yielded over 10,000 pages of bank and trading records. On 11 October the High Court issued a restraint order relating to the bank accounts in question. Following this, the police lifted the LNCs on 12 October.
When the matter appeared before Coleman J inter partes, a week later, on 19 & 20 October 2021it was as stale as an hundred-year-old egg. The Tam family had no conceivable interest in whether the LNCs were “legal” or not. As the Court of Appeal said ( para 41 ): “It would be pointless for the court to quash the LNCs or the decision to issue them or the refusal to consent to the withdrawal of funds, which were among the orders sought in the Form 86”.
The matter had become purely academic. Yet the judge persisted in dealing with the issues raised in Form 86. Why? Because they were, he said, “issues of real public importance”.
The Tam family were interested in resolving “issues of real public importance”? That is nonsense.
What would have been of real public importance is for the High Court to be mindful of its responsibilities to the community at large, to protect Hong Kong’s public institutions from confected attack by lawyers. The six grounds put forward by counsel were untouched by reality on the ground, unaffected by the tug of discipline and the pull of consequence.
The Chief Justice, in his speech at the formal Opening of the Legal Year, spoke of the doctrine of precedent: “Judges not only decide cases, but also create legal precedents”. Interpreting and applying provisions of the Basic Law are important judicial duties, not be undertaken lightly. But here, in the Tam family case, is a High Court judge doing just that without a clear understanding of the facts to which the provisions of the Basic Law applied.
His determinations affected the police and the banks. If he was resolving matters of real public importance, how was it that the banks were not parties to the proceedings?
The precedent he created stood in the statute book for just over a year until quashed by the Court of Appeal.
CULTURE OF COMPLEXITY AND OBSCURITY
Form 86, which initiated the process, “comprised over 60 pages of closely typed description and argument” said the judge: a clear case of abuse of process.
Why did the ex parte judge, who dealt with the matter when the papers were first received, not simply dismiss the application out of hand? And when, contrary to the rules, the matter went inter partes in what was called a “rolled-up hearing” – when the issue was still whether the applicants should be given leave to start proceedings – why did Coleman J assume there were real issues to be argued over by counsel? He said that the applicants’ counsel’s “skeleton submissions” came to 46 pages ( not counting the further 50 pages given in reply ). The Commissioner’s counsel’s “skeleton submissions” ran to 83 pages. How could one expect any light to shine through such a mountain of words?
The Court of Appeal quashed all the judge’s determinations, in – alas – another mega-judgment. Clarity and brevity were not part of the culture.
What is worse is this: on 15 August 2023, the Court of Appeal certified questions to be resolved by the Court of Final Appeal: largely questions raised in the original six issues to be gleaned from Form 86. Take one of the “questions” as an example: “Whether the No Consent Regime operated by the Commissioner and the LNCs issued by the Commissioner……fulfilled the requirements of being prescribed by law”.
This appears to be an about-face from the court’s earlier ruling: that none of the questions could stand scrutiny if, fundamentally, the Commissioner did not exercise power to “freeze” the accounts.
There the matter stands, to be resolved by the CFA. Will the CFA show leadership and go straight to the heart of the matter? Or will it, with wrinkled brow, deal with the “questions” one by one, giving oxygen to confected legal arguments? One can only wait and see.
Lastly, the abiding mystery is this: why do the applicants continue to spend money on lawyers when, clearly, they have nothing whatever to gain from the proceedings, whichever way the matter goes? Will this be of interest to the CFA?
The Honorable Henry Litton was Permanent Judge of the Court of Final Appeal in Hong Kong from 1997 to 2000.
He has written a number of articles reviewing legal themes in Hong Kong law. To see all of them, click here.
Illustration at the top by fridayeveryday.