In a landmark decision handed down by the Court of Final Appeal (“CFA”) on 10 April 2024 in Tam Sze Leung & Ors v Commissioner of Police [2024] HKCFA 8, the CFA unanimously dismissed the appellants’ appeal and upheld the legality and constitutionality of the police practice of issuing “Letters of No Consent” in the context of the Organized and Serious Crimes Ordinance (Cap. 455) (“OSCO”).
The appellants were under investigation by the Securities and Futures Commission (“SFC”) concerning offences involving market manipulation of stocks. The SFC passed on the information to the police who communicated those suspicions to the banks. They requested the banks to file suspicious transaction reports in accordance with their reporting duties, and intimated that they would issue (or consider issuing) LNCs upon their doing so, followed by the banks disabling or “freezing” the appellants’ accounts. The appellants applied for leave to seek judicial review of the police’s decision to issue and maintain the LNCs. The appellants were later arrested and eventually the Secretary for Justice obtained a restraint order against them. The LNCs were thus lifted and the judicial review became academic. Coleman J nevertheless found in favour of the appellants on ultra vires and constitutional grounds. The Court of Appeal allowed the police’s appeal, and the CFA affirmed the same.
Like the Court of Appeal, the CFA placed great emphasis on the statutory framework (the constitutionality of which is not being challenged), namely that (i) a person who deals with property knowing or having reasonable grounds to believe that it represents proceeds of crime commits an offence of money laundering created by section 25(1) of the OSCO, and (i) a person who has knowledge or suspicion that the property concerned represents such proceeds but fails to report such knowledge or suspicion to the police commits an offence under section 25A(1) of OSCO. Under section 25A(2)(a), immunization of criminal liability under section 25(1) is available if there is prior reporting under section 25A(1) and consent of the police is obtained in advance.
In line with the above statutory framework, despite the issuance of the LNCs, no property belonging to the suspect is ever held or seized by the police. It is the bank which maintains the account for the customer and decides whether the customer should be allowed to draw on the suspect funds or whether the account should be disabled. Hence, the disabling or freezing of the accounts was not done by the police, but by the banks in compliance with their own legal duties under OSCO and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), as well as regulatory obligations laid down by the Hong Kong Monetary Authority. The freeze might have been instigated by the police but it represents the bank’s own act, done in compliance with its legal and regulatory duties.
Hence, first and foremost, the CFA held that the actions of the police were lawful. They were not ultra vires, nor did they constitute any misuse of police power, in that the communications with the banks fell within the duties and powers of the police under the Police Force Ordinance (Cap. 232) (“PFO”) to prevent crime and to protect property. Moreover, the ultra vires argument has three flaws: (i) it wrongly presupposes that in the absence of authorization by OSCO the police’s actions are ultra vires; (ii) it mischaracterises the actions of the police as their freezing of the accounts; and (iii) it erroneously assumes that the only lawful means of freezing an account is by obtaining a restraint order under OSCO section 15.
Secondly, the CFA held that the improper purpose ground is misdirected. It wrongly presumes that the police is given a statutory power and misuses it for an improper purpose. However, that is not the case. Section 25A(2)(a) of OSCO is merely concerned with immunising persons who deal with suspicious property where proper disclosure is made. It is not the source of the police powers to communicate suspicion to the banks or issue LNCs, as those powers derive from section 10 of PFO. In any event, the appellants’ argument again involves mischaracterising the actions of the police as freezing the accounts.
Thirdly, as regards the appellants’ constitutional challenge, the CFA emphasised that only if the constitutional right invoked is engaged, does one need to go on to consider legal certainty, proportionality and remedies. In this case, since the “freezing” or continued “freezing” remains the bank’s doing and the police’s acts did not prevent the appellants from using the property and thus did not infringe their protected rights, articles 6 and 105 of the Basic Law are simply not engaged. On this ground alone, the constitutional challenge based on property rights cannot be sustained. The CFA nevertheless went on hold that, even if they were wrong on this, the police’s actions are “prescribed by law” and they are not disproportionate. The CFA further held that neither the right to private and family life under BOR14 nor fair hearing rights under BOR 10 or common law are engaged.
Fourthly, the CFA held that the appellants’ challenge is clearly academic and superseded by the restraint order, particularly where the appellants are given full access to the court but failed in their application to prevent extension of the restraint order’s validity.
Last but not least, the CFA did not find it necessary to deal with the necessity and proportionality of the impugned police actions in the context of the Interush decision. For one thing, the appellants do not seek to make the “full frontal” argument that sections 25(1) and 25A of OSCO are in themselves unconstitutional, unsuccessfully advanced in Interush. For another, Interush proceeded on a quite different analysis, and the so-called “full frontal” challenge arose because the police’s practice involving the use of LNCs was treated as being based on section 25A(2)(a), whereas the CFA adopted a very different approach here. That said, the CFA did question the apparently self-conflicting reasoning in Interush, namely that the LNC did not by itself freeze the accounts and yet the LNC somehow engaged property right, which the CFA considered not easy to follow.
Jenkin Suen SC instructed by the Department of Justice, acted for the Commissioner of Police in both the Court of Final Appeal and the Court of Appeal.
The full judgment of the Court of Final Appeal is accessible here: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=159306&currpage=T
The full judgment of the Court of Appeal is accessible here: https://legalref.judiciary.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=151894&QS=%28%7BTam+Sze+Leung%7D+%25parties%29&TP=JU
