Case Detail

HCA000025A/1978

No. 25 of 1978

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

_____

BETWEEN
	ATTORNEY GENERAL	Plaintiff
	AND
	LUI LOK alias LUI MO LOK	Defendant

_______

Coram: The Hon. Mr. Justice Hunter.

Dates of Hearing: 26 - 30 March, 2, 3, 5, 6, 9 April 1984

Date of Delivery: 3 May 1984

___________

JUDGMENT

___________

1. On 9th December 1940 the defendant joined the Royal Hong Kong Police Force as a constable. Save for an enforced break during the Japanese occupation, when he returned to his birth place in China, Luk King Village, Hoi Fung, he served continuously until he retired on 16th May 1969. He was then a detective staff sergeant grade I stationed at C.I.D. H.Q. Kowloon. He held the rank of detective staff sergeant for about 11 years before his retirement, having been promoted to this rank in grade II on 1st February 1958 and to grade I on 1st April 1962. On 18th April 1962 he was posted to C.I.D. H.Q. Hong Kong; and on 1st April 1967 to his final position in Kowloon. The Crown now asserts that during his service, more particularly the latter part, and especially during his tour of duty in Kowloon, the defendant was an exceedingly corrupt policeman. This contention is based upon two classes of evidence namely:-

	(1)	Direct evidence from Ng Sik Ho; and
	(2)	Indirect evidence - the inferences the court is invited to draw from the defendant's unexplained wealth.

I shall consider these two classes in turn.

Direct Evidence

2. In 1975 Ng Sik Ho was convicted of conspiring to traffic in dangerous drugs and sentenced to a term of 30 years imprisonment which he is still serving. I have therefore treated him as in effect an accomplice, and looked at his evidence with some circumspection. So viewed, it carried a chilling authenticity, not least with he summed up the effect of his dealings with the defendant in these words: "law did exist: police enforcing it did not: ..... my money did it". I accept his account and in particular that:-

	(1)	On taking up his Kowloon appointment the defendant demanded, and until his retirement received from the syndicate controlled by the witness $1,200 a day in respect of that syndicate's drug store, usually collected by Choi Chun Shing; and $450 a day in respect of the syndicate's gambling business usually collected by Lui King.
	(2)	In return the syndicate received advance information of intended raids upon the premises it controlled to enable avoiding action to be taken and if necessary "opera actors" to be engaged, i.e. persons retained for the purpose of being arrested
	(3)	There were three other major syndicates operating in different areas at this time. The defendant, who was known as the "old chief", exercised considerable control over the operation of all these syndicates, and at one time insisted upon their combining their operations. From this the witness drew the necessary inference, as do I, that the defendant made financial demands upon these other syndicates which were no less than those made upon him.
	(4)	In addition Ng made gifts to the defendant of $30,000 or $40,000 about every other month, in respect of successful importations of drugs. Larger gifts of a similar nature were to his knowledge made by the Ma brothers, i.e. Ma Sik Yu and Ma Sik Chun.

3. I have no hesitation in finding that the defendant was totally corrupt. For a greater insight into the amount of money involved and the size of his corrupt returns I turn to the indirect evidence.

Indirect Evidence

4. Throughout his entire service with the Police the defendant's total net earnings did not exceed $176,500 making a reasonable estimation for the period when no records exist. A very modest sum might reasonably be added to this to cover allowances received but not recorded. A grand total of $180,000 would probably be generous. The modesty of the defendant's total earnings is confirmed by his successful application in January 1953 for a loan of $96 from the Police Welfare Fund repayable by 5 instalments deducted from salary. In addition the defendant has not pointed to, or attempted to assert, any other source of legitimate income during his period of police service. As will be seen his defence only adopts some of the allegations advanced by his father.

5. By contrast I have had put before me the pass-sheets of six bank accounts successively operated at the Kowloon branch of the Wing On Bank. Between 14th October 1961 and 14th May 1969 the cash deposits alone credited to these accounts exceeded $12.5 million. The bare particulars of these accounts are as follows:

No. 4153

Account holder:	Lui Koo or Ku - alias Lui Kwan Pok the defendant's father (father)
14 Oct 61	Account opened.
May 1967	Account closed by four transfers to Australia of a total of $1,097,274 in the name of Anthony Lui Shing.
II.
No. 5713
Account holder:	Lui Ping Shing alias Anthony Lui Shing born 29th September 1946, the defendant's eldest son (eldest son).
21 Mar 67	Account opened.
20/24 Feb 68	Account closed by two transfers of $358,000 and $1,378,862.05 to Account III.
III.
No. 5985
Account holder:	Anthony Lui Shing (eldest son)
20/24 Feb 68	Opened with assistance of transfers from Account II.
11 Sept 68	Closed by transfer of $579,362.01 to Account IV.
IV.
No. 6148 Account holder:	Lui Kwan Pok (father)
6/11 Sept 68	Opened with assistance of transfer from Account III.
8 Nov 68	Closed by transfer of $1,609,740.61 to Account V.
V. No. 6201
Account holder:	Tam Mui, the defendant's mother (mother).
31 Oct 68	Account opened.
8 Nov 68	Transfer from Account IV of $1,609,740.61.
19 Mar 69	Transfer of $500,000 to Account VI.
21 May 69	Account closed by transfer of $117,058.86 to Account VI.
VI. No. 6149
Account holder:	Lui Ping Yan born 19th May 1950, the third son of the defendant (third son).
6 Sept 68	Account opened.
19 Mar 69	First transfer from Account V.
21 May 69	Second transfer from Account V.
22 May 69	Transfer $1,221,555.50 to Canada to the order of father and/or defendant.

6. The particular features of these accounts are:-

	(1)	They were operated in succession with large transfers from one apparent holder to the next.
	(2)	The periods of operation were increasingly and arbitrarily short.
	(3)	None has any of the ordinary characteristics of a normal current account. Throughout very large round sum deposits were made in cash. These increased in size and frequency until over about the 15 month pre-retirement period covered by the last four accounts, they totalled $6,104,950, an average of over $400,000 a month. In addition there were substantial cheque credits.
	(4)	There are no signs of normal or ordinary expenditure. In the early years account I was used for the accumulation of monies for apparent investment in Hong Kong. The later accounts were used for the accumulation of monies pending its transfer abroad.
	(5)	Consideration of these pass-sheets alone suggests control by one person and what might be called a fairly crude "laundering" exercise: the use of the bank accounts by someone wishing to conceal his control over these monies until they were safely removed abroad.

7. The first question is who was this controller. There are only two possibilities. Mother had no known assets. Both sons were at the material time still engaged in whole time education in Sydney, Australia. The eldest son described himself as a student, when on 14th May 1970, at the age of 23, he applied for a passport. The third son gave the same description on an application dated 10th January 1968. Although I am aware of no obstacle to their giving evidence, neither was called nor has advanced any claim to the funds at one time standing in their names. The defendant in his defence pleaded that the monies in accounts III, V and VI were the property of father. Father repeated this in his written statement which I admitted in evidence under the Evidence Ordinance. It was therefore common ground that one person was in control of these nominee account holders, the issue being whether it was the defendant or father.

8. The pleaded case was that the monies in these three bank accounts represented the capital and accumulated profits of a business carried on by the defendant and father between 1941 and 1945 or 1946. The business was described thus: "the defendant purchased in Hong Kong goods that were in demand in China, and he took such goods personally to Waichow China, and there sold them at a profit. He then purchased in Waichow goods that were in demand in Hong Kong and he took such goods back to Hong Kong to be sold at a profit". These accumulated profits were said to have amounted to $3 million at the end of this period and to belong entirely to father.

9. The pleading did not attempt to stem the gap between 1946 and 1967/1969, or to explain how this initial "capital" produced the massive deposits recorded in the bank accounts. This was attempted in father's statement. There he asserted that he gave two million dollars to his other two younger sons born in 1927 and 1929 respectively, and to his godson, to establish a jewellery business in Bangkok. The capital and profits of this business, he said were his. He received in cash over an unspecified period $20,000 a month. In 1967 he decided to emigrate and called for the return of his capital from Bangkok. This "was brought back to Hong Kong in cash" by the godson prior to his death on 17th October 1967 or "his frields or associates in numerous instalments". These monies were paid into accounts III, V and VI. This story has only to be read, to be seen to be wholly superficial, totally lacking in any convincing detail, and literally beyond belief.

10. In September 1967 father applied for a certificate of naturalization. The note taken by his interviewer on 29th December 1967 survives, and records what father then said about his past and his assets. This was that:-

	(1)	When he fled Hong Kong to return to his native village in China in 1941 he there established a jewellery business which he ran until 1946.
	(2)	From 1946 to 1960 he said he was a real estate broker earning $500 a month.
	(3)	In 1960 he became a partner in a meat business. He said that he received a salary as manager of $300 a month and that the net profit of the business were $2,300 in 1966 and $3,700 in 1967. The existence of this partnership was confirmed by the business name registrations certificate. His partner was the said Choi Chun Shing.
	(4)	Mention was made of a jewellery business being carried on in Bangkok by the two younger sons but not to any suggested interest of father in it.

11. Two elderly Lui clansmen were called before me. Lui Ho Ng who was an elder in Luk King Village, Hoi Fung during the war told me about the family. Father, he said, had formerly had a small business in the village selling dumplings. During the war he conducted no business and lived in a state of hardship. The defendant was employed by him as a security guard in the village. Father, he added, first became a rich man some time in the 1950s after the defendant became a police officer. Lui Shing told me that when father returned to Hong Kong in 1946, he lived in humble circumstances. He pulled a rickshaw, and his wife had to work as a labourer when the family did not have enough income. I accept this evidence as being substantially correct. I reject the account given by father in his statement as pure fiction.

12. Conversely there is a body of documentary evidence connecting the control of these bank accounts with the defendant.

	(1)	By a purchase and sale agreement dated 28th January 1964 father agreed to buy two flats and two car parking spaces at Po Shan Mansions for $320,000 payable as to $100,000 down and the balance by instalments one of $40,000 and the remainder of $20,000 at named phases of construction. The purchase was completed by two assignments dated 23rd June 1966 each of one flat and one car space, which recorded receipt of the total purchase price of $320,000. Of this sum, $160,000 can with reasonable assurance be said to have come from Account I. The material debits are 29th January 1964 $100,000; and 3 each of $20,000 on 23rd May, 11th June and 14th September 1964. Other withdrawals may well have been used for the same purpose. But by a Declaration of Trust also dated 23rd June 1966, father acknowledged that this $320,000 "did not belong to me but was paid out of money belonging to" the defendant.
	(2)	In a similar transaction, father, by an agreement for sale and purchase dated 29th March 1965, bought a total of six flats at Harilela Mansions for a price of $398,650 payable as to $218,650 down, and the balance of $180,000 by twelve instalments of $15,000. This agreement was completed by an assignment dated 5th September 1966 which records the receipt of the total purchase price. Again by a Declaration of Trust of the same date, father acknowledged that this price had been found by the defendant. A total of $234,150 can be positively identified as coming from Account I. The material debits are 17th March 1965 $99,150: 30th June 1965 $15,000: and 22nd July 1965 $120,000. Again other withdrawals may have been used for the same purpose. These entries further demonstrate the falsity of father's assertion that these properties were purchased out of "the cash I had in hand".
	(3)	The defendant over this period made a number of loans to Chan Lit (deceased) which were from time to time repaid by Chan Lit to the defendant personally. Although in every case I am satisfied that the only persons concerned were the defendant and Chan Lit, the loans were drawn from and the repayments made to whichever account was operative at the time, regardless of the name of the apparent account holder.
	(4)	Out of $3,055,133.75 withdrawn from Account V on 7th March 1969, $2,955,113.75 was expended on the purchase of mutual funds in Canada to the respective values of US$250,000 and C$250,000 through Sam Wong in the name of the defendant.
	(5)	The withdrawal of $1,221,555.50 from Account VI on 22nd May 1969 was the cost of a remittance of US$200,000 to Canada to the order of father and/or the defendant.
	(6)	The withdrawal of $30,597.75 from Account VI on 9th May 1970 was used to purchase travellers cheques in the name of and for the use of the defendant.
	(7)	Similarly the withdrawal of $30,853.75 from Account VI on 22nd July 1970 was used for the purchase of travellers cheques in the name of and for the use of the defendant.

13. In these circumstances there is no room for doubt that the creator and controller of these accounts was the defendant. He used the names of his family as nominees both in respect of these accounts and of the remittances abroad in an attempt to conceal his identity as controller. The overwhelming inference from the documents, coupled with the direct evidence, is that these accounts were created by the defendant for the receipt, concealment and accumulation, pending remittance abroad, of monies which he ought not to have received. My conclusion and finding on the facts therefore is that in the absence of any explanation or evidence to the contrary in relation to particular credit items, prima facie all the monies paid into these accounts were corruptly obtained or received by the defendant.

The Pleadings

14. On what was called a fair reading of the Statement of Claim the Crown claimed to be entitled to relief under three heads namely:-

(1)	A specific claim which now totals $9,634,169.65 if the purchase price of Po Shan Mansions and Harilela Mansions (the properties) is included, and $8,915,519.65 if it is not. There are three ingredients in this claim namely:-
	(a)	An assertion that the total sums credited to Account III, V and VI between 20th February 1968 and 22nd May 1969 and said to total $8,977,292 were bribes. For no apparent reason the deposits in account IV were not specifically included.
	(b)	An assertion that the properties were bought with money corruptly received. This claim is now alternative to claim number 3.
	(c)	A credit is given for the totally artificial sum of $61,773 said to be the maximum that the defendant could have saved out of his earnings during his total period of employment.

	(2)	An account of all monies received by the defendant as bribes and/or secret commissions and of the manner in which he received such monies.
	(3)	An order that the defendant transfer the properties to the plaintiff free of encumbrances.

15. To this Mr. Martin Lee, Q.C. for the defendant replies that the plaintiff is limited by his pleading to the specific claim. There is, he says, no room for an account, and no sufficient plea that the properties were bought with tainted monias. I disagree. The Statement of Claim in paragraph 3 contained a broad general allegation. Paragraphs 4 and 5 were in substance particulars of this, and fore-shadowed the two branches of the present claim; direct evidence under paragraph 4; inference from accumulated wealth under paragraph 5. At the time the pleader had no direct evidence, so when particulars were requested, those given under paragraph 4 said that the plaintiff would rely upon "the inference that (the defendant's) property and pecuniary resources were the proceeds of corrupt activities". Particulars of the property and pecuniary resources referred to were given under paragraph 5, not by way of any alleged total but by way of illustration. The defendant it was said was liable to account for the specific sum produced by this illustration, and "for such other sums as he may have received". This was because it is notorious in this type of case that only the recipient of the bribes knows the full figure. I cannot regard the striking out of paragraph 4 as a striking out of the explanatory particulars thereunder (which of course led to the making of that order) any more, than it precluded the later delivery of voluntary particulars under paragraph 3 and the calling of direct evidence.

16. In my judgment the plaintiff is entitled to maintain these three heads of claim. It may be cumbersome to invite the court to order a general account and then in substance to take part of it, but it is a stance that the plaintiff is entitled to adopt. I shall consider these three claims separately in this order namely:-

	(1)	The account.
	(2)	The specific claim.
	(3)	The proprietary claim.

(1) The Account

17. It is not and cannot be disputed that a servant or agent is obliged to account to his principal for any secret commissions bribes or benefits received. In Reading v. Attorney General (1950) 1 A.C. 507 Lord Normand summarised the position in these words: "In consequence ..... all profits and advantages gained by the use or abuse of his military (in that case) status are to be for the benefit of the Crown" p. 517. In Attorney General v. Goddard (1929), 98 L.J.K.B. 734, a case likewise concerning a corrupt police officer, Rowlatt J. held that the basis of the obligation was a fiduciary relationship, and a duty not to misuse the confidential information the police officer received in the course of his duties. This analysis is particularly apt to the present facts. It therefore necessarily follows from my findings of fact that the defendant must be ordered to account generally for the bribes and secret commissions he has received.

(2) The Specific Claim

18. This is substance requires me to take one side of the account namely the payments credited to Accounts III, V and VI. Since it is impossible sensibly, or on the figures, to exclude it I shall cover Account IV as well. On my findings there can be no doubt that the cash receipts were corrupt. I shall therefore consider separately in respect of each account the credits other than cash. My approach to these will be that since the monies have been paid into what I regard as basically corrupt accounts, the onus is upon the defendant to show that they were legitimate receipts. This is particularly true where the receipt is itself so large as to give rise to suspicion.

Account III No. 5985

19. I exclude:-

	(1)	A credit of $80,000 on 20th February 1968. This was a repayment from Chan Lit. Corrupt monies may have been loaned to him and in that case will be brought into account as receipts at an earlier date. I cannot regard the repayment as corrupt.
		I include:-

	(2)	Two large credits of $358,000 and $1,378,862.05 which were transferred on the closure of Account II on 20th and 24th February. A consideration of this account and of Account I convinces me that these sums were the accumulations of earlier corrupt payments; and that in particular $1,378,641.19 was corrupt money first remitted to, then recalled from Australia.
	(3)	Two large receipts from Lau Chi Wai of $150,000 on 20th May 1968 and $100,000 on 7th August 1968. This man was not called by either party. These receipts are suspicious in themselves and no explanation was tendered.
	(4)	A large transfer on 13th June 1968 of $82,067.60 from Chartered Bank by reason of its size and for want of explanation.

20. On this account the corrupt receipts between 20th February to 5th September 1968 are:-

	Cash	3,061,220.00
	Credits - transfer from Account II	1,736,862.05
	Credits - original	332,067.60
	Total	$5,130,149.65
		==========

Account IV No. 6148

21. I exclude:-

	(1)	The opening transfer from Account III of $579,362.61 already included above.
	(2)	A small credit of $383 on 17th September.

The remaining credits are all cash so the corrupt total is $950,000.

Account V No. 6201

22. I exclude:-

	(1)	The opening transfer of $1,609,740.61 from Account IV.
	(2)	Three credits from Regalia Restaurant of $102,500 on 3rd January 1969; $25,740 on 4th February 1969; and $19,200 on 4th March 1969, a total of $147,440. On size alone I am suspicious of the first. But both father and mother were directors of this restaurant and despite the absence of any direct explanation I am prepared to give the defendant the benefit of the doubt.
		I include:-

	(3)	A credit of $50,000 on 30th January 1969 from Lau Pui Ching, the wife of the collector Choi Chun Shing. The source is obviously suspect and there was no explanation.
	(4)	Two large credits from Liu Chong Hing Bank of $160,000 on 4th February 1969 and $170,000 on 3rd March 1969 by reason of their size and for want of explanation. The corrupt totals on this account are accordingly:-

	Cash	1,535,000
	Credits	380,000
	Total	$1,915,000
		============

Account VI No. 6149

23. I exclude:-

	(1)	The opening transfers of $500,000 and $117,058.86 from Account V already taken into account.
	(2)	The credit of $35,000 from Regalia Restaurant for the same reason as above.

24. The cash receipts were all corrupt and totalled $558,730.

25. Upon my calculations the total corrupt receipts between 20th February 1968 and 21st May 1969 were $8,553,879.65 of which $6,817,017.60 was actually received and paid in during this period. These appalling figures speak for themselves. During the last 15 months of his service the defendant's corrupt receipts were 37 times greater than his total legitimate service earnings and averaged over $450,000 a month. Subject to the checking of my arithmentic, I am of the opinion that the plaintiff is entitled to judgment for this total sum, less the credit of $61,773 namely $8,492,106.65.

(3) The Proprietary Claim

26. I am quite satisfied that the total price of the properties of $718,650 was provided by the defendant out of monies corruptly received; in part identifiably from Account I, and as to the balance either from that account or from other corrupt cash in his possession. On those findings it is not in dispute that this sum could properly be added to any money judgment. But the Crown wishes to go further. It can be assumed that the properties have increased in value since their purchase. This increase is part of the defendant's profit from his illicit activities. The Crown claims this profit by means either of an order for the transfer of the properties, or a direction that the account to be taken should extend to an account of profits.

27. The defendant's answer to this is founded upon the decision of the Court of Appeal in England in Lister v. Stubbs (1890) 45 Ch. D.1. That decision, says Mr. Lee, establishes that the relationship between the plaintiff and the defendant is that of creditor and debtor not trustee and beneficiary: that the defendant's sole obligation is to account for the money in fact received when it was received, and perhaps with interest: but that the money is not the plaintiff's money and the plaintiff has no valid proprietary claim or any claim to profits earned after receipt of the money. The decision, he points out, was followed again by the Court of Appeal in Powell & Thomas v. Evan Jones (1905) 1 K.B. 11, and was cited with approval by Lord Wright in Regal (Hastings) Limited v. Gulliver, a 1942 decision noted in 1967 2 A.C. 134 at p.156. The decision itself, in its result, may have lost its authority by reason of what can be described as the Mareva injunction cases; but he submits the authority of its underlying principle has not been impaired. It stands despite the criticisms of it in Goff & Jones Law of Restitution 2nd edition page 510.

28. I have found this a formidable argument but in the end am unable to accept it. I cannot disregard Lister v. Stubbs as Mr. Graham invited me to do, but I do not think it precisely covers this case. In both Lister and the case which preceded it, Metropolitan Bank v. Heiron 5 Ex.D. 319, the corrupt agent received nothing which the court could regard as the principal's property; and per Lindley L.J. in Lister at p.15 ownership and obligation were not to be confused. But there is another line of the highest authority including two recent decisions of the House of Lords namely Regal (Hastings) (supra) and Boardman v. Phipps (1967) 2 A.C. 46. Both cases concerned agents who were in a fiduciary position and who used to their advantage information they had obtained by reason of such position. In Boardman v. Phipps the House was divided on this issue. The majority were of the opinion that information emanating out of a fiduciary relationship could constitute trust property, the question whether it did so being one of fact and degree in every case; see Lord Cohen p.102, Lord Hodson p.107 and Lord Guest p.115. Lord Upjohn dissenting, regarded this approach as too wide, and was of the opinion that information could not constitute trust property unless it was confidential and given to the agent in circumstances which "would make it a breach of confidence for him to communicate to anyone", P.129.

29. The narrower proposition suffices here. The defendant was in a fiduciary position in the sense that that phrase was used in Readings case both in the House of Lords, and in the Court of Appeal (1949) 2 K.B. 232, 236. He was in a position analogous to that of a trustee and subject to analogous fiduciary obligations in relation to confidential information obtained in the course of his duties. Rowlatt J.'s analysis in Goddard is directly applicable. The information the defendant possessed about forthcoming raids was highly confidential. In equity it was the property of the Crown. This information the defendant converted to his own profit to an alarming extent. These illicit proceeds likewise belong in equity to, and can be traced by the Crown. The defendant holds any properties purchased therewith, and especially the properties, for the Crown on a resulting trust. The plaintiff is accordingly in my judgment entitled to the transfer order sought. This result seems to me directly to follow from the observations of Lord Denning in Phipps v. Boardman in the Court of Appeal (1965) 1 All E.R. 849 pps. 856-7.

30. I therefore agree with the suggestion in Goff and Jones at page 510 that Lister v. Stubbs has no application "if the fiduciary obtains the bribe from the use of the beneficiaries' property". I would also have been prepared to have reached the same conclusion by the broader path advocated by these authors upon the authority of the cases collected particularly at pps. 46-48. There seems to me to be ample authority for the proposition that a pre-existing equitable proprietary right is not an essential pre-condition to the grant of proprietary relief. A constructive trust is "imposed by law whenever justice and good conscience require it" in the words of Lord Denning M.R. in Hussey v. Palmer (1972) 3 All E.R. 744; 747. "I do not think that the categories of fiduciary relationships which give rise to a constructive trusteeship should be regarded as falling into a limited number of strait-jackets or as being necessarily closed. They are, after all, no more than formulae for equitable relief": said Slade J. in English v. Dedham Vale Properties Limited (1978) 1 All E.R. 382, 398. The same judge went on to cite with approval from the judgment of Ungoed Thomas J. in Selangor United Rubber Estates Limited v. Cradock (1968) 1 W.L.R. 1555 at 1582 where he said: "The Court of Equity says that the defendant shall be liable in equity, as though he were a trustee. He is made liable in equity as trustee by the imposition or construction of the Court of Equity. This is done because in accordance with equitable principles applied by the Court of Equity, it is equitable that he should be held liable as though he were a trustee". If, as I accept, these are true statements of principle, one could hardly have a clearer case calling for the implementation of equitable principles and for equitable relief.

31. Lord Wright's speech in Regal (Hastings) seems to me not to stand in the way of this conclusion but rather to support it. The only claim in that case which was pursued in the House of Lords was for money had and received, see Lord Porter at p.158. The result was a money judgment in the terms proposed by Lord Russell at p.152. On my reading of his speech Lord Wright was at pains to show that the same conclusion in this field was reached "both in law and equity" p.154F. His basic question was posed in wide terms which embraced both jurisdictions and was "whether an agent, a director, a trustee or other person in an analogous fiduciary position, when a demand was made upon him by the person to whom he stands in the fiduciary position to account for profits acquired by him by reason of his fiduciary position" in substance had any defence other than consent. His answer was negative. But from his reference to such cases as Boston Deep Sea Fishing Co. v. Ansell (1888) 39 Ch.D. 339 and Lister v. Stubbs, as examples of fiduciary relationships giving rise to an obligation to account, I think that he saw this obligation arising at common law in an agent who was not in truth a trustee but rather a debtor. But for my part I can see no reason to limit Lord Wright's formulation, or any of the other general formulations in the authorities where such phrases as "any profits" or "all benefits" are used, to the initial sum received, thus leaving the agent free to retain any consequential profits or benefits. Where information is used in breach of a duty of confidence "it follows as a matter of right that the (injured parties) are entitled at their option to claim damages ..... or alternatively an account of the profits made ..... in invasion of their rights" per Pennycuick J. in Peter Pan Manufacturing Corporation v. Corsets Silhouette Limited (1963) 3 All E.R. 402 at p.411. The gravity of the offence decides which form of relief the court in its discretion grants, Seager v. Copydex (1967) 2 All E.R. 415. If I had not felt able to order the transfer of the properties, I would have directed the defendant to account for his profit thereon, measured by their present value, which is as far as the plaintiff invited me to go.

32. Two final observations. As I have had to look closely at the figures, and have taken part of the account, I am, if requested, prepared to retain this case and take the balance of the account myself in chambers. Secondly in the light of my conclusion on proprietary relief, I am also, if requested, prepared to direct and conduct an inquiry into the defendant's dealings with, and expenditure of, corrupt monies, and into the existence of any properties or assets acquired therewith.

(D.S. Hunter)
Judge of the High Court

Representation:

Mr. Peter Graham, Mr. Jimmy Siu, Mr. Dixon Tang of Legal Department for Plaintiff.

Mr. Martin Lee, Q.C., Mr. Patrick Fung instructed by M/s Oscar Lai & Ho for Defendant.

HCA000025/1978

No. 25 of 1978

Claim by Crown to recover from former police officer monies corruptly received. Defendant out of jurisdiction and outstanding warrant for his arrest. On application for evidence of (a) defendant and (b) his father to be admitted under Evidence Ordinance held:-

(1)	Since repeal In 1980 of section 53 of the Evidence Ordinance, the reasoning in Rasool v. West Midland Passenger Transport Executive (1974) 3 All E.R. 638 and Piermay Shipping Company SA v. Chester (1978) 1 W.L.R. 411 is no longer authoritative in Hong Kong and the question is one of the true construction of the rules.
(2)	On the true construction O.38 r.22-27 the application raised three questions namely:-
	(i)	Were the applicants beyond the seas.
	(ii)	If so, could they give evidence.
	(iii)	If so, should they give evidence.

	(3)	The defendant could and should give evidence, dicta in Attorney General v. Lui Lok (1982) H.K.L.R. 413 applied.
	(4)	For reasons of health the defendant's father could not give evidence.
	(5)	Defendants statement rejected - father's admitted.

On the facts, and on the Crown's claim for an account and for proprietory relief in respect of properties purchased with corrupt monies held:-

(1)	On the facts very large sums of money had been corruptly received.
(2)	The Crown was entitled to judgment for a specific sum as well as an order for an account: Reading v. Attorney General (1950) 1 A.C. 507 followed.
(3)	The Crown was entitled to proprietory relief in equity and to an order for the transfer of properties purchased with corrupt monies because:-
	(i)	The defendant having misused the Crown's property, confidential information, to obtain the property it belonged in equity to the Crown Regal (Hastings) Limited v. Gulliver (1967) 2 A.C. 134 and Boardman v. Phipps (1967) 2 A.C. 46 applied; Lister v. Stubbs (1890) 45 Ch.D. 1 distinguished.
	(ii)	Because proprietory relief was a form of equitable relief which in the circumstances it was appropriate to award: Dicta in Selanqor United Rubber Estates Limited v. Cradock (1968) 1 W.L.R. 1555 and English v. Dedham Vale Properties Limited (1978) 1 All E.R. 382 applied.
(4)	The defendant could probably have been ordered to account for his profits at common law.

No. 25 of 1978

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

_____

BETWEEN
	ATTORNEY GENERAL	Plaintiff
	AND
	LUI LOK alias LUI MO LOK	Defendant

_______

Coram: The Hon. Mr. Justice Hunter.

Date: 5 April 1984

________

RULING

________

1. I have now to rule upon the defendant's application for the evidence of himself and his father Lui Koo to be admitted under section 47 of the Evidence Ordinance in the form of written statements. It is an important matter because I have been told that it is the only evidence which is being tendered on behalf of the defendant in this case. It is also a matter of some significance to lawyers having regard to the legislative differences which now exist between the law in Hong Kong and the law in the United Kingdom.

2. The factual background is this. After his retirement from the Police Force in May of 1969, the defendant left the colony, and has ever since lived abroad. There has been a warrant for his arrest outstanding for some time, which explains his unwillingness to return. His father, likewise, I understand, followed suit. It is common ground that both are at present living in Taiwan and accordingly are "beyond the seas".

3. As far as the defendant himself is concerned, he is well able to return. There is no physical or financial impediment. The matter is one of choice, plainly explained by the outstanding warrant. As far as Lui Koo is concerned, the position is somewhat different. He is now aged 82. I had put before me a medical certificate dated 24th February of this year in which he is said to be suffering from four conditions. It may be possible to paraphrase them as "old age"; but specifically it is said that he should "avoid mental and physical stress".

4. The question as to how these two gentlemen's evidence should be given came before the court at earlier stages in this suit. As far as the father was concerned, on the 21st December 1981 an order was made by consent for his evidence to be taken before a special examiner in Taiwan. If that had happened, he would have given evidence on oath which would have been recorded; then he would have been cross-examined and that would likewise have been recorded. But that order was not in fact taken up. In December 1982 it was said that he was too ill to be subjected to the strain of giving evidence. It follows that this proposed method of putting his evidence in, is very much a matter of last resort, and on any view must seriously effect any weight that I could give to it.

5. As far as the defendant himself is concerned, he has been the subject matter of a reported decision, Attorney General v. Lui Lok (1982) H.K.L.R. 413 where the Court of Appeal refused to allow his evidence likewise to be taken before a special examiner in Taiwan. There is one sentence in the judgment of Cons J.A. who gave the leading judgment in the Court of Appeal which is much relied upon by the Crown and is this: "It would in my view be quite wrong for the Courts of this colony to make such an order in favour of a person who could rightly be said to be ordinarily resident here, yet by his own choice and action has deliberately put himself beyond their jurisdiction".

6. It is in those circumstances that this application is made. There are two notices before me. The defendant's notice asks for a statement made by him to his solicitor on the 6th March of this year to be admitted on the ground that "he cannot be called as a witness at the trial because he is beyond the seas". In respect of father, the notice is very similar. The defendant is likewise asking for his statement made to his solicitor on the 6th March of this year to be admitted, upon the basis that father "cannot be called as a witness at the trial because he is beyond the seas and it is unfit by reason of his bodily condition to attend as a witness". So for himself the defendant relies upon a single reason; for father on two.

7. In answer to that, counter notices were served which in respect of the defendant take three points: first, that cross-examination is essential in his case; secondly that to allow his evidence to be taken in this way would be an abuse of process quoting from the judgment of the Court of Appeal to which I referred; and thirdly that he is beyond the seas by choice. It says this: "It is contended that the defendant is a wealthy retired man with the time and money to come to Hong Kong to give evidence if he chooses to do so". As a matter of fact that statement is not contested. The point was originally taken that the notices were out of time, but that has not been pursued. In respect of father, reference is made first to the history of the earlier orders which I have already recited, and secondly to the need for cross-examination.

8. Now, in answer to that Mr. Martin Lee Q.C. for the defendant, in substance said this. First there is no direct relevance in the decision of the Court of Appeal. It related to a different subject matter. His client may be "a fugitive from justice" in the words of Mr. Justice Cons, but that does not put him under a disability. He has the same rights as any other litigant in this court. Secondly on the true construction of the Ordinance and the Rules, and on authority, there is only one question which arises upon this application and that is: Is the witness beyond the seas? Thirdly, if the answer to that is "yes", then the defendant has the right to put these statements before the court in this form. Fourthly the court has no residual discretion in this matter to reject the statements. Finally any comment or criticism which the court may make about the defendant's conduct goes to the weight to be attached to the statement, not to its admissibility.

9. Now in answer to that the Crown through Mr. Graham, in effect says this: First it is quite true this man is not under any disability at all. But he is not entitled to any favours, and he has chosen not to come. Secondly Mr. Lee's authority does not cover the position here in Hong Kong. Thirdly on a contested application of this nature the court has, or may have to consider, not one question but three. The first question is Mr. Lee's namely: Is the witness beyond the seas? If the answer to that is "yes"; then the second question arises: Can he give evidence? If the answer to that is "no", then the third question does not arise. But if the answer to that question is "yes" then the third question does arise which is: Should he give evidence? These questions, particularly the third, involve an exercise of judgment in the court which is called upon to make a decision. Fourthly he submits that even if these three questions are answered in the applicant's favour, the court has a residual discretion to reject the evidence in the interest of fairness and justice, if it comes to that conclusion. So that the heart of this matter comes down to this: Does an application of this nature raise one question as Mr. Lee asserts, or possibly three as the Crown asserts.

10. Before trying to answer that, it is necessary to refer to the legislative history. This started in 1968 in the U.K. with the passage of the Civil Evidence Act of that year. That was followed in Hong Kong in 1969 by the enactment of Part IV of the Civil Evidence Ordinance, which followed the English Act more or less verbatim. Both Acts contained their own rule making power. It was in section 8 of the English Act and section 53 of the Hong Kong Ordinance. That rule making power was closely defined and confined. It is not unfair, I think, to say that the section put the rule making authority in a statutory strait-jacket. Pursuant to that power rules were made in the United Kingdom, and after 1969 rules were made in Hong Kong. Those rules are to all intents and purposes again identical in both jurisdictions.

11. In that state of play the true construction of the Act and the Rules came before Finer J. in England in Rasool v. West Midlands Passenger Transport Executive (1974) 3 All E.R. 638. The matter again came before the court in England in Piermay Shipping Company S.A. and another v. Chester (1978) 1 W.L.R. 411. Now Finer J. concluded that there was simply one question which arose, the question advanced by Mr. Lee. In the Piermay decision Donaldson J., as he then was, described himself as a "reluctant convert" to that conclusion. The matter was treated as plain in the Court of Appeal on the construction of the Act, and the Court of Appeal declined to give any extended or differing meaning to the Rules.

12. If that was still the position, I think, sitting as a judge of first instance in Hong Kong, I would be constrained to follow those decisions. But it is not, because in 1980 there was enacted here the Evidence Amendment Ordinance and that basically did two things. First of all it repealed section 53 of our Ordinance, which was the rule making power, and likewise it repealed a parallel rule making power in section 57, which related to that part of the Ordinance which followed the 1972 Act in England. So that the specific rule making power with its limitations was struck out. In its place there was put a general rule making power, based upon section 54 of the Supreme Court Ordinance.

13. The whole question is: what is the effect of this? For the applicant Mr. Lee says, virtually nothing at all: because you have still got the same rules; you must still give them the same meaning; you must therefore still follow the English decisions. The contrary view put by Mr. Graham, goes something like this. It must be presumed that the legislature here acted with knowledge of the U.K. decisions and to some purpose. It must be taken that the removal of the statutory strait-jacket was deliberate. The minimum effect of that is that one now looks at the rules without that strait-jacket in mind; and one looks at the rules and gives them their apparent, natural and ordinary meaning. He submits that if you follow that approach, the rules produce the answer for which he contends.

14. In order to understand that I think that it is necessary to look at three elements in what I have called the statutory strait-jacket which were identified by Finer J. in the Rasool decision. The first point to note is that the provision is mandatory in terms. It repeatedly says that the rules "shall" provide for this and "shall" provide for something else. I think the only qualification that I have seen is in sub-section 53(2) which is "subject to such exception (if any) as may be provided for". The second point is that section 53(2)(a) provided for the giving of notice by the person who wanted to introduce the statement in this way. That was followed by sub-section 2(b) which says "any party who receive such notice" can by counter-notice "require any person of whom particulars were given with the notice to be called as a witness in the proceedings unless that person ..... is beyond the seas". So that transposing those words one can see this: If the person is beyond the seas there is no power to give a counternotice at all, requiring that person to be called as a witness. This provision is very closely drawn and is absolute. There is an interesting contrast between it, and what originally was contained in the 1938 Evidence Act (the very first step in this evidential process) where the parallel provisions which talked about a person being beyond the seas had this added qualification "and it is not reasonably practicable to secure his attendance". Now not only was that dropped from the 1968 Act in England, it was ruled out completely. The only question which this section raises as a matter of fact is: Is the person beyond the seas? Secondly the same approach goes for five other reasons which are set out in this sub-section and which are later to be found in rule 25 and which I shall refer to as the rule 25 reasons. Again each time no right to give a counternotice arises unless a certain factual situation exists.

15. The third element in the strait-jacket is section 53(3)(a) which says that the rules may confer a discretion on the court to admit a statement where the rules have not been complied with, "but except in pursuance of paragraph (b) shall not confer on the court a discretion to exclude such a statement where the requirements of the rules affecting its admissibility have been complied with". So if you fail to comply with the rules the court can admit the statement. If you do comply with the rules the court cannot refuse to receive it, except under paragraph (b) of that sub-section which relate to very special circumstances of no relevance here.

16. It is hardly surprising therefore when one sees those three elements in this statutory strait-jacket, that Finer J. came to the conclusion that he did, and that the argument under the Act was regarded as completely impossible by the Court of Appeal in Piermay.

17. Now I come back to the rules. I shall endeavour to read those without any preconceived views having regard to the fact that this strait-jacket has now gone. The first relevant rule is O.38 r.32 which provides for the giving of notice by the person who wishes to have a statement admitted in this way. R. 22(3) says this: "If the party giving the notice alleges that any person particulars of whom are contained in the notice, cannot or should not be called as a witness at the trial or hearing for any of the reasons specified in rule 25, the notice must contain a statement to that effect specifying the reason relied upon". To make sense of that one has to go on to rule 25, which picks up the five reasons which were originally set out in the statute. It is in these terms (the numbers added are mine). "The reasons referred to in rule 22(3) ..... are:

	(1)	that the person in question is dead; or
	(2)	beyond the seas; or
	(3)	unfit by reasons of his bodily or mental condition to attend as a witness; or
	(4)	that despite the exercise of reasonable diligence it has not been possible to identify or find him; or
	(5)	that he cannot reasonably be expected to have any recollection of matters relevant to the accuracy or otherwise of the statement to which the notice relates."

18. I think one only has to look at those two opening rules to see that the Rules Committee appear to have departed materially from the second part of the statutory strait-jacket, because they have not simply said, as they might have done if they were strictly following section 53(2)(b), that the notice must say whether the person falls within one or other of the categories in rule 25. They have added these words: "Cannot or should not be called as a witness for any of the reasons". Now that introduces, as I see it, two new concepts. "Can" and the disjunctive "or should". These two concepts are said to be applicable, one or other or both of them, to all the reasons. One can readily see circumstances in which they could apply. First, the person is dead. Death terminates all arguments and it is perfectly obvious that the person cannot be called. But consider the third reason. It is not difficult to visualize circumstances where the person is so disabled that he cannot physically attend as a witness; equally it is not difficult to visualize circumstances where it may be just possible for him to attend but highly undesirable that he should run the risk having regard to his condition. It seems to me in that situation the court might well wish to say, that he can come, but he should not. The fourth reason must be a case of "cannot", because if you cannot find the person, it is perfectly obvious that he cannot be called. The only question is "yea or nay" has reasonable diligence been exercised. The fifth one is a plain case of "should" because someone in that category can be called, and the issue is whether it is a waste of time that he should be called. So one can see circumstances in which both these concepts can apply individually and, in one case at least, collectively to these reasons.

19. Now if that be the case for four out of five reasons I ask myself why could not it equally apply when the person is "beyond the seas". Taking first of all the case of a witness, the question "can" will normally be decisive either on the basis of physical impossibility or legal impossibility, because the witness who has taken himself outside the jurisdiction cannot be reached by subpoena, and there is no way in which the party can compel his attendance. But that is not so readily applicable to a party himself. If there is no physical or financial impediment it is possible for him to come, if he wishes, and then the question seems to arise under these rules whether he should attend. Now if that is the prima facie effect of the rules requiring the giving of notice then it suggests that there is not one question but three.

20. I go on to the next rule which deals with counternotice. That is r.26(2): "Where any notice under rule 21 contains a statement that any person ..... cannot or should not be called as a witness for the reasons specified therein, a party shall not be entitled to serve a counternotice under this rule requiring that person to be called as a witness of the trial or hearing of the cause or matter, unless he contends that that person can, or as the case may be, should be called, and in that case he must include in his counternotice a statement to that effect". This rule seems to me expressly to confirm the prima facie meaning which I have put upon the two rules that I have read. The issue is not simply whether the witness comes within any of the categories in rule 25. He may come within one of those cateogries, but the party is permitted to contend that he either can or should be called.

21. The last relevant rule as I see it, is rule 27(1): "Where in any cause or matter a question arises whether any of the reasons specified in rule 25 applies in relation to a person that question may be determined prior to the heraing". Now there are two possible constructions of this. One is the narrow view that "the question whether any of the reasons specified applies" means no more than is the person within one of the categories in rule 25. That comes very much closer to the old statutory strait-jacket. The other view is that is simply raises the question whether the reasons in the notice are made out i.e. whether in the terms of the notice the witness cannot or should not be called because of the reason given. It seems to me that the second meaning fits better my prima facie construction of the earlier rules.

22. In these circumstances in my judgment on an application under these rules which is contested, three questions may arise. The first question is: Is the witness within one of the categories in rule 25? The second question is: If so, can he be called as a witness? If the answer to that is "no", that is the end of the inquiry. But if the answer to that is "yes" then you have to ask the further question: Should he be called as a witness? It seems to me further that the court which is called upon to answer those questions and to rule upon the application, has in relation to the third, the "should" question, to exercise its judgment as best it can in all the circumstances, having regard to the interests of the parties, the balance of convenience and the interests of justice. I do not want to get involved in a philosophical discussion as to where judgment ends and discretion begins, but I would regard that exercise as one of judgment rather than discretion.

23. Thirdly it seems to me that if all these questions are answered in favour of the applicant, then the court has no residual discretion to reject the application. I think the rules as they are at present drawn echo or reflect the old terms of section 53(3)(a), and that the rules themselves contain a special code for admissibility. I am far from sure that any residual discretion can be said to exist or arise outside these rules which would entitle me to reject the evidence even though the rules are complied with.

24. Now directing myself in that way, I pose these three questions, first of all in relation to the defendant. (1) Is he beyond the seas? Answer: Yes. (2) Can he be called? Answer: Yes. (3) Should he be called? This is the decisive question. I think I should start here by referring to another passage in the judgment of Cons J.A. in the decision I have already referred to, where he said this: "The established form of trial is for parties who wish to give evidence, to be examined viva voce in court before the judge who has to determine the issues. The defendant is asking us to depart from that norm, and the only reason he puts forward in support is, that he is fleeing from the justice administered by the same court to whom he makes his request". Those observations seem to me to be as applicable to the application before me as they were to the application then before that court. There is no person whose evidence in this case could be more significant, and there is no person whose cross-examination could be more significant than that of this defendant. For those reasons alone it seems to me that the proper answer is that this man should be called. But having regard to the importance of this matter to him, I have at the request of counsel read the statement. I am bound to say that it does not seem to me to put forward any explanation of the matters that have already been laid in evidence before me, and particularly of the documentary evidence in the bank accounts which I find even prima facie credible. In its present form, unsworn and without cross-examination, I find almost entirely valueless.

25. My conclusion as far as the defendant is concerned is therefore that his application is rejected on the basis that he is a person who should be called. I could, perhaps, have reached the same conclusion by a different route, having regard to my comments on the content of the statement, by saying, "yes, it is admitted, but I attach no weight to it". But I do not put it upon that basis because it seems to me in the circumstances of this case that the right and proper course is to say that the court is not prepared to receive this statement because the rules have not been complied with.

26. Now in respect of the father I put the same questions. The first question is: Is he beyond the seas? Answer: Yes. Second question: Can he give evidence on that account? Answer again I think: Yes. Now it is true that he is a witness and not a party, and different considerations therefore apply; but he is a very special witness, because by his statement he is himself claiming that the monies, which are the subject matter of the bank accounts which I have considered, belonged to him. But that is not decisive on the second question as far as he is concerned, because he also asserts that he is unfit to attend. I have already referred to the medical report which has been put before me. It is true that that medical report is not expressly directed to his ability to give evidence in a court of law and is put in general terms only. But I think that having regard to its contents I should give him the benefit of the doubt, and say that on the grounds of his physical and mental condition he is in fact unfit to attend. I therefore answer the second question in his favour, and that leads me to the conclusion that his statement is admissible.

27. I think it is right that I should go on to say that if I had come to the third question, Should he be called? or if I had thought I had a residual discretion, I would probably have come to the same conclusion in respect of him as I would have in respect to the defendant. I have already recited the history of the earlier attempts to place his evidence before the court. Likewise I have read his statement. Prima facie to me it carried very little conviction, and does not, as I see it, really condescend to deal with the detailed matters that have been put before me in the documents. I do not reach that question because I am satisfied that on the grounds of his disability he cannot attend. Therefore in his case my decision is that his statement is admissible, and I admit it.

(D.S. Hunter)
Judge of the High Court

Representation:

Mr. Peter Graham, Mr. Jimmy Sin, Mr. Dixon Tang, Corwn Counsel (Legal Department) for the Plaintiff.

Mr. Martin Lee, Q.C., Mr. Patrick Fung (M/s Oscar Lai & Ho) for Defendant.

ATTORNEY GENERAL v. LUI LOK

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