THE QUEEN v. KO CHI YUEN
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Criminal Law and Procedure - Drug Trafficking (Recovery of Proceeds) Ordinance Cap. 405 - confiscation orders - s 5 statement, form of - realisable assets, burden of proof as to.
IN THE HIGH COURT OF JUSTICE
CRIMINAL JURISDICTION
CASE NO. 286 OF 1991
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Transcript of the shorthand notes taken by the Court Reporters of the Judgment on Confiscation Order in the case of Regina v. KO Chi-yuen, charged with Manufacturing a Dangerous Drug before the Hounourable Mr Justice Leonard. |
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Date: 2nd June, 1993
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JUDGMENT
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COURT:
1. On the 12th of October 1992, the defendant pleaded guilty to manufacturing a dangerous drug contrary to section 6(1) (a) of the Dangerous Drugs Ordinance, Cap.134. The drug involved was methylamphetamine hydrochloride, commonly known as "ice", and the quantity which he admitted to manufacturing was 408.57 grammes.
2. On the same occasion he pleaded guilty to possession of a dangerous drug for the purpose of unlawful trafficking therein contrary to section 7 of the Dangerous Drugs Ordinance. The drug in question was again methylamphetamine hydrochloride and the quantity in his possession was 19.9268 kilogrammes.
3. These offences are "drug trafficking offences" for the purposes of the Drug Trafficking (Recovery of Proceeds) Ordinance ["the Ordinance"] as to which see section 2(1) and Schedule I. Reference to a section in this judgment, unless the contrary appears, will be references to a section of the Ordinance.
4. During the course of this judgment, I shall be referring to a number of decisions of the Court of Appeal in England. They relate to the Drug Trafficking Offences Act 1956 to which the Ordinance is identical in most respects. Where the text is the same in the two statutes, I take the decisions of the Court of Appeal in England as being of strong persuasive authority on the question of interpretation.
5. Following the defendant's conviction on his pleas of guilty, the Crown made formal application for a confiscation order under section 3 of the Ordinance. On the 16th of October 1992, I sentenced the defendant to concurrent terms of seventeen years' imprisonment on each count and ordered the confiscation of the dangerous drugs which had been seized by the police. Where a court is dealing with an application for a confiscation order, the first step is to decide whether the defendant has benefited from drug trafficking. In the present case, that is an admitted fact and I now formally determine pursuant to s.3(3) that the defendant has benefited from drug trafficking. The next step is the determination of the amount to be recovered.
The Amount to be recovered.
6. Section 3(5) reads:
"(5) If the court determines that he has so benefited, the court shall determine in accordance with section 6 the amount to be recovered in his case by virtue of this section."
"He" is the defendant.
7. section 6(1) provides as follows:
"(1) Subject to subsection (3), the amount to be recovered in the defendant's case under the confiscation order shall be the amount the High Court or the District Court, as the case may be, assesses to be the value of the defendant's proceeds of drug trafficking."
8. I shall refer later to the effect of s.3(3).
The Value of the defendant's Proceeds of Druqs Trafficking
9. In assessing the value of the defendant's proceeds of drug trafficking, I must have regard to s.4, which, so far as is material for the purpose of these proceedings reads as follows:
"4(1) For the purposes of this Ordinance -
(a) any payments or other rewards received by a person at any time (whether before or after the commencement of this Ordinance) in connection with drug trafficking carried on by him or another are his proceeds of drug trafficking; and
(b) the value of his proceeds of drug trafficking is the aggregate of the values of the payments or other rewards.
(2) The High Court or the District Court, as the case may be, may, for the purpose of determining whether the defendant has benefited from drug trafficking and, if he has, of assessing the value of his proceeds of drug trafficking, make the following assumptions, except to the extent that the defendant shows that any of the assumptions are incorrect in his case.
(3) Those assumptions are -
(a) that any property appearing to the court -
(i) to have been held by him at any time since his conviction; or
(ii) to have been transferred to him at any time since the beginning of the period of 6 years ending when the proceedings were instituted against him,
was received by him, at the earliest time at which he appears to the court to have held it, as a payment or reward in connection with drug trafficking carried on by him or another;
(b) that any expenditure of his since the beginning of that period was met out of payments received by him in connection with drug trafficking carried on by him or another; and
(c) that, for the purpose of valuing any property received or assumed to have been received by him at any time as such payment or reward, he received the property free of any other interests in it."
10. The prosecution has tendered a statement under s. 5 and served it on the defendant. I required the defendant pursuant to s. 5(2) to indicate to what extent he accepted each allegation in the statement and, so far as he did not accept any such allegation, to indicate any matters he proposed to rely on.
11. The defendant tendered to the court written notice in which he stated that he accepted the allegations contained in paragraphs 13, 17, and 47 of the s. 5 statement. Those paragraphs reported statements made by the defendant after his arrest to the effect that he had received from one "Francis" payments amounting on average to $60,000.00 per month between November 1990 and the end of April 1991 for storing the drugs found at his home: a total of $360,000.00. And the defendant made other statements to the police.
12. In the same notice, the defendant stated that he did not accept allegations contained in paragraphs 42, 49 and 51 of the s. 5 statement.
13. Paragraph 42 alleges that during the period between 17th June 1990 and 18th May 1991 the defendant had a concealed income of $1,427,888.78. Paragraph 49 alleges that 'there are reasons to believe the purchase and mortgage repayments of the city Gardens property are financed by drug proceeds Ko received'. The 'City Gardens property' is Flat D, 13th floor, Block 10, City Garden, North Point, Hong Kong, the former residence of the defendant and the place in which the drugs were found. Paragraph 51 states the belief of the maker of the statement that the total benefit received by the defendant from drug trafficking during the material period was $3,584,888.78 made up by adding the alleged concealed income of $1,427,888.78 to a figure of $2,157,000 representing the proceeds of sale of the city Garden property ($4,120,000.00) less the purchase consideration ($1,963,000.00).
14. On the question whether during the stated period he had a concealed income of $1,427,888.78 representing benefits from drug trafficking the defendant's written notice stated that he would rely upon the statements he made to the police and which were attached to the s. 5 statement. On the question whether the "purchase and mortgage repayments of the city Garden property were financed by drug proceeds" the defendant also relied upon his statements attached to the s. 5 statement. Further, the defendant, relying on the same statements and upon decisions of the English Court of Appeal in R. v. Brian Chapman (unreported) 1st November 1991 and R. v. Julie Johnson (1990) 91 Cr. App. R. 332 did not accept the allegation that the appreciation in value of the City Garden property represented benefits received by him for drug trafficking. It was pointed out by Mr Dunn that the prosecution had failed to take account of the fact that part of the purchase price had been a mortgage loan from the Hang Seng Bank - which loan could not be regarded as drug proceeds, so that a proportionate part of the sum realised on the sale could likewise not be regarded as representing drug proceeds.
15. Mr Dunn tendered a written calculation showing that what he described as the profit attributable to the defendant's financial contribution was $739,851.00. He later amended that figure to $804,561.00. I make the assumption that the defendant's contributions to the purchase of the property were the proceeds of drug trafficking, the defendant having failed to rebut it.
16. Mr Carlson accepted the decision in Chapman as persuasive and I have taken it as common ground that the increase in value of the defendant's contribution to the purchase of the city Garden property, representing a 'profit' attributable to his financial contribution apart from the mortgage loan was $804,561.00.
17. The position regarding the s. 5 statement is that from what he has said about paragraphs 13, 17, 42, 47, 48, 49 and 51 the defendant has not indicated whether he does or does not accept the allegations of fact contained in it. To that extent he has failed to comply with the court's requirement made under s. 5(2). It is provided by s. 5(3) as follows:
"If the defendant fails in any respect to comply with a requirement under subsection (2) he may be treated for the purposes of this section as accepting every allegation in the statement apart from -
(a) any allegation in respect of which he has complied with the requirement; and
(b) any allegation that he has benefited from drug trafficking or that any payment or other reward was received by him in connection with drug trafficking carried on by him or another."
18. If I treat the defendant as accepting every allegation in the s. 5 statement, other than those which he has specifically dealt with, and I do so treat him, then s. 5(1) comes into play. It reads:
"(1) where -
(a) the prosecutor tenders to the High Court or the District Court, as the case may be, a statement, as to any matters relevant to the determination whether the defendant has benefited from drug trafficking or to the assessment of the value of his proceeds of drug trafficking; and
(b) the defendant .accepts to any extent any allegation in the statement,
the court may, for the purposes of that determination and assessment, treat his acceptance as conclusive of the matters to which the acceptance relates."
19. It is therefore open, to this court to treat as conclusively accepted by the defendant the allegations contained in the s. 5 statement other than those allegations set out in paragraphs 42, 49 and 51.
20. It was stated by the English Court of Appeal in
21. I now turn to the contents of the s. 5 statement. It was made by Detective Senior Inspector LAW Yue-kwong who produced a copy of. it when he gave evidence in court. The statement is 16 pages long and has fifteen annexures running to another 191 pages. These annexures include written statements made by the defendant to the police, statements made by other persons, bank records and financial analyses.
22. Mr Dunn had an opportunity when he cross-examined Detective Senior Inspector Law to challenge any allegations made in the s. 5 statement. He confined himself to establishing the amount of the deposit on the City Garden premises, the amount of capital repayments made by the defendant and the appreciation in value of the property. The defendant chose not to give evidence and called no witness.
23. Mr Carlson submitted that this court is not bound by the expressions of belief contained in the s. 5 statement. He abandoned the estimates of concealed income and of the appreciation in value of the City Garden property, as set out in paragraph 51. Recommending a different approach, he cited the unreported case of R. v. Atkinson in the English Court of Appeal and tendered a copy of the transcript of the judgment which was delivered on the 29th June 1992. There the Crown had contended for a confiscation order in the sum of £7,000.00 but the judge had made an order in the sum of £27,267.98, holding that the Crown had no power to limit its application. The Court of Appeal held that he was entitled and indeed bound to reject prosecuting counsel's suggestion that the scope of the inquiry should be restricted.
24. In the present case, Mr Carlson having invited the court not to limit the enquiry to the approach suggested in the s. 5 statement, Mr Dunn first submitted that it was not for this court to make its own investigation but he then accepted that the court has power to go outside the conclusions expressed in the s. 5 statement. Though he complained that the Crown should have served a new s. 5 statement setting out its new line of attack, he did not seek an adjournment for the purpose of taking further instructions or giving further consideration to the matter.
25. Mr Carlson's arguments were not based on any new factual material. He simply invited the court not to accept the conclusions and beliefs of Detective Senior Inspector LAW Yue-kwong. So far as matters of fact were concerned, the defence were not taken by surprise.
26. The document put forward in this case by the prosecution as a s. 5 statement was, in reality, an investigation report in which the author described the results of his investigations into matters of fact, such as bank transactions, then set out, by reference to statements by various persons including the defendant, to form and express opinions as to the assessment of the defendant's proceeds of drug trafficking and the amount of realizable assets.
27. Such a document is of undoubted value to the prosecution but it seems to me that it is not appropriate to tender it as a s. 5 statement. In my view, a s. 5 statement should be drafted in the same way as a Notice to Admit Facts. The prosecution should set out clearly and simply in a series of numbered paragraphs the allegations of fact upon which it relies. There should be no recital of hearsay or expression of opinion. Schedules and annexures, such as bank statements may be incorporated by reference. A defendant by his response to the notice can show what statements of fact he accepts or does not accept. He can, where he does not accept an allegation of fact, indicate the matters he proposes to rely on and the prosecution may accept any allegation made by the defendant, such acceptance being conclusive of the matters to which it relates. Thus the factual issues will be defined and each party will know what witnesses will need to be called to support its own allegations and if necessary to refute the allegations of the opposing party. Such statements as "the captioned subject alleged that he was introduced to Ko some 10 years ago in the Philippines" as in paragraph 21 of the s. 5 statement do not assist. Mr Dunn said that he accepted the allegations that certain persons had said certain things but not that what they had said was true.
28. I have not accepted witness statements annexed to Detective Senior Inspector Law's statement as evidence admissible to prove the truth of the matters therein alleged. Where the s. 5 statement contains unequivocal and unchallenged allegations of fact, I have treated them as being accepted by the defendant but I have placed no reliance on any argument, hearsay or expressions of opinon or belief contained in that statement.
29. Of course, I am not saying that the prosecution should not show its hand by serving upon the defence the results of its investigations. The more material it discloses, the more likely it is that it will be possible to define the issues and narrow the scope of the enquiry. But matters of evidence and opinion should be kept out of the s. 5 statement itself. Witness statements can be served with the s. 5 statement, as can written skeletion arguments setting out the prosecution's view as to the interpretation of the facts.
30. On the basis of the s. 5 statement, I find the following facts as to financial transactions: I find that, on his own admission, the defendant received $360,000.00 in cash from one Francis during the period November 1990 to May 1991. On his own admission he did not pass it through his bank account. The money was on his own admission the proceeds of drug trafficking. I am not bound to accept and I do not accept his contention that his proceeds of drug trafficking are limited to $360,000.00.
31. On the basis of paragraph 18 of the s. 5 statement and the bank records and vouchers annexed to the statement and incorporated in it by reference, I find that the defendant received the following sums, deposited into his Hang Seng Bank Savings account No. 285-2-100540:
(a) Deposits by Shing Nam Wu Co. $ Between 7.3.90 and 16.6.90 1,690,000.00 Between 17.6.90 and 18.5.91 3,667,984.00 (b) Deposits from Unknown Sources On 21.3.90 (cheque) 250,000 Between 17.6.90 and 18.5.91 (cash) 1,086,500 making the total of deposits from unknown sourses 1,336,500.00 (c) Chi Sun Co. Between 17.6.90 and 18.5.91 (cheques) 159,731.00 (d) Chenq Kwei Yinq & So Chi Soon 31.1.91 (cheque) 26,042.00 (e) Aqua Mart 20.6.90 (cheque) 70,000.00 That makes the total of deposits $6,950,257.00
32. I note that there were deposits amounting to $73,500.00 into the defendant's Hang Seng Bank account and $310,000.00 into the defendant's Bank of China account between the 17th June 1990 and 18th May 1991 but the prosecution accepts that those sums may have been withdrawn from the savings account and I shall not take them into consideration.
33. Mention is made in paragraph 18 of the s. 5 statement of a time deposit made on the 19th March 1991 in the name of KO Chi-yuen for $500,000.00. Of that sum, $300,000.00 appears to originate from a person named WU Pui-yee (see paragraph 18c(i) of the s. 5 statement and pages 178 - 180 of the annexures). I find that the sum of $300,000.00 was a payment made to the defendant on the 19th March 1991.
34. I find that the contents of the safe deposit box opened in the joint names of KO and his mother have not been proved to originate from the defendant.
35. I am satisfied beyond reasonable doubt that the defendant received between the 7th March 1990 and 18th May 1991 the following:
$ Cash admitted received 360,000.00 Savings Account Deposits 6,950,257.00 Time Deposit 300,000.00 That comes to a total of 7,610,257.00 To that must be added the increase in value of the defendant's contribution to the purchase of the flat 804,561.00 The total thus being $8,414,818.00
36. It is open to me to make the statutory asstmption that the above sum represents payments or other rewards received by the defendant in connection with drug trafficking (s. 4(3) (a)). The Ordinance, however, provides (s. 4(2)) an exception if the defendant can show that the assumption is incorrect. The burden of doing so is upon him and he bears only the civil burden, on the balance of probabilities. If he fails to show that it is incorrect, the assumption stands as fact - R. v. Redbourne (C.A.) [1992] WLR 1182 at p. 1188.
37. The defendant relies upon the contents of his statements which are annexed to the s. 5 statement. He has chosen not to give evidence or call witnesses. Drugs of the type found at his home are easy to produce and afford high profits. The "ice" seized in this case was estimated to have a retail value of $15,000,000.00. The defendant spent the period from 1979 to 1990 in the Philippines where he married an overseas Chinese lady. Detective Inspector YOUNG said in evidence that there are lucrative markets for "ice" in the Philippines and elsewhere. Having heard evidence prior to sentencing the defendant, I was satisfied beyond reasonable doubt that he knew full well that the substance he was involved with was "ice", though he attempted when he gave evidence on that issue, to suggest otherwise. Large sums of money passed through his bank accounts. Mr. Dunn suggested that it was the same relatively small amount of money being recycled through the account. In fact, there was no evidence given on oath as to the destination of payments out of the account. The defendant relied on what he had told the police.
38. Taking into consideration the contents of his statements and all other relevant material, I am not satisfied on the balance of probabilities that the statutory assumption under s. 4(3) (a) has been shown to be incorrect. I make that assumption and find that the sum of $8,414,818.00 was the total value of sums received by the defendant as payments or rewards in connection with drug trafficking carried on by him or another. That sum is the value of the defendant's proceeds of drug trafficking (s. 4(1) (b)).
39. Having declined to give evidence, the defendant must take the consequences. As Lord Lane C.J. said in R. v. Dickens (supra) at p. 167:
"It is plain that the object of the Act is to ensure, so far as is possible, that the convicted drug trafficker is parted from the proceeds of any drug trafficking which he has carried out. The provisions are intentionally draconian. Since the amount of those proceeds and the size of his realisable assets at the time of conviction are likely to be peculiarly within the defendant's knowledge, it is not surprising perhaps if evidential burdens are cast upon him of a kind which are, to say the least, unusual in the area of the criminal law and this, despite the fact that the confiscation order and the penalties for failing to comply with it might be rigorous."
40. I pause to note that the drug trafficking need not have been carried out by him.
The Amount to be recovered
41. Section 6(3) is in the following terms:
"(3) If the court is satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount the court assesses to be the value of his proceeds of drug trafficking, the amount to be recovered the confiscation order to the court to be the realised."
42. Section 3(5) imposes upon this court the duty of assessing the amount to be recovered. That amount is prima facie the amount which I have assessed to be the value of the defendant's proceeds of drug trafficking, but before making a confiscation order I must have regard to the provisions of s. 6(3) and consider whether I am satisfied that the amount that might be realised is less than the assessed value of the defendant's proceeds of drug trafficking.
43. The prosecution is under no duty to prove the amount which might be realised. It was held by the English Court of Appeal in the case of Horst Reiner Ilsemann (1990) 12 Cr.App.R.(S) 398 that it was a misconception to say that the amount of the confiscation order should be limited to the amount which the prosecution could prove to be the value of the defendant's assets known to them. If the defendant wished to say that that was all that was realisable, it was for him to satisfy the court to that effect. The Hong Kong Ordinance is based upon the United Kingdom Drug Trafficking Offences Act 1986 and the scheme in each is to virtually the same effect. I have no hesitation in following the decision in Ilsemann. The standard of proof which a defendant must meet if he seeks to show that the amount which might be realised is less than his proceeds of drug trafficking is the civil standard.
44. I note the unchallenged assertion in paragraph 43 of the s. 5 statement that by the order of Hooper J. dated the 20th May 1991 in this matter, the defendant was required to file an affidavit giving a detailed account of his assets. The defendant has failed to comply with that order.
45. In this connexion, I adopt the following passage from the judgment of the English Court of Appeal in R. v. Comiskey [1991] 93 Cr.App.R. 227 at p. 232:
"On whom is the duty laid of satisfying the court that the amount that might be realised is less than the assessed value of the proceeds? There can be no doubt that the defendant is in an incomparably better position to do so, since he (or she) alone knows what has become of the proceeds. In our judgment, the object of the Act is to oblige a defendant to reveal this information so as to enable the court to make an effective order. There is no obligation on the Crown to satisfy the court under s. 4(3) that the amount that might be realised is less than the value of the proceeds. If that were so, the purpose of the Act would be defeated.”
Section 4(3) of the Act is in exactly the same terms as s. 6(3) of the Ordinance.
46. The defendant has chosen not to give evidence or call witnesses on this issue. It may well be that he has ample funds salted away, as yet undiscovered by the Crown.
47. The defendant has failed to satisfy me on the balance of probabilities that the amount that might be realised at the time the confiscation order is made is less than the amount which I have assessed to be the value of his proceeds of drug trafficking. Thus by virtue of s. 6(1) the amount to be recovered is the amount which I have assessed to be the defendant's proceeds of drug trafficking, to wit $8,414,818.00 and pursuant to s. 3(5) I determine that that is the amount to be recovered.
48. Pursuant to s. 3(6) (a), I hereby order the defendant to pay the sum of $8,414,818.00.
49. In accordance with the duty imposed upon me by s. 8(1) (a) I must now fix a term of imprisonment which the defendant is to serve if any of the amount which he is liable to pay is not duly paid or recovered. The maximum term according to the table in s. 8(2) is 5 years and by virtue of s. 8(4) it must be consecutive to the term of 17 years' imprisonment to which I have already sentenced the defendant. I fix the term which the defendant is to serve if any of the amount which he is liable to pay is not duly paid or recovered at three years.
50. It will be open to the defendant in due course, if he deems it appropriate, to make application under s. 15(1) for variation of the confiscation order.
51. Taking account of the confiscation order I do not impose any fine upon the defendant or make any of the orders mentioned in s. 3(6) (b) (i) and (ii).
52. Finally, I turn to the question whether I should issue a certificate pursuant to s. 6(2).
53. The short title of the Ordinance is in these terms:
"An Ordinance to provide for the tracing, confiscation and recovery of the proceeds of drug trafficking, to create the offence of assisting drug traffickers to retain those proceeds, and for incidental and related matters."
54. In view of the avowed object of the Ordinance, it might be thought that only property shown to be or to represent the defendant's proceeds of drug trafficking could be "realisable property". By s. 7(1), however, realisable property is defined, (subject to subsection (2) which does not apply in this case) as
"(a) any property held by the defendant; and
(b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Ordinance." (Emphasis supplied).
55. Though the Ordinance speaks of a confiscation order, s.3(6) requires the court, not to order the confiscation of the proceeds of drug trafficking but rather to order the defendant to pay a sum of money. That order is enforceable as if it were a fine (s. 8(b) (i)) and any property, as described in s. 7(1) above may be applied to satisfy the order whether or not it is or represents the proceeds of drug trafficking. The intention of the legislature is evidently to put a defendant into the financial position in which he would have found himself if he had not received his proceeds of drug trafficking.
56. In R. v. Chrastney (No. 2) C.A. [1991] 1 WLR 1385 at P.1395, it was said in the judgment of the Court of Appeal:
"I have read the definition of realisable property within section 5(1). In our view it is quite clear that that definition embraces legitimately acquired property. We cannot read into the Act ... any inference that that definition is to be limited to illegitimately acquired property; that is to say, the proceeds of drug trafficking."
57. I respectfully adopt those words in relation to the Ordinance.
58. I certify that the following items are realisable property:
$ 1. Cash seized from the defendant 13,713.80 2. The following bank balances: (i) Bank of China a/c 012-886-1-005540-6 12,092.00 (ii) Hang Seng Bank a/cs: 285-2-100540 2,784,560.05 262-308562-001 3,290.00 292-512928-266
(100 taels gold) valued at344,400.00 >3. The sum of $30,000, part of the balance on the account with the Hongkong & Shanghai Banking Corporation a/c No. 014-2-063023 in the name of WONG Sheung-ngan 30,000.00 4. The jewellery and watches listed in Schedule "CRT 1" submitted by the Prosecution, as amended. The valuations in the amended schedules are based partly on an agreed appraisal of the jewellery and partly on the valuations of 3 Rolex watches which are contained in the s. 5 statement. The total value as amended, is 332,755.00 5. The contents of safe deposit box No.60317 at the Hang Seng Bank, held in the name of the defendant, being cash 10,140 Thai baht which were last valued at at 3,082.56 That makes a total according to the valuations of although, of course, values will fluctuate from time to time. 3,52.3,893.41
59. I have considered whether it would be appropriate to certify that I was satisfied that certain items were not realisable assets but it seems to me that that is not something I am called upon to do.
Present: Mr. John Dunn (John Massie & Co.) for Accused
Mr. J. Carlson, S.C.C. for the Crown.