An important appeal judgment in a failed judicial review challenge in Interush Ltd v Commissioner of Police has been handed down ( HKCA 70, CACV 230/2015).
The background to the case is summarised in an Industry Insights ("Constitutionality of 'No Consent' Regime Challenged", September, 2015). In short, the applicants sought declarations that (among other things) the "No consent to dealing" regime adopted pursuant to section 25A of the Organized and Serious Crimes Ordinance ("OSCO" – Cap. 455) was unconstitutional for being in contravention of protected property rights under Articles 6 and 105 of the Basic Law. In this case, the "No consent to deal" related to funds in the applicants' bank accounts maintained with two banks in Hong Kong.
At first instance, the challenge failed because the court found that these rights were not engaged.
In the appeal, the applicants' case was described as a "full frontal constitutional challenge" to the statute itself. That challenge (and appeal) failed but not without some points of law being won in the applicants' favour:
- the Court of Appeal accepted the applicants' argument that the "No consent" regime adopted by the relevant law enforcement agencies, following the reporting of suspicious transactions pursuant to section 25A of OSCO, did engage the applicants' property rights. While the "temporary freezing" of the applicants' bank accounts did not constitute a deprivation of property, it did affect their use of property in the nature of a debt that had an "economic value";
- the procedural steps set out in the Police internal manual ("Force Procedures Manual"), that implemented the "No consent" regime, were not so uncertain as to fall foul of the proportionality requirement; neither were they unreasonable, in all the circumstances;
- in particular, the Court of Appeal (like the first instance court) was reluctant to imply any reasonable time period after which the "temporary freeze" should expire. The Court of Appeal did not find comparisons with other jurisdictions (whose legislation did provide for an express time limit) helpful;
- like the first instance court, the Court of Appeal found that the applicants' right to access the courts was not engaged because their grievances could be taken-up by: (i) a judicial review challenge (the "No consent" regime was amendable to judicial review by the account holder or the bank); and (ii) civil claims against the banks (in order to recover the funds in the bank account).
The outcome in the appeal is of no surprise. The operation of the "No consent" regime is underpinned by strong policy arguments (particularly, in an environment of increasing scrutiny by banks over the operation of customers' accounts). However, the period of the "temporary freeze" in this case will not have gone unnoticed; some seventeen months elapsed before a formal restraint order was in place. Civil claims against a bank are often of limited use given the usual terms of business for operating an account, unless the account holder can show that the bank acted in bad faith or irrationally.
The appeal judgment is an interesting read for any practitioner working in this area; particularly, the summary of parts of the "Force Procedures Manual". It would be useful if the proceedings made their way to the Court of Final Appeal. However, given the robust acquittal in the underlying criminal case (involving a charge of "dealing" contrary to section 25 of OSCO – HKSAR v Matthews, DCCC 698/2015, 31 May, 2017) it is doubtful whether the applicants will seek permission for a final appeal.
In the meantime, anyone who operates a bank account in Hong Kong needs to pay serious attention to the two principal money laundering offences contained in sections 25 and 25A of OSCO; namely, "dealing" and "failing to report".