P was the controlling shareholder of C, a holding company and listing vehicle for a group of companies. In August 2020, P was arrested for collusion with a foreign country or with external elements to endanger national security, contrary to art.29(4) of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (the NSL). He was also charged with two other NSL related offences and was being investigated for another NSL offence. In May 2021, the Secretary for Security issued P with a Notice under s.3 of Sch.3 to the Implementation Rules for Article 43 of the NSL1 (the Implementation Rules) in respect of the Specified Property, including shares in C held by P (the Shares), suspected to be “offence related property” for the purposes of s.3 of Sch.3. The Notice directed P not to directly or indirectly “deal with” the Shares. The Notice also referred to five ways in which the Specified Property could be “dealt with”: (i) to receive or acquire the Specified Property; (ii) to conceal or disguise the Specified Property; (iii) to dispose of or convert the Specified Property; (iv) to bring into or remove from Hong Kong the Specified Property; or (v) to use the Specified Property to borrow money, or as security (the Five Acts). P applied for a declaration that for the purposes of Sch.3 and the Notice, “deal with” in relation to the Specified Property excluded exercising voting rights in relation to the Shares, and alternatively for a licence under s.4(2) of Sch.3 authorising him to exercise such voting rights. At issue was: (i) whether, on the true and proper interpretation of the NSL, in particular Sch.3 of the Implementation Rules, to “deal with” shares in a company alleged to be “offence related property” and subjected to a notice under Sch.3 included exercising directly or indirectly voting rights in relation to such shares (the Construction Issue); and (ii) if so, whether it was reasonable to grant P a licence (and if so, whether and what conditions were to be attached) to exercise those rights under s.4(2) of Sch.3 (the Licence Application). P subsequently sought to adjourn the Licence Application.
Held, answering the Construction Issue in the affirmative, dismissing the application for the declaration sought and adjourning the Licence Application sine die with liberty to restore, that:
- A purposive and contextual approach should be adopted in the construction of the NSL and Implementation Rules. The purpose of the NSL was stated explicitly in NSL 1 to include the prevention, suppression and punishment of NSL offences (the Stated Purposes). Pursuant to NSL 3, the executive, legislature and judiciary are to effectively prevent, suppress, and impose punishment for any act or activity endangering national security in accordance with the NSL and other relevant laws (Ng Ka Ling v Director of Immigration (1999) 2 HKCFAR 4, Director of Immigration v Chong Fung Yuen (2001) 4 HKCFAR 211, HKSAR v Lai Chee Ying (2021) 24 HKCFAR 33, Tong Ying Kit v Secretary for Justice  3 HKLRD 350 applied).
- Pursuant to NSL 43(3), a property which was used, intended to be used for or relating to the commission of NSL offence and proceeds of NSL crime, may be subject to freezing, restraint, charging, confiscation and forfeiture measures. The power to freeze under s.3 of Sch.3 of the Implementation Rules may only be invoked in respect of “offence related property”, that was: (i) property of a person who committed or attempted to commit or participated in or facilitated the commission of a NSL offence; or (ii) any property that was intended to be used or was used to finance or otherwise assisted in the commission of a NSL offence. These provisions aimed to put into effect the provisions of NSL 43 and for the Stated Purposes
- The provisions for the freezing, restraint, confiscation and forfeiture of property were embodied collectively under Sch.3 of the Implementation Rules because they were related. It was reasonably clear from the provisions of s.3, read with the other provisions of Sch.3, especially ss.9 and 13, that one of the purposes of a freezing notice was to preserve the property in question so that a confiscation or forfeiture order may be obtained in the future. In addition, a freezing notice may also serve the purposes of preventing (i) the use of the property in financing or assisting any NSL offence; or (ii) any dealing with the property in a manner which may prejudice on-going investigation or proceedings concerning NSL offence.
- Section 3 of Sch.3 of the Implementation Rules was drafted in wide and embracing terms. The natural and ordinary meaning of “deal with” was wide. The use of the words “directly or indirectly” was consistent with an intention that the ambit of prohibition imposed by a freezing notice was also wide. Read in light of the context and purpose of the NSL that intention was fortified. Furthermore, the opportunity to obtain a licence under s.4(2) to allow a property to be dealt with in a particular manner was an important constituent of s.3, which mitigated the harshness of the freezing regime and further fortified the intention that “deal with” should be construed widely.
- In respect of P’s reliance on NSL 4 and NSL 5 which emphasised protection on human rights, a shareholder’s voting right in a company was a property right protected under arts. 6 and 105 of the Basic Law. However, the protection of a property right was not absolute. There was a degree of imprecision in the phrase “deal with”, nonetheless, there was no reason to read down Sch 3 s.3 to exclude the exercise of the voting right under the NSL freezing regime. Moreover, the existence of the licence exception provided a balance between the Stated Purposes and the protection of property right. It also mitigated the imprecision of the phrase “deal with” (Re CA Pacific Finance Ltd  2 HKLRD 1, HKSAR v Lai Chee Ying (2021) 24 HKCFAR 33 considered).
- In addition, “deal with” was not confined only to the Five Acts. The reference to the Five Acts in the exhaustive definition of “deal with” in the context of a freezing regime under the United Nations (Anti-Terrorism Measures) Ordinance (Cap.575) (the UNATMO) was unhelpful. The NSL was a national law with a wider purpose and was intended to operate as a separate regime to the UNATMO (Cheermark Investment Ltd v Director of Lands  1 HKLRD 79 applied).
- P’s submission that the exercise of the voting right by him would not possibly impact upon the purposes of the NSL freezing regime adversely was rejected. In matters of national security and related risk assessment, there was a need to give due weight to the views of the enforcement agencies. Further, the submission was undermined by the particular facts in this case (Secretary of State for the Home Department v Rehman  1 AC 153, Hysan Development Co Ltd v Town Planning Board (2016) 19 HKCFAR 372 applied).
This was an application by the plaintiff against the Secretary for Security following a notice issued by the Secretary pursuant to s.3 of Sch.3 of the Implementation Rules for Article 43 of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region.