A year ago, we reported that the “Letters of No Consent” Regime (LNC regime) was held unconstitutional by the Court of First Instance in Tam Sze Leung & Ors v Commissioner of Police  HKCFI 3118. The applicants sought to challenge, by way of judicial review, the decision of the Commissioner of Police (Commissioner) to issue and maintain “letters of no consent” (LNC) in respect of their bank accounts under the Organized and Serious Crimes Ordinance, Cap.455 (OSCO). In his judgment handed down on 30 December 2021 and decision dated 23 March 2022 (CFI decision), Coleman J declared that the LNC regime was ultra vires sections 25 and 25A of OSCO, not prescribed by law and disproportionate. The case background and details of Coleman J’s reasoning were covered in our previous article.
Upon the Commissioner’s appeal, the CFI decision was overturned by the Court of Appeal (CA), which held that the LNC regime is constitutional: see Tam Sze Leung & Ors v Commissioner of Police CACV 152/2022  HKCA 537 (Cheung, Yuen, G Lam JJA).
No Consent Regime “as operated by the Commissioner”
The CA criticised the judge’s use of the phrase No Consent Regime as operated by the Commissioner as being unclear, which phrase has not been defined by the judge.
In Interush Ltd v Commissioner of Police  HKCA 70, the CA already held that ss.25 and 25A of OSCO are constitutional. The CA said that to say that the “No Consent Regime as operated by the Commissioner” is systematically unlawful or unconstitutional leaves one in doubt as to what precisely is held by the judge as being unlawful when the statutory provisions remain intact. Interush remains binding on the CA unless it is decided that the decision was plainly wrong.
Ground: Ultra vires
The CA laid down the correct legal analysis in respect of sections 25 and 25A of OSCO. G Lam JA opined that “in a case such as the present, the account is “frozen” not because there is any enforceable order made by the police (like a Mareva injunction granted by a civil court) that blocks the account, but because the bank has chosen, whether or not permissibly under the banking contract, not to comply with its customer’s instruction, no doubt due to its concern about criminal liability under section 25(1) [of OSCO] for dealing with property that represents proceeds of crime. The withholding of consent no more “freezes” an account than the giving of consent compels the bank to release money. The police have no power to require the bank to do anything. What the police are empowered by the statute to do is to give consent, as an authorised officer, for an act in contravention of section 25(1), i.e. a dealing with the property. Coupled with prior disclosure under section 25A(1) [of OSCO], such consent immunises the bank from criminal liability under section 25(1).”
The above analysis i.e. that it was the bank’s decision to freeze, was previously endorsed by the CA in Interush. This is the crux of the CA’s reasoning. The police did not have power under s.25A of OSCO to require the bank to freeze the account. The decision to freeze the account rests solely with the bank, for fear of infringing s.25 of OSCO if the bank knows or has reasonable grounds to believe that the funds in the account represent the proceeds of crime.
As the power for an authorised officer, i.e. the police, to give consent under section 25A(2)(a) necessarily implies a power to withhold or refuse consent, it is not ultra vires for them to inform a bank under the LNC regime.
Ground: Not prescribed by law
Contrary to the judge’s conclusion, the CA found that there is no uncertainty or vagueness in section 25(1) which prohibits dealing with property in specified circumstances. Further, there are remedies in private law for any infringement of property or contractual rights that may have occurred. There are also sufficient constraints to guard against arbitrary or capricious refusal.
Ground: Not proportional
The CA was not satisfied that the decision in Interush was plainly wrong. Accordingly, Interush remains good law and it is difficult to see how it can be distinguished in this case. As it has been held in Interush that sections 25 and 25A of OSCO and the LNC regime are not systemically unconstitutional, G Lam JA opined that the judge should not have entertained the systemic challenge in the first place.
The CA judgment not only removes the uncertainty left by the CFI decision as to whether banks and financial institutions are able to freeze the funds in dispute upon receipt of a LNC, but also helpfully clarifies the legal position as to the operation of the LNC regime. It is now apparent that a LNC does not amount to any enforceable order whatsoever. Banks and financial institutions are obliged to exercise their independent judgment and determine whether or not they pay out funds to a customer or to his order when instructed by the customer to do so taking into account the potential criminal liability under section 25(1) of OSCO.
Furthermore, banks and financial institutions should review terms and conditions with their customers and ensure there are express terms entitling them to “block” or suspend accounts of their customers held with them for compliance with the law and particularly section 25(1) of OSCO. In the absence of such express terms, banks and financial institutions may only rely on implied terms.