The final say: Consent for the "letter of no consent" regime

After more than three years of litigation, the decision of the Hong Kong Court of Final Appeal (CFA) in Tam Sze Leung & Ors v Commissioner of Police [2024] HKCFA 8 has brought certainty on how the police, banks and financial institutions should deal with (or not deal with) funds reported to be proceeds of crime under section 25A of the Organized and Serious Crimes Ordinance (Cap. 455) (OSCO).  It also assures victims of financial crime that the LNC Regime can still work in favour of their efforts to recover misappropriated funds.

In this blogpost, we will revisit the decisions of the Court of First Instance and the Court of Appeal, and finally, why the CFA ultimately found the Letter of No Consent Regime (the LNC Regime) to be constitutional.  The factual and procedural background of this case may be found in our previous blogposts on the Court of First Instance and Court of Appeal decisions.

First chapter: LNC Regime held unconstitutional by the Court of First Instance

The first instance decision was given on the basis that section 25 of the OSCO did not expressly permit the Commissioner to operate the LNC Regime in the way he did, and was therefore ultra vires.  Coleman J held the LNC Regime was a means for the Commissioner to freeze property indefinitely without being subject to any judicial oversight or other express legislative safeguards.

The Court also concluded that since the LNC Regime lacked legal certainty as to its source, nature, and extent of powers, it was not a regime 'prescribed by law'.

Furthermore, the LNC Regime disproportionately interfered with the Applicant's right to property since the way it was operated prioritised the need to combat crime over the need to protect an individual's constitutional rights, resulting in an "unacceptably harsh burden on the individual”.

Second chapter: Court of Appeal overrules the Court of First Instance

Overturning the first instance decision, the Court of Appeal took a different view from Coleman J in that the Applicants' accounts were not frozen because of any act by the Commissioner, but by the banks who chose not to comply with the Applicants' instructions due to their fear of attracting criminal liability by dealing with funds in those accounts, after receiving the letters of no consent.

Since the Commissioner's actions fell strictly within the duties of the police to take all steps to prevent crime and an authorised officer's power to give consent pursuant to the OSCO, the LNC Regime was not ultra vires. Given the issuance of letters of no consent were regulated by the Forces Procedures Manual and other guidelines, the Court of Appeal also held the LNC Regime to be prescribed by law.

Notably, the Court of Appeal relied on its earlier decision in Interush Ltd v Commissioner of Police [2019] 1 HKLRD 892 to reject the Applicant's contention that the LNC Regime was disproportionate.

Final chapter: Court of Final Appeal confirms the constitutionality of LNCs

The Court of Appeal decision prompted the Applicants to further appeal to the CFA. As the Court of Appeal held itself bound by Interush, the Applicants asked the CFA to determine whether that decision correctly held that the LNC Regime was a necessary and proportionate restriction on the right to enjoyment of private property under the Hong Kong Basic Law, in addition to the three grounds previously considered.

The CFA dismissed the Applicants' appeal on all grounds, upholding the Court of Appeal's view that the issuance of a letter of no consent does not automatically freeze assets, but rather, the decision to freeze assets is in the hands of the recipients of letters of no consent (i.e. the banks in this case).

Ultra vires and improper purpose

The CFA held that the OSCO was not the only source of the Commissioner's power to give or withhold consent from dealing with suspicious funds. Specifically, section 10 of the Police Force Ordinance (Cap. 232) (PFO) permits the Commissioner to take various measures to prevent the crime of money laundering, seek information in aid of their investigations, and prevent the dissipation of the suspected property. The CFA found that such measures include, among others, communicating with the banks and issuing the LNCs.

It was also emphasised that banks are "not agents of the Police" and are "obliged to and [do] exercise [their] own judgment”, rendering any suggestion that the banks would regard their communications with the Commissioner as "instructions" to be "entirely unfounded”.

Constitutionality

In relation to the challenges on constitutionality and proportionality requirements, while the CFA did not overrule Interush, it departed from the Court of Appeal's decision in finding that the LNC Regime did not in fact engage or infringe the Applicants' right to property under the Basic Law.

The CFA further held that letters of no consent are clearly no more than reasonably necessary to achieve a legitimate aim.

Procedural fairness

The CFA also rejected the Applicants' challenge to the procedural fairness of the LNC Regime, emphasising that the Applicants had every opportunity to assist the investigation and make representations with a view to dispelling suspicion, but chose to stay silent.

Comments

This CFA judgment puts to rest further debate over whether the LNC Regime is constitutional.

The key takeaway is that any steps taken as a result of a no consent letter fall squarely within the judgment and responsibility of the recipient, and not on instruction of the Commissioner. Hence the LNC Regime on its own does nothing to interfere with a citizen's rights.

For further information, please contact Gareth Thomas, Partner, Rachael Shek, Partner, Jojo Fan, Partner, Peter Ng, Senior Associate, Timothy Shaw, Senior Associate, Trevor Ho, Senior Associate, or your usual Herbert Smith Freehills contact.