HKSAR v. GAVISH OMER

DCCC 1033 & 1036/2012 (A)
(Consolidated)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1033 & 1036 OF 2012 (A) (Consolidated)

------------------------------------

------------------------------------

------------------------------------

REASONS FOR VERDICT

------------------------------------

Introduction

1.  Three Israeli males stand trial together before me in this case.  The 2^nd defendant (D2), Mr Gavish Omer, faces a joint charge (Charge 1) with the 1^st defendant (D1) Mr Hen Yoav, of “dealing with property known or reasonably believed to represent the proceeds of an indictable offence”, contrary to sections 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 (“OSCO”).  The charge is more commonly known as “money laundering”.  The 3^rd defendant (D3), Mr Fadlon Daniel, faces another money laundering charge alone (Charge 2), the particulars of offence of which is almost identical with Charge 1, that he together with D1 and D2 laundered the same property, namely 342 kg of gold bars but also with the addition of 4 diamonds.  The details of Charge 2 are set out in the charge sheet and the court is not going to repeat them here.  Suffice it to say that I am not concerned in this trial with Charge 2 as D1 and D3 both pleaded guilty to their respective charges at the outset of the trial whilst D2 pleaded not guilty to Charge 1.

2.  Thus the present trial relates to Charge 1 only.  The particulars of this charge alleges that D2 and D1, between 1 May and 7 May 2012, both dates inclusive together with D3, knowing or having reasonable grounds to believe that property, namely 342 pieces of 1-kg gold bars, in whole or in part directly or indirectly represented proceeds of an indictable offence, dealt with the said property.

The summary of the prosecution case

3.  According to the Admitted Facts (P55), the subject-matter of the charge, namely the gold bars, were all purchased from one Metalor Technologies Hong Kong Ltd (“Metalor”) during the period between November 2008 and June 2011 by corporate customers including Southern Ace Ltd (“Southern Ace”) and GX Port Ltd (“GX Port”).  Metalor is a subsidiary of a Swiss gold refining company which carries on the business of buying and selling gold bars in Hong Kong.  Each of the gold bars sold by Metalor to the companies had a serial number.  The gold bars were seized by the police during an operation in which D2 and D3 were arrested on 7 May 2012 inside a room of a hostel at Chung King Mansions, Tsim Sha Tsui, Kowloon for the offence of “possession of explosive substance”.  The police searched the room where D2 and D3 were found and found five bags containing a total of 161 gold bars, each weighing 1 kilogramme, with a value of approximately HKD66 million and three receipts (inside one of the bags) issued by Metalor relating to its purchase of 181gold bars from Cycom Tech Ltd (“Cycom”) just a few days between 2 and 4 May 2012.

4.  It is further admitted that on 2 – 3 May 2012, D1 first went with an unidentified foreign male (holder of a Philippino passport under the name Gordo) to the office of Metalor and sold to them 85 and 32 gold bars respectively and on 4 May 2012, D3 also went with Gordo and sold to Metalor another 64 gold bars (total 181 gold bars).  All the gold bars were sold under the name of Cycom.  The total amount of the sale of the gold bars during these period was HKD73 million.  Together with the balance of gold bars which was later seized by the police on 7 May 2012, the total value of the whole lot of the 342 pieces of gold bars was therefore approximately HKD139 million.  The proceeds of the sale of the gold bars (HKD73 million) were received into Cycom’s bank account at HSBC.  Between 4 and 8 May 2012, HKD5.4 million was transferred to the bank account to East Asia Escrow Ltd (“East Asia”) and HKD16.7 million was transferred to Cycom’s another securities account.

5.  According to the Admitted Facts, it was revealed that Madam Chu Miu Hing, an employee of Southern Ace was responsible for the buying and collection of the gold bars purchased by Southern Ace and GX Port from Metalor until she left her employment in August 2010.  Payment for the gold bars purchased from Metalor by Southern Ace and GX Port came from the bank accounts of those two companies and the same were in fact all controlled by one Shulman Doron Zvi (“Shulman”), a holder of Israeli and Australian passports.  As it turned out, Shulman was already arrested by the police at his office situated in Kwun Tong on 30 April 2012.

6.  Between January 2010 and April 2012, Shulman had visited Hong Kong on 21 occasions.  He spent a total of 651 days in Hong Kong  in that period.  On each occasion, he entered as a visitor.  Shulman was in control of a number of companies and their bank accounts including the accounts of East Asia, Southern Ace, GX Port and Cycom.  Corporate services to the companies under Shulman’s control were provided by a number of Hong Kong secretarial companies.  Shulman dealt with those companies and used the name “Justin” to do so.

7.  Funds were regularly transferred between the bank accounts of these companies in significant amounts.  In the period from 2 January 2010 to the arrest of Shulman on 30 April 2012, 9 of the 10 companies under Shulman’s control received into their bank accounts a total of HKD1.7 billion of which HKD1.5 million and HKD875 million (approximately) was received and transferred respectively from those company bank accounts when he was in Hong Kong.

8.  During the same period, approximately HKD2.7 million was received in Shulman’s 5 personal accounts with HSBC and one savings account with Citibank and the amount remaining in his personal bank accounts at the time of his arrest was approximately HKD170,000.  Shulman was however described as a student in his personal account documentation.

9.  It is also not disputed that in August and September 2010, Shulman also purchased two village houses situated in Nga Yiu Tau, Yuen Long (“House A”) and Tsiu Keng Road, Sheung Shui (“House B”) in the names of another two companies under his control for the total sum of HKD7.7 million approximately.  The title deeds and keys of the both houses were later found by police at Shulman’s office and his residence at Laguna City, Kwun Tong following his arrest.  The bank cards and e-banking tokens which could be used to operate some of the bank accounts of the companies under his control were also found by the police in his apartment.  It is the prosecution case that these two houses were bought with the sole purpose of storing and concealing the gold bars.

10.  According to the Admitted Facts, the Inland Revenue Department confirmed that only 7 out of the 10 companies controlled by Shulman had submitted profit tax returns for the past years.  For those companies which had filed the tax returns, each stated that no gross profit was received.  Cycom stated in its 2010/2011 tax return that it had not yet commenced business.

11.  A number of other persons were arrested by police in connection with the case:-

· On 2 May 2012, Ivan Vaclavic the holder of both a Slovak and Bulgarian passport was arrested by police in Hong Kong. He was later released on police bail which he failed to answer and his whereabouts are unknown. An e-flight ticket in the name of Ivan Vaclavic for a flight from Rio de Janerio departing Hong Kong on 2 May 2012 was found by police in the office of Shulman when it was searched on 30 April 2012;

· On 10 May 2012, the police arrested one Cheung Yuen Pui, Lilian, the holder of a Netherlands passport, when she arrived at Hong Kong. A search of her person revealed she was in possession of one remittance slip which was for the transfer on 23 March 2012 for USD300,000 to Cycom;

· Santos Jason Perez, a Philippine passport holder, and a director of East Asia was also intercepted by police at the airport on 11 May 2012 as he was attempting to leave Hong Kong. A search of his person revealed him to be in possession of 10 telegraphic transfers forms which were for the remittance of a total of USD7.8 million from Cycom’s bank account to a number of other bank accounts. He was arrested but he jumped police bail afterwards.

12.  D2 was subsequently interviewed on 7 and 8 May 2012 by the police under caution after he was arrested.  During the interviews, D2 explained how he came to be found together with the gold bars in Chung King Mansions and his involvement with Shulman, D1, D3 and the other persons at large.  His three video records of interviews (“VIRs” P50-52) together with the transcripts (P41-43) were all admitted into evidence without any challenge by the defence to their voluntariness and accuracy.  In this trial, D2 elected to testify and he adopted the content of his statements made during these interviews as his evidence at the start of his testimony.

13.  D2 came to Hong Kong from Israel for the first time on 30 January 2012 for a job which he learned about through a friend called Noam on Facebook on the internet.  Noam in turned introduced D2 to another man called Razi Berger who forwarded Shulman’s email address to him for direct contact.  Razi told D2 that Shulman worked for a Dutch businessman.  The job Shulman offered to D2 was to come to Hong Kong to keep a watch in a house and live in there and for that he was promised to be paid with a monthly salary of USD3,000 in cash together with the costs of the airfares.  No written contract was entered.

14.  Upon arrival, D2 met up Shulman in Kowloon Station and he was immediately taken to House A by Shulman.  When D2 asked questions about details of his job and his boss, Shulman told him that it was better not for him to ask for whom he was working.  D2 was specifically told by Shulman not to open the door of a locked room in House A.  He later admitted in the interview that he had knew he had to stay in the house to watch the safe. He was the only person who lived in House A during his initial stay in Hong Kong.  He stayed there for 3 months.  He left Hong Kong for the Philippines on 24 April 2012 for a week because, as an ordinary visitor and a holder of a tourist visa, his original permission to stay in Hong Kong for 90 days came to be expired.  Shulman paid for the air tickets for this trip and D2 returned to Hong Kong in the early hours of 1 May 2012.

15.  According to D2, when he returned to House A, he saw D1 who he only met for the first time.  D1 was a fellow Israeli and he was told that D1 had come to replace him in the house whilst he was away.  He tried to contact Shulman to clarify the matter but was of no avail.

16.  It is the prosecution case that between 1 May to 7 May 2012, D2 was acting in concert with D1 and later D3 to remove the gold bars from the two village houses to three different hostels situated inside Chung King Mansions for storage and concealment and also for the purpose of converting more than half of the gold bars by selling them back to Metalor and transfer the proceeds of sale to the bank account of Cycom.

17.  Based on the undisputed evidence and the version given by D2 when he was interviewed under caution, Mr Turnbull gave a very detailed account of the events in chronological order between 1 May and 7 May 2012 (see paragraphs 10.23-10.59 of the prosecution final submission).  I shall adopt the content of those paragraphs without repeating them here.  In gist, D2 admitted inter aliaunder cautionof:-

· helping D1 to remove the safe from the wall in House A with a crowbar;

· going with D1 to purchase metal cutting equipments to cut open the safe;

· assisting D1 in the beginning in trying to open the safe in House A;

· going to House B and witnessed the safe being cut opened by another Israeli male called Din; and

· seeing the gold bars inside the bags and handled two of them during his stay in a hostel at Chung King Mansions.

The summary of defence case

18.  The defence case was derived from what D2 had admitted and explained in the VIRs together with his testimony in court.  Briefly stated, the defence case is that D2 decided to accept the offer and came to work in Hong Kong as a “house-sitter” because it was a sinecure rather than the hard work he was engaged as a construction worker back home.  He also saw it as an opportunity to see more of the world.  His friend also assured him that he knew Shulman well and D2 was satisfied that he could trust Shulman.  All along, he did not know that gold bars were kept in House A, he said.  He further said he was not there when the safe was opened in House A and House B on 2 May 2012.  He admitted to have assisted in the moving of the safe in House A and locating the hardware store to purchase the metal-cutting tools but he was only following the instructions of D1 and Din whom he had earlier met in Manlia when he was there to renew his passport.  D2 said he was told by Din to remove and carry smaller bags that contained clothing from House B and he did not carry any bags that contained the gold bars to Chung King Mansions from the houses and he was not involved with the selling of the gold bars with D1 or D3 to Metalor.

19.  D2 explained in court that he was there with D1, D3, Din and the others as he only thought they were acting under the direct instructions from the employer.  He said he still regarded himself to be continually employed for the job although he had already lost contact with Shulman.  D2 said Shulman still owed him wages for the 3^rd month of his work and he understood that his employment was for 6 months when the offer was made to him and by the time he returned to Hong Kong from the Philippines on 1 May 2012, he only had the equivalent of less than HKD3,000 with him as he had lost most of his wages in a casino in Manila.

20.  D2 said he only saw the gold bars for the first time at about 4 pm on 2 May 2012 inside a hostel when he stayed together with the others in Chung King Mansions and he had only touched two gold bars out of curiosity in another hostel room on 6 May 2012.  Whilst he had followed the others and moved to 3 different hostels in Chung King Mansions during the period, he said he was never told to guard the gold bars and he was never left alone in the room with the gold bars.  He denied any suspicion on his part that the gold bars was “illegal” and by that he meant he did not have any knowledge and he never considered that the gold bars were the proceeds of an indictable offence.

The law

21.  In an offence of “dealing with the proceeds of an indictable offence”, the prosecution need not prove the commission of the original indictable offence that gave rise to the proceeds.  The prosecution is only required to prove that the defendant knew or had reasonable grounds to believe that the property represented the proceeds of an indictable offence.

22.  Dealingis defined in section 2 of the OSCO to be in relation to property:-

(a) receiving or acquiring the property;

(b) concealing or disguising the property (whether by concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it or otherwise);

(c) disposing of or converting the property;

(d) bringing into or removing from Hong Kong the property;

(e) using the property to borrow money, or as security (whether by way of a charge, mortgage or pledge or otherwise).

23.  Property is also defined in section 2 of the OSCO to include both movable and immovable property within the meaning of section 3 of Interpretation and General Clauses Ordinance.

24.  The prosecution must point to evidence that the defendant knew of the grounds and that those grounds are reasonable.  This means that any person considering those grounds would so believe. In HKSAR v Yam Ho Keung (unreported), CACC 555 of 2001, the Court of Appeal approved of the approach adopted in the lower court when considering whether there are reasonable grounds for believing that the property represents the proceeds of and indictable offence.  The approach is that where there is a range of scenarios which might give rise to the belief that the property being dealt with was a proceeds of an indictable offence and the defendant holds reasonable grounds for believing in them all.  If one of the scenarios is related to an indictable offence that is a sufficient basis to found a conviction.

25.  The prosecution does not have to make out the actual belief of the defendant only that the defendant was aware of the reasonable grounds (See HKSAR v Shing Siu Ming & another (1999) 2 HKC 818 at 825 affirmed in HKSAR v Ma Zhujiang and another (2007) 4 HK LRD 285).

26.  In Shing Siu Ming, it was held by Mayo JA that the phrase “having reasonable grounds to believe” involved both objective and subjective elements (“the Shing Siu Ming test”):-

(i) the objective element requires proof that they were grounds that a common sense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in whole or in part represented any proceeds of an indictable offence;

(ii) the subjective element requires proof that the defendant knew or was aware of the existence of those reasonable grounds.

27.  The approach identified in Shing Siu Ming has been since then been consistently applied by trial courts and upheld by courts of appeal as representing a correct statement of the way this phrase should be understood and applied.

28.  In its most recent judgment on the offence of “money laundering”, HKSAR v Pang Hung Fai CACC 34/2012 (unreported) 31 May 2012, the Court of Appeal however revisited the Shing Shiu Ming test.  McWalters J (sitting as an additional JA) noted thatthe test itself actually did not stipulate the order in which each of the two components (objective and subjective) should be addressed but over the years as in explaining each of them in the way Mayo JA did, first the objective and then the subjective, an order became assumed.

29.  After carefully reconsidering the mens rea element of the offence, the Court of Appeal decided to revise the current approach and that the order of the questions proposed in the Shing Siu Ming test be reversed.  The more logical approach as described by McWalter J should be now as follows:-

(i) Firstly, what were the facts known to the defendant and the objective factual circumstances in which he found himself and of which he was aware at the time at which he dealt with the property which is the subject of the charge?

(ii) Secondly, do those facts and circumstances provide reasonable grounds to believe that that property in whole or in part represented the proceeds of an indictable offence? (see paragraphs 107-108 of the Judgment)

30.  The Court of Appeal further elaborated on the first step that:-

“110. The first step in determining whether a defendant had reasonable grounds to believe is to identify all the facts known to the defendant that relate to the dealing with property that is the subject of the charge. These facts may, depending on the circumstances of each case, extend beyond those relating to just the dealing with the property and include facts known to the defendant about other persons or circumstances linked in some way to the dealing.”

31.  As to the second step:-   

“112. The second step is to process these facts through the mind of the common sense, right-thinking member of the community and determine whether this person, possessed of these facts, objectively would consider them sufficient to lead a person to believe that the property in question constitutes the proceeds of an indictable offence. When this reasonable person considers these facts objectively it means he does so uninfluenced by the personal beliefs, perceptions or prejudices of the defendant.

113. The question that would be posed to a jury would run as follows: “On those facts and in those circumstances, did the defendant have reasonable grounds to believe that the property was the proceeds of an indictable offence? The question is not whether the defendant believed the property to be the proceeds of an indictable offence, still less whether the property was in fact the proceeds of an indictable offence. The question is whether he had on all those facts and circumstances known to him reasonable grounds so to believe.” (emphasis added)

32.  Finally, Stock VP also held (at paragraph 204) in the same judgment that “halfway house” defence should be made available to a defendant under section 25 of the OSCO so that, given the proof of reasonable grounds to believe that the property was the proceeds of an indictable offence, nevertheless, on the defendant discharging the burden of proof on the balance of probability, it would be a defence that the defendant honestly and reasonably did not suspect the property to represent the proceeds of an indictable offence.

General directions

33.  In arriving at my verdict, I direct myself that the prosecution must prove beyond a reasonable doubt that D2 is guilty of the charge he faces and he does not have to prove anything.  I further direct myself that I have to be sure of D2’s guilt on the charge before I can convict him of it.  This is the same thing as being satisfied beyond reasonable doubt of his guilt before I can convict him.

34.  The requirement of proof beyond reasonable doubt does not prevent me from inferring, from the facts that have been the subject of direct evidence before me, the existence of some further facts, such as the knowledge and intent of the accused, which constitutes an essential element of the offence; but the inference must be a compelling one and the only one, that no reasonable man could fail to draw from the direct facts I find proved.

35.  D2 has a clear record.  In considering the truth of his evidence in court and his explanation in the VIRs and what weight I should attach to them, I should bear in mind that it was made by a person of good character and take that into account when deciding whether I can believe it.  Secondly, the fact that D2 is of a good character may mean he is less likely than otherwise might be the case to commit this offence and in considering whether the prosecution has satisfied me of his guilt, his good character should be taken into account.

36.  The VIRs were admitted by the defence to be accurate and voluntary statements.  D2’s answers contain both incriminating parts as well as explanations and they are mixed statements.  I remind myself that I must consider the whole of the content of all the statements in deciding where the truth lies.

Closing submissions by the prosecution

37.  Mr Turnbull, counsel on fiat, submitted on behalf of the prosecution that the version of events put forward by D2 is wholly unbelievable in relation to the question of his knowledge of the gold bars in the village houses.  He asked why any person would hire another who resides in a foreign country and whom they never knew or had previous dealings with to come to Hong Kong to just watch over a village house?  He posed the same question to anyone in D2’s position and queried why D2 would not feel suspicious about the job and accepted such an offer under the circumstances.

38.  It is the prosecution’s submission that any person in the position of D2 would have asked Shulman, a fellow Israeli what he was looking after in the village House A.  Any person in the position of D2 who failed to get an adequate response from Shulman would not continue with the venture.

39.  D2 in fact admitted on arrival in Hong Kong and upon being taken to the village House A that he had some unease about what he was being asked to do.  However, he decided to continue with his employment despite this initial feeling.  It is further submitted by the prosecution that D2’s knowledge or having reasonable grounds to believe that the property represents the proceeds of an indictable offence only increases when one consider the objective facts which occurred after his return from the Philippines.

40.  In a nutshell, Mr Turnbull relied on the very suspicious circumstances of D2’s job nature, his working environment and in particular the incredible explanation offered by him in the VIRs and submitted that the irresistible inference to be drawn is that D2 was well aware that he was guarding gold bars in the village house.

41.  It is the alternative submission by the prosecution that even if this court accepts D2’s claim that he did not know that gold bars were contained in the safes at the village Houses and that he only gained that knowledge at Chungking Mansions when D1 opened the bags he had brought from the village houses which contained gold bars, based on his acts of dealing with the gold together with the others including D1 and D3 during the intervening period, the prosecution has still made out its case against D2.

Closing submissions by the defence

42.  Mr Hemmings, counsel for D2, submitted that there is no evidence of any dealing by D2 in respect of the gold bars.  He submitted that the concealment of the proceeds of the alleged indictable offence was achieved when the proceeds were converted by purchasing the gold.  Although D2 was aware of the existence of the gold in Chung King Mansions, he did nothing in relation to the gold at all apart from handled two of gold bars briefly on 6 May 2012 in a room of the hostel.  He submitted that it is not suggested by the prosecution that D2 took any of the gold bars to Chung King Mansions, or that he was involved in the subsequent removal of the gold bars from Chung King Mansions and its sale to Metalor.  There is no evidence that D2 was ever asked to ‘guard’ the gold bars in the hostel, nor is there evidence that he did so.  There is no evidence that D2 either concealed or assisted in concealing the gold.  

43.  Mr Hemmings submitted that D2 did his best to truthfully answer the questions that was put to him in the VRIs.  He pointed out that D2 had no reason in the interviews to distance himself from the gold bars by being untruthful as he had not been told that the gold bars were illegal and the suspected offence of which he was investigated was the possession of explosives.  Furthermore, nothing that D2 said in the interviews has been demonstrated by the prosecution to have been untrue.

44.  Regarding D2’s oral testimony, Mr Hemmings submitted that D2 was in no way shaken in his testimony and his answers were all perfectly rational in particular as to why he believed D1 and Din had instructions from the house owner.  He said it was most normal for people to employ what he described as a ‘house-sitter’ to watch over a vacant house and there is nothing surprising about Shulman wanting a fellow Israeli for the job.  There is also nothing strange about a house owner locking his personal belongings in a room when the house is to be occupied by a stranger.  It was also submitted that there was no evidence that D2 was aware of any companies referred to in the Admitted Facts and there is no evidence to show that D2 was aware of the existence of any other suspected persons referred to in the Admitted Facts other than those he has expressly referred to in his evidence.

45.  D2 is jointly charged with D1 to have laundered the gold together with D3 in Charge 1 but it was submitted that there was no evidence to prove that D2 was part of a joint enterprise in relation to the ‘dealing’.  D2 believed that D1, D3 and the others were acting upon instructions from the owner of the gold and he did nothing to assist them in their dealings with the gold.  D2 was just ‘staying there’ in the room and doing nothing in relation to the gold.

46.  In relation to the mens rea element of ‘reasonable grounds to believe’, it was submitted by the defence that there was nothing about the appearance of the gold bars which could give rise to any such grounds.  It was pointed out that Metalor had no suspicion that the funds used to purchase the gold bars between 2008 and 2011 derived from an indictable offence.  Likewise, they also had no suspicion that the gold bars they purchased from Gordo on behalf of Cycom between 2 and 4 May 2012 had been earlier purchased with proceeds of an indictable offence.  D2 therefore had no ‘reasonable’ or indeed any ground to believe that the gold bars were the proceeds of an indictable offence.  Mr Hemmings reiterated that the gold was not in itself illegal.  He submitted that nothing contained in the admissions by D2 amounts to ‘dealing with property’ or even ‘assisting in dealing with property’. 

Evaluation of evidence

47.  I have considered the evidence, submissions and the cases cited by counsels very carefully.  I have in particular followed the two-steps approach as laid down in paragraphs 107-108 of Pang Hung Fai when I come to evaluate the evidence before me and consider the mens rea element of the offence.

48.  I now turn to the issues.

(i) Does the 342 pieces of 1-kg gold bars, the subject of the offence, represented proceeds of an indictable offence?

49.  There was the undisputed evidence that the gold the subject of the charge had been purchased by Southern Ace and GX Port from Metalor in the period 2008 to June 2011 and they were subsequently stored in two safes in both House A and House B.  I only need to repeat paragraphs 7-9 above regarding the undisputed evidence of the flow of the funds to establish that in the period from January 2010 to 30 April 2012, a massive HKD1.7 billion passed through nine companies’ bank accounts (including inter alia, Southern Ace and GX Port) all under the control by Shulman who hired D2 to come to Hong Kong to watch over the village house in January 2012.  Even the two village houses where the gold were stored were in fact purchased by two other companies also controlled by Shulman.

50.  As said, in a money laundering offence such as the present, the prosecution need not prove the commission of the original offence that gave rise to the proceeds.  There is no requirement to prove the specific conduct of the underlying offence and therefore no need for the court to identify such specific conduct (see HKSAR v Lam Hei Kit (unrep, CACC84/2003).

51.  The Court of Appeal had also held that “it is not necessary for the funds themselves to be the immediate proceeds of an indictable offence…” (see HKSAR v Au Hau Ching (unrep, CACC 146/2008, [2009] HKEC 1310).

(ii) Actus reus

52.  In order to prove the actus reus element of the offence, the Court of Appeal is of the view that what must be proved is no more than the act of ‘dealing’ in the property that is the subject of the offence (see HKSAR v Lung Yun Ngan & Another (unrep, CACC 482/2010). “Dealing” is broadly defined in section 2(1) of the OSCO and includes receiving, concealing, disposing or converting property.

53.  In this case, after Shulman was arrested by the police on 30 April 2012 and could not be contacted, D2 came back to Hong Kong and since then, despite his claims that he did not has the knowledge of the gold, he had in effect been engaged in the process of removing the gold bars from the safes of both village houses to Chung King Mansions.  Although he said he only first saw the gold bars inside the first hostel at Chung King Mansions in the afternoon on 2 May 2012, he was practically still staying together with the others and moved with them to three different hostels together with the gold within Chung King Mansions until he was found with D3 and the gold bars in a room in the third hostel by the police on 7 May 2012.  In particular, D2 had at least admitted, inter alia, to have performed the following tasks during the period:-

(i) located an equipment shop at Yuen Long and from which he purchased metal cutting equipment to cut open the safe;

(ii) assisted D1 to remove the safe from the wall in House A;

(iii) followed the instruction of D1 to proceed to House B where he witnessed another safe being cut opened by Din and from where he removed some smaller bags of clothing to Chung King Mansions;

(iv) went with others to rent another village house in Yuen Long with a view to deposit the gold; and

(v) went to the secretarial company of Cycom in Central and tried unsuccessfully to collect the company chop of Cycom.

54.  Based on the above, I cannot bring myself to agree with the submission by the defence that there is no evidence of any ‘dealing’ by D2 of the gold. Clearly, if it is the case, I would expect to be called upon to deal with a no case submission relying on this point by Mr Hemmings and not until he raised this for the first time in his final submission.  The thrust of this submission was based on the premise that those acts of dealing were performed by D2 without the knowledge of gold before the evening 2 May 2012 which I shall return later in the discussion on the mens reaelement of the charge.

55.  This is a bold submission but insofar as the actus reus element of a section 25 offence, “the actus reus is dealing with property knowing, at the time of dealing, certain grounds which have a particular character.” (see paragraph 182 of Pang Hung Fai).

56.  Clearly there is already ample evidence before me to assess that D2 has been engaged and was still engaging in the process of concealing/disguising and converting the gold with the others during the period before or after he knew the existence of the gold.  Based on his admissions in the VIRs and in court, and given the unusual instruction he received from D1 to cut open the safe, his act of locating an equipment shop in order to purchase and supply of the cutting-tools was already an act of ‘dealing’ in the sense of ‘concealing the location’ of the property within the board definition of ‘dealing’ under section 2 of the OSCO.  The act of D2 was already so pivotal in cutting open of the safe in House A but the following acts by him were equally, if not more important, especially the acts were done after he said he already had knowledge of the gold after 2 May, 2010:-

(i) Firstly, one can easily understand that the storage of the gold bars in a hostel was only meant to be a temporary measure and thus D2’s act of looking for a village house with others in Yuen Long to rent between 3 to 5 May 2012 could no doubt be considered as a step taken by him with the others to facilitate the concealing/disguising of the gold in a more long term and permanent basis;

(ii) secondly, the guarding and the watching over of the gold in Chung King Mansions during the intervening period;

(iii) thirdly, there is the undisputed evidence that the proceeds received from Metalor in relation to the sale of the gold on 2 to 4 May 2012 were all paid into Cycom’s bank account and there were transfers made from this account into other accounts in the days followed. In this way, the gold was therefore ‘laundered’ and ‘converted’ into chose in action. As said, the Filipino male Santos, the director of East Asia, also a company controlled by Shulman, was arrested in the airport when he tried to leave the territory and found by the police to be in possession of 10 telegraphic transfers forms which were for the remittance of a total of USD7.8 million from Cycom’s bank account to a number of other bank accounts;

(iv) D2 admitted to have followed the instruction of Din and tried to collect the company chop of Cycom on 5 May 2012 from Cycom’s service company in Central. Despite his claim that he had been unsuccessful, by attempting to get hold of the company chop which was for the use to validate the transfer of the funds from Cycom’s bank account into other overseas accounts, D2 could also be assessed to have been acting together with the others and engaged in the process of ‘laundering’ or ‘dealing’ with the gold this way by assisting in the transfer of the proceeds of the sale of the gold into other jurisdictions.

(iii) The mens rea

57.  It was not contended by the prosecution that when D2 was approached by Shulman to come to Hong Kong to do the job, he knew of Shulman’s previous dealings in relation to the gold bars.  In this trial, D2 admitted that he only had knowledge of the gold when he saw the gold bars D1 and Din had brought from the village houses into a hostel in Chung King Mansions on 2 May 2012 but Mr Turnbull submitted however that the inference to be drawn based on the evidence adduced was that D2 was well aware that he was guarding gold bars in the village house all along.  In either case, the prosecution case was based entirely on the second and alternative limb of the mens rea element of the offence, namely that D2 had reasonable grounds to believe that the gold bars represented the proceeds of an indictable offence.

58.  I now follow the two-steps approach as set out in Pang Hung Fai to determine the mens rea ingredient of the offence.

The first step

59.  In this case the facts and circumstances which would objectively be examined are the following events in chronological order and they were actually emanated from the statements by D2 in his VIRs which were also adopted into his testimony in court.  I therefore also adopt mostly the account of D2’s oral testimony in the final submission by the defence:-

(i) There is this person Shulman, a fellow Israeli, whom D2 did not know personally but was introduced through friends on facebook. Shulman offered D2 a job to come from Israel to Hong Kong to watch over a house and for that he would be paid USD3,000 as his monthly salary plus return airfares;

(ii) D2 said his friend assured him that he knew Shulman well and D2 was satisfied that he could trust Shulman. D2 had no written contract for the job but only verbal agreement;

(iii) upon arrival in Hong Kong on 30 January, 2012, D2 was taken to House A by Shulman. He thought he was coming to Hong Kong to work for a rich person but he only met Shulman and he told D2 that he need not know who the owner of the house was and when Shulman told him not to open a locked door in House A, he admitted to became ‘nervous’;

(iv) D2 said he had concerns about what he was doing but did not think he was doing anything dangerous or illegal and he decided to stay after reassurances from Shulman;

(v) D2 stayed in House A for three months before he left for Manila for a week as his visitor visa came to be expired and he had to renew his passport there. He met a person called Din (also an Israeli) in Manila. Before he left, he had visited a company in Yuen long to order iron gates to be installed in House A as instructed by Shulman;

(vi) when D2 returned to Hong Kong and went back to House A, he saw another Israeli man called Eddie (D1) who had replaced him at House A. He was unable to contact Shulman on his return to Hong Kong;

(vii) the next day on 1 May 2012, Dl left House A. He went to Shulman’s flat in Kwun Tong but he failed to gain entry. Later he returned to the house and opened the locked door in House A. There was a safe in the room and D1 told D2 that he had to move the safe from the wall and D2 had assisted D1 to do so;

(viii) the next morning on 2 May 2012, D2 said D1 told him that the owner of the house had instructed him (D1) to open the safe but D1 had no key. D2 went to an equipment shop at Yuen Long to buy some equipment to cut steel. D1 later used the equipment to cut open the safe in House A;

(ix) later he was instructed by D1 to go to House B and he met Din there. Din broke into a locked room and used an electric cutter to open another safe in a room there. Din told D2 that it was better not to know why the safe was being broken;

(x) before Din could open the safe, D2 said he sat on the crouch and walked around for a while before he was asked by Din to go to Chung King Mansions and so he left with a suitcase containing Din’s clothing;

(xi) D2 said he first saw the gold at approximately 4 pm on 2 May when he met D1 in a hostel in Chung King Mansions. D1 was with a Filipino whom he had never met before. D1 opened one of the two suitcases and showed D2 some gold bars. He told D2 that it had come from the safe in House A. Later D1 left with the Filipino and D2 was told that they were going to deposit the gold. D2 was asked by D1 to await their return in the hostel room. He said in the VIR (P52 counter 1794-5) that he was sort of ‘stay and watch’ the gold. They later decided to move to another hostel in the evening after returning to the hostel as they were worried that ‘people were suspicious’ (with the gold);

(xii) whilst he was in the hostel, he received a call from Din asking him to locate a locksmith. D2 found one on the internet and informed Din who then contacted the locksmith who went to House B to prise open a door there;

(xiii) they later moved to a 2^nd hostel which contained two rooms of which D2 had sole access to one and D1 had the other one. Din later also arrived with several suitcases. D1 and the Filipino male went down to the lobby to help carrying the suitcases. D2 was told that the suitcases brought by Din contained gold from safe in House B;

(xiv) between the evening of 2 May and the morning of 6 May 2012 D2 slept in his room in the 2^nd hostel, except for the night of 4 to 5 May when he stayed with a girlfriend. On 3 May D3 also arrived at the 2^nd hostel. D2 was introduced to him as ‘John’. D1 and John shared with the same room in the 2^nd hostel;

(xv) during the period from 3 to 5May 2012 D2 was asked to help find a house in the Yuen Long area to rent. D1, D3 and Din also looked for a suitable property. Nothing suitable was found;

(xvi) on 4May 2012, D2 was asked to collect a company chop from an address in Central. He said he had no idea what it related to. He went there but the chop was not ready. The next day he said D3 went to collect the chop and, according to the Admitted Facts, the one who did so was using the name ‘John Miller’;

(xvii) in the morning of 6 May 2012, D2 was told that the group were moving to a new hostel. D2 overheard the others talking about the owner of the 2^nd hostel being suspicious about the gold. This was the hostel where D2 and D3 were arrested. D2 carried 2 small suitcases to this new hostel which were found in the room at the time of his arrest. The other bags were taken by D1, D3, Din and the Filipino male. Din left after assisting D3 to repack the gold leaving only D2, D1 and D3 in the room. Later in the day D1 left. He was expected to return to the 3^rd hostel but did not do so;

(xviii) the 3^rd hostel comprised a single room with 3 beds. During 6 May, inside the room, D2 maintained that D3 repacked the bags, moving stuff from between the various suitcases. At the time of his arrest D2 did not know which bags contained gold;

(xix) at some time during the 6May, inside the 3^rd hostel, D2 admitted to have handled two of the gold bars out of curiosity. Otherwise he said he was just waiting there. D2 maintained that he did not ‘take care’ of the luggage in the room;

(xx) during his time at Chung King Mansions, D2 said he was daily expecting Shulman to contact him as Shulman still owed him one month’s salary and D2 was expecting to resume his job at House A. It was only after his arrest that D2 was told that Shulman had been arrested;

(xxi) although D2 had been employed by Shulman, he knew that Shulman was acting on behalf of the owner of House A. He said he did not know who the owner was but his friend Razi had told him on facebook that Shulman worked for a Dutch businessman;

(xxii) D2 thought that the gold was legal.

The second step

60.  As explained by McWalters J in Pang Hung Fai at paragraph 112:-

“the second step is to process these facts through the mind of the common sense, right-thinking member of the community and determine whether this person, possessed of these facts, objectively would consider them sufficient to lead a person to believe that the property in question constitutes the proceeds of an indictable offence. When this reasonable person considers these facts objectively it means he does so uninfluenced by the personal beliefs, perceptions or prejudices of the defendant.”

61.  At paragraph 153 of the same judgment, McWalters J reminded us that it is important to bear in mind that the second step is all about assessment by the reasonable person who looks at the facts objectively unblinkered by the personal beliefs, perceptions or prejudices that might be possessed by the accused and which might hinder him in assessing the facts presented to him.

62.  His lordship was of the view that the fact that the applicant in Pang Hung Fai was too trusting or because he could not bring himself to think ill of a wealthy friend who asked him for permission to deposit HKD14 million into his own bank account does not, on its own, provide him a defence to the charge.  The fact of the matter is the applicant had not considered the provenance of the money.

63.  In our case, irrespective of the question of when was the first time D2 came to be aware of the existence of the gold, it was crystal clear that he had failed to consider the provenance of the gold and before 2 May 2012, D2 even denied any knowledge of the gold bars in the village houses. 

64.  As pointed out in the summary of the prosecution case, Mr Turnbull submitted that the version of events put forward by D2 is wholly unbelievable.

65.  In terms of proving there existed “reasonable grounds to believe” the prosecution relied upon the following facts and circumstances:-

(i) that it is unthinkable for someone in Hong Kong to hire an unknown person and pay for the airfares to Hong Kong when the job was to just looking after a village house which could well be performed by a local resident;

(ii) that one of the scenarios that must have crossed D2’s mind is that the job he was being asked to perform may have involved some illegal conduct. It is reflected by his feelings of unease when he was told by Shulman not to ask about the man he was working for and not to open a door in House A;

(iii) that any person in the position of D2 would have asked a fellow Israeli what he was looking after in the village House A and any person in the position of D2 who failed to get an adequate response from Shulman would not continue with the venture;

(iv) that D2 must have been aware that he could be used by Shulman in serious criminal activity such as trafficking of dangerous drugs. The prosecution relied on what D2 had said in the 2^nd VIR (P52 counters 65 – 72);

(v) that the inference that D2 was aware that he was guarding gold bars was strengthened as it was D2 who in March and April 2012 had gone to one Lees (HK) Development Company and engaged their services to arrange the installation of an iron gate at House A;

(vi) that it was D2 who found the equipment shop in Yuen long from which equipment was purchased in order to cut open the safe on 2 May 2012;

(vii) that D2, despite being unable to contact his employer Shulman, obeyed the orders of D1 (Eddie) whom he had allegedly only met that same day concerning leaving village House A on 2 May 2012 when D1 was engaged in breaking open the safe which D2 had been hired to watch over. At House B, he saw Din who he had met only days earlier in the Philippines also breaking open a safe at that village House and he also followed the instruction of Din to carry the bags of clothing and proceeded to Chungking Mansions;

(viii) that allowed of the only reasonable inference that D2 would not be engaging in this pattern of behaviours unless he, Shulman, Eddie and Din knew all along that gold bars were stored in the safe and he had been engaged to ensure there concealment and safe disposition;

66.  I have carefully considered the above evidence and the submissions by the prosecution together with the reply by the defence in their final submission as outlined in paragraph 42 to 47 of this judgment.

67.  D2’s account of his role in his involvement with the gold bars was dubious and problematic.  Being the ‘house-sitter” of House A  which turned out to have contained a safe of valuable gold bars, his assertion that he was being brought over by Shulman to come all the way from Israel to Hong Kong without knowing at least that ‘valuables’ were kept inside the house is highly questionable.  Any reasonable person would agree that the task of keeping watch over a vacant village house and the task of guarding a safe which contained ‘valuables’ is entirely two different matters in terms of the seriousness of the job which requires and demands different degree of attention and dedication.  I totally agree with Mr Turnbull that if it was only a simple task of watching over a house, any local people who can speak simple English can do the job for only a fraction of D2’s salary.

68.  I accept that D2 might not have any idea of the pay for a similar post in the local job market but the same cannot be said about Shulman who frequently came to Hong Kong in so many occasions and has stayed here for a total of more than two years and who has controlled over 10 companies in Hong Kong.

69.  The fact remains, as the matter unfolded, that Shulman did not hire D2 to just watch over an empty village house.  Also, it would be so unwise for him to spend that kind of money (USD 3,000 per month) to hire someone who could not be very serious about guarding his gold when D2 was not even told of its existence in the first place.  I just fail to understand why D2 had to be ‘kept in the dark’ about what he was paid to guard inside the house.  At the very least, D2 would be told that there was a safe and there were valuables inside.

70.  Mr Hemmings submitted that there is nothing strange about a house owner locking his personal belongings in a room when the house is to be occupied by a stranger.  But even according to D2’s own account in the VIR, he felt “weird” and unease when he found out from Shulman that there was a locked room in House A.  Indeed, quite rightly so as any reasonable person in his position should feel suspicious about what was kept inside the locked room and what he was exactly hired to do in the house especially when Shulman told him he did not need to know who the house owner was and not to ask questions about the house owner.  The thought that there might be something dangerous or illegal was only natural in the mind of any reasonable person in his position and D2 also admitted in the VIR (P52) that he had considered that possibility:-

“It’s not dangerous. It’s not like, er, I thought, I thought it’s not like, er, drugs or something.”(counter 70)

71.  Under cross-examination, D2 denied and maintained that he did not think for a moment that there was drugs or anything illegal.  He explained that sometimes “he made mistakes in words”.  He did not think for a moment then that there was drug or anything illegal in the house.  It is only a problem of expression.  Indeed he later even called the Hebrew interpreter in court, Miss Sade Lior (DW2) to support him on this point.

72.  His explanation in cross-examination is inconsistent with his answers under caution.  Despite his effort to explain himself due to poor expression in English, I have no difficulty in understanding his English in the VIRs and his testimony in court.  However, in the step two analysis, the question is actually not whether D2 himself had considered the possibility of any illegal activity he might be involved.  It is all about whether the common sense, right-thinking member of the community, possessed of these facts, would objectively consider that possibility.  What D2 would like me to believe is he simply did not give any thought to that possibility which did not really assist him in his defence. I fully agree with Mr Turnbull that any right-thinking member of the community in the position of D2 who failed to get an adequate response from would not stay behind to watch over a house like this in the circumstances. 

73.  D2 said he trusted his friend and his friend knew Shulman well and therefore he was satisfied that he could also trust Shulman.  In fact, even his friend Noam did not know Shulman personally.  Noam only referred him to another man called Razi who in turn introduced Shulman to him.

74.  In the step two analysis, McWalter J held that when a reasonable person considers these facts objectively, he does so uninfluenced by the personal beliefs, perceptions or prejudices of the defendant.  In Pang Hung Fai, the applicant personally knew the person who borrowed his bank account and he knew for a fact that the person was a wealthy merchant but the Court of Appeal still considered that that was not a defence and the applicant was only all too trusting and did not want to think-ill of his friend.

75.  In our case, D2 did not even know Shulman personally.  He had no knowledge of what business Shulman was actually engaged in and who exactly he worked for.  In short, he had no knowledge of his character, occupation or reputation.  And the same could be said about the house owner.  His first contact with Shulman was only on the internet by facebook some 10 days ago before he met Shulman in Hong Kong.  Even accepting D2’s claim that he did not consider anything wrong or illegal going on behind the locked room, there is no good reason why he would think so and obviously he did so under the influence of his personal beliefs, perceptions or prejudices.  As Mr Turnbull further submitted after reading Pang Hung Fai, the defendant decided to continue with his employment despite his initial feeling of unease but his personal beliefs about the propriety of what he was doing have to be removed from the process of assessing what a reasonable man would take into account.

Inferences to be drawn

76.  Given the suspicious circumstances, however, I still would not go so far as the prosecution suggested that it can be inferred from the evidence that D2 must already knew that what was inside the safe were gold bars when he first came to the job and during his initial stay of three months inside House A.  

77.  In my judgment, it is still possible that D2 was not aware of the existence of the gold bars before he came to Hong Kong, but when he accepted the job and already came here, Shulman must at least told him that he was guarding something valuable inside the safe as part of his duty to watch over a house for the reasons I gave earlier.  After all, it would only create suspicion if D2 was told there was a locked room and he has no access to it.  As said, many a reasonable man would just quit the job and leave the house immediately in the same circumstances. 

78.  The inference that D2 knew that there were valuables in the house was strengthened when it was not disputed that he had gone in March and April 2012 to a company to arrange the installation of iron gate at House A.  In court, D2 said he even ordered iron bars to be affixed on the windows of the house as well. This would be highly unusual if there was nothing valuable inside the house.  I can see from the photos of House A produced in court that it was just simply furnished and there was absolutely no need to install an iron gate and iron bars in such a simple village house.  The fact that D2 would just follow the instruction of Shulman to order these fittings without questioning indicated he had prior knowledge about the existence of the valuables in the house.  If he said he did not know and did not think about the existence of the valuables in the locked room, it would be difficult to believe.  Even if that was the case, he was also turning a blind eye to the obvious scenario.

79.  I totally agree with the submission by prosecution that the reasonable grounds to believe that the property represents the proceeds of an indictable offence only increase when one considers the objective facts which occurred after his return from the Philippines.

The objective facts and circumstance

80.  The objective facts and circumstances which occurred after D2 returned to Hong Kong are as follows:-

(i) that suddenly Shulman had gone missing;

(ii) that a fellow Israeli whom he met for the first time (D1) had come to replace D2 in the house;

(iii) that D1 told D2 that he had instruction to open the safe but he had no key and had to cut open the safe with tool but he was unable to verify D1’s claim;

(iv) that D2 nevertheless went along with the instruction and locate a metal store to buy metal cutting equipment with D1;

(v) that D2 helped moving the safe from the wall to the floor in House A;

(vi) that D2 went to House B as instructed and saw another safe being cut opened by Din with a electric cutter;

(vii) that Din asked D2 to locate a locksmith for him and he did so in the internet;

(viii) that D2 saw gold bars on 2 May. 2010 and was told they were removed from the safes of both houses;

(ix) that D2 continued to stay together with D1 and Din and there was also some more strangers such as the Filipino male and later D3;

(x) that he followed the others to move to other hostels even though he knew the reason was the owner of the hostel became suspicious;

(xi) that he went with others to look for another village house to store the gold;

(xii) that he went to Central to collect the company chop of Cycom which was later used to apply for telegraphic transfer of the funds to other jurisdictions; and

(xiii) that he was found with D3 in a room with the gold bars when he was arrested by the police on 7 May, 2010

81.  As I found, D2 must at least knew that what was inside the safes were valuables if not exactly gold.  Of course, I accept that there was nothing wrong for valuables to be kept inside a safe by the owner as suggested by the defence but when D2 was told by D1 on 1 May 2012 that the instruction from the owner was to open the safe but there was no key and instead they were asked to purchase metal cutter to cut it open by force, the whole idea simply did not make any sense at all and it smacked of illegality.

82.  It is because effectively D2 was asked by D1 to assist in the breaking and to destroy the very property which he was supposed to safe guard in the first place.  Even if he did not know a safe were there in the locked room, it was still a safe in the house and thus a property belonging to the house owner which he was supposed to guard and watch over.  Any reasonable person would be really baffled and worried by the time upon hearing that request.

83.  Under such circumstances, no one in his right mind would feel comfortable and agree to participate in the removing of the content from the safes unless he or she has been told what exactly was going on and what was exactly inside the safe.  D2 said he did not see any gold during the time when the safes in both houses were cut opened.  It was like both D1 and Din deliberately asked him to leave the house before the safe was opened.  If that was the case, I find it strange why D1 would later still showed the gold bars to D2 in the hostel.  If they deliberately sent D2 away when the safes were still being opened, there is no logical reason why D1 had to show D2 the gold and told him that the gold were removed from the safes in the houses.  I therefore did not believe D2’s account and I am sure the reason he said that was he had touched the gold before he was arrested and he knew his fingerprints would be found.

84.  Based on the cumulative circumstantial evidence, I come to the conclusion that by the time he started to engage himself with the others in the process of removing the content of safe in the morning on 2 May 2012, he must already knew for a fact that a large number of gold bars were kept inside the safes.  This is a kind of case where individual piece of evidence on its own might not be sufficient but when they were combined together, the inference is just overwhelming.

85.  In any event, it does not make much difference in terms of the timeline because even on D2’s own account, he came to know that those were gold bars from the safes of both village houses at about 4 pm on 2 May 2012 inside the first hostel in Chung King Mansions when D1 arrived and took the gold bars out from the suitcases.

86.  In the days followed, D2’s decision to continue to take instructions from these people whom he did not know well and who was busy disposing, converting or concealing the gold bars was difficult to understand.

87.  His explanation that he still regarded himself to be continually employed was unthinkable when he was not even staying in House A and watched it over anymore.  There was no good reason for him to go with the others to look for another village house in Yuen Long to store the gold.  The right-thinking person would, by this stage, definitely be very doubtful after knowing that they were planning to relocate the gold to a yet another village house.

88.  When he was asked to find another village house to rent in order to store the gold, any reasonable man in his position would think to himself, why these people have to go into all these troubles by removing the gold from the original two houses in the first place?  What went wrong and why the gold could not be stored in the original two village houses?  Then one would also think hard about why Shulman suddenly disappeared?  Shulman was just disappeared for one day and why they could not just wait for a few more days and needed to break into a room and safe and removed the gold to Chung King Mansions in such a hurry?  

89.  These are all legitimate questions which would cross the mind of a reasonable person caught in D2’s position.  Until those questions were satisfactorily answered, I judge that any reasonable man would refuse to take part in the process as there existed so many grounds for beliefs that the gold bars were proceeds of an indictable offence.

90.  Mr Hemmings submitted that there was nothing unusual about the appearance of the gold bars.  They were legitimate gold purchased from a proper metal company with serial numbers on it.  I agree but we are not only concerned with a few gold bars and were talking about 342 pieces of 1-kg gold bars with a massive value of HKD139 million.  If they were legitimate gold bars why they would be stored in just two village houses and attended by a person like D2 who was not even a proper and professional security guard and worse still, according to D2 that he even was not told of its existence when he came to guard the house?

91.  This single scenario just cries out for explanation.  To say that there was nothing wrong with the appearance of the gold was to ignore the whole suspicious circumstances and the provenance of the gold and to turn a blind eye to the most obvious indication that the gold bars were involved with some illegitimate businesses.

92.  D2 was trying very hard to distance himself from the gold both in the police station and in court.  It is true he was not physically involved in the carrying and the selling of the gold to Metalor but it does not mean he played no part at all in the dealing with the gold ie the whole process of concealing or disguising the property by concealing its location, disposition or movement. The looking for another house to store the gold and the collection of the company chop of Cycom was just two glaring examples.

93.  D2’s claim that he had nothing to do with the gold apart from touching them out of curiosity after he moved to Chung King Mansions was also not to be believed.  If he was still waiting for Shulman and the issue of his salary for the 3^rd month as he said, he could still wait at House A, his designated place of work.  He had all the contact numbers of D1 and Din in his mobile phone so he could stay in touch with all these people without following them to the hostels.

94.  In court, D2 explained that it was just gold and there was nothing illegal so he decided to stay with the others and the gold in the hostel.  He said he thought D1 and Din had permissions from the owner to remove the gold by cutting open the safe.  However, there was simply no basis for him to trust what he heard from D1 and Din even though they were fellow Israelis when Shulman disappeared and he did not even know who the owner was.  If he really chose to believe the words of D1 and Din, he was also just too trusting and when a reasonable man possessed this explanation, in the step two analysis, personal perception has to be removed.

95.  On the other hand, it would be absurd for D1 and Din to allow D2 to stay with them together in the hostel if he was only like an ‘innocent bystander’ to them.  There was no need for them to rent an extra room or extra bed in the hostel for his stay if D2 was of no use to them.  They could have asked D2 to return and stay in House A after the gold bars were removed from the houses and therefore minimise the risk of exposing their trails and activities.  It turned out that D2 had assisted in the whole process and the inevitable inference was that they were acting in concert to ‘launder’ the gold and based on the evidence, it is not difficult for me to infer that D2 was there to take part in the process of moving the location of the gold.  He would be watching over the gold in the room whenever he was there.  Indeed, he was there with the gold together with D3 when he was arrested.  

96.  Applying common sense to the cumulative effect of all these facts and circumstances referred above, I am satisfied beyond reasonable doubt that there were reasonable grounds sufficient to lead D2 to believe that the property with which he dealt represented the proceeds of an indictable offence.

“Half-way house” mistake of fact defence

97.  Can D2 relied on the defence that he honestly and on reasonable grounds did not suspect the gold bars to be proceeds of an indictable offence?

98.  In Pang Hung Fai, McWalters J made it clear that the offence is not concerned with whether property is, in fact, the proceeds of indictable offence.  The mistake of fact is rather concerned with the defendant’s appreciation of how the reasonable person would react to the known grounds and such a mistake of fact in order to be credibly asserted may well require the defendant to give some thought to the facts surrounding the requested dealing which make up the known grounds (see paragraphs 182-184).

99.  Stock VP however also acknowledged that once a tribunal of fact concludes, by reference to all the facts known to the suspect and the circumstances in which he found himself when he dealt with the property, that the reasonable person would be satisfied that those facts and circumstances constituted grounds to sustain the requisite belief, there will be left little room for the accused to establish a true and reasonable lack of suspicion (see paragraph 214).

100.  In this case, given the most unusual circumstances of how the gold bars were stored and removed (by force), it was impossible for any right-thinking member of the community, including D2, not to give thought to the question of the provenance of the gold bars before he decided to take part to deal with the property.  D2’s explanation was he thought the gold bars were legitimate and he believed they belonged to the owner who he had not even met before and whose identity was also unknown to him.

101.  If what he said was to believe, effectively he had not considered the provenance of the gold bars at all and he just accepted the words of the others who were not even his friends for their face value and he gave no thought to it.

102.  Alternatively he must be aware of those suspicious grounds concerning the provenance of the gold but he deliberately turned a blind eye to it.

103.  On the evidence before me, there is simply no basis for any mistake of facts in relation to the offence and I would simply reject any suggestion that D2 honestly and on reasonable grounds did not suspect that the gold bars represented the proceeds of an indictable offence.

Conclusion

104.  I am satisfied on all the evidence before me that the prosecution have proved beyond a reasonable doubt that the defendant (D2) is guilty of Charge 1.