HKSAR v. LAM KWOK MING IVARN AND ANOTHER

DCCC500/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 500 OF 2012

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Reasons for Verdict

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1.  There are three charges in the Re-amended Charge Sheet. Each charge is for the offence of dealing with property known or reasonably believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Chapter 455 (“OSCO”).

2.  Charge 1 is against D1, Charge 2 is against D2, and Charge 3 is a joint charge against both defendants.  D1 and D2 pleaded not guilty to their respective charges.

3.  In Charge 1, the prosecution alleged that between 10 December 2004 and 25 June 2011, D1 dealt with property in the total sum of HK$11,442,198.04 through 4 bank accounts which were in the sole name of D1 with the requisite mental element of the offence.

4.  In Charge 2, the prosecution alleged that between 9 December 2003 and 28 October 2010, D2 dealt with property in the total sum of HK$26,802,472.74 through 4 bank accounts which were in the sole name of D2 with the requisite mental element of the offence.

5.  In Charge 3, the prosecution alleged that between 5 February 2010 and 30 June 2011, both D1 and D2 dealt with property in the total sum of HK$2,275,085.22 through one bank account in their joint names with the requisite mental element of the offence.

6.  The prosecution had particularized these bank accounts in its written closing submissions.  The prosecution referred to the 4 bank accounts relevant to Charge 1 as A/C1 to A/C4, the 4 bank accounts relevant to Charge 2 as A/C5 to A/C8, and the only bank account relevant to Charge 3 as A/C9.  I shall adopt the same abbreviation.

The law relating to a section 25(1) offence

7.  I have been taken through the law by learned counsel for the prosecution Mr. Neil Mitchell and learned counsel for the defence, including Eric Kwok S.C. leading Mr. Clement Lau for D1, and Mr. Keith Fung for D2, on the elements of the offence that the prosecution must prove beyond reasonable doubt in order to sustain a conviction under section 25(1) of the OSCO.  There is little dispute between them.

8.  It is quite clear that the prosecution must prove, in relation to each charge, that D1, or D2, or both of them, as the case may be,

(1) dealt with property; and

(2) at the time of this dealing, knew or had reasonable ground to believe that the property represented the proceeds of an indictable offence.

9.  “Dealing with property” is the actus reus of the offence.  According to the definition in section 2(1) of OSCO, “dealing” is broadly defined and included “receiving, concealing, disposing or converting property”.

10.  As to the mens rea of the offence, according to section 25(1), if a person dealt with property (a) knowing or (b) having reasonable ground to believe that the property represented the proceeds of an indictable offence, he will be guilty.  The requisite mental element of the offence is therefore one of these two alternatives.

11.  In his written closing submissions, Mr. Mitchell pointed out that he had focused in the course of the trial on the limb of “having reasonable grounds to believe” because there was no admission from any of the defendants that he or she knew that the property represented proceeds of an indictable offence.  However, he submitted that given the nature of some of the transactions, the explanations provided by the defendants and the source of funds, it was open to this court to infer D1 and/or D2 had that knowledge.

12.  Mr. Fung complained that the prosecution was “shifting the goal post”.  I don’t think the defence had been misled into meeting a different case.  It is clear that the prosecution is relying on the limb of “having reasonable grounds to believe” all the time. What Mr. Mitchell meant was simply that the evidence was so strong against each defendant that it was open to this court to infer actual knowledge against them.  Of course, if a person knew the property represented the proceeds of an indictable offence, he must also have reasonable ground to hold the same belief, although a person having reasonable ground to believe might not actually know that the property represented the proceeds of an indictable offence.  On the other hand, putting it in the reverse way, if a person did not have reasonable ground to believe that the property represented the proceeds of an indictable offence, it must follow that he would not have actual knowledge either.  Hence, in my deliberation, I shall first of all consider whether the prosecution succeeds in proving that each or both of the defendants had reasonable ground to believe that the funds transacted in their various and respective accounts represented proceeds of an indictable offence.  It is only after I have answered the question in the affirmative then I might need to proceed further to consider the question of actual knowledge.

13.  Learned counsels for the prosecution and defence had drawn my attention to various cases on the test to be adopted to determine whether the defendant had reasonable ground to believe that the property represented the proceeds of an indictable offence.  The parties told me that the prosecution had to prove, first of all, the objective element, i.e. there 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 person’s proceeds of an indictable offence; and if so, secondly, the subjective element, i.e. those grounds were known to the defendant.  From the submissions, it seemed to be common ground that I should ask those two questions in that order.

14.  During the course of deliberation, I came across the case of HKSAR v Pang Hung Fai (CACC34/2012) which learned counsel had not drawn my attention to.  I meant no criticism because the Court of Appeal delivered its judgment only on Friday 31 May 2013, and counsel before me made their closing submissions on the following Monday 3 June 2013 when the written judgment of Pang Hung Fai might not have been published.  This case is important because while the Court of Appeal reiterated that the mens rea of a section 25 offence comprised both the objective and subjective elements, the order in which the two questions to be asked should be the reverse of the hitherto practice.  This judgment of the Court of Appeal is of course binding upon me.  I quote the following parts of the judgment of McWalters J, with whom Stock VP and Lunn JA agreed, and I shall adopt the approach stated therein in my deliberation of the verdicts in this case: -

“107. ……. Consequently I am of the view that the more logical approach is first to ask the question: 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? It is for the prosecution to establish the facts and circumstances relied upon.

108. The second question then is this: 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?

109. ….

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.

111. ….

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.

114. I see no difficulty with such an approach for it addresses all the facts known to the particular defendant and the circumstances and framework in which that knowledge came to him. It allows the finder of fact to distinguish between the significance, in the context of a section 25 charge, of $1 million dollars to X and Y who are men of very limited means and of the significance of such a sum, in the context of a section 25 charge, to men of considerable wealth; and it allows the finder of fact to take into account the particular relationship and history of trust (if there be such a history) that prevails in the particular case.

115. There may be cases where the reasonable ground to believe must be assessed against the background of a mistake of fact. So, for example, if X makes a false representation as to his business or as to the provenance of the property, the fact of that representation and its operative effect on Y is part of the factual matrix to be addressed.”

15.  Before I leave the law relating to a section 25 offence, I wish to refer to the submission by Mr. Mitchell that “applying the test of reasonable person with the knowledge of the defendant does not however import an honest but mistaken belief of the defendant since to do so would undermine the objective standard of the test”. The Court of Appeal in Pang Hung Fai had deliberately left open the question whether, notwithstanding the establishment of reasonable grounds, a defendant might nonetheless escape liability for a section 25 offence if he honestly and reasonably did not suspect the property to represent the proceeds of an indictable offence.  I had considered whether I should invite parties to address me further on this particular point, which the Court of Appeal called the “halfway house defence”, but I found it unnecessary to do so in light of my findings on facts.

General directions

16.  In arriving at the verdict in respect of each charge, I bear in mind that the prosecution must prove each and every element of the offence beyond reasonable doubt.  Although each defendant has given evidence and called a number of witnesses, none of them is required to prove their innocence or to raise a reasonable doubt in respect of any of the charges.  In fact, they are not required to prove anything.  On the other hand, this Court must take into account the testimony of the defendants and their witnesses in determination of factual issues.  If the defence evidence is or may be true, this Court must act on the basis of the defence evidence and reject that of the prosecution if there is any conflict between the two.

17.  I have also borne in mind that if any inference of facts is to be drawn, the facts upon which the inference is to be drawn must be facts proved beyond reasonable doubt in the first place.  Furthermore, before any inference of fact is drawn, that inference must be the only reasonable and irresistible inference that can be drawn from the proven facts.

Analysis of the evidence

18.  Part of the prosecution evidence was dealt with by way of admitted facts pursuant to section 65C of the Criminal Procedure Ordinance.  Those facts admitted were of course conclusive as far as these proceedings were concerned.  The defendants’ interviews under caution, either in written form or by means of video recording, were also produced into evidence with the defence admitting that the defendants participating in these interviews voluntarily.  Banker’s affirmations for the accounts concerned were produced into evidence pursuant to section 20 of the Evidence Ordinance.

19.  The prosecution had called only three witnesses to give oral evidence.  After D1 and D2 failed in their submissions of no case to answer, both defendants elected to give evidence with D1 calling 9 defence witnesses and D2 calling 11 defence witnesses.

20.  According to the admitted facts, D1 and D2 are husband and wife.  They got married in 1988. Both are Hong Kong permanent residents.  D2 was arrested on 12 October 2010, and D1 was arrested about a year later on 14 October 2011 for the offences that formed the subject matter of the present trial.

21.  The various bankers’ affirmations produced by the prosecution proved that at all material times, D1 was the owner and sole signatory of A/C1 to A/C4, D2 was the owner and sole signatory of A/C5 to A/C8, and they were the joint owners of A/C9 and each of them could individually sign on the account.

22.  These bankers’ affirmations also proved that monies had been deposited into and withdrawn from A/C1 to A/C9 in various forms like in cash, by cheque or by bank transfer between 9 December 2003 and 30 June 2011. These monetary transactions had been summarized by the prosecution in a number of charts.  These charts had been used in the course of the trial during which some minor amendments had been made to the charts.  The accuracy of these charts as amended was not disputed.  I was satisfied that the charts as amended accurately reflected the monetary transactions in A/C1 to A/9 as disclosed in the bankers’ affirmations.

23.  From these monetary transactions, I found that the prosecution had proved beyond reasonable doubt that: -

(a) between 10 December 2004 and 25 June 2011, a total sum of HK$11,442,198.04 had been deposited into A/C1 to A/C4 (i.e. all sums deposited into these 4 accounts in whatever form less the sum of HK$6,397,522.18 in A/C2 which were in fact transfers from A/C1),

(b) between 9 December 2003 and 28 October 2010, a total sum of HK$26,802,472.74 had been deposited into A/C5 to A/C8 (i.e. all sums deposited into these 4 accounts in whatever form less HK$3,247,705 in A/C7 which were in fact transfers from A/C6), and

(c) between 5 February 2010 and 31 May 2011, a total sum of HK$2,275,085.22 had been deposited into A/C9.

24.  The money deposited into A/C1 to A/C9 had been drawn out in various forms either in cash, or by cheques, or by bank transfers.  The balances of these bank accounts, at the time when they were frozen as a result of the defendants’ arrest, were as follows:

D1’s bank accounts

On 25 June 2011, A/C1 had a balance of $50,165.35;

On 26 April 2011, A/C2 had a balance of $22,395.37;

On 21 September 2010, A/C3 was closed (with the balance of

$7,571.31 on that day transferred to A/C9);

On 8 June 2011, A/C4 had a balance of $3,420.44.

(Total: $75,981.16)

D2’s bank accounts:

On 28 October 2010, A/C5 had a balance of $2,702,063.85;

On 2 October 2010, A/C6 had a balance of $4,052,647.24;

On 20 October 2010, A/C7 had a balance of $5,907.33;

On 7 October 2010, A/C8 had a balance of $114,542.32;

(Total: $6,875,160.74)

Joint bank account of D1 and D2

On 31 May 2011, A/C9 had a balance of $2,272,950.22.

25.  Hence, as on 25 June 2011, the aggregated amount of the balances in these 9 accounts were $9,224,092.12.  This amount was considerably less than the total amount deposited into these accounts.  In addition, the charts as amended showed clearly monies coming into and going out of these accounts on numerous occasions.  Since D1 was the sole owner and signatory of A/C1 to A/C4, I drew the only reasonable and irresistible inference that he had dealt with $11,442,198.04 between 10 December 2004 and 25 June 2011 as specified in Charge 1.  Likewise, since D2 was the sole owner and signatory of A/C5 to A/C8, I drew the only reasonable and irresistible inference that she had dealt with $26,802,472.74 between 9 December 2003 and 28 October 2010 as specified in Charge 2.  Furthermore, since D1 and D2 were the joint owners and each of them was a signatory to A/C9, I also drew the only reasonable and irresistible inference that they had dealt with $2,275,085.22 between 5 February 2010 and 31 May 2011 as specified in Charge 3.  In other words, I was satisfied that the prosecution had proved the actus reus of the alleged offence in each charge beyond reasonable doubt.

26.  The remaining question was whether, in respect of each charge, the prosecution was able to prove the mens rea of the offence beyond reasonable doubt.  In other words, the question of guilt or otherwise depended entirely upon the state of mind of the defendant concerned at the time when the property was being dealt with.  Did he/she/they have reasonable ground to believe that the monies he/she/they had dealt with in his/her/their respective accounts, as the case may be, represented the proceeds of an indictable offence?

27.  In his closing submissions, Mr. Mitchell listed out a number of factors that were indicative of money laundering activities.  One such factor was transactions in large sums of cash because the origin and ownership of cash were generally not traceable, and it was rare to have substantial amounts of cash passing through personal bank accounts.  Mr. Mitchell pointed out that large sums of cash were deposited in A/C1 and A/C5.  In A/C1, the cash deposits represented over 45% of the total deposits and were the largest form of deposit in percentage form.  Similarly, in A/C5, cash deposits amounted to nearly 40% of the total deposits.  In A/C6, cash deposits represented 16% of the total deposits which was of a smaller proportion than the others but was still in significant proportion.  Mr. Mitchell was clearly correct in his data analysis.

28.  Another factor referred to by Mr. Mitchell was deposits into bank accounts in excess of a person’s legitimate income.  In this regard, the evidence of Mr. Chiu Chi Kai Walker (PW1), the acting assessor of the Inland Revenue Department, showed that neither D1 nor D2 had filed any tax return with the Inland Revenue Department or paid any tax in Hong Kong for the period from 2 September 2004 to 1 September 2010.  His evidence was not disputed by the defence.  The Admitted Facts also proved that D2 had not filed any tax return or paid any tax during the period concerned.  I accepted the evidence of PW1.  I also drew the only reasonable and irresistible inference that D1 and D2 had not engaged in any employment or business in Hong Kong that would enable any of them to earn legitimate income that they could have deposited into any of their bank accounts.

29.  The defence case was that neither D1 nor D2 had to file any tax return or paid any tax in Hong Kong.  It was the backbone of their case that the money deposited into their bank accounts included money earned legitimately by D1, not in Hong Kong, but in Macau where D1 was engaged in lawful gambling business in the VIP gaming rooms inside various casinos in Macau.

30.  From the evidence of Mr. Stephen Chan (PW3), D1 and Mr. Tam Ka Wo (DW7), I was given to understand that the right to run casinos in Macau was opened up in 2003 when 3 to 4 concession licence holders were authorized to run casinos in Macau.  Apart from running the mass gaming rooms inside the casinos, these concession licence holders also ran VIP gaming rooms jointly with junket promoters who had to hold junket gaming licences granted by the Macau Gaming Board.  The concession licence holders would provide gaming tables, staff members and card dealers inside the VIP rooms, whereas the junket promoters were responsible for operation, fund raising and seeking customers to play in the VIP rooms.  The profits generated from the VIP rooms would be shared among the concession licence holders and the junket promoters.  Baccarat was the only game played in the VIP rooms at the material times, and the customers could only bet with non-negotiable chips inside the VIP rooms, though when they won, they would be paid in cash chips which could be converted back to cash or be used for gambling in the mass gaming rooms.  When a junket licence holder (who could be a person or a group of persons or a company limited called the “operators”) was about to start operating a VIP gaming room, it would raise fund by recruiting investment shareholders and seek customers by engaging non-negotiable chips agents.  There were two types of investment shareholders: (1) fixed dividend shareholders who would receive a monthly dividend according to a stipulated rate on the amount of capital he had invested in the VIP room, irrespective of the profits or losses of the VIP room in any given month; and (2) “su sat” shareholders whose actual capital investment would be multiplied to represent a notional capital investment, and who would obtain a monthly dividend on that notional capital investment, but would be required to share in and pay for the losses sustained by the VIP room in any given month on a pro rata basis.  There was little dispute on this part of the evidence.

31.  In his testimony, D1 explained how he started and engaged in his gambling business in Macau.  According to D1, his friend Mr. Stephen Shin introduced him to the person-in-charge of “Lisboa Neptune Club” in 2003, and became a fixed dividend shareholder by investing $2 million in the VIP room.  A document with the title “Formal Receipt of Capital Stock of Neptune VIP Club” dated 13 September 2003 (Exhibit P64) was issued by the Neptune VIP Club to certify his investment.  Since then, he received a fixed dividend each month at the rate fluctuating between 1 to 2% on the capital he had invested until January 2007 when the rate was permanently fixed at 1% thereafter.  The monthly dividend would be distributed to him by way of cash chips by the cashier of the VIP room, and such cash chips would be put inside an envelope together with a receipt on which D1 had to sign and return to the cashier of the VIP room. D1 might keep the envelope.  For the cash chips he received as monthly dividend, he could exchange them into cash and take away the money, or he could keep them in his account with the cashier of the VIP room. 

32.  D1 identified some of the fixed dividend statements issued by the Neptune VIP Club to him with the statement printed either on a sheet of paper or on an envelope.  He produced some of them to the police during police enquiries (Exhibit P42) and the others in Court (Exhibit D11(1), D11(2), D11(3) and D32) to prove that he had been paid fixed dividends by Neptune VIP Club for the period between June 2004 and June 2011.  The statements produced covered most but not all of the months in this period.

33.  D1 further testified that in mid-2005, he was recruited as a “su sat” shareholder in the “Sands Lucky Club” which was the second VIP gaming room operated by the shareholders of Neptune VIP Club.  He invested $2 million into this VIP room and was treated as if he had invested $10 million.  He received a fixed dividend at 1% of the amount he was treated to have invested (i.e. $10 million) each month, but he had to make up the losses if any suffered by the VIP room in any given month.

34.  Since mid-2005 when the shareholders of Neptune VIP Club had 2 VIP rooms (i.e. in Grand Lisboa Hotel and Sands Hotel), they formed the “Neptune Group” so as to manage their business more conveniently.

35.  According to the evidence of D1, in 2008, the Neptune Group opened their 4^th VIP gaming room called the “Wynn Guangdong Club” in Wynn Hotel.  D1 was not involved in the 3^rd VIP room opened by the Neptune Group.  When Wynn Guangdong Club was opened, D1 transferred his shares in Sands Lucky Club to Wynn Guangdong Club, and he operated under the same conditions as in Sands, i.e. he invested as a “su sat” shareholder.  Since this was a transfer, D1 was not required to put in more money as capital, and he was treated as if he had invested $10 million into this VIP room.  D1 produced a document with the title “Wynn shareholder’s letter of shares confirmation” dated 1 June 2008 (Exhibit D13) to prove that he had become a shareholder of that VIP gambling room from 1 June 2008 onwards.  The monthly fixed dividend to be paid to D1 was $100,000. 

36.  D1 produced a batch of documents to the police during police enquiries (Exhibit P41) and another batch in Court (Exhibit D31) to prove that he had been paid a fixed dividend on his agreed capital investment by Wynn Gudangdong Club for the period between July 2008 and June 2011.  He was paid $100,000 a month, except that for the first 7 months (i.e. from July 2008 up to January 2009) when he was paid $300,000 a month with the extra $200,000 each month being a bonus to recognize his contribution in getting 4 to 5 shareholders to invest in Wynn Guangdong Club.

37.  D1 further testified that in January 2009, he was recruited by the Suncity Group (which was different from the Neptune Group) to become a “su sat” shareholder in the “Suncity VIP Club”.  He invested $2 million, but was treated to have invested $5 million.  In return, he received a monthly dividend of $100,000 which was equivalent to 2% of the notional amount of his capital investment. D1 produced a document with the title “Certificate of Shareholder’s share capital” dated 5 January 2009 [Exhibit D14(1)] issued by the Suncity Club to prove his investment.  He also identified some documents which he had provided to the police during investigation (i.e. Exhibit P26) and some documents he produced in Court (i.e. Exhibits D14(2) and D23) with each document having the same title “Suncity VIP Club Certificate of Dividend paid to Shareholders” to prove that he was paid dividend in the sum of $100,000 a month for the period between February 2009 and June 2011 (except the certificate for November 2010 was missing).

38.  The evidence of D1 therefore showed that from January 2009 onwards, he would receive fixed dividends from 3 VIP rooms in the total sum of $220,000 each month.  However, according to his evidence, this was not the only income he earned because, as he had said, he also made money through the non-negotiable chips business throughout the years.

39.  The evidence of D1 showed that he ran the non-negotiable chips business in all the VIP gaming rooms he had invested. As customers had to gamble with non-negotiable chips in the VIP rooms, D1 would take his customers to the cashier of the VIP rooms to obtain non-negotiable chips through his account.  The customers could buy non-negotiable chips with cash, but if the customers did not have cash or did not want to pay there and then, D1 could sign out non-negotiable chips for the customers by using the marker money in his account with the cashier of the VIP room, and collect payment from the customers later.  The amount of marker money he had in his account was equivalent to the amount of his capital investment in the VIP room, plus the profits (i.e. fixed dividends and/or commissions) he had earned and left in his account.  When the customer betted in the VIP room with the non-negotiable chips obtained through D1’s account, the VIP room would pay a commission to D1.  Each VIP room had its own rule, but the commission was generally equivalent to 1% of the amount of “rolling chips”.  It was not necessary for the purpose of this judgment to explain what was meant by “rolling chips” except to say that, according to my understanding, D1 would receive a commission from the VIP room even if the VIP room lost to the customer brought in by D1.  Although D1 had only invested in two of the VIP rooms operated by the Neptune Group, he was entitled to sign out marker money in all the VIP rooms operated by the Neptune Group and earned commissions on the non-negotiable chips obtained by his customers.  At the time of trial, the Neptune Group had 15 VIP gaming rooms as opposed to only one VIP room in 2003.  D1 further testified that after his marker money were drawn, he would usually repay the marker money before his customers repaying him so as to maintain the level of his marker money to facilitate his gambling business.

40.  According to the evidence of D1, he could also operate his non-negotiable chips business through his “low line” who would use his account to obtain non-negotiable chips for the customers brought in by the low line.  D1 said that if the customer brought in by the low line exchanged non-negotiable chips fully in cash, he would pay over all the commission that was earned to his low line, but if his marker money had been used to exchange for non-negotiable chips, he would deduct 10% to 20% of the commission as his own profit.  He started to have low line only in 2007 or 2008.

41.  D1 identified some commission statements issued to him by casinos within the Neptune Group such as the Star World Guangdong VIP Club (Exhibit P35 & Exhibit D27), Wynn Guangdong VIP Club (Exhibit P36 & Exhibit D28), Sands Guangdong (Lucky) VIP Club (Exhibit P37 & Exhibit D29), and Neptune VIP Club (Exhibit P38 & Exhibit D30) as proof of the commissions he had received from his non-negotiable chips business.

42.  D1 also identified some envelopes which he had produced to the police during police enquiries (Exhibits P27 to P34) and some other envelopes which he produced in Court (Exhibit D24 to D26) to be proof of the chips commissions he had earned from the  Suncity Group for some of the months between August 2009 and April 2011.  A commission statement was printed either on a separate sheet accompanying the envelope or on the envelope itself.

43.  It could be seen from the various documentary exhibits produced by D1 that the amount of commissions earned through the non-negotiable chips business could be quite substantial.  It was not uncommon to find that the commissions paid in a month was more than $100,000, and there were occasions where commissions could be more than $600,000 a month (Exhibit P29 & D26), or close to $1 million (Exhibit P30), or more than $1.8 million for the month of March 2011 (Exhibit D24).  These incomes were in addition to his income as a fixed dividend shareholder.

44.  The evidence of D1, if true or may be true, was significant in a number of respects.  First, he had legitimate source of income that was generated in Macau.  The prosecution had never argued, nor was it arguable, that the type of gambling business of D1 in Macau, both as a fixed dividend shareholder and as a non-negotiable chips agent, was unlawful. Second, the income earned by D1 in his gambling business could be substantial. Third, the incomes he earned were paid to him in cash.

45.  In light of the testimony of D1 and his witnesses especially that of Mr. Tam Ka Wo (DW7) and Miss Ko Un Sut (DW9), coupled with the documentary evidence produced, D1 had clearly discharged the evidential burden to raise the issue that he had earned substantial legitimate incomes in Macau during the relevant period covered by the charges.  The burden now rested fairly and squarely on the prosecution to disprove the defence evidence if this Court were to reject the defence evidence.

46.  It seemed to me that the prosecution attempted to rely upon the testimony of Mr. Stephen Chan (PW3) as direct evidence to contradict the evidence of D1.  The evidence of PW3, which was not disputed by D1 or D2, was that Exhibit P9, P10, P11 and P64 were not documents of his company, i.e. Neptune Group Limited which was a listed company in the Hong Kong Stock Exchange with a Stock Code number “0070”, that he did not know D1, and that D1 was never a director of his company.

47.  Just to recap, Exhibits P9 to P11 were produced by D1 to the police during enquiries when he sought to explain his income were derived from his Macau gambling business.  Exhibit P9 was his name card in that business, and he was described as a “director” of Neptune Group Limited on the name card, whereas Exhibits P10 & P11 were two certificates issued by the Neptune Group certifying his investment as a fixed dividend shareholder in Neptune Club, and as a “su sat” shareholder firstly in Sands Lucky Club and later in Wynn Guangdong Club.  Exhibit P64 was a document seized by the police on 13 October 2010 from a safe box held in the joint names of D1 and D2 at the Fanling Branch of the Bank of China (Hong Kong) Ltd.  This document was dated 13 September 2003 with the title “Formal Receipt of Capital Stock of Neptune VIP Club” purported to certify that D1 had $2 million as capital stock of Neptune VIP Club.  The evidence of PW3 was that all the logos appearing on these documents were similar to the logo of his company, but they were not issued by his company.  The website address appearing on Exhibits P9 to P11 were that of his company.  The English and Chinese names and stock code number of the company appearing on Exhibit P9 were the same as those of his company, but D1 had no relationship either as a director or as a shareholder of his company.  He also pointed out that the office addresses appearing on these documents were unrelated to his company. 

48.  The evidence of PW3, on first glance, appeared to have the effect of disproving the evidence of D1 because, by producing his name card (Exhibit P9) to substantiate his claim that he was running a gambling business in Macau, D1 was saying that he was a director of this Hong Kong listed company Neptune Group Limited running a gambling business in Macau, which according to the evidence of PW3 could not be true.  However, under cross-examination, PW3 admitted that since 2007, he was aware of the existence of the Neptune Group in Macau which was involved in the Macau gaming business. He also knew Mr. Tam Ka Wo (DW7).  He had visited the office of Mr. Tam on two to three occasions to sign documents, and he saw the logo displaying outside the building in which Mr. Tam’s office situated was the same as that of Neptune Group Limited.  He also agreed that his company the Neptune Group Limited had signed a contract with Mr. Tam concerning an intended investment in the New Lisboa Guangdong No. 31 Club.  He finally agreed that his company and the Neptune Group in Macau each had its own business and ran its own system, and he did not see any particular harm when the two companies had similar names.

49.  At the end of cross-examination, it was quite clear that while Mr. Stephen Chan (PW3) could prove that D1 had or might have misrepresented himself in his name card (Exhibit P9) as a director of a Hong Kong listed company, PW3’s evidence could not disprove that D1 was engaging in gambling business in Macau under the Neptune Group.  On the contrary, PW3 confirmed the existence of the Neptune Group in Macau and that this Neptune Group was involved in the gambling business.  As he knew Mr. Tam Ka Wo (DW7) and signed contracts with Mr. Tam for an intended gambling investment by his company, there was no doubt whatsoever that Mr. Tam was a junket licence holder, and it was Mr. Tam’s evidence that D1 was introduced by other shareholders of Neptune VIP Club and was recruited as its fixed dividend shareholder since 2003.  I found the evidence of Mr. Stephen Chan (PW3) in fact enhanced the credibility of the evidence of Mr. Tam (DW7) whose evidence in turn supported the case of D1.

50.  It was therefore clear that there was no direct evidence discrediting D1’s evidence that he was involved in the gambling business in the way as testified to by him.  Mr. Mitchell sought to discredit his evidence on a number of grounds in an attempt to show that D1’s evidence was not credible.  Put it briefly, it was submitted that (1) there was no contract or documentation on the terms of the alleged gambling investment; (2) the unreasonably high rate of return indicated the implausible existence of a legitimate business; (3) the so-called “shareholding” of D1 in his gambling business was just a credit guarantee; (4) the VIP rooms in which D1 was a shareholder were mere fiction; (5) D1 failed to produce books and accounts to substantiate his business; (6) the share certificates produced by D1 as proof of his investment were not credible; (7) D1’s misrepresentation on his name card as a director of a Hong Kong listed company indicated the dubious nature of his alleged gambling business; (8) D1 was unable to recall who introduced him into the Suncity Group despite that was his alleged recent investment; (9) no bank activities in A/C1 to A/C4 after D2’s arrest on 12 October 2010 indicated money into these accounts were not genuine gambling business earnings; (10) D1 had a propensity to mislead.

51.  In considering whether the criticisms on D1’s evidence were justified, it was important to understand the relationship between D1 and the junket promoters and the role played by D1 in the gambling business. 

52.  From the evidence of D1 and Mr. Tam Ka Wo (DW7), it was clear that the recruitment of shareholders into the VIP gaming rooms by the operators was not an open process such that anyone interested could join.  According to D1, there had to be an introducer, and the person to be recruited should have the ability to bring in customers.  Mr. Tam (DW7) stated the same conditions, and he added that the operators and the intended shareholder should know each other.  I agree with the submission of Mr. Mitchell that the ability to bring in business played little part in the consideration because neither D1 nor Mr. Shum had any proven track record of bringing in customers, but they were still recruited as shareholders.  In my judgment, what Mr. Tam had said in evidence must be the most important consideration, i.e. the recruited shareholder had to be introduced by the shareholder of the VIP rooms and had to be known to the operators of the VIP rooms.  It was clear that personal relationship must be the predominant if not the only consideration in deciding whether someone would be accepted as a shareholder of the VIP room.  When people having some kind of special personal relationship were doing business together, it would not be appropriate to judge the reasonableness of their action by the standard that might otherwise be applicable in the ordinary commercial world.  On this basis, the absence of a written contract setting out the terms of their business relationship like the duration and the return of the investment, or the term governing the withdrawal from the investment was not surprising.

53.  On the submission based on the unreasonably high level of return, Mr. Mitchell pointed out that if D1’s evidence were true, just for fixed dividends alone, he would have earned a profit equivalent to 60% per annum of his capital investment as a “su sat” shareholder in Sands (later Wynn) and Suncity, and another 18% per annum on average of his capital investment in Neptune Club, not to mention his further income from the non-negotiable chips business.  Mr. Mitchell questioned whether any reasonable person would expect such large returns on a legitimate investment.  He queried whether it was credible at all that D1 could earn so much by doing very little beyond chatting to his customers.

54.  In my view, the answer to this submission must lie in the contribution made by D1 to the gambling business of the junket promoter running the VIP rooms.  According to D1 and DW7, and the prosecution did not dispute this, during the period under consideration, the only game played inside VIP gaming rooms was baccarat, in which the customer would bet on whether the player or the banker would win the game.  If the player won, no commission would be drawn by the VIP room (i.e. junket promoter) on the winnings of the customers, but if the banker won, 5% of the customers’ winnings would be drawn by the VIP room as commissions.  In this way, if half of the customers betted on the banker and the remaining half betted on the player, the VIP room was not actually betting with the customers because the winning customers would be completely paid off by the losing customers, but the VIP room would obtain a commission equivalent to 5% of the winnings obtained by the customers who betted on the winning banker.  In this manner, it was clear, as a matter of probabilities, that more customers to gamble would result in a greater chance that the customers were just betting amongst themselves, while the VIP room would inevitably make a profit equivalent to 5% of the winnings of the customers who betted on the winning banker. In this way and on a long term basis when the chances of banker winning and player winning would most likely become even, the VIP room would never lose but gain.  Hence, bringing customers as many as possible into the VIP rooms to gamble and doing so continuously were the first step to generate or maximize the profits of the VIP rooms.  It was clear from the evidence of Mr. Tam Ka Wo (DW7) that the shareholders were not recruited just for the purpose of fund raising.  According to Mr. Tam (DW7), the shareholders had the responsibilities to seek customers and carry out the non-negotiable chips business, and that if the shareholder did not have any business operation, he would be removed within a matter of months.

55.  To generate or maximize the profits of the VIP rooms, the second step to take, after a customer had entered the VIP rooms, was of course to facilitate or encourage him to gamble.  It was clear that a customer brought in by D1 needed not have cash with him before he could gamble inside the VIP rooms.  D1 could sign out marker money from his account with the cashier of the VIP room for the customer, let him gamble first, and if the customer lost, collect payment from him at once if the customer had the money and was willing to pay, or to obtain payment from the customer subsequently.  As Mr. Lo Chi Sang Dennis (DW17) had testified, customers expected D1 to provide them with credit, and D1 did offer credit to them, and this was probably the reason why customers were attracted to gamble in the VIP gaming rooms.  As to the amount of marker money signed out by D1, it was limited by the amount he had in his account with the cashier of the VIP rooms, and if the marker money was not repaid within the period allowed, the money in D1’s account with the cashier of the VIP room would be deducted to settle the deficit.  The notice in Exhibit P64 served as a reminder for this.  In this way, it was clear that, not only did D1 bring in customers, he also provided the customers with his own money to gamble which would enable the VIP room to generate or maximize profits, and the VIP rooms would not suffer any loss in the form of bad debts owed by the customers or D1 due to the security provided by the money in D1’s account with the cashier of the VIP rooms, and the loss if any would fall on the shoulder of D1.  In this manner, the junket promoter had a very low risk of losing out financially, but the potential of obtaining large profits was great.  To say the least, while the junket promoters would in general pay out a commission equivalent to about 1% of the amount of rolling chips to D1, they might at least get 5% return from the winnings of those customers who placed bets on the winning banker.  As DW7 had testified, the profits brought to the VIP rooms by the shareholders such as D1 could be 10 times or even 20 times the commissions paid to them.  On the other hand, D1 clearly bore the risk of a customer running away without making payment.  D1 was criticized for being unable to tell how many customers had run away without payment, but I think this was irrelevant because he had actually bore the risk.  In light of the benefits to VIP room (or the junket promoter) and the detriment to D1, I was of the view that the return was fully justified, and that the rate of return did not show that D1 could not have run the gambling business as he had testified, or that the business could not have been a legitimate one. 

56.  Mr. Mitchell submitted that the shareholding of D1 in the VIP rooms was no more than a payment to facilitate a credit with the VIP rooms allowing the “shareholder” (in this case D1) to draw credit.  I did not think it was correct to equate the money paid by D1 to the VIP rooms with a credit guarantee.  According to D1’s evidence as corroborated by Mr. Tam Ka Wo (DW7) and Miss Ko Un Sut (DW9), D1 was paid a fixed dividend on the money he had deposited, a payment he would not be entitled to if the money he paid was merely for a credit guarantee.

57.  Mr. Mitchell also argued that the Neptune Group in Macau was just a fiction and not a legal entity, and that there was in fact no such company in Macau although there was a logo appearing outside the building where Mr. Tam’s office was situated.  Mr. Mitchell pointed out that this was the admission made by Mr. Tam Ka Wo (DW7) under cross-examination. He also pointed out that Mr. Tam had also admitted that Neptune VIP Club, Sands Lucky Club or Wynn Guangdong Club were just names appearing on the door of the VIP room and they were not legal entities.  Mr. Mitchell therefore argued that all documentary exhibits purportedly issued in these names could not verify any legitimate business investment on the part of D1.

58.  In my view, the evidence of Mr. Tam must be considered in its entire context.  While it was true that Mr. Tam admitted that Neptune group and all the names appearing on the doors of the various VIP gaming rooms were not the names of actual legal entities, his evidence had all along been that gambling business had been operated by junket promoters inside these VIP gaming rooms with shareholders operating non-negotiable chips business there.  Furthermore, it was quite clear that the junket promoters were carrying on their gambling business under the names as appearing on the doors of these VIP rooms, and the various documentary exhibits issued in the names of these VIP rooms in the course of that gambling business must have been issued by or with the authority of the junket promoters and had the effect of verifying the legitimacy of the business that D1 had testified that he had engaged in.

59.  Mr. Mitchell argued that there was a complete lack of documents to substantiate the gambling business as alleged by D1.  Mr. Mitchell pointed out that while D1 claimed that he kept a book of accounts in respect of the non-negotiable chips he signed for his customers and obtained some kind of IOUs, D1 had not produced any such document to Court. However, D1’s explanation that he had lost his books of accounts and had returned IOUs to the customers when the debt was settled was not inherently improbable or impossible, and it could not be said that his evidence must be untrue.  Mr. Mitchell also pointed out that D1 had not produced any books of accounts or records kept by the cashiers of the VIP rooms that could have shown his credit standing as a shareholder in the VIP rooms, the issue of non-negotiable chips to him, his profits and some other payments.  However, these books or records were the property of the VIP rooms and D1 was not in a position to produce them.  Furthermore, D1 had already called Mr. Tam Ka Wo (DW7) and Miss Ko Un Sut (DW9) who were witnesses from the VIP rooms to give evidence to support his case, and it was difficult for this Court to draw adverse inference against D1 when the books or records in respect of D1’s accounts with the cashiers of these VIP rooms were not produced.  In any event, D1 had already produced many documentary exhibits during police enquiries and in Court to substantiate his business in Macau.  Such exhibits included payment statements of dividends and non-negotiable chips commissions to him.  Mr. Mitchell submitted that these statements proved very little, but I disagreed.  It was the evidence of Mr. Tam Ka Wo (DW7) that every commission statement issued by his company was approved by the Macau Government because his company had to pay tax to the Macau Government.  These commission statements must be of substantial evidential value in favour of D1 because they were prepared at the time when the VIP rooms concerned had to comply with their revenue duties towards the Macau government and would attract liabilities on the junket promoters on payment of tax. 

60.  Mr. Mitchell also submitted that the share certificates submitted by D1 were also of little value.  It was submitted that the share certificate dated 1 June 2008 issued by Wynn Guangdong Club (Exhibit D13) and the share certificate dated 5 January 2009 issued by the Suncity Group (Exhibit D14) were not credible because they were not produced by D1 to the police during investigation.  Mr. Mitchell was of the view that D1’s explanation that he could not find these certificates because they were placed between some invoices at the time of police investigation was just a pretext. I agreed that D1’s explanation should be viewed with suspicion, but on the other hand, D1 did produce to the police two certificates both dated 15 December 2011 (Exhibit P10 & P11) at the time of police investigation.  D1 admitted that he specifically asked the Neptune Group in Macau to issue these two certificates to prove his shareholdings in Neptune Club (Exhibit P10) and in Sands Lucky Club later Wynn Guangdong Club (Exhibit P11) in response to the police investigation.  In my view, when D1 was able to ask the Neptune Group to issue these two certificates (Exhibit P10 & P11), it must follow that either he was truly a shareholder in Neptune Club and Sands Lucky Club/Wynn Guangdong Club, or he was in a position to manipulate people in Neptune Group to issue false certificates.  If D1 was able to cause false certificates to be issued, why wouldn’t he cause the false certificate to be issued in the form as in Exhibit D13 and D14 in the first place and produce them to the police during police enquiries?  It was also evident from the contents of Exhibit D13 that it mentioned only that D1 was a shareholder of Wynn Guangdong Club.  It mentioned nothing about the transfer of his shares from Sands Lucky Club to Wynn Guangdong Club as in Exhibit P11.  If Exhibit D13 was a false document, why didn’t D1 cause a certificate in line with Exhibit P11 to be issued, or prepare another certificate to show that he had been a shareholder of Sands Lucky Club?  Having carefully considered the evidence, I cannot say that the evidence of D1 that he could not find Exhibit D13 & D14 at the time of police investigation was necessarily untrue.  Mr. Mitchell had pointed out that the chops appearing on various documents were different.  I did not think this was a matter of importance bearing in mind these VIP rooms were not legal entities.  When these rooms were not formal corporate persons, there might not be strict rules governing the use of chops both in respect of its form or shape.  DW7 had also explained that there were old chop and new chop.  In addition, I find Exhibit P64 a particularly weighty piece of evidence in favour of D1.  There were in fact two documents in Exhibit P64.  The first one was a document with the title “Formal Receipt of Capital Stock of Neptune VIP Club” dated 13 September 2003 issued by the Neptune VIP Club to certify D1’s $2 million investment as capital stock of Neptune VIP Club.  This document was found together a notice issued by Neptune VIP Club which albeit undated did mention that the shareholder had to pay off credit loan within time or else interest would be charged and capital stock deducted.  This second document was clearly an indication that D1 was engaging in non-negotiable chips business.  I say Exhibit P64 a particularly weighty piece of evidence because the police seized them inside a safe deposit box in the joint names of D1 and D2 inside a bank in Fanling on 13 October 2010, i.e. the day immediately after D2’s arrest.  These two documents could not have been prepared in advance and placed inside the safe deposit box because neither D1 nor D2 could have anticipated the arrest of D2 on 12 October 2010.  In my view, these two documents were, or were at least most likely to be, genuine documents in support of D1’s evidence that he started his gambling business in Macau in 2003.

61.  Mr. Mitchell further submitted that the dubious nature of D1’s alleged gambling business was demonstrated by the use of a name card (Exhibit P9) in which he falsely portrayed himself as a director of the Neptune Group Limited which was a listed company in Hong Kong.  He pointed out that D1 had no choice but to admit that he was not a director of the Neptune Group Limited.  He took the view that D1’s explanation that he was not aware of the contents of his name card was not credible. 

62.  I agreed with Mr. Mitchell in this regard.  However, I also find D1’s evidence that the name cards were prepared by people in the Neptune Group and that the contents of the name card were not decided by him might be true.  It had not been canvassed in detail, but it was clear that it was around 2005 when the Neptune Group was formed in Macau, and at about the same time, the company formerly known as “Massive Resources International Company Limited” changed its name into “Neptune Group Limited”, and Mr. Stephen Chan (PW3) was unable to say whether or not the Neptune Group in Macau and his company in Hong Kong had one common major shareholder at that time that caused his company to change its name into Neptune Group Limited.  If the defence allegation were true, and there were such a common major shareholder, it was not beyond imagination that the name card of that shareholder in his Macau Neptune Group capacity might contain details of the Hong Kong company, and staff of the Macau Neptune Group might later prepare name cards of other personnel of the Group by copying the same format.  It was clear that I had made a lot of speculation in this respect, but the point to make was that I could not say that D1’s evidence must be untrue.  It was also significant to note that when Mr. Tam Ka Wo (DW7) gave evidence, he produced his name card (Exhibit D7), but that name card still carried the website address of Neptune Group Limited in Hong Kong.  I did not think DW7 would have come to court to produce his name card when he knew or realized that it was a false document when it was not necessary for him to produce that name card at all.  In any event, I could detect no benefit to D1 by including details of the Hong Kong Neptune Group Limited in his name card.  As the defence submitted, D1 might well be guilty of boasting when he tried to lure customers when he associated himself with a Hong Kong listed company having the same or similar name to his group the Neptune Group.  But it did not mean that D1 was not in the Macau gambling business, and there was no evidence that anyone had been cheated when he used this name card.

63.  Mr. Mitchell also submitted that although Suncity was the most recent investment of D1, he could not remember who introduced him as an “investor” according to what he said during the video recorded interview.  I agreed that it was very likely that D1 was not telling the truth in this respect.  However, his reason for not telling the truth had to be considered.  Was it because he had no investment in Suncity, or was it because he did not want to reveal the identity of his introducer, bearing in mind that D1 who was with the Neptune Group was introduced to join Suncity, and I think I could safely assume that the two groups must be competitors in the Macau gambling business?  I could not rule out the latter possibility.  In any event, the evidence of Miss Ko Un Sut (DW9) and the commissions statements produced clearly supported D1’s case that he had invested in the Suncity VIP Club.

64.  In another submission, Mr. Mitchell pointed out that it was apparent from the account summaries that as from October 2010, there were no further credits to A/C1.  The last credit to A/C2 (save for a minor cash deposit of $460 in January 2011) was in October 2010 just a few days after D2 had been arrested (and this was to balance the account and to meet credit card payments for the months following).  A/C3 had been closed on 21 September 2010, and A/C4 was used to make mortgage payments in respect of the Tai Po property acquired at the end of 2010.  Mr. Mitchell submitted that if as D1 so claimed all the transactions including the money from Macau were legitimate gambling business earnings and not from money laundering, why did he stop sending money from Macau into his own accounts and made use of the Greenwood arrangement to divert funds to pay his mortgage?  Mr. Mitchell pointed out that D1 was arrested only on 14 October 2011 but prior to that, D1 was still active in his alleged Macau gambling business.

65.  In my view, the defence must be right in saying that it was just natural for D1 to stop putting funds into his accounts for fear that the police would allege those money were proceeds of indictable offence and freeze his account.  Even if the money to go into these accounts were legitimate income, there was no reason for D1 to run the risk that the police might prevent him from using the money by freezing his bank accounts.  I agree with the defence that the lack of banking activities into these accounts after D2’s arrest was not a pointer to show that the money previously put in was not legitimate.

66.  There was one minor point made by Mr. Mitchell that D1 had a propensity to mislead as shown by the fact that he made regular deposits of $120,000 a month into A/C1 starting from July 2009 for about a year so as to secure a mortgage from bank, but he stopped the deposit once the mortgage was secured.  I could see nothing sinister.  He just wanted to prove to the bank that he had regular income to secure a mortgage, and this was precisely what the bank wanted him to demonstrate.

67.  I had considered the submissions by Mr. Mitchell very carefully, but I had not been persuaded.  I did not find the evidence of D1 inherently improbable or incredible.  I agreed that there were some inconsistencies between the evidence given by D1 in Court and his statements to the police, but I found that not much weight could be given to such discrepancies due to limitation of one’s memory, and lack of documents for refreshing memory.  In short, I did not find that D1’s evidence in Court had been destroyed or shaken in cross-examination.  On the contrary, I found that his evidence was supported by his wife who had attended the opening ceremonies of Sands and Suncity VIP gaming rooms with him and who heard her husband being introduced to others as a shareholder of the VIP rooms.  D1’s evidence was also supported by the evidence of the operator (DW7 Mr. Tam Ka Wo) and the cashier (DW9 Miss Ko Un Sut) of the VIP rooms concerned.  It was submitted that the evidence of Mr. Tam and Miss Ko were largely hearsay or were just based on their reading of the documents shown to them.  However, Mr. Tam’s evidence was that he came to know D1 in 2003 when D1 was introduced by another shareholder.  As one of the operators of the Neptune Club, he must have the personal knowledge of the status of D1 in the VIP rooms.  For Miss Ko, while she might not have frequent contact with D1, she was clearly in a position to testify to the fact that D1 was recognized by people in Suncity VIP Club as a “su sat” shareholder, that he had a shareholder’s account with the Suncity VIP Club, and the cashier of Suncity VIP Club prepared commission statements for him.  These were clearly matters within the personal knowledge of Miss Ko and not hearsay.  The evidence of D1 was also supported by his “low line” (DW10 Mr. Chan Chun Ping), and by his friend and customer (DW17 Mr. Lo Chi Sang Dennis).  His evidence was corroborated by the various documentary exhibits produced.  Not only substantial evidence had been adduced by the defence, the burden was also on the prosecution to disprove the defence evidence but I found that it had failed to do so.  For these reasons, I had to consider this case on the factual basis that D1 did engage in the Macau gambling business as testified to by him.

68.  It followed that I had to consider this case on the factual basis that D1 was paid in cash for his earnings from Macau.  In light of the statements concerning payment of dividends and non-negotiable chips commissions to him, I had to act also on the basis that his income could be very substantial.  As mentioned before, there were occasions when he earned nearly $1 million in one month, and about $1.8 million in another month.  It would not be possible for me to find how much he had earned in total in these years, but it was not necessary for me to do so.  It was for the prosecution to prove beyond reasonable doubt that the money D1 deposited into his accounts or given to his wife (D2) could not be money from his Macau gambling business, but I find that the burden has not been discharged.  Furthermore, since I found that it was possible for D1 to earn substantial sums of money in cash, it would also be reasonable for him to deposit cash in large sums into his bank accounts from time to time, or to give substantial sums of cash to his wife D2 for her to use or to deposit into her account from time to time.  It was also of course open to them to ask other people like their godson Hui Chun Kit to deposit money into their bank accounts for them. 

69.  I noted the submission that shortly after the arrest of D2 in October 2010, Hui Chun Kit was apparently disappeared, but I must not draw any adverse inference from this fact against any of the defendants.  It might be due to many reasons why Hui Chun Kit was out of contact now including innocent reasons.  Even if Hui Chun Kit were in contact and none of the defendants called him as a witness, I would still not draw any adverse inference against any defendant for the simple reason that the defendants had no burden to prove anything.

70.  I now turned to the individual monetary transactions that the prosecution had placed emphasis on.  In this respect, I would have to consider whether these transactions were money laundering activities on the part of D1 and/or D2, or they were carried out for innocent reasons.  In this regard, I had to bear in mind that since I could not rule out D1 and D2 had the money from D1’s Macau gambling business, I had to judge their actions on the basis that they had the money to spend.  The defence reminded me that since D1 was in business and earned his living from legitimate source, that made him less likely to be a person who would resort to crime, and the usual hallmark of a person not in gainful employment receiving large sums of cash from time to time was absent in the present case.  I agreed that these consideration had to be taken into account.

Siu Gor & Lau Kwok Sun

71.  In respect of D1, Mr. Mitchell first of all referred to a credit transfer of $291,000 on 1 April 2005 from the bank account of Lau Kwok Sun to A/C1.  D1 admitted that he did not know Lau Kwok Sun.  According to the evidence of D1, this sum of money was for purchase of 3 watches for some mainlanders from Guangzhou including Sui Gor (i.e. Mr. Chan Kam Sui) and his friends.  Mr. Mitchell argued that these people were coming to Hong Kong on shopping trips, there was simply no reason why D1 had to act as their financial broker, and even taking D1’s account on its face, this was a case where funds originating in the mainland being channelled into the account of Lau Kwok Sun who in turn transferred the money into D1’s account who in turn paid for the watches which were taken back or otherwise sent to the mainland.  Mr. Mitchell submitted that there was no credible reason why D1 should pay in the first place and no credible reason why the money was transferred through the third party Lau.

72.  I had considered Mr. Mitchell’s submissions, but I found the evidence of D1 to be true or at least probably true.  His evidence was fully corroborated by the contemporaneous documents, i.e. the two cheques issued to Success Investment Limited and one cheque issued to Elegant Jewellery Holding Ltd.  The evidence of D1 that he drew out the 1^st cheque of $59,000 in favour of Success Investment so that Siu Gor’s friend needed not pay handling fees for payment by credit card was not inherently incredible.  That D1 did not ask for reimbursement immediately was also not beyond belief bearing in mind that Siu Gor had agreed to work out the payment with D1 later because Siu Gor and his friend would return to Hong Kong later to buy a Rolex watch which was out of stock at that time.  D1 said he had absolute trust in Siu Gor because Sui Gor was his good friend in Guangzhou and his customer in Macau.  The fact that Sui Gor was a customer of him in Macau might well be another reason why D1 was willing to extend his hospitality to Siu Gor’s friends in this payment exercise.  Establishing a good personal relationship must be a key to success in attracting customers into his VIP gaming rooms.  According to the evidence of D1, Sui Gor and his friend did return about a month later, only to find the Rolex watch still out of stock but Sui Gor’s friend bought another watch worth $100,000, and D1 issued another cheque in that sum to Success Investment.  On the same occasion, they went to Elegant and placed an order for a Rolex watch with D1 paying a deposit of $4,000.  Eventually, Elegant informed D1 that the watch was available.  After confirming with Sui Gor that his friend would purchase the watch at the asking price, i.e. $132,000, D1 at the request of Sui Gor provided his bank account number for money to be transferred to him for making the purchases.  Later, $291,000 were transferred into A/C1 on 1 April 2005 which was the exact sum for paying the first two watches and the forthcoming Rolex watch.  The payment also meant that the trust placed by D1 on Sui Gor was well-founded.  D1 admitted that he did not know Lau Kwok Sun from whose account the money was transferred to him.  However, I had no reason to doubt his evidence that when he received the payment, he did not know the money was from Lau.  It must also be right that he would not have any reason to doubt the source and use of the money because he had already been told in advance, and the amount deposited was exactly the aggregate of the prices of the three watches.  Furthermore, even if D1 knew that the money was from Lau, it did not mean that D1 should have reason to think there was anything wrong with the money because the money was from an identifiable bank account.  In light of the evidence of D1, I found that the prosecution could not prove beyond reasonable doubt that D1 had reasonable ground to believe that this sum of money represented the proceeds of an indictable offence.

Mr. Shum & Chan Ching Wah

73.  Mr. Mitchell then referred to a cheque deposit of $1 million into A/C1 on 30 August 2005 from the account of Miss Chan Ching Wah.  Again, D1 did not know Miss Chan Ching Wah.

74.  According to the evidence of D1, a Mr. Shum caused this $1 million cheque deposit to be credited into A/C1 because Mr. Shum asked him to take the money to Macau to pay for his (Mr. Shum’s) investment in the Macau gambling business.  I had no reason to doubt D1’s evidence that he had taken the money to Macau to pay for Mr. Shum’s investment as evidenced by the fact that D1 did use the money in A/C1 to issue two cashier orders for the total sum of $1 million paid to SJM Holdings Ltd. on 31 August 2005, and the travel index record also proved that he left Hong Kong after 6 p.m. on that day for Macau.  There was no doubt that the payment to SJM Holdings Ltd. was in connection with the Macau gambling business.  The only issue to consider was when D1 dealt with this sum of money, would he have reasonable ground to believe that the money represented the proceeds of an indictable offence?

75.  According to the evidence of D1, at that time, the facts that were known to him were: (1) Mr. Shum was his familiar customer who was doing real estate business in the mainland, (2) Mr. Shum was interested in investing in the Macau gambling business, (3) he had introduced Mr. Shun to discuss with the person-in-charge of Neptune Club at that time (i.e. Michael)  about his investment in the gambling business, (4) Mr. Shum told him on 30 August 2005 that he had confirmed the terms of his investment with Michael, but he needed D1’s help to bring money to Macau for the investment as he was busy, and (5) Mr. Shum said he could send someone to bring cash to D1, but D1 asked him to deposit money into his bank account so that he would arrange for cashier orders to be issued because that would be less risky, (6) money deposited into A/C1, and (7) D1 only knew money had been deposited into A/C1 but did not know it was from Chan Ching Wah because the source of the deposit was not revealed in that checking.  There was no basis for me to find his evidence must be untrue.

76.  With these facts in mind, I did not find that a common sense, right thinking member of the community would consider sufficient to lead a person to believe that those $1 million in whole or in part represented any person’s proceeds of an indictable offence.  D1 had introduced Mr. Shum to the person-in-charge of Neptune Club to discuss a possible investment by Mr. Shum into the VIP room.  D1 must have some idea about the financial ability of Mr. Shum as he was his frequent customer, and he understood that Mr. Shum had a real estate business in the mainland.  It would not be surprising to D1 that Mr. Shum had the money.  Much emphasis had been placed by the prosecution that Mr. Shum did not himself take the money on the ground that he was busy, but it was not known what were the agreed terms between him and the person-in-charge of the Neptune Club as to the time of payment.  It was also said that Mr. Shum could cause other people to take the money to Macau, but D1 was clearly a suitable person to take money for him to Macau, bearing in mind, as testified to by D1, that D1 was familiar with Neptune Group, and it was D1 who introduced Mr. Shum to Neptune Club.  All in all, I did not find that the objective test had been satisfied.

Lee Tit On

77.  The third monetary transaction Mr. Mitchell referred to in his closing submissions was the exchange of $509,150 into 50,000 Euros on 8 January 2007.  According to the evidence of D1, his former business partner in fabric trade in Guangzhou Mr. Lee Tit On asked him to exchange the Euros for him as he was about to go on a trip to Europe.

78.  Mr. Mitchell questioned whether D1 would exchange this sum of money into Euros for Mr. Lee when doing so, he would cause the balance in A/C1 which was a prestige account to dip below the required $1 million level and incur bank charges.  In my view, the bank charges would not be a ground for preventing D1 from using his money.  In any event, it was a fact that his money had been exchanged into Euros, and I had no reason to disbelieve his evidence that he had given the Euros to Mr. Lee.  According to D1, Mr. Lee had already repaid him in full.  D1 identified the cash deposit of $100,000 on 1 February 2007, and $100,000 on 2 February 2007 into A/C1 being repayment from Mr. Lee.  D1 further testified that Mr. Lee came to Hong Kong a few days later and paid the balance of $309,150 to D1’s godson Mr. Hui Chun Kit who was sent by D1 to take Mr. Lee to have meal and to collect payment from Mr. Lee because D1 was away from Hong Kong at that time between 3 and 7 February 2007.  D1 identified a deposit of $100,000 on 9 February 2006 made by Hui Chun Kit as part of the money collected by Hui Chun Kit from Mr. Lee.  But Mr. Hui Chun Kit asked D1 to lend him the balance and promised to repay as soon as possible.  D1 said he agreed to lend the money to Hui, and he even asked Hui to repay only $200,000, and let Hui keep the balance for serving his friend.  D1 further testified that Hui Chun Kit had repaid him.  He identified the $100,000 deposited on 8 March 2007, $50,000 on 24 March 2007, and $50,000 on 30 March 2007 to be the repayment made by Hui Chun Kit.  The last two sums were cash deposits, but the first sum of $100,000 was from the account of Yau Chi Keung. He said that Hui Chun Kit told him on the phone that this sum had been deposited.  He checked his account and found the deposit, but at that time he did not know the deposit was from the account of Yau Chi Keung because he was not able to check that.  He agreed he did not know Yau Chi Keung.

79.  Mr. Mitchell argued that there was no credible reason why Lee who had made two cash payments would not simply credit the third instalment into D1’s bank account directly.  In my view, Mr. Lee of course could have done so, but I did not find the evidence of D1 incredible because if Mr. Lee were to come to Hong Kong, as testified to by D1, Mr. Lee chose to hand over the money directly to D1 was not beyond belief.  Mr. Mitchell also questioned why Hui Chun Kit did not raise his cash flow problem with D1 when he was asked by D1 to receive Mr. Lee, but chose to keep large part of the money after collecting payment from Lee.  But the simple answer could be that his cash flow problem only arose after D1 had given him the instruction to receive Lee.  I had no cause for concern.  I cannot disregard D1’s evidence as being untrue.

80.  With these facts in mind, would a common sense, right thinking member of the community would consider sufficient to lead a person to believe that the money deposited by Lee or the money deposited by Yau Chi Keung and Hui Chun Kit in the total sum of $509,150 in whole or in part represented any person’s proceeds of an indictable offence? My answer was no.  D1 had in effect lent out money to Mr. Lee, and when he received payment from Lee and Hui, he was just getting back what was owed to him.  He knew the source of the money he received.  There was no reason for him to have concern why Lee had the money.  The fact that the deposit of $100,000 on 8 March 2007 was from the account of the unknown Yau Chi Keung did not change his state of mind.  His evidence that at the material times he did not know the money was from Yau was not beyond belief.  Even if he knew, he had been assured by his godson that the money was this repayment, and there was nothing wrong for one person to ask another person to repay or transfer money for him.  In any event, it was common to find in money laundering cases that the offender received money first and transferred away the money later as a conduit pipe, but in the present case, D1 did not receive money but pay out money first, and he just got back the money later, but in exactly the same amount and from an identifiable source.  His action was not consistent with money laundering activities.

81.  I should also add that according to the evidence of Mr. Lee Kwong Ming (DW22) who was called by D2 to testify, Mr. Lee was a good friend of Hui Chun Kit.  He also knew Yau Chi Keung who lived in the same village as he.  He further knew that Yau Chi Keung knew Hui Chun Kit. Under these circumstances, it was clearly possible that Hui Chun Kit asked Yau Chi Keung to deposit the money for him into the account of D1.

82.  Mr. Mitchell in his closing submissions then referred to certain money transaction concerning a person called Kwok Wah.  That transaction involved with both D1 and D2.  I shall skip all transactions involving both D1 and D2 now, and deal with them later.

Ringo Ng / Tse Chiu Kei & Chan Chun Ping (DW10)

83.  Mr. Mitchell called into question two sums of money which D1 explained to be repayment of marker money.  The first sum was a cash deposit of $294,300 into A/C1 on 8 March 2007 by Ringo Ng Tse Man.  The second sum was $400,000 transferred into A/C1 on 30 June 2009 from the account of Tse Chiu Kei.

84.  D1 agreed that he did not know Ringo Ng or Tse Chiu Kei.  He said that he thought that the payments were repayment of marker money and he made enquiry with his “low line” about the payment after his arrest.  He was told by Mr. Chan Chun Ping (DW10) that the second sum, i.e. $400,000 was repayment of marker money by DW10’s customer.  Mr. Chan Chun Ping actually testified in court to support D1’s case.  He said that the debt from his customer had been long overdue, but one day the customer called him and said he was in Hong Kong and was able to pay him.  However, DW10 was not in Hong Kong, but he wanted to receive the money at once.  However, he did not have a bank account in Hong Kong.  Hence, he called up D1 and asked D1 for his bank account number to receive the money.  D1 agreed, and DW10 forwarded the account number of D1 to the customer.  For the first sum from Ringo Ng, D1 said his “low line” could not confirm if it was repayment of marker money since the “low line” with whom he made enquiry had not yet been recruited at the time of payment.

85.  Mr. Mitchell referred to the evidence of D1 and DW10 and pointed out that D1 was alive to the risks associated with “strangers” paying money into his account, and yet this happened in both his and D2’s account.  Mr. Mitchell asked rhetorically why he did not guard against the risk.  In my view, as far as the second payment from Tse Chiu Kei was concerned, I found the evidence of D1 and DW10 corroborated with one another. Their evidence was not inherently improbable or incredible.  Nor had they been destroyed or shaken under cross-examination.  

86.  As far as the first sum from Ringo Ng was concerned, it was clear that D1’s evidence that he believed the money was repayment of marker money must be a mere guess on his part.  However, given the nature of the business he was in, that guess was an educated guess, and I agreed with the defence that it was not inherently improbable for marker money to be repaid in this way.  In any event, the sources of these two payments were clearly identifiable and had been identified.  I agreed with the defence that traceability of the source of fund was a hallmark against the inference of money laundering activities.

Mr. Leung Chung Man (DW8)

87.  The other monetary transaction commented on by Mr. Mitchell was a cheque deposit of $60,000 into A/C1 on 10 April 2007 from Mr. Leung Chung Man (DW8). 

88.  According to D1, Mr. Leung (DW8) was his friend for more than 10 years, and this cheque of $60,000 was payment by Mr. Leung of his mahjong debt.  This cheque was dishonoured due to insufficient fund.  Both D1 and Mr. Leung testified that the mahjong debt was eventually paid off by two ATM transfers made on 11 April 2007 and 30 April 2007 for $40,000 and $20,000 respectively.  Mr. Leung (DW8) testified that he made use of the ATM account of his employee Miss Siu Suk Wai to deposit money into A/C1.  He produced a photocopy of Miss Siu bank card for the ATM transfers (Exhibit D34) which bore a card number which was the same number appearing on the accounts summaries prepared by the prosecution.  I had no reason to doubt the evidence of D1 and Mr. Leung (DW8).  The only comment made by Mr. Mitchell was that Mr. Leung (DW8) was unable to explain why he did not simply ask D1 for time to pay but had to resort to his employee.  However, since he had already issued a cheque that was dishonoured, there was every reason why he should settle the payment as soon as possible.  In any event, as far as D1 was concerned, it was a payment of mahjong debt rightly owed to him by a known individual.  Under these circumstances, when he received the money, there was no reason for him to have concern about the source of money.

Mr. Wong Shek Ming (DW5)

89.  Mr. Mitchell also referred to sums of money transferred into A/C1 by Mr. Wong Shek Ming (DW5).  The evidence of D1 and Mr. Wong (DW5) was that these sums of money were repayment of two loans made by D1 to Mr. Wong.

90.  According to Mr. Wong (DW5), he was invited to join in a karaoke business in 2005 but he did not have the fund and was not able to raise money through financial institution due to lack of income proof.  He therefore borrowed $100,000 from D1 whom he had known for more than 10 years, and repaid by monthly instalments of $9,000 each in one year.  He thought that there was no problem for him to pay an extra $8,000 to D1 for this loan.  When there were about 2 to 3 instalments of repayment to make, he was in financial difficulty again, and he therefore borrowed another $100,000, to be repaid on the same terms as before.  He had eventually paid off all the loans by May 2008.

91.  Mr. Mitchell queried whether the alleged loans were genuine.  He pointed out that Mr. Wong (DW5) had said under cross-examination that he did not put the money he borrowed from D1 into the karaoke business, and that even though the karaoke was running at a loss, he was able to pay off the loan from the money he borrowed.  Mr. Mitchell asked under these circumstances why he should ask for the loan in the first place and pay back D1 effectively at an interest rate of 8%.  In my view, according to the evidence of Mr. Wong (DW5), the loans were clearly beneficial to him in the sense that he had the money available for his disposal.  His evidence was that he was not required by his partners to put in money as capital but he had to share in the loss if any sustained by the karaoke each month.  When that was the term of the partnership, it would not be unreasonable for Mr. Wong to borrow money so as to have ready cash.  The fact that he used part of the loan from D1 to repay D1 was not incredible because he was just using the money available at his disposal to manage his financial affairs.  Mr. Wong (DW10) had also testified that he used part of the loan to cover the expenses of his son.  It was clear from the deposits made by Mr. Wong (DW5), which were all traceable to be made through his accounts, were in sums of $4,500, $9,000 or $18,000.  In my view, this pattern of payment clearly corroborated his evidence that he had agreed to repay D1 $9,000 a month, and the fact that he could only pay on occasions half of the $9,000 and that he could only pay off all the loans by May 2008 were clearly supportive of the inference that he was not just using D1’s loans to repay D1, and he had in fact used the money for some other purpose and had to raise the money elsewhere to repay the loans.  Mr. Mitchell also raised the points that the loan was informal, that it was made without security, and that its purpose was not known to D1 because, according to Mr. Wong (DW5), he had not told D1 why he needed the loan.  However, if D1 and Mr. Wong (DW5) were good friends for over 10 years, this sort of arrangement was not uncommon. Besides, if it were a money laundering exercise, it would have been an exercise that took place seemingly on a monthly basis with an amount of just $4,500 or at most $18,000 from a traceable source spreading over a period of about 3 years.  Why took such trouble and not do it in one go in cash without Mr. Wong leaving trail of identification?  All in all, I could not discount D1 and Mr. Wong (DW5)’s evidence to be untrue and had to act on the basis that there were genuine loans and repayment between D1 and Mr. Wong (DW5).  I did not find D1 should feel suspicious of the payment from Mr. Wong.

Miss Hung Lai Chu (DW2)

92.  Miss Hung Lai Chu was a director of Greenwood (H.K.) Ltd.  Previously, Greenwood and D2 were the directors of Maple Hill Limited carrying on garment trading.  In 2003, Greenwood left Maple Hill and continued with the garment business on its own.

93.  According to the evidence of D1 and Miss Hung Lai Chu, in 2010, Miss Hung asked D1 for assistance because Greenwood was in need of cash.  D1 agreed to assist because Miss Hung was his good friend for many years.  He injected cash $100,000 a month into Greenwood and became a director and shareholder of Greenwood.  According to the Notification of Change of Secretary and Director (Exhibit D16), starting from 15 April 2011, D1 became a director of Greenwood, and he was allotted 50 shares out of the 98 shares issued.  D1 could not remember exactly when he injected fund but it was between 2010 and 2011.  When he injected fund into Greenwood, he received a director’s fee of $30,000 a month.  After injecting $100,000 a month for 8 months, and receiving director’s fee for 8 months, D1 stopped injecting money because he found that Greenwood was not improving.  He also resigned from the directorship, and a notification was filed with the Companies Registry and transferred the shares back to Miss Hung (Exhibit D17).  According to summary of A/C1, the last cheque of director’s fee to him was dated 1 June 2011.

94.  Mr. Mitchell submitted that this arrangement was made without documentation and without security.  I did not share the same view because documents had been filed with the Companies Registries to show that D1 had become a director and a shareholder of Greenwood.  It was also important to note that D1 was not making a loan to Greenwood.  On the other hand, I agreed that the payment of a director fee of $30,000 a month was an unusual feature.  Bearing in mind that this arrangement was made at the time after D2 had been arrested, there was every reason to believe that the $30,000 a month was intended to be used to give money to D1 to pay off his house mortgage which was in the same amount.  However, I did not think there was anything sinister, and in particular, I did not think Miss Hung intended to put D1 in fund.  It was clear from the evidence of Miss Hung that after calculation, she estimated that Greenwood needed $100,000 each month as running cost, but she still agreed to pay the director’s fees because she hoped that as long as the company was running, there would be a chance for generating profits.  In other words, by receiving $70,000 a month in effect from D1, Greenwood might be able to earn profits to cover the director’s fee paid to D1.  Furthermore, even if the company failed to get any profits but had to pay $30,000 a month to D1 as director’s fee, the company still got an injection of $70,000 a month.  Why not?  On the other hand, D1 needed money to pay off his mortgage.  So long as the money he injected into Greenwood was from legitimate source, I saw no objection to this exercise.  From the evidence of D1 which I could not discount, he did have the ability to earn legitimate income of $100,000 or more a month from his gambling business in Macau.

95.  I shall now turn to monetary transactions that involved both D1 and D2 in Mr. Mitchell’s closing submissions.

Kwok Wah (DW6)

96.  In his closing submissions, Mr. Mitchell referred to a group of monetary transactions involving both D1 and D2.  On 5 November 2009, $200,000 was transferred from A/C1 to A/C2, cash $300,000 was deposited into A/C2, but $500,000 was withdrawn from A/C2 by cheque in favour of Mr. Kwok Wah.  Likewise, $200,000 was transferred from A/C6 to A/C7, cash $300,000 was deposited into A/C7, but a cheque of $500,000 was withdrawn from A/C7 by cheque in favour of Mr. Kwok Wah.  On 6^th November 2009, cash $220,000 was deposited into A/C1 by Fung Kwok Hung; and cash $200,000 was deposited into A/C6 by Fung Kwok Hung.  It was admitted by D1 that he did not know Fung Kwok Hung.

97.  According to the evidence of D1 and D2, their friend Mr. Kwok Wah who was a former snooker champion in the mainland and now running snooker business wanted to invest $1 million in Hong Kong stocks. He had opened a securities account with the Bank of China.  He asked D1 if a handling fee would be charged if he deposited $1 million cash into the account.  D1 told him that there would be a handling fee but he offered to help.  At that time, he thought that if the cash deposit was just $500,000, no handling fee would be charged.  Hence, he suggested to Kwok Wah that he and his wife would each issue a cheque of $500,000 to pay the money into Kwok Wah’s account, and Kwok would deposit $500,000 cash into his bank account and the bank account of his wife.  Mr. Kwok agreed.  He told D1 that he would ask Miss So to take the money to him.  According to D1, he had known Kwok Wah and Miss So for 10 odd years.  Shortly afterwards, Miss So contacted him.  They made an appointment to meet at the bank. D1 and D2 each prepared a cheque of $500,000 in favour of Kwok Wah.  At the bank, D1 and D2 met Miss So.  They went to make the deposit, but the bank staff told them that cash deposit exceeding $300,000 would attract a handling fee.  Hence, Miss So deposited $300,000 each into the current accounts of D1 and D2, and D1 and D2 each transferred $200,000 from their respective savings account into current accounts to honour the cheques for Kwok Wah.  Miss So promised to deposit $200,000 each back to their accounts the following day so that D1 and D2 would not be troubled to go to the bank again. On 6 November 2009, D1 received a cash deposit of $220,000 into A/C1, and D2 received $200,000 into A/C6.  At that time, they did not know the deposits were from Fung Kwok Hung who was unknown to them.  The additional $20,000 into A/C1 was Kwok Wah’s reimbursement to D1 because D1 had purchased dried seafood for him.

98.  Mr. Kwok Wah (DW6) gave evidence for the defence.  He also did not know Fung Kwok Hung.  His evidence largely corroborated with that of D1 and D2, but Mr. Mitchell considered that there was a substantial discrepancy between D1 and Kwok Wah that cast doubt on their evidence.  Mr. Mitchell submitted that according to D1, he (D1) told Kwok Wah of the potential bank charges and Kwok Wah asked D1 if there was a way to avoid this charge, whereas according to Kwok Wah, it was Miss So who told him of the potential bank charges.  I had carefully considered the evidence of Kwok Wah. It appeared that Kwok Wah had never been asked directly if he had ever enquired with D1 about payment of the bank charges.  It was possible that Miss So had told Kwok Wah of the bank charges, and when Kwok Wah sought help from D1, he asked D1 again if there would be such charges.  I found that even if their evidence could be regarded as different, the discrepancy was explainable and in any event minor.

99.  The testimony of D1, D2 and Kwok Wah, coupled with the account summaries as well as the share transaction record issued by Bank of China in respect of Kwok Wah’s stock account (Exhibit D20), had clearly established that the $1 million cheques issued by D1 and D2 had been paid into the account of Kwok Wah to enable him to purchase stocks in Hong Kong.  It also proved beyond doubt that on the day when the cheques were issued and on the following day, D1 and D2 got back a total of $1,020,000.  I had no hesitation to accept that the whole exercise was D1 helping his friend to avoid bank charges.  It did not make sense to a money laundering exercise when Kwok Wah could have through Miss So just deposited the cash into the bank account so that there would be no trace of the source of money, but to engage the service of D1 and D2, thereby making it easier for the source of fund to be traced.  It was said that it was unreasonable for D1 and D2 not to collect the balance of $400,000 from Miss So there and then and left it to Miss So to deposit the money the day after.  However, D1 had seen the money was with Miss So, and he knew her and Kwok Wah for 10 odd years.  It was reasonable for him to believe her, and D1 and D2 did receive the payment on the following day.  The fact that the money was from Fung Kwok Hung was neither here nor there.  First, there was no evidence that D1 or D2 knew at that time the money was deposited by Fung Kwok Hung, and there could be many reasons why Fung Kwok Hung deposited the money and did so for innocent purpose, such as he was a friend of Miss So and agreed to help Miss So.  Second, when D1 and D2 found the money in their accounts, they would only assume the money was from Miss So as they had been told the day before, and they knew Miss so had the money as she had the money the day before, and they believed the deposits were repayment to them.  There was simply no reason for them to have any concern about the source of the money.  So would any reasonable man.

Mr. Lo Chi Sang (DW17)

100.  The next item referred to by Mr. Mitchell was the 9 cash deposits in the total sum of $960,000 identified to be from Mr. Lo Chi sang (DW17) into A/C5 between November 2006 and June 2010.  There might be a further cash deposit of $100,000 on 27 November 2008 into A/C5 from Mr. Lo.  According to D1, D2 and Mr. Lo (DW17), they had known each other for over 10 years, and these sums of money were repayment of gambling debts owed by DW17 to D1 when he gambled in Macau VIP gaming rooms and drew on the marker money of D1.

101.  Mr. Mitchell submitted that there was discrepancy between the evidence of D1 and Mr. Lo Chi Sang, and that D2 only repeated what D1 had said.  Mr. Mitchell pointed out that Mr. Lo paid the money into D2’s account because Mr. Lo wanted to pay the money into a HSBC account but he did not have one, so he asked Mr. Lo to pay into D2’s HSBC account and provided Mr. Lo with D2’s account number, whereas Mr. Lo testified that it was D1 who told him to pay the money into D2’s account and made no mention of making a request to pay through a HSBC account. 

102.  I had studied the evidence very carefully.  When Mr. Lo gave his evidence-in-chief, Mr. Fung drew his attention to the HSBC account of D2 (A/C5) and told him that he (Mr. Lo) had deposited money into this account on 9 occasions.  Mr. Fung then asked Mr. Lo whether he knew whose account was this. Mr. Lo replied that D1 told him that it was the account of his wife.  Mr. Fung then asked Lo to explain why he deposited the money.  Mr. Lo said in gist that he was to repay gambling debt owed to D1.  Mr. Fung then put the question, “Who told you to put money into that account?”  Mr. Lo answered, “D1.”  Mr. Lo was not asked further why D1 told him to put money into D2’s account.  This matter was not canvassed in cross-examination by prosecution either.  In my view, the answer given by Mr. Lo was merely a direct response to Mr. Fung’s question, but the answer itself was not wide enough to cover other related area like why D1 asked Mr. Lo to put the money into the account of his wife and not his own.  In my view, Mr. Lo had never said specifically that he had never asked to pay money into a HSBC bank account, and I did not think there was necessarily a discrepancy in evidence.  If it were a discrepancy, I did not think it was such a material discrepancy to destroy the credibility of the evidence.  If D1 wanted to launder the money, would it really make a difference if he asked for the money to be paid into his account or the account of his wife who was obviously closely related to him and who must also be a target of investigation by the police due to their relationship?  Furthermore, it was clear that Mr. Lo had made no attempt to hide that it was him who deposited the money.  His name and identity card number were recorded in some pay-in slips and some payments were made through bank accounts.  This was a hallmark against money laundering.  Mr. Mitchell submitted that the evidence of Lo Chi Sang on this was consistent with a pattern of D1 seeking to dissipate money through both his and D2’s account.  However, D1 and/or D2 was receiving money from Mr. Lo, they were not dissipating them. 

Connie Tan

103.  Mr. Mitchell also referred to a sum of $200,000 deposited into A/C6 on 8 December 2005 by cheque issued by a Hung Hon Yee.

104.  According to the evidence of D1 and D2, Miss Tan was a Malaysian who went to Macau for fun in late November 2005 and gambled in D1’s VIP gaming room and lost $200,000 worth of chips drawn on D1’s marker money.  A few days later, Miss Tan gave the cheque of $200,000 drawn by Mr. Hung to settle the marker money.  D1 and D2 knew that Mr. Hung was the boyfriend of Miss Tan.  There was nothing curious for a boyfriend to settle a gambling debt of a girlfriend. It was also nothing strange for D1 to ask D2 being his wife to cash the cheque and deposit the money into her account. 

OCPT

105.  D2 testified that in 2008, she formed a company called New Mary with other partners to invest in beauty parlour in collaboration with another company Rise Bright.  New Mary and Rise Bright formed a new company OCPT to run the business in the name of Glow Concept which provided beauty service and sold beauty and skin care products.

106.  According to the evidence of D2 and Mr. Ho Chun Kit (DW16) who was one of the partners of Rise Bright, Rise Bright ran into financial difficulties, and Mr. Thomas Chow of Jetour introduced potential investors including D1 and D2 to them.  Eventually, D1 and D2 each agreed to contribute $500,000 into OCPT through New Mary.

107.  Mr. Mitchell submitted that D1 and D2 were not engaging in a legitimate business enterprise when they invested in OCPT.  Mr. Mitchell pointed to his cross-examination of D2 that D2 was unable to say what would be the financial projection for the business other than saying that she hoped the business would be good, and that D2 did not know how and on what basis she could withdraw from the business.  D2 was also unable to say how she could get back the $1 million investment.  On the other hand, in 2010, Mr. Ho was able to acquire the business for around $600,000 when New Mary withdrew.  Mr. Mitchell took the view that the casual approach adopted by the defendants to this dissipation of funds through Glow Concept was indicative of money laundering.

108.  I appreciated the force of the submission, but the evidence of D1 and D2 had to be taken into account.  When they decided to invest, part of the reasons was they wanted to help some young men to establish the business.  The whole investment therefore could not be judged purely from the monetary perspective.  Furthermore, I did not find D2’s inability to answer Mr. Mitchell’s query indicated the business was a sham. When the investment started, of course nobody could be certain of the profit projection, especially at the time when D1 and D2 joined in, the business of the company must be at its bottom, or else there was no need for D1 and D2 making capital investment.  If D1 and D2 took the investment seriously, they would have considered continuing with the business as long as possible, and there was just no reason for them to think of the terms and prerequisite of withdrawal or how to get back the $1 million investment at that stage. 

109.  Mr. Mitchell also referred to an incident on 20 July 2009 when D1 deposited $300,000 cash into the account of OCPT.  Mr. Mitchell commented that D1 had given an incredulous account of how he received the cash and went to the bank to deposit the money, only to find that he did not know the number of the account, and he could not contact his wife over the phone for the information, so he had to put the money into his account, but then his wife called back with the account number, and he had to withdraw the money from his account and deposited it into OCPT account.  Mr. Mitchell further submitted that in any event, this sum of money was overseas funds coming from a Malaysian investor, and there was just no reason why the overseas investor did not deposit the money directly into the account of OCPT herself.

110.  In my view, the very action of D1 indicated that he was not engaged in money laundering. When he had already had the cash from overseas and if he knew or believed the money represented proceeds of an indictable offence, he would not be so stupid to put the money into his own account first before depositing into OCPT account, so as to leave a trail by which he could be identified.

111.  At this juncture, it was convenient to deal with the evidence of Mr. Chan Kau (DW19).  His evidence was that he was a customer of Glow Concept, and that there were occasions when the purchases he wanted to make cost more than a few hundred dollars, he would take the goods first and later pay through the bank account of D2.  Mr. Mitchell submitted that it was incredible for Mr. Chan Kau to say that he found it nothing strange when he purchased goods from a business, but made payment into the bank account of an individual, even if that individual was the boss of the business.  I had to say I did not share Mr. Mitchell’s view.  If the business itself had no objection or permitted that mode of payment, there could not be any problem.  What the business needed was a good accounting system to ensure there was no mixed-up in the accounting, leaving no goods remained unpaid.  Furthermore, allowing the customer to pay into the personal account of the boss might have other advantage, i.e. the customer felt that he was being treated as a friend.  It was the evidence of Chan Kau that but for the fact that D2 was the boss of Glow Concept, he might not patronize it.  In fact, the summary of A/C6 showed many instances when OCPT paid D2, which according to D2, were reimbursement from OCPT after she had paid for the company first.  In any event, the importance of the evidence of Mr. Chan Kau lay on the fact that Glow Concept was a genuine business in which D2 played a part.  I had no reason to disbelieve Mr. Chan.  Had he been a witness coming to court only with a view to assist the defendants, I would have expected him to tell me that he had patronized VIP gaming rooms run by D1 and witnessed how D1 made big money out of it.  However, on the contrary, he was adamant in saying that he did not even know if he had ever walked past the VIP rooms of D1 when he was in Macau.

112.  Having considered the evidence of D1, D2 and DW19, I could not conclude that the investment into OCPT or Glow Concept was not a credible business investment.

113.  I now deal with monetary transactions relating to D2 only in the closing submissions of the prosecution.

114.  Mr. Mitchell referred to a number of monetary transactions which D2 explained to be loans to friends and relatives.

Wong Lok Kai

115.  First, Mr. Mitchell referred to the $220,000 transferred out of A/C5 on 18 November 2004 which D2 testified to be a loan to Wong Lok Kai. According to D2, when she and D1 were also running the fabric trade in Shum Shui Po, Mr. Wong was a fellow fabric trader in the same area.  Mr. Wong Lok Kai asked her for help because of his cash flow problem, so she lent him money.  Mr. Wong repaid $50,000 on 18 November 2004, $50,000 on 17 May 2005, and $120,000 on 21 September 2005.

116.  Mr. Mitchell submitted that this loan was questionable because D2 had just quitted from the fabric business which was no longer profitable, and hence there was no reason for her to lend money to another person in this unprofitable trade.  However, it was uncommon to find friends providing loans to a needy friend even though there was a risk that the money might not be recovered.  I saw no inherent incredibility in D2’s evidence.  The fact that the money had been fully repaid by Wong Kai Lok caused me no concern at all that this was a genuine loan transaction.

Chan Ka Yin (DW18)

117.  Mr. Mitchell then referred to another loan of $30,000 D2 had made to her nephew Mr. Chan Ka Yin (DW18) around 2004.  I had heard the evidence of D2 and DW18.  I noted in particular the 16 pieces of ATM pay-in slips (Exhibit D50) produced by Mr. Chan Kai Yin which were no doubt contemporaneous documents fully corroborative with their evidence.  I believed D2 did lend money to Mr. Chan and Mr. Chan did repay in the manner as they testified to.  There was no cause for concern of the source and the use of these sums of money.

Tse Hun Bun Victor (DW13)

118.  On 9 July 2009, D2 transferred $1.8 million out of A/C5 into the bank account of his elder brother Mr. Tse Hun Bun Victor (DW13).  On 31 August 2009, Mr. Tse (DW13) transferred back from his own account into A/C5 an identical sum of $1.8 million.  Mr. Tse testified that he purchased a property in Tai Po at $1.98 million.  He needed to pay a balance of a little bit under $1.8 million to complete the sale not later than 11 July 2009.  His wife also purchased a car park and need to pay another sum of $500,000 odd also not later than 11 July 2009.  He therefore needed a loan of $1.8 million from D2.  At the same time, he sold his property in Kennedy Road, and he received over $5 million on 25 August 2009.  He therefore repaid D2.  The evidence of D2 and DW13 was clearly supported by the contemporaneous documents which were letters from the two firms of solicitors (Exhibit D43 & D44) produced by Mr. Tse (DW13) that showed Mr. Tse had bought and sold the premises he had mentioned.  The $1.8 million in and out of D2’s A/C was clearly a bridging loan with source known and use of the money legitimate.

Miss Hui So Ping

119.  Mr. Mitchell referred to another loan by D2 to Miss Hui So Ping.  According to D2, Miss Hui So Ping was her good friend and one of her mahjong playmates.  She transferred $500,000 out of A/C6 to Miss Hui on 1 November 2004 because Miss Hui had cash flow problem in her fashion wholesale business.  Miss Hui agreed to repay as soon as possible. Miss Hui deposited $70,000 on 23 February 2005, and $50,000 on 2 September 2005 into A/C6, leaving a balance of $380,000 which was eventually settled when D2 purchased a property from Miss Hui in September 2006, when the outstanding sum was deducted from the purchase price.  A land search record (Exhibit D36) was produced by D2.

120.  I had no reason to reject D2’s evidence in this regard.  The only comment that Mr. Mitchell had made was that the loan between D2 and Miss Hui lacked formality.  However, their relationship had to be taken into account.  In any event, D2 must know that Miss Hui had a property which must be some kind of assurance to D2 even if it was not a security of the loan in law.  Mr. Mitchell also noted that Miss Hui was selling the property at a loss to D2 after she had got the property for about 15 months.  D2 said she purchased from Miss Hui at the then market price.  It was not uncommon to see fluctuation in the property market.  I could see nothing sinister.  D2’s evidence that she had made a loan of $500,000 to Miss Hui and she was fully repaid in the manner described was not beyond belief.  In fact, I noted from the land search record, that at least on paper, she made a profit of 550,000 within 16 months after she purchased the property from Miss Hui.

Lee Kwong Ming (DW22)

121.  Mr. Mitchell then referred to the loan of $1 million lent by D2 to Mr. Lee Kwong Ming (DW22) on 31 January 2005.

122.  According to D1 and DW22, DW22 needed the loan because he had to repay a gambling debt incurred on a gambling boat.  It was agreed that Mr. Lee would repay in 3 years.  Mr. Lee also agreed to pay an extra sum of $100,000 to D2 as tea money out of his own initiative. The repayment would be made in instalments but at irregular interval and in an amount convenient to Mr. Lee, so long as the loan was paid off within 3 years. D2’s godson Mr. Hui Chun Kit was responsible for collecting repayment from Mr. Lee.  An IOU was drawn up.  Mr. Lee eventually repaid the whole sum, and the IOU was returned to him which he threw away.

123.  In my view, this was clearly a loan of substantial sum of money and it was an unsecured loan as well. However, even so, it could not be said that it was inherently improbable for D2 to make this loan because other factors could come into play.  It appeared that D2 did have the financial ability to make the loan.  The summary of A/C6 showed that even after the $1 million had been withdrawn, there were still nearly $4 million in her account.  Personal relationship had to be considered as well. According to D2, at the time of the loan, she had known Mr. Lee for about 6 years, and Mr. Lee was her good friend, and also a good friend of his godson Hui Chun Kit since 1996.   D2 also knew that Mr. Lee had his own business and that his family was rich because his father was the son of the Chairman of the Fanling Rural Committee.  She knew that the Lee family had business in vegetable wholesales and household products.  In other words, she had reason to believe that Mr. Lee had the ability to repay the loan.  In cross-examination of DW22, Mr. Mitchell queried why Mr. Lee (DW22) did not borrow money directly from his own family if it was rich.  Mr. Lee said he did not want his family to know that he had lost lot of money in a gambling boat.  That was a reasonable and credible explanation.

124.  In his closing submissions, Mr. Mitchell emphasized that the alleged repayment of the loan by Mr. Lee was not a straight forward arrangement.  Mr. Mitchell queried why Hui Chun Kit was involved.  However, the evidence of D2 and Mr. Lee (DW22) was that it was Hui Chun Kit who assisted Mr. Lee to ask D2 for the loan.  It was only natural and reasonable to expect Hui Chun Kit to play a part to get Mr. Lee to repay, not to mention that DW22 also said in evidence that he was busy in his own work. 

125.  Mr. Mitchell also pointed out that D2 recalled specifically that on 6 March 2006 she received a call from Hui Chun Kit saying that he had received a payment of $60,000 from Mr. Lee but he would only deposit $43,000 into D2’s account because he would deduct $17,000 for replacing tyres and rims on D2’s car.  Mr. Mitchell pointed out that this deposit of $43,000 was however from Yau Chi Keung whom was unknown to D2. However, I could see no problem with that because according to Mr. Lee (DW22), Hui Chun Kit and Yau Chi Keung knew each other, and Yau lived in the same village as Mr. Lee.  Hence, it was possible that Hui asked Yau to deposit the money for him.  Furthermore, at the time when D2 received the payment, her godson had already confirmed that there would be such sum of money coming into her account.  What would have made her doubt the source and use of this sum of money?  In addition, there was in fact no evidence to prove that she knew at the time of the deposits that it was made by Yau Chi Keung.

126.  Mr. Mitchell also queried how D2 could have identified any cash payment to her to be repayment from Mr. Lee, but both D2 and DW22 testified that they had kept record.  DW22 would also call D2 by phone to confirm the payment.  The fact that D2 could not in Court identify which particular sum was a payment from Mr. Lee but could only say that it might be repayment from Lee and some other possibility was not open to criticism because she was asked to remember now, but the situation was different when the money was repaid to her.  Besides, D2 must have been satisfied that Mr. Lee (DW22) had fully repaid before she would return the IOU to him.  Also, the fact that the IOU was not produced in Court was not a matter upon which an adverse inference could be drawn.  The evidence was that the loan was fully repaid in February 2008.  There was simply no reason to keep that piece of IOU.

127.  Furthermore, according to the summary of A/C6, it was beyond doubt that Hui Chun Kit had through his account deposited $350,000 on 13 December 2007 and $400,000 on 12 February 2008 into A/C6.  The evidence of D2 and Mr. Lee (DW22) showed that these were repayment from Mr. Lee.  If their evidence were not to be believed but an exercise in money laundering, why should Hui Chun Kit be identified in these payments?  All in all, I cannot discount the evidence of D2 and Mr. Lee (DW22) in this regard to be untrue.

Jetour

128.  Another sum referred to by Mr. Mitchell was a transfer of $143,200 into A/C6 on 8 June 2005.  According to the evidence of D2, this was a transfer from Jetour.  The manager of Jetour Mr. Thomas Chow asked D2 for help because his staff needed £10,000 urgently in London and he knew D2’s husband had a cousin in London who ran a restaurant there.  D2 said she then contacted the cousin and asked the cousin to pay over £10,000, and Jetour paid the money back to her in Hong Kong dollars equivalent by this payment.

129.  Mr. Mitchell submitted that D2’s evidence could not be supported because an examination of her account records did not show a corresponding debit in this sum in favour of the cousin. However, the evidence of D2 was that the money was offset from the purchase of dried seafood she had made for the cousin.  This piece of evidence was not inherently incredible.  Mr. Mitchell further submitted that there was no credible reason why an established travel agency would need to resort to using the personal account of D2 to facilitate its business.  It appeared that the prosecution did not dispute that the payment was from Jetour, rather than Thomas Chow.  I believe this was also not disputable because the summary of A/C6 clearly identified the account by number from which the money was transferred to D2. When it was a payment from Jetour, and it was accepted by the prosecution that Jetour was a well established travel agency, why should D2 have any query but to think that what Thomas Chow asked her to do was really for the sake of Jetour’s business?  I noted that the prosecution had not summonsed witness from Jetour to rebut D2’s evidence.  I could not say D2’s evidence untrue.

Tsang Wai Yee Di Di (DW21)

130.  On 14 October 2005, a deposit of $211,500 was made into A/C6.  D2 and DW22 both testified that this sum represented a payment of $160,000 for a handbag which D2 sold to Miss Tsang, and of $51,500 for mahjong gambling debt.  It was a cash deposit which, according to Miss Tsang, was made by her boyfriend a Mr. Fan who owned many restaurants and who would pay for her because he gave her the bag as a gift.  D2 had earlier given evidence that she purchased this handbag through her friend Peggy Lau in Paris at $160,000.  Mr. Mitchell queried how they could have recalled the evidence given the passage of time.  I think the short answer was that sale and purchase of a handbag worth $160,000 in 2005 was not a matter that could easily forget. I had no doubt with their evidence.

Ricky Hui

131.  In his closing submissions, Mr. Mitchell mentioned a little bit about the $120,000 loan made by D2 to Miss Ricky Hui on 11 October 2007 for Miss Hui to pay off her credit card debt.  D2 identified cash payments of $50,000, $40,000 and $30,000 on 11 October 2007, 18 October 2007 and 7 December 2007 respectively were repayment from Miss Hui.  I had no reason to disbelieve her.

Hui Hon Wan (DW15)

132.  Mr. Mitchell submitted that there were two arrangements that D2 had made but no reasonable people would have got involved.

133.  The first one was concerned with an agreement between Hui Hon Wan (DW15) and D2.  From the evidence of D2 and DW15, as well as the documentary exhibits (Exhibit D37 & D38) produced, my understanding of the facts leading to their agreements and of the agreements itself were as follows.  In Sai Kung, male indigenous villager might apply to the Government for right to build an indigenous house.  A Mr. Yu Kwok Keung and a Chung Wing Shing were such indigenous villagers.  They had signed an agreement with two persons Tam Yee Ku and Leung Yung Hei (“the former developers”) by which they and the former developers would collaborate together to apply to the Government to grant them the right to build indigenous houses. Hui Hon Wan (DW15) and D2 formed the First Wealth Development Limited in about 2004 and purchased the development right from the former developers.  Mr. Hui Hon Wan owned 55% of the beneficial interest in First Wealth and the remaining 45% owned by D2.  They paid $2.1 million to the former developer.  According to their interest proportion, D2 had therefore contributed about $900,000.  When D2 entered into this venture, her original intention was to have one storey of a three storey house built pursuant to the rights of the indigenous villagers. She however wanted to withdraw subsequently at the time when, according to DW15, the balance of deposit of about $1.1 million was about to be paid to the indigenous villagers.  It was then decided that D2 would sell her share in the development right acquired by First Wealth from the former developers to Mr. Hui Hon Kwan (who was the younger brother of Mr. Hui Hon Wan) at the price of $540,000 to be paid by Mr. Hui Hon Kwan in 3 instalments according to the dates stated in the agreement, but if for whatever reason the development did not take place, D2 had to assist Mr. Hui Hon Wan (DW15) to recover the money paid to the former developers, and to repay the purchase price to Mr. Hui Hon Kwan. As a result, two agreements both dated 2 October 2006 (Exhibit D37 & D38) were signed.  Pursuant to this agreement (Exhibit D38), Mr. Hui Hon Wan on behalf of his younger brother had paid $300,000 on 5 October 2006, $120,000 on 10 April 2007 and $120,000 on 22 October 2007 by cheques into A/C6.  In fact, on 5 October 2006 when the first instalment was made, Hui Hon Wan issued another cheque of $8,000 in favour of D2 as reimbursement of expenses that D2 had formerly incurred for First Wealth.  The summary of A/C6 was in fact wrong when the two cheques deposited on 5 October 2006 were lumped up together as one single entry of $308,000.

134.  It was Mr. Mitchell’s submission that all these agreements between D2 and Hui Hon Wan from acquisition of the development right to withdrawal of D2 from the development were sham.  Mr. Mitchell’s argument was that Mr. Hui Hon Wan agreed in cross-examination that the right to build vested only in the indigenous villager, and the development agreements were entered into prior to that right having been granted, and the underlying agreement was not disclosed to the government when the right to develop was applied for in the name of the indigenous villager.  Mr. Mitchell pointed out that since the Government would not grant the permission to build to First Wealth, the whole agreement was just a means to circumvent the Government policy.

135.  In my view, the development agreement made between the indigenous villagers and the developers was undoubtedly a device to cope with the Government policy, but it was not necessarily an illegal circumvention of the Government policy.  From the evidence of Hui Hon Wan, my understanding was that the indigenous villagers might be granted land by the Government to build an indigenous house, but they might not have the money to do so.  Hence, the developers would collaborate with them in that the indigenous villagers would contribute the land and the developers would contribute the cost for building house in the land, and they would decide upon the benefit to be gained by the developers.  To carry out the collaboration, the developers might apply to the Government on behalf of the indigenous villagers for permission to build, but the developers could not apply in their own names.  This was my understanding of the nature of the agreement.  As to whether this type of agreement was illegal, this was not the appropriate forum to determine, but I had no basis whatsoever to find that when Mr. Hui Hon Wan and D2 entered into these agreements, they knew that the agreement was illegal.

136.   Mr. Mitchell pointed out that another matter that indicated this arrangement was a sham was that Mr. Hui Hon Wan (DW15) did not even know when first asked First Wealth, and he did not know that Mr. Hui Chun Wah who was the other godson of D2 was a director of First Wealth.  Mr. Hui Hon Wan (DW15) pointed out that he was only concerned with his collaboration with D2 and the name of the company had little significance to him.  I did not find his answer unconvincing, bearing in mind that layman did not distinguish the concept of corporate entity from that of a human entity. D2 had testified that she was both a director and shareholder of First Wealth when the company was set up, and she did not recall whether it was in 2004 or 2005 she transferred her directorship to her godson Hui Chun Wah.  Given the nature of the company and the agreement between D2 and Hui Hon Wan (DW15), I did not find it surprising that Hui Hon Wan did not know of Hui Chun Wah, and even if he had been so informed by D2 of the change of directorship, he would not bother to remember it, just like he did not remember the name of First Wealth well.  I was not persuaded that there was anything suspicious.

137.  As clearly indicated in the summary of A/C6, these 4 cheque payments in the total sum of $548,000 were identified to be from Hui Hon Wan.  It was clearly a payment pursuant to the agreement relating to D2’s withdrawal from the development project in Sai Kung, and the agreement was evidenced by contemporaneous document.  There was clearly no reason for D2 to doubt the source or the use of the money.

Phua Teong Kee

138.  The second arrangement that Mr. Mitchell submitted that no reasonable person would have got involved but D2 said she had related to a loan of $2 million made to Mr. Phua Teong Kee (or Brother Kee as D2 called him) on 31 January 2008.

139.  According to the evidence of D2, Brother Kee was a Malaysian.  He had purchased a village house in Sai Kung for resale purpose.  However, at the time when he had to make the second payment, he had cash flow problem.  He therefore telephoned her and asked her for a loan of $2 million to be repaid when he sold the property.  He further proposed to treat the $2 million loan as D2’s investment in the property, which meant that if the property was sold at a profit, D2 would share in the profit on a pro rata basis, but if there was no profit or the sale was at a loss, D2 would still get the full $2 million back.  D2 agreed.  She paid $2 million to a law firm.  As identified in the summary of A/C6, the law firm was So Lung & Associates, Solicitors.  D2 further testified that on 22 July 2010, she received a cheque of $2,548,000 from a solicitors firm Sanny Kwong & Henry Lo, which was a repayment of the $2 million plus the pro rata profit given to her by Brother Kee.

140.  Mr. Mitchell argued that no reasonable people would have acted like D2.  He pointed out that D2 made a loan of $2 million to a non-Hong Kong resident who only came to Hong Kong a few times a year on the strength of one phone call from overseas, without enquiring whether or not Brother Kee really had cash flow problem or how well he was doing in his business.  Mr. Mitchell further stressed that D2 did not even make any written agreement with Brother Kee or take any legal advice.  When the property was sold, again just on the strength of a telephone call from Brother Kee, D2 just accepted the sale price and her share of profit without question.

141.  I certainly agree with Mr. Mitchell that D2 should have taken the step to verify whether or not Brother Kee was making a genuine request for a loan, but the fact that D2 did not do so proved nothing other than that either she was ignorant or she trusted her friend without reservation.  Furthermore, the reasonableness of her action must also be viewed in the circumstances that she knew from her own personal visit that Brother Kee’s did have a restaurant business in Malaysia, and that D2 was paying the $2 million over to a firm of solicitors and that must give her the assurance that the request for loan was not a sham.  As the matter turned out, it was a genuine request for loan made by Brother Kee who honoured his promise not only to pay back the loan but also share the profit with D2, and the money paid over to her was also from a firm of solicitors.  It gave the appearance of legitimacy.  Mr. Mitchell questioned why D2 did not check the sale price, but the profits Brother Kee had given her were nearly $550,000.  By lending out $2 million for about 2½ years, that must be a very handsome return, and I would not criticize D2 for not making any verification.  I had no reason to doubt the evidence of D2, and I found that she should not have any cause of concern about these transactions.

Mr. Lum Yiu Chuen (DW20)

142.  According to the evidence of D2, she knew Mr. Lum Yiu Chuen for over 10 years.  She received money from Mr. Lum because she organized a wedding ceremony for Mr. Lum on 29 May 2009 in the Intercontinental Hotel in Tsim Sha Tsui.  The cost was about $600,000.  She received the money in two instalments.  The first instalment was $400,000, she deposited $200,000 of it on 6 May 2009 into her DBS credit card account (i.e. A/C8), and $170,000 of it on 11 May 2009 into her savings account (A/C6).  On 20 May 2009, Mr. Lum paid her another $200,000 and she deposited $170,000 of it on 27 May 2009 into credit card account (A/C8).  She made use of the $600,000 to pay Intercontinental Hotel and some other miscellaneous payments.  She used her Heng Seng Master Card (A/C6) to pay $209,700 as deposit to Intercontinental Hotel on 17 April 2009 as deposit, and used her DBS credit card (A/C8) to pay $230,000 to Intercontinental Hotel on 29 May 2009 after the wedding banquet. There was also a pre-wedding party in the Xin Club.  Payment had to be made for photography, decoration, performance and hiring civil celebrant.  Mr. Lum’s evidence fully corroborated D2.

143.  Mr. Mitchell submitted that D2’s bank account had been used rather strangely and her credit card was used more like a debit card than a credit card.  He submitted that D2/s bank account had been used as a convenient method of payment in what could only be described as rather odd circumstances.

144.  I did not share Mr. Mitchell’s view.  To start with, there could not be any doubt that Mr. Lum Yiu Ming did marry and hold a wedding banquet in Intercontinental Hotel on 29 May 2009, and the marriage certificate (Exhibit D51) and the credit card payment were conclusive proof.  As to the involvement of D2 in the wedding ceremony, the evidence was that Mr. Lum was in a hurry to get married because his wife was pregnant but he was unable to return to Hong Kong to make the arrangement since he ran a karaoke in the mainland even though he was a Hong Kong citizen.  D2 and Mr. Lum had known each other for 10 odd years, and D2 was willing to help.  I could see nothing sinister.  Mr. Lum admitted that he was present at the time when deposit was paid to Intercontinental Hotel but Mr. Lum thought payment by credit card would be better and D2 said payment by credit card would earn flying mileage.  I think this was a very credible reason, and there was no reason why a credit card user did not seize upon this opportunity to earn the mileage especially when the payment amount was over $200,000.  In cross-examination of DW16, a point had been raised whether Mr. Lum was in breach of the mainland custom control in bringing too much cash out of the country, but Mr. Lum had said he thought he had not exceeded the limit due to the number of persons inside his car.  It was not necessary for me to decide if the cash brought in by Mr. Lum was in breach of the mainland regulations, so long as I was satisfied that the money paid to D2 were money from Mr. Lum.  Mr. Lum testified that he ran a karaoke business in the mainland and I could not say he could not have earned the amount he paid D2.  Mr. Mitchell queried why Mr. Lum did not have a bank account in Hong Kong even though he was a Hong Kong resident.  But his business was in the mainland, and in any event, it was not a must for a Hong Kong resident to have a Hong Kong bank account.  The evidence of Chan Chun Ping (DW10) also showed that he had no Hong Kong bank account.  All in all, I did not find the facts testified to by D2 and Mr. Lum had any strange or peculiar characteristics so as to raise doubt on their veracity.  In fact, there was no doubt that payment of about $600,000 had been spent in Mr. Lum’s wedding.  Payment to Intercontinental Hotel and Xin Club could not be false.  Hence, if it was a money laundering exercise by D2 and Mr. Lum, why shouldn’t Mr. Lum just pay over the cash to the hotel and the lounge?  In short, I could not discount the evidence of D2 and DW20 as being untrue.

Lai Yui Ming (DW12)

145.  Mr. Mitchell further questioned a cheque dated 11 June 2010 in the sum of $200,000 issued by D2 in favour of a Mr. Chung Koon For.  According to the evidence of D2 and Mr. Lai Yui Ming (DW12), they played mahjong and D2 lost over $120,000 to Mr. Lai.  They then had dinner together, during which an estate agent contacted Mr. Lai and told him that the vendor of the property which Mr. Lai was interested was willing to sell at a reduced price that met the requirement of Mr. Lai.  The estate agent then asked to go to their dinner place to collect a cheque of $200,000 for deposit of the property.  Mr. Lai then asked D2 to issue a cheque of $200,000 for him, and he would reimburse $70,000 odd to D2 after deducting the mahjong debt.

146.  I had no doubt that D2 and Mr. Lai (DW12) were telling me the truth.  There was nothing strange in Hong Kong for an estate agent to urge or even press an interested purchaser of a property to issue a cheque for deposit immediately for onward delivery to an interested vendor, because in Hong Kong, estate agents would be paid after a provisional sale and agreement had been signed coupled with the delivery of a cheque from the purchaser as deposit.  In order to ensure their effort would not be wasted, they would travel anywhere, not to mention from Marina Cove to Jordan, to get a cheque for deposit from the intended purchaser at any hour of the day.  In addition, it did not matter whether the cheque was the personal cheque of the intended purchaser.  It was because cheque was just like cash in that anyone who issued it had to honour it, and the payee of the cheque had the right to sue on it.  It was therefore common to find that a cheque issued by a person other than the intended purchaser was accepted in land transactions.  This was exactly what happened in this case.  Mr. Lai produced the provisional sale and purchase agreement (Exhibit D42) which was dated 11 June 2010.  The date of this agreement and the date of the cheque fully corroborated the evidence of D1 and Mr. Lai.  The provisional sale and agreement could not be false because the deal had actually been completed according to the land search record (Exhibit D41).

147.  I do not think I needed to repeat or analyze the evidence of other defence witnesses whom I had not yet mentioned.  It was because they did not surface in the prosecution’s submissions, and I take it that there was no dispute of their evidence.  I just wish to add that in the evidence of D2, there were sums of money that she could only say that it was cash given to her by her husband, cash withdrawn by her for her own use, mahjong repayment from or to her friends, or friends reimbursing her for some purchase after she had made payment first.  It was hard to criticize her evidence to be in such a general nature because it was just impossible for any person to remember the purpose of each payment in and out.

148.  As to A/C9, it was clear that it was an account opened for the purpose of paying mortgage of the newly acquired property of the two defendants.  Whether or not the transactions there represented money laundering, it depended on the activities of D1 and D2 in respect of other accounts.

149.  I believe I had already dealt with all the transactions that Mr. Mitchell had drawn my attention to.  In the present case, while it was beyond doubt that large sums of money had been going in and out of the defendants’ accounts, they were not required to explain why there were such transactions, and it was for the prosecution to prove the elements of the money laundering offence beyond reasonable doubt.  There was no requirement for any person to explain his wealth, and it was not an offence even if a person failed to explain his wealth satisfactorily unless it was proved beyond reasonable doubt that he had reasonable ground to believe that the property he dealt with represented the proceeds of an indictable offence. 

150.  Furthermore, having considered the evidence adduced by the defence, I could not rule out the possibility that D1 had made substantial income in Macau out of his gambling business.  I could not rule out the possibility that he did bring back cash to Hong Kong from time to time, in substantial sums, and had them deposited into his bank accounts or his wife’s bank accounts, either by him or by her or by their godson at their direction.  When the prosecution failed to rule out the possibility that D1 could have a legitimate source of income beyond reasonable doubt, it could be said at once that its case ran into difficulties.  Furthermore, as the account summaries showed, it was rare to have cash deposited into the accounts drawn out immediately or shortly thereafter, which was one of the hallmarks of money laundering activity. Furthermore, I did not agree that the evidence pointed to the fact that the defendants’ bank accounts are merely temporary repository for funds.  The accumulated wealth of the two defendants in A/C1 to A/C9 was over $9.2 million.

151.  As to all the bank transactions being pointed at by the prosecution as an indication of money laundering activities, the defence had called a large number of live witnesses who appeared to be honest and credible, and produced a large amount of documentary exhibits, many of which appeared to be contemporaneous document, to explain these transactions.  I found the evidence of the defence substantial, both in terms of quality and quantity, and plausible.  In fact, it appeared to me that, perhaps with the exception with the deposit by Ringo Ng which D1 could only make an educated guess that the deposit was for repayment of marker money which I found to be a possibility that could not be ruled out, the defence managed to prove clearly, in respect of each transaction, that the money was from a known and lawful source and the use of the money was for a legitimate purpose. To say the least, the prosecution has failed to demonstrate beyond reasonable doubt that the defence evidence could not be true. 

152.  Under these circumstances, I find that the prosecution failed to prove each of the charges beyond reasonable doubt.  Accordingly, I find D1 not guilty of Charge 1, D2 not guilty of Charge 2, and D1 and D2 not guilty of Charge 3.  All charges are dismissed.  D1 and D2 are acquitted and discharged.