HKSAR v. LUNG MING CHU

CACC 165/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 165 OF 2008

(ON APPEAL FROM DCCC NO. 298 OF 2006 )

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REASONS   FOR   JUDGMENT

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Hon Hartmann JA (giving the reasons for the judgment of the Court) :

Introduction

1.  On 29 April 2008, following a trial in the District Court before Deputy Judge Yau, the applicant was convicted of conspiracy to deal with property reasonably believed to represent proceeds of an indictable offence, contrary to section 159A of the Crimes Ordinance, Cap 200, and s.25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455.

2.  The applicant had originally been jointly charged with a man named Tang who had pleaded guilty at the commencement of the trial. Upon the applicant’s conviction at the conclusion of trial, she was sentenced to three years and three months imprisonment.

3.  The applicant sought leave to appeal her conviction only. Two grounds of appeal were advanced on her behalf by her counsel, Mr. Bruce SC, both grounds asserting that the trial judge had misdirected himself in law as to the elements of the offence.

4.  Having heard submissions, we refused leave, dismissing the application. We said that we would give our reasons later and do so now.

Background

5.  Between 2001 and 2003, a man named David Peng, a bank official in Shenzhen, stole approximately 40 million renminbi from his bank. He was arrested in April 2004 and the following year was convicted of embezzlement by a Shenzhen court.

6.  It was not disputed at the applicant’s trial in the District Court that a substantial amount of the embezzled money was transmitted to Hong Kong where it was held in various savings and investment accounts with local financial institutions. A flow chart showing the movement of these funds within Hong Kong was admitted into evidence by consent.

7.  Prior to Peng’s arrest in April 2004, the applicant had had dealings with him in respect of the money remitted to Hong Kong, dealings which were very much out of the ordinary. However, the charge of conspiracy related only to events which took place after Peng’s arrest in Shenzhen in early April 2004.

8.  In this regard, just two days after the arrest, Peng’s wife came to Hong Kong using a forged travel document, a fact known to the applicant.

9.  The wife was then accompanied by the applicant to a branch of the Shanghai Commercial Bank, a bank to which the applicant had introduced Peng several months earlier and where Peng held accounts. The wife, who had signing powers, requested that her husband’s investment account be liquidated immediately and the proceeds paid to her. She was unwilling to wait the required two days for the investments to be sold, giving the bank officials a story to explain her haste which the applicant knew to be false. An overdraft arrangement was agreed so that the wife at least could remove a sum of HK$500,000.

10.  After the investments in Peng’s account had been liquidated, the applicant and Tang, her original co-defendant, arranged for a sum of about HK$7.6 million drawn from the account to be transferred to accounts which they had opened in their joint names with the same bank, the Shanghai Commercial Bank. Within a week, however, the bulk of that money had been transferred to another account, this time a joint account in the name of the applicant and Tang opened by them with Citibank. As the judge commented with understandable scepticism, the applicant “saw nothing wrong with this rapid movement of funds or the moving of the money from one account to another for no particular reason”.

11.  Some eight or nine weeks later, the applicant received a communication from the ICAC who wished to meet with her. On her own admission, suspecting that it had to do with the affairs of Peng, the applicant then contacted Peng’s wife suggesting that she should withdraw all of the funds held in the Citibank joint account in the applicant and Tang’s name. This was done over the ensuing days in a series of large cash withdrawals, the necessary withdrawal slips being signed by the applicant or Tang.

12.  In a careful assessment of the evidence, the judge, by way of a comprehensive and logical progression, came to the conclusion that the circumstances - which were known to the applicant and Tang and certainly to Peng’s wife - would have led a common sense, right-thinking member of the community to believe that the money dealt with in the Shanghai Commercial Bank and Citibank represented the proceeds of an indictable offence. The judge further came to the conclusion that the only reasonable inference to be drawn was that the applicant had conspired with Tang and Peng’s wife to deal in the money, each of them knowing or having reasonable grounds to believe that it represented the proceeds of an offence which, if it had been committed in Hong Kong, would have been an indictable offence. These findings of fact have not been contested.

The first ground of appeal

13.  As advanced by Mr. Bruce, this ground of appeal looked to what he has described as “the relationship” between s. 25(1) of the Organized and Serious Crimes Ordinance and s.159A of the Crimes Ordinance. S.25(1) creates the substantive offence of dealing in property knowing, or having reasonable grounds to believe, that it represents the proceeds of an indictable offence. S.159A is a codification of the offence of conspiracy.

14.  Mr. Bruce accepted that a conviction of a substantive offence under s.25(1) may properly arise out of a finding that a defendant dealt with property having only reasonable grounds to believe that it represented the proceeds of an indictable offence. However, relying on the judgment of the House of Lords in R v Saik [2007] 1 AC 18, he put forward the proposition that, in a charge of conspiracy to commit an offence under s.25(1), it is not sufficient for the prosecution to prove merely that a defendant and at least one other party had a reasonable belief. That is because, on a true reading of s.159A, it is an essential ingredient of the offence of conspiracy to commit an offence under s.25(1) that a defendant and at least one other party must know that the agreed course of conduct will constitute dealing in the proceeds of an indictable offence.

15.  Drawing from Saik, Mr. Bruce argued that in a conspiracy charge it is the intention of the parties that is criminalised not the course of conduct itself; the intention, that is, to enter into that agreed course of conduct. That being the case, if intention itself is blameworthy, s.159A(2) provides that the parties must actually know of any fact or circumstance that will make their intended course of conduct criminal. In a charge of conspiracy to commit an offence under s.25(1) what must be known, therefore, is not merely that there will be a dealing in property but that the property does, or will, represent the proceeds of crime.

16.  Mr. Bruce has said that the trial judge, who considered a similar proposition, wrongly concluded that s.159A(2) was not applicable on the facts before him and therefore misdirected himself as to the true intention that had to be proved in order to convict the applicant.

17.  To better understand the strength of Mr. Bruce’s proposition, the two sections – s.25(1) and s.159A – must first be considered in the light of both Hong Kong jurisprudence and English authorities.

18.  S. 25(1) creates the substantive offence of dealing in property knowing, or having reasonable grounds to believe, that it represents the proceeds of an indictable offence. The sub-section reads :

“… a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.”

19.  It is to be noted that the case against the applicant never rested on the first limb of s. 25(1); namely, that the applicant knew that the money she dealt with represented the proceeds of an indictable offence but rested rather on the second limb; that is, that she (and one or more of her co-conspirators) had reasonable grounds to believe that it was so.

20.  As to the elements of the offence under the second limb, the law is now well settled. The section does not define the actus reus of the offence as “dealing with the proceeds of an indictable offence” which, it may be argued, would require proof of the fact that the proceeds were of an indictable offence. Instead it defines the offence as “dealing with property which the person knows, or has reasonable grounds to believe, represents the proceeds of an indictable offence”. That being so, the quality or nature of the property is not an element of the actus reus but of the mental element of the offence, the mens rea.

21.  In this regard in HKSAR v Wong Ping Shui and Another (2001) 4 HKCFAR 29, the Appeal Committee of the Court of Final Appeal said that the mental element to be proved – “whether in terms of knowledge or belief on reasonable grounds” - was directed merely at the property being dealt with. Once this was understood, said the Appeal Committee, “all the provisions of s.25 operate without difficulty”.

22.  By way of a purposive overview, the Appeal Committee went on to say that -

“… it is wholly implausible that the legislature could have intended proof of money laundering offences to require proof of the underlying criminal offences that generated the money being sanitised. There is the obvious likelihood that such activities would be cloaked in secrecy and that they may well have taken place in one or more foreign jurisdictions.”

23.  In the later judgment of the Court of Final Appeal in Oei Hengky Wiryo v HKSAR (No. 2) (2007) 10 HKCFAR 98, McHugh NPJ, giving the judgment of the court, said that the construction which the Appeal Committee had given to s. 25(1) reflected the natural and ordinary meaning of the sub-section.

24.  Of relevance to the present appeal, McHugh NPJ went on to say that the terms of s. 25(1) stood in sharp contrast to the language, context and history of certain English legislation which had been considered by the House of Lords in R v Montila and Others [2004] 1 WLR 3141 and that accordingly the reasoning in Montila was not applicable to s. 25(1).

25.  Expressed broadly, in Montila it had been held that converting or transferring property which a defendant has reasonable grounds to suspect represents another person’s proceeds of crime is not an offence unless the prosecution also proves - as a fact - that the property is the proceeds of crime.

26.  In short, Montila held that, in the English legislation, the fact of the provenance of the property was an ingredient of the offence and had to be proved. In Hong Kong, however, because of the different language, context and history of the legislation, when the prosecution seeks to prove a case under the second limb of s.25(1), it does not have to prove the fact of the provenance of the property.

27.  The mental element of the offence under the second limb of s.25(1) arises out of the phrase “having reasonable grounds to believe”. That phrase is not new to Hong Kong’s criminal statutes. It has been settled that having “reasonable grounds to believe” involves both subjective and objective elements. Objectively, it requires proof that there are grounds that a common sense, right-thinking member of the community would consider sufficient to lead a person to hold a particular belief. Thereafter, subjectively, it has to be proved that these grounds were known to a defendant.  It is not necessary to prove that a common sense, right-thinking member of the community would himself have held such a belief nor that a defendant himself held that belief.

28.  The applicant of course was not convicted of a substantive offence under s.25(1), she was convicted of conspiracy under s.159A(1) of the Crimes Ordinance which provides :

“… if a person agrees with any other person or persons that a course of conduct shall be pursued which, if the agreement is carried out in accordance with their intentions ... (a) will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement ... he is guilty of conspiracy to commit the offence or offences in question.”

29.  As Mr. Bruce emphasised, the offence therefore lies in making an agreement. This is a different offence, and accordingly a different harm, from the commission of the substantive offence.

30.  In his speech in Saik, Lord Nicholls, in referring to the exact same provision in the English statute, said that conspiracy -

“… apart from the mental element involved in making an agreement, comprises the intention to pursue a course of conduct which will necessarily involve commission of the crime in question by one or more of the conspirators. The conspirators must intend to do the act prohibited by the substantive offence. The conspirators’ state of mind must also satisfy the mental ingredients of the substantive offence. If one of the ingredients of the substantive offence is that the act is done with a specific intent, the conspirators must intend to do the prohibited act and must intend to do that prohibited act with the prescribed intent.”

31.  The offence of conspiracy under s.159A(1) is qualified by s.159A(2) which provides :

“Where liability for any offence may be incurred without knowledge on the part of the person committing it of any particular fact or circumstance necessary for the commission of the offence, a person shall nevertheless not be guilty of conspiracy to commit that offence by virtue of sub-section (1) unless he and at least one other party to the agreement intend or know that that fact or circumstance shall or will exist at the time when the conduct constituting the offence is to take place.”

32.  This sub-section, recognised by Lord Nicholls in Saik as being “difficult” and in part “opaque”, arose, it appears, out of the difficulties perceived in R v Churchill (No.2) [1967] 2 AC 244. As Lord Hope, in his speech in Saik, expressed it, Churchill had held that :

“… if on the facts known to them at the time of their agreement what the parties agreed to was lawful, they were not rendered guilty of conspiracy to commit an offence by the existence of other facts not known to them which gave a different and criminal quality to the act or course of conduct that they had agreed on.”

33.  Lord Hope commented that the English provision, equivalent in exact terms to s.159A(2), codified this principle. A lucid description of what exactly was codified was given by the Law Commission in England in its 1976 report on Conspiracy and Criminal Law Reform, cited in Saik (para. 12) :

“What the prosecution ought to have to prove is that the defendant agreed with another person that a course of conduct should be pursued which would result, if completed, in the commission of a criminal offence, and further that they both knew any facts they would need to know to make them aware that the agreed course of conduct would result in the commission of the offence.”

34.  The Law Commission spoke of knowledge “of any facts” that the parties to an agreement would need to know to make them aware that their agreed course of conduct would result in the commission of an offence. In the legislation, this is provided for by the statement that, while a substantive offence may be committed by a person even though that person does not have knowledge of any particular “fact or circumstance” necessary for the commission of the offence, if a conspiracy to commit that same offence is to be proved, the parties to the agreement must “know” either that that same “fact or circumstance” will exist at the time when the conduct constituting the offence takes place or must “intend” that it will exist.

35.  Clearly, a “fact or circumstance” relates to an element of the actus reus of the offence. Any required mental element is not a “fact or circumstance” for the purposes of s.159A(2). That was recognised by Lord Nicolls in Saik (para. 9).

36.  That being the case, as the law now stands in Hong Kong, when an offence of conspiracy to commit an offence under s.25(1) is charged, the only “fact or circumstance” that must be known to the parties, or which they intend shall exist, is that there will be a dealing in an identified form of property. The mental element; that is, the intention, is to deal with that property having reasonable grounds to believe that it represents the proceeds of an indictable offence. Proof of that intention is by way of the two-stage test described earlier in this judgment (para 27).

37.  What must be recognised, as did the trial judge, is that Saik arises out of the judgment of the House of Lords in Montila, the latter judgment holding that, under the English legislation, the ‘fact’ that the property is the proceeds of crime must be proved. Under s.25(1) of the Hong Kong legislation no such ‘fact’ has to be proved. Montila therefore, on the authority of the Court of Final Appeal, has no relevance and it must follow that Saik is fundamentally distinguishable.

38.  The crucial importance of the finding in Montila was recognised by Lord Nicolls in Saik when, at the conclusion of his speech, he said :

“… in the present case the court of appeal ... expressed their conclusion, in para 67, as :

“if two people agree that property shall be converted or transferred, and each of them knows or suspects that the property represents the proceeds of criminal conduct and realises that the purpose of the conversion or transfer is to assist someone to avoid prosecution for the criminal conduct which they know or suspect has been committed, that is sufficient to make each of them guilty of conspiracy to contravene s.93C(2). There is nothing in s.1(2) of the 1977 Act [equivalent to s.159A(2) of the Hong Kong Ordinance]which in any way affects this conclusion.”

This decision was given before the decision of your Lordships’ House in R v Montila. At that time the provenance of the property was not understood to be an ingredient of the substantive offence. It was not a fact necessary for the commission of the offence. That is no longer the law.”

39.  In Hong Kong, however, in respect of s.25(1), the provenance of the property is not an ingredient of the offence, it is not a fact that must be proved to prove the commission of the offence. Accordingly, in our judgment, the conclusion of the English Court of Appeal cited above reflects the law in Hong Kong as to conspiracy to commit an offence under s.25(1); namely, that if two people agree to deal with property, and if each of them knows or has reasonable grounds to believe that it represents, or will represent, the proceeds of an indictable offence, that is sufficient to make each of them guilty of conspiracy to contravene s.25(1).

40.  In his Reasons for Verdict, the trial judge found, on a similar analysis, that s.159A(2) does not apply.  He was correct in that conclusion.

41.  As an alternative to his first ground of appeal, Mr. Bruce made reference to what is clearly an ingredient of the offence of conspiracy to contravene s.25(1); namely, that it must be proved that at least two people have agreed to deal with property, each of them knowing or having reasonable grounds to believe that the property represents, or will represent, the proceeds of an indictable offence. In the present case, said Mr. Bruce, the trial judge came to a finding of fact that the applicant had agreed to deal with the property and had done so having a reasonable belief that it represented the proceeds of an indictable offence. However, he came to no finding of fact that at least one other person named in the charge had agreed to deal with the property in the same knowledge or belief.

42.  While it may be correct that the judge did not state in specific terms that he was so satisfied, it is abundantly clear on a reading of the Reasons for Verdict that he did come to that exact determination. Indeed, he concluded his Reasons for Verdict by saying that there could be no other inference than that the applicant had “conspired” with Tang and Peng’s wife in dealing with the money remitted to Hong Kong.

43.  As the judge made clear in his detailed Reasons, after Peng’s arrest his wife came to Hong Kong using a forged travel document and dealt with the remitted monies together with the applicant. The facts and circumstances, therefore, upon which the judge had reached his objective determination, must have been known equally to the wife.

The second ground of appeal

44.  In respect of his second ground, Mr. Bruce argued that the trial judge had misdirected himself as to the standard of proof to be applied in determining whether the requisite mens rea had been established.

45.  In his Reasons for Verdict, the judge found (para 64) that –

“… there existed substantial grounds that would have led a common sense, right-thinking member of the community to believe that the money in the Shanghai Commercial Bank and subsequently Citibank joint accounts were proceeds of an indictable offence.” [our emphasis]

46.  The phrase “to believe” is, of course, drawn from s.25(1) itself. But Mr. Bruce submitted that, given the inevitable seriousness of the criminal offence created under s.25(1), it was insufficient, as a matter of law, that the objective element of the two-stage test described earlier in this judgement (para 27) should rest upon a mere belief even if that belief is qualified by the requirement that it must be founded on reasonable grounds. That being so, said Mr. Bruce, the phrase “having reasonable grounds to believe” must be equated with, and therefore read as, “having reasonable grounds to be sure”.

47.  The first difficulty that Mr. Bruce faced with this submission was that a plain reading of s.25(1) removes for all practical purposes any difference between the two tests of knowledge contained in the sub-section - knowing and having reasonable grounds to believe - and thereby goes against clear legislative intent. To “know” is to comprehend as fact or truth. To be “sure” is to be certain in mind, having no doubt. It may be argued, on the basis of refined semantics, that there is a difference still between the two tests. But if so, and we doubt it, it is a difference of no value.

48.  To support his argument that mere “belief” was insufficient in law, Mr. Bruce submitted that any standard less than “having reasonable grounds to be sure” would violate the applicant’s constitutional right “to be presumed innocent”. This submission, however, was not supported by any direct reference to authority. We do not see how it can be said that a test of “having reasonable grounds to believe” in respect of one element of an offence, when the offence itself must be proved beyond a reasonable doubt, undermines any right to the presumption of innocence.  The burden of proof remains at all times on the prosecution, the defendant being given the benefit of the doubt.  There is nowhere any form of reverse onus.  To the contrary, the burden rests on the prosecution at all times to prove a set of facts and circumstances of sufficient cogency to meet, first, the objective test of “reasonable grounds to believe” and then to establish that the defendant and at least one other party were aware of those facts and circumstances.

49.  In support of his argument that “belief” was insufficient in law, Mr. Bruce also spoke of the inherent imprecision of the objective test which is to be judged according to the standards of the common sense, right-thinking member of the community. It is accepted that difficulties can be presented in ascertaining the standards of such hypothetical persons, equally with the “reasonable man”, but, to employ the phrase used by Sir Anthony Mason NPJ in Shum Kwok Sher v HKSAR (2002) 5 HKCFAR 381 (para 94), it is none the less a task which is not so imprecise or vague as to violate the requirements of the Basic Law or the Bill of Rights. Nor can it be characterised as an arbitrary standard.

50.  A high degree of definition in respect of burdens and standards of evidence is often simply unattainable. But it does not follow that the concept cannot be understood and sensibly and accurately applied, in the context of a particular set of facts, by both judges and juries. Indeed, the phrase “beyond a reasonable doubt” presents difficulties when it is subject to analysis but, in its day to day application, it is nevertheless well understood.

51.  For the reasons given, we are satisfied that the test of “having reasonable grounds to believe” does not require to be given a more stringent meaning than the natural and ordinary meaning of the phrase allows.