HKSAR v. AU HAU CHING

CACC 146/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 146 OF 2008

(ON APPEAL FROM DCCC NO. 1144 of 2000)

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REASONS FOR JUDGMENT

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Hon Wright, J. (giving the judgment of the Court):

1.  The appellant sought leave to appeal her conviction by HH Judge Andrew Chan in the District Court on a single charge of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to s. 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap. 455, the relevant particulars of which read:

“AU Hau-ching, between 1 December 1999 and 9 June 2004, both dates inclusive ... knowing or having reasonable grounds to believe that property, namely the total sum of $24,400,000.00 ..., in whole or in part directly or indirectly represented the proceeds of an indictable offence, dealt with the said property.”

The judge adjourned sentencing for the purpose of obtaining a background report as he was concerned about the arrangements which might be made for her children. Having considered that report and mitigation, he sentenced her to serve a period of 5 years imprisonment.

2.  At the conclusion of the hearing of the applications we dismissed that for leave to appeal the conviction but allowed that for leave to appeal sentence; treating the hearing of the application as the hearing of the appeal, we set aside the sentence of 5 years imprisonment and substituted a sentence of 4 years and 10 months imprisonment. We indicated that we would hand down our reasons for our decision: these are they.

THE APPEAL AGAINST CONVICTION

The prosecution case

3.  The prosecution case was straightforward and agreed in its entirety with no witnesses testifying: we summarise the more salient aspects. On 9 June 2004, the day when the appellant and her cohabitee, CHEN Cheng, were arrested in Malaysia, Hong Kong police conducted a search of the appellant's home in Hunghom, Kowloon, she being the owner of that property: in the course of the search a safe was located in a wardrobe in the appellant's bedroom which, when opened, was found to contain $13,009,000 in bank notes. The wardrobe in which the safe was located contained male clothing but also a few items of female jewellery: a second wardrobe in the same bedroom contained female clothing. No key to that safe was ever located.

4.  On 12 August 2004 the appellant was deported to Hong Kong: upon arrival, she was arrested. On 13 August 2004 two safe deposit boxes rented by the appellant at the Bank of China and HSBC were inspected: in the former, Hong Kong dollar banknotes with a value of $6,355,000 and foreign currency with a value of some $217,000 were found together with items of personal jewellery and various personal documents relative to the appellant, whilst in the latter police found cash in the sum of $2,650,000. The appellant was the only person authorised to have access to either of these boxes.

5.  As at 9 June 2004 the appellant maintained, either in her sole name or jointly with two of her children then aged 10 and 4 years, a number of bank accounts at six different banks in Hong Kong, including the two banks from which she rented the safe deposit boxes, in respect of which accounts the appellant was in each instance the sole signatory: those accounts were in credit by approximately $3.9 million. Bank records showed that between December 1999 and June 2004 an amount of $60,000 had been credited to one or more of the accounts on a monthly basis.

6.  The appellant was the owner of two properties, including her home, which had been purchased in 1996 and 2001 at an aggregate amount of almost $10 million. The appellant had filed income tax returns for the financial years ended 2000, 2001 and 2002, only in the first of which had she reported any taxable income, being $32,500 in rental from her second property. In response to a Production Order the appellant had indicated that she had no documentary records which related to any lawful business in Hong Kong or elsewhere.

7.  Between May 2001 and October 2003 six cheques, uncrossed and without a named payee, to an aggregate value of $10,200,000, issued by two casino operators in Macau, had been deposited into the appellant’s bank accounts: almost the entire proceeds of the first two cheques had been used in the purchase of the appellant's home; $4,900,000 being the proceeds of the third and fourth cheques, had been withdrawn by the appellant in cash. It was an admitted fact that a pit attendant in the employ of the issuers of the cheques asserted that casino policy is that a gambler/customer can only request the casino to issue a cheque against cash chips if those cash chips are won when gambling; none of the persons who signed for receipt of the cheques was either the appellant or CHEN; the appellant had not travelled to Macau on five of the six occasions when the cheques were issued.

The appellant’s case

8.  There were two sets of admitted facts on behalf of the appellant, which primarily related to information concerning CHEN. She called one witness to testify on her behalf but elected not to testify herself. She has no record of criminal convictions in Hong Kong.

9.  CHEN had been born in the mainland, had no right of abode in Hong Kong, did not hold a Hong Kong identification card but carried a passport issued by the Republic of Nauru. He is the registered owner of a one property in Yuen Long and one property in Macau. He held a bank account in Hong Kong. In a four-month period in 2003 three amounts aggregating $3,580,928 had been paid by Wah Hing (China) Marine Co Ltd to CHEN upon the instruction of a supplier to Wah Hing.

10.  On 9 June 2004 the appellant and CHEN were arrested by the Malaysian police pursuant to a joint operation by law enforcement agencies from Fiji, Australia, New Zealand, Malaysia and Hong Kong involving allegations relating to drugs. The appellant had been released on 12 August 2004 but CHEN had been detained until 24 May 2005 when he had been released from custody: his whereabouts were unknown subsequently.

11.  The testimony of the witness called by the appellant was summarised by the judge thus:

"6. Mr Ma is currently a casino consultant working for the Neptune Cruises, a gambling ship. Between year 2000 and 2006, he was manager of the casino on board of the Neptune.

7.   In year 2001, Mr Ma was informed by the management that the defendant had become a shareholder of the casino for the defendant had acquired a $2 million worth of shareholding. As a result of that, the defendant would introduce customers to gamble on board of the Neptune.

8.   Mr Ma thereafter contacted the defendant. He met the defendant in a meeting and was told by the latter that her employees would be those taking customers to the casino on board.

9.   The defendant was granted a $2 million credit facilities by the casino. In return for her introducing customers to gamble, the casino would pay to the defendant a commission, the amount of which depended upon amounts of chips exchanged by her customers. The commission was calculated and paid to the defendant's employees on a daily basis.

10. In or about August 2004, the defendant cease her casino business. According to Mr Ma's evidence, between 2001 and 2004 in the defendant had never been seen coming on board of the Neptune. Neither had she herself taken any customers to gamble.

11. Mr Ma produced to court a number of commission payment vouchers which recorded the amount of commission payable to defendant in year 2003 and 2004."

The appellant's contentions

12.  The appellant's essential contention at trial and on appeal was that it was not open it to the trial judge to draw, as the irresistible inference, that there were reasonable grounds for the appellant to believe that the sums of money in her possession represented, in whole or in part, the proceeds of an indictable offence: more specifically that in regard to the cash found in the safe in the appellant’s bedroom, the judge could not be certain that that did not belong to CHEN whilst, in regard to each or all of the other amounts, there was no basis for the judge to find that the moneys may not have been given to her by CHEN in circumstances which simply would not have given her reasonable grounds to believe that they were the proceeds of an indictable offence.

13.  Six grounds of appeal were initially advanced but the first was not pursued. The second challenged the judge’s finding that the appellant had "dealt", in the sense used in s. 25(1), with the $13 million found in the appellant's bedroom; the third, that he erred in finding, contrary to the admitted facts, that the moneys from the Macau casinos did not represent proceeds of legitimate gambling; the fourth, that he failed to analyse or identify grounds upon which an inference of guilt could be drawn in respect of the moneys held in the appellant's bank accounts; the fifth, that he placed insufficient evidence on the apparently legitimate commercial activities of CHEN; and the sixth that, in the light of the lack of evidence as to the circumstances in which the sums had been received or came into the possession of the appellant, he had erred in finding that she had reasonable grounds to believe that they represented the proceeds of an indictable offence.

14.  The judge approached his analysis of the evidence and the reasoning by which he arrived at his conclusion by considering individually the evidence concerning the various amounts of money which went to make up the full amount of the $29,400,000 referred to in the charge. However, he had indicated during the course of the trial that, although he need consider the evidence in that manner, it was the totality of the evidence by which, at the end of the day, he need be satisfied.

15.  We were urged by Mr Macrae SC, on behalf of the appellant before us but not before the court below, to adopt the approach urged on the judge. It was submitted that if the judge had considered the circumstances relating to each amount of money separately, none of those circumstances was sufficient, on its own, to have enabled the judge to draw the irresistible inference that the appellant would have had reasonable grounds to believe that that amount of money, or part of it, was the proceeds of an indictable offence: consequently, the argument went, if he could not be sure about each of the individual amounts, there was no additional evidence which would have justified him in drawing the inference in regard to the combined amount.

16.  We are unpersuaded that the course suggested by Mr Macrae would have been the proper one for the judge to have followed. We do not suggest that there is no need for a judge to consider individual aspects of the evidence and how it may impact on the overall result but it is far from uncommon to find, when standing back and looking at the evidence in the round, that the sum is greater than the whole of its parts: this is particularly true where the prosecution presents circumstantial evidence from which the judge is required to draw an inference or inferences. The judge's approach was, in our opinion, the only appropriate course.

17.  Judges are urged too often on behalf of an accused person to consider the different facets of evidence in isolation one from the other: this is an unrealistic approach for it is the duty of the judge to determine whether the prosecution has discharged the onus on it, to the requisite standard, on the totality of the evidence before him.

18.  We adopt what was said by McHugh J in the decision of the High Court of Australia in Shepherd v R [1990] 170 C.L.R. 573 at 592:

"If an inference of guilt is open on the evidence, the question for the jury is whether the inference has been proved beyond reasonable doubt - not whether any particular act has been proved beyond reasonable doubt.”

and, at 593:

“The cogency of the inference of guilt is derived from the cumulative weight of circumstances, not the quality of proof of each circumstance.

In a particular case, an inference of guilt beyond reasonable doubt may not be able to be drawn unless each fact relied on to found the inference is established beyond reasonable doubt. This is likely to be the case where the incriminating facts relied on to establish the inference are few in number. But the more facts that are relied on to found the inference of guilt, the less likely it is that each or any fact will have to be proved beyond reasonable doubt to establish guilt beyond reasonable doubt. Consequently, even when guilt beyond reasonable doubt cannot be inferred unless certain facts are proved, it may still be open to infer guilt beyond reasonable doubt even though each fact is not proved to that standard."

19.  In the light of the submissions made, we turn briefly to consider the judge’s findings in respect of each amount of money.

The money in the wardrobe

20.  There was a little over $13 million in $1000 and $500 banknotes. The gist of the argument in respect of this money was that there was no evidence as to when or in what circumstances or by whom the money had been placed in the safe; there was no evidence of contact between the money or, indeed the safe, and the appellant; no key to the safe was found in the appellant's possession or in her home; in view of the undoubted relationship between CHEN and the appellant, it was significant that the safe was in a wardrobe which contained only male clothing; there was a complete lack of evidence to show that the appellant had "dealt" with this money.

21.  The judge was criticised for ostensibly having misunderstood the thrust of the defence at trial: we do not believe that he did. It is quite plain that the point concerning the lack of evidence that she dealt with the money specifically was taken on behalf of the appellant and we can see no basis upon which it can be suggested that this was not clear to the judge. It is correct that the judge did refer in §28 of his Reasons for Verdict that it had been suggested by the defence that, amongst other things, there was a possibility that the appellant might not have been aware of the existence of that sum: this was an approach which favoured the appellant but which, for cogent reasons, he dismissed. Although he did not consider, in respect of these moneys alone, whether she had dealt with them, he turned specifically in §§65 and 66 to consider the issue of whether he could find that the appellant had "dealt" with all of the moneys: he expressed himself as satisfied, as he must have been on the evidence, that she had.

22.  It was also suggested before us that it is not uncommon for people in Hong Kong, who have the means to do so, to keep what may be regarded as large amounts of cash about themselves or their residences. That may or may not be. $13 million, in the absence of evidence of substantial wealth, of which there was no evidence in this case, is by any yardstick a very large sum of money indeed.

23.  Against each of the factors urged upon us as having the effect of causing doubt in the judge's mind as to whether the appellant had dealt with these banknotes or had reasonable grounds to believe the money to be the proceeds of an indictable offence, remains the singular feature that the money was found in the appellant's own bedroom, in the appellant's own home which was owned by her.

The money in the safe deposit boxes

24.  Approximately $9 million in $1000 and $500 Hong Kong banknotes was found in the two safe deposit boxes. It is indisputable that the appellant must have dealt with these moneys if for no reason other than that she was the only person permitted to have access to each box.

25.  Insofar as these moneys were concerned there were two further factors which the judge was justified in taking into account: first, in each of the two boxes there was found a bundle of notes with sequential numbers clearly establishing a link between the boxes even in the absence of any other evidence; and, second, the boxes were located in the very banks in which the appellant held accounts to which the money could have been deposited.

26.  The judge considered the cumulative effect of the fact that in the safe in her own bedroom was $13 million in cash and the fact that in the two safe deposit boxes to which only she had access was another $9 million in cash and expressed himself as "fail[ing] to see", in the absence of any explanation, why a person who had bank accounts with a substantial credit balance would keep $22 million in cash on hand. We agree. Of course there was no onus on the appellant to provide an explanation but, as the judge rightly observed, there was no evidence from the appellant to undermine, contradict or even explain the evidence put forward by the prosecution.

The bank accounts

27.  The judge appreciated that an amount of $60,000 had been paid on almost a monthly basis into the appellant's bank accounts either by way of transfer from or a cheque issued by a named person. He took the view that there was no evidence as to the identity of that person or her relationship with the appellant. He went on to indicate that there was " ... no evidence to show the origin of the money kept at the defendant’s various bank accounts."

28.  In this regard he fell into error. A simple arithmetical calculation showed that the monthly payments amounted to some 85% of the credit balance in the accounts. The added factors that the payments were a regular amount, were from a regular source and that the source was identified would be sufficient, in our view, to cause him to doubt whether she had reasonable grounds to believe that those moneys were the proceeds of an indictable offence.

The money from the casinos

29.  The complaint made is that the judge drew the inference adverse to the appellant in the face of the admitted fact that a "pit boss" had stated the casinos’ policy to be that cheques would only be drawn in respect of chips won at gambling in the casino.

30.  Superficially, that is an attractive argument. What it ignores, however, is, first, the nature of the legislation and, second, the remaining admitted facts which impact upon these moneys.

31.  Section 25(1) of the Ordinance provides:

“(1)    Subject to section 25A, 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.” [emphasis added]

32.  The effect of this provision is that it is not necessary for the funds themselves to be the immediate proceeds of an indictable offence but merely that, in whole or in part, they represent such proceeds. It seems to us that, given the nature of the legislation, such a provision is specifically designed to counter a situation where funds ostensibly are legitimate yet have accrued to a person in circumstances which give rise to the reasonable grounds for belief.

33.  When it is appreciated, in the light of that legislation, that none of the cheques was made payable to a named payee; no receipt of any of the cheques was acknowledged by the appellant or, insofar as it may be relevant, by CHEN; she used almost the entire proceeds of $3.5 million of the first two cheques in the purchase of her home; there was evidence from the records of the Immigration Department that the appellant had not travelled to Macao on the days when those two cheques had been drawn; it is clear that the cheques could not have represented the proceeds of her gambling; she withdrew, in cash, from her account/s the entire proceeds of the third and fourth cheques in the sum of $4.9 million, we agree with the judge that "... it is clear ... that this kind of arrangement aims at one objective ... to conceal the true nature of the money ... used to purchase the property. All the facts were known to the defendant".

Other matters

34.  The judge gave consideration, specifically, to the fact that the appellant had been a shareholder in the casino on the Neptune. It was mooted that this may have accounted for some or all of the cash found in her possession. The judge dealt with this shortly: it needed no more. He said:

"39.     Commission vouchers produced show altogether $2.65 million and $1.12 million cash have been paid to the defendant's operation account in the year 2003 and 2004 respectively.

…

42.   In other words, this $3.7 million commission payment represents income only. Any profit generated as a result is simply anyone's guess. This is so because there are simply no trading records, ledgers, business records of any kind to substantiate. I note, strangely enough, that not even the Neptune keeps any such record.

43.   ... in response to a production order ... the defendant indicated ... that she did not have any trading record, accounting record, employment record, salary record, documentary proof of any kind of source of income, correspondence, computer record or any other document in relation to any company business..."

35.  The judge also carefully considered the evidence regarding CHEN's apparent sometime presence in the appellant's home and their relationship. He addressed the submission made to him that he could not exclude the possibility that CHEN had been a successful businessman who preferred to hold onto cash rather than keep it in a bank account. However, he was fully alive to the fallacy that led to the suggestion that there was evidence that CHEN was a legitimate business men. Paragraph 14 of the Admitted Facts (2) makes it perfectly apparent that the payment to CHEN was on the direction of the supplier of abalone to Wah Hing, not as a consequence of CHEN trading in abalone: equally clear is that CHEN was unknown to the proprietor of Wah Hing.

36.  Moreover, the judge was fully alive to the fact that even if a person carries on a legitimate business that is no bar to simultaneously dealing with the proceeds of indictable offences: the law reports are replete with examples.

Conclusion

37.  We are satisfied that the judge’s analysis of the various amounts of money, save in regard to the amount of $3.9 million in the appellant’s bank accounts, was correct. The net effect is that he was left with evidence which showed a woman who professed no occupation or income other than for a very small amount in one of three tax years; denied the existence of any records relating to any business operated by her; who appeared, on the evidence of her own witness, to have carried on a business associated with a gambling ship; operated a number of bank accounts yet kept $13 million in cash in her bedroom and $9 million in cash in safe deposit boxes in the very banks with which she operated accounts; who received over $8 million from casinos in Macao by way of cash cheques; and who had expended almost $3.5 million of those moneys as a deposit on her flat.

38.  In those circumstances, he was entirely correct to draw the inference that she had dealt with the moneys concerned, that there existed reasonable grounds for her to believe that some or all of those funds were the proceeds of an indictable offence and that those facts were known to her. That we entertain doubts in regard to the $3.9 million standing to the credit of her bank accounts does not affect the conviction: the charge was that she dealt with $29,400,000 having reasonable grounds to believe that in whole or in part that property represents the proceeds of an indictable offence.

THE APPEAL AGAINST SENTENCE

39.  We gave consideration to whether the fact that the prosecution had fallen short of proving that there were reasonable grounds for the appellant to believe that the full amount charged was the proceeds of an indictable offence should have any effect, in favour of the appellant, on sentence. We concluded it should not.

40.  In our view, the sentence was in any event below that which may well have been considered to be appropriate, albeit not to the extent that it was manifestly inadequate. This was dealing with a very large sum of money indeed over a considerable period. As is well established, there are no guidelines for sentence in respect of this offence. One trend which is discernable from previous sentences passed is that, for whatever reason, where the predicate offence is established as being illegal bookmaking sentences regularly fall at the lower end of the spectrum.

41.  Factors to be considered when sentencing may be derived from previous decisions: the nature of the indictable offence from which the property derived is of no major significance unless it can be shown that the accused knew the nature of the crime and that it was of a serious nature, when this would be an aggravating feature; where the conviction is based on the "reasonable belief' limb, the mental capability of the offender is of little relevance; the relationship between the accused and any conspirator, or the source of the property, is not a mitigating feature unless the accused was subjected to undue influence; the number of transactions involved, the period over which the transactions occurred; see HKSAR v MAK Shing CACC322/2001; HKSAR v Xu Xia Li and Anor. CACC395/2003; HKSAR v CHOW Ying-ki CACC378/2004.

42.  Two specific grounds of mitigation were urged upon us: first, that the appellant had been detained in Malaysia for a period of two months suspected of being involved in drug trafficking, those suspicions being directly allied to this prosecution; second, that there had been delay on the part of the prosecution such as justified a reduction in sentence.

43.  The appellant and CHEN were arrested as part of a joint operation between a number of law enforcement agencies from different jurisdictions, including Hong Kong, in respect of what was alleged to be drug trafficking on an international scale. When the Hong Kong police searched the appellant’s home it was by virtue of a warrant which made reference to drug trafficking. Although we accepted that she was eventually charged with a substantially different offence, we thought there to be sufficient nexus between the offence and the original allegation for which she was arrested for it to be just that we give her credit for the two months which she spent in custody in Malaysia, which under existing rules she would not otherwise receive.

44.  We gave consideration to the detailed chronology supplied by Mr Macrae. We agreed with his contention that the judge erred in regarding the fact that the defence had launched an application for permanent stay of proceeding as contributing to the delay. However, these proceeding were an offshoot of a very substantial international investigation which, inevitably, will result in delay. It was also necessary for the prosecution to seek Letters of Request in an attempt to obtain evidence from witnesses in the mainland: it is notorious that that procedure is protracted. We did not disagree that, ideally, it would have been better if the appellant’s trial had occurred earlier than it did, but we were unable to find that, in the circumstance of this matter, it entitled the appellant to any reduction in sentence.

45.  In the circumstances, we felt it proper to set aside the sentence of 5 years imprisonment and to substitute it with one of 4 years and 10 months.