HKSAR v. MAEDA HISATO

CACC 367/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 367 OF 2014

(ON APPEAL FROM DCCC 353 OF 2014)

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REASONS FOR JUDGMENT

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Hon McWalters JA (giving the Reasons for Judgment of the court):

1. The applicant faced a joint charge of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455. The applicant pleaded not guilty to the charge. On 16 October 2014, after a trial before District Judge Sham (“the judge”), the applicant was convicted as charged and on 22 October 2014, he was sentenced to 6 years’ imprisonment.

2. On 30 October 2014, the applicant filed a Notice of application for leave to appeal against sentence (Form XI).  After the refusal of his application for legal aid on 19 December 2014, the applicant then filed a Notice of Abandonment on 2 January 2015. 

3. However, the applicant subsequently sought to treat his abandonment of his application for leave to appeal against sentence as a nullity.  At the hearing of that application on 16 August 2016 the applicant’s abandonment was adjudged to be a nullity. 

4. The hearing of the application for leave to appeal against sentence was adjourned to 8 November 2016, to enable the judge’s Reasons for Verdict and the transcript of the applicant’s video record of interview to be included in the Appeal Bundle.  On 8 November 2016, the applicant informed the court that he wished to apply for leave to appeal against his conviction out of time.  As it appeared to the court that the applicant might have an arguable ground of appeal against his conviction, the court granted legal aid to the applicant on conviction only and the applications for leave to appeal against conviction out of time and sentence were adjourned to a date to be fixed.

5. At the hearing of the applications we allowed the applicant leave to appeal his conviction out of time and, treating the hearing of the application as the hearing of the appeal we allowed the appeal.  We said we would hand down our reasons for so deciding at a later date.  These are our reasons.

The Charge Sheet

6. The Charge Sheet contained two charges and two defendants, of which the applicant was D2.  The first charge in the Charge Sheet was an offence of using a false instrument, contrary to section 73 of the Crimes Ordinance, Cap 200.  This charge was against D1 only and concerned his use on 14 November 2013 of a forged cashier’s order in the sum of US$1,900,000 to deceive an employee of Citibank Ltd into accepting it as genuine so it could be successfully negotiated and the proceeds credited to an account at Citibank.

7. The second charge was a joint charge against both D1 and the applicant and was for the offence of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap 455.  The charge alleged that the two defendants committed the offence together with an uncharged other by the name of Kinoshita Shunji.  The property with which they were alleged to have dealt was the US$1,900,000 proceeds of the forged cashier’s order whose presentation at Citibank was the subject of the first charge.

8. The Particulars of Offence of the second charge were as follows:

“IKEGAYA Kazushi and MAEDA Hisato, between the 28^th day of October 2013 and the 15^th day of November 2013, in Hong Kong, together with Kinoshita SHUNJI, knowing or having reasonable grounds to believe that property, namely a total sum of $1,900,000.00 United States currency, in whole or in part, directly or indirectly represented the proceeds of an indictable offence, dealt with the said property.”

9. Underlying the charges was evidence that D1 and the applicant had opened the account of Citibank in the name of the company that was the payee of the forged cashier’s order that is the subject of the first charge.  D1 subsequently transferred and withdrew the bulk of the money from this account. 

10. D1 pleaded guilty to both charges and was sentenced to 4 years’ imprisonment for each offence with an order that the sentences should be served concurrently with one another.

The prosecution case

11. On 2 October 2013, a Madam Chan (PW1) bought a cashier’s order in the amount of US$1.9 million from the Standard Chartered Bank.  The cashier’s order was payable to Evzen Mobilya Limited (“Evzen”) to be used as proof of funds for the purpose of enabling PW1’s company to do business with an overseas supplier.  An image of the cashier’s order was emailed to the overseas supplier.

12. On 28 October 2013, the applicant together with D1 came to Hong Kong and set up a company in the same name as the payee company named on PW1 cashier’s order, i.e. Evzen.  They also set up bank accounts in the name of this company at Citibank before leaving Hong Kong together on 1 November 2013.

13. On 14 November 2013, D1 returned on his own to Hong Kong.  He went to Citibank and presented a cashier’s order identical to that purchased by PW1.  Though later confirmed to be a forged document, the cashier’s order was successfully negotiated and a sum of US$1.9 million was credited to one of the Evzen accounts.  On the following day, D1 returned to Citibank and remitted US$1,779,000 of the deposit to an overseas account in the name of “Evzen Mobilya Limited” held with the Bank of Tokyo Mitsubishi UFJ in Tokyo, Japan.  D1 also withdrew US$100,000 and the Hong Kong dollar equivalent of US$10,000 (HK$77,174) in cash.  The Citibank account of Evzen was then left with a balance of US$10,681.46.

14. On 17 November 2013 D1 departed Hong Kong.

15. When PW1’s prospective business dealing did not eventuate she returned to the Standard Chartered Bank on 4 December 2013, intending to encash the cashier’s order but was told that the money under the order had already been paid out.  She reported the fraud to the police and both the applicant and D1 were placed on the Immigration Department’s wanted list. They were arrested on separate days when they returned to Hong Kong.  D1 was arrested on 19 December 2013 and the applicant on 20 December 2013.

16. The prosecution also relied on the contents of a video record of interview in which the applicant participated.  The admissibility of this interview was challenged by the applicant and this issue was resolved by means of the alternative procedure.  The judge ruled the record of interview admissible.  In his interview, the applicant claimed, inter alia, that:

(a) his friend, Kinoshita Shunji, asked him to come to Hong Kong to set up a company and open a bank account for him; Kinoshita’s main work was in the music producing industry, something like making CDs;

(b) Kinoshita asked the applicant to do it with D1 because D1 knew English;

(c) the applicant was a university graduate in Radiology.  He was out of work at the time and he used to work part-time as a painter or renovation worker;

(d) the applicant came to Hong Kong on 28 October 2013, setting up the company and opening up the bank accounts with D1 and then he left on 1 November 2013.  The bank account could be operated by either D1 or himself;

(e) the applicant was promised a commission of 2.5% of the money deposited into the accounts; but he knew nothing about the details of the money as it was all arranged by Kinoshita;

(f) he did not know that D1 had deposited a forged cashier’s order for US$1.9 million in the company’s account; however, he had once been shown a cheque in Japan by Kinoshita, but he was not sure if it was the same one.  The applicant was told by Kinoshita that the job involved using the company’s account for depositing money on 5 – 6 occasions; and

(g) expressing both surprise and anger when he was told by the police that almost all of the US$1.9 million had been transferred out, the applicant said he understood that nothing would be done before the ATM card was ready, and the money would be transferred to somewhere else by internet banking when they had the ATM card.  He came on 20 December 2013 on the instruction of Kinoshita to pick up the ATM card.

17. In answer to the question if he ever thought how much money would be deposited to the account the applicant said:

“Well, well it might sound strange to say I’m not child, but a little, well, I thought something a bit dangerous, how to say, it was a money matter but I did not think of a fraud or something like that, a little.

Something like a forgery.”

The prosecution relied on this statement as an admission that he believed the use of the account would be in some way improper.

18. But, in response to further questioning he qualified this answer by saying:

“Let me think. Well, in fact, I don’t know about the process or how to do it, so I cannot say it is dangerous that I said so by myself. We, specifically, I don’t quite know.”

The no case to answer submission

19. At the end of the prosecution case the applicant’s counsel at trial, Mr I Polson, made a submission of no case to answer.  Mr Polson submitted that the charge referred to a dealing with specific property, namely the US$1.9 million and that property did not come into existence until a time when the applicant was no longer in Hong Kong.  His presence in Hong Kong at an earlier time was to commit preparatory acts that would enable a later dealing to take place.  Mr Polson argued that these facts may prove a prima facie case of conspiracy to money launder but not of the substantive offence when the applicant was not in Hong Kong when the actual dealing took place. 

20. The judge ruled that the applicant had a case to answer but neither at that time, nor subsequently, did he provide any reasons for that ruling. 

The defence case

21. The applicant gave evidence but called no witnesses.

22. The applicant said he had known Kinoshita Shunji for 15 years and previously had business dealings with him.  These dealings were in music production and the making of CDs but the applicant was not employed by Kinoshita.  The applicant thought that Kinoshita offered him the job because he was an old friend and the applicant did not have a proper job.  The applicant thought Kinoshita was taking care of him.

23. Kinoshita did not provide the applicant with a complete picture of what would be required of him.  He said he was setting up an entertainment company and asked the applicant to be a director of it.  The applicant said he would like to make a success of this business.  He said he had a lengthy discussion with Kinoshita about the company and what it was to do and what he, the applicant, would receive but the amount of money he would receive would depend on the contract and the content of the business.

24. The applicant said he had only known D1 for about 1 year and had met him through Kinoshita.  He had had no previous dealings with D1 and he was not a close friend of D1.  He had heard that D1 took directions from Kinoshita, as did the applicant.

25. He denied having any knowledge of the forged cashier’s order or of D1’s actions in respect of it on 14 November 2013. He said he remained ignorant of the order and of D1’s dealings with it right up to his return to Hong Kong on 20 December.  He claimed that after he returned to Japan on 1 November he had no further contact with D1.

26. The reason he came to Hong Kong on 20 December was because he was told by Kinoshita that the bank account was now opened and he, the applicant, was to go to the bank and pick up the cash card.

27. He asserted that had he known beforehand that the bank account was going to be used for an improper purpose he would not have agreed to set it up.

28. Under cross-examination he agreed that he was going to receive a commission of 2.5% of the value of monies passing through the account that he helped set up.  He said his role in respect of the bank account was only up to opening the account and did not include using it to receive credits to it.  He was going to participate in the management of the company but had not yet started doing so.

29. When asked about his potential earnings he said he did not know what they would be as they depended on the profits from the CD sales.

30. He maintained that his aim was to start a proper business and that he had no knowledge of D1’s actions in respect of the forged cashier’s order.  He was surprised when told by police in his record of interview that a credit had been made to the bank account.  He said he was surprised because something had happened that he knew nothing about.  He denied thinking that there was anything improper or dangerous going on in relation to the bank account he had been asked to open.  He agreed that Kinoshita told him that there would be 5 or 6 occasions where there would be transactions involving cashier’s orders.

The judge’s Reasons for Verdict

31. The judge commenced his Reasons for Verdict by noting that according to the prosecution this was a case of a cashier’s order fraud in which the applicant’s role was to come to Hong Kong with D1 to set up the company Evzen and open bank accounts in its name.  In so saying he hinted that the basis of the applicant’s criminal liability, on the prosecution case, was that the applicant was a participant in a joint enterprise involving a cashier’s order fraud in which the applicant had a particular role to play. 

32. The judge then summarized the evidence much of which was not disputed.  He then turned to what he identified as the issue in the case. 

33. Under a heading of “The Issue” the judge said that the applicant’s situation was similar to that of someone lending his bank accounts to others for them to use.  Of this situation he said:

“Nothwithstanding the facts that it was that other person who dealt with the money in the accounts, there are authorities in which it was held that lenders of such accounts were considered having dealt with monies in the accounts (See Lau Sui Hing CACC 111/2008 and Wong Chor Wo CACC 314/2006)”

34. The judge then referred to the submission made by Mr Polson at the close of the prosecution case that there was no case for the applicant to answer.  This submission the judge described as being:

“… that there was no evidence of dealing by D2 because he was not in Hong Kong when the cashier order was cashed here, but he agreed that there was a prima facie case for a conspiracy.”

35. The judge then said:

“12. Clearly, their agreement was put into action when D1 and D2 travelled to Hong Kong and successfully set up the company and the bank accounts, and there seemed nothing to suggest that D2 had backed out from the plan as evidenced by his returning to Hong Kong to get the ATM cash card of the accounts with the intention of further dealing with the accounts in question.

13. True to say there is no direct evidence to prove that D2 knew about the cashier order fraud at the time, and the prosecution concedes on this point.”

36. By referring to the agreement to which the applicant was a party the judge was harking back to the basis of the applicant’s criminal liability being joint enterprise but, by his paragraph 13, he appears to suggest that the joint enterprise was not the carrying out of the cashier’s order fraud. 

37. Thereafter, the judge did not return to the issue of how the applicant could be liable if he was not a party to the dealing with the property and, if his criminal liability stemmed from being a party to a criminal joint enterprise, what the scope or terms of the agreement was between the applicant, D1 and Kinoshita that underlay their criminal joint enterprise.  Instead he turned to the mens rea element of “reasonable grounds to believe” saying:

“The issue in the present case seems to me to be a question of reasonable belief, viz the application of the 2-stage test as stipulated in the recent case Pang Hung Fai CACC 34/2012, the two questions to be asked are:

1^st 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?

2^nd question

Do those facts and circumstances provide reasonable grounds that that property in whole or in part represented the proceeds of an indictable offence?

In other words, whether there were grounds that a commonsense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in whole or in part represented the proceeds of an indictable offence.”

38. The judge specifically dealt with the reliance by the prosecution on what it claimed was an “admission” made by the applicant in his video record of interview when he said he thought the matter involved “…something a bit dangerous”.

39. The judge carefully examined the relevant parts of the applicant’s video record of interview and concluded that the applicant did not really mean to say “he thought the matter involved was something a bit dangerous or improper”.  The judge found that the applicant had never used the word “improper” and that it was the word used by the interpreter when he interpreted “dangerous”.  The applicant did use the word “dangerous” but later he said “…so I cannot say it is dangerous that I have just said so by myself….”. Looking at what the applicant had said as a whole, the judge did not think it would be fair to say that he had admitted that he thought the money matter was something dangerous or improper and so the judge declined to treat the applicant’s words as an admission.

40. In dealing with the 1^st question, the judge was satisfied on the evidence before the court that the following facts were known to the applicant:

(a) on 28 October 2013, D1 and the applicantcame to Hong Kong and set up Evzen in which the applicant was made the director or CEO;

(b) two days later, D1 and the applicant opened the company’s bank accounts at Citibank and they left Hong Kong together on 1 November 2013;

(c) the applicantwas asked by Kinoshita, who he said was in the business of music production, to do all this, and he was to be paid a commission of 2.5% of the money passing through the accounts;

(d) the applicantwas once shown a cheque by Kinoshita in Japan prior to his coming to Hong Kong and was told by Kinoshita that deposits would be made to the accounts on 5 or 6 occasions;

(e) the money in the account would be transferred to somewhere else by internet banking when the ATM cash card was ready.  The applicantcame to Hong Kong on 20 December 2013 with the intention of collecting the cash card; and

(f) the applicant was unemployed before coming to Hong Kong.  Before that, he worked in part-time jobs for a long time as a painter or renovation worker.

41. In dealing with the 2^nd question, the judge observed that the applicant did not seem to have the relevant experience or managerial skills to be appointed as the CEO of the company, and he was out of work at the time when this job opportunity came along.  In addition, if Kinoshita was a genuine businessman, as the applicant said he was, it would not make any business sense at all to make both D1 and the applicant the signatory to the company accounts and to entrust the finances of the company to a person of the applicant’s background.

42. The judge found that on the evidence before the court the company did not appear to be carrying on any genuine business.  The sole purpose of creating the bank accounts was to deal with money.  The applicant was told there would be deposits made into the accounts on 5 to 6 occasions.  Clearly Kinoshita would not dare to associate his own name in any dealing with this account, and so had to pay someone to do it, and this is how the applicant came into the picture.

43. By placing a commonsense, right-thinking member of the community into the applicant’s shoes, the judge was satisfied that such a person would say that there was something fishy going on.  There were grounds that a commonsense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in whole or in part represented the proceeds of an indictable offence.  For these reasons, the judge was satisfied that the prosecution had proved the charge against the applicant to the required standard and convicted the applicant.

The application for an extension of time

44. No affirmation has been placed before us but at the time that the applicantwas being tried the judge did not enjoy the benefit of the Court of Final Appeal’s judgments on the offence of dealing with property known or believed to represent the proceeds of an indictable offence.

45. It was only when the matter came before us that it became apparent that the applicant had reasonably arguable grounds of appeal. Given the unusual circumstances of this case and given the strength of the applicant’s grounds of appeal we were of the view that the applicant should be granted the extension of time he needed in order to pursue an appeal against his conviction.

The Perfected Grounds of Appeal against Conviction

46. In his Perfected Grounds of Appeal filed on 9 January 2017, Mr Andrew Bullet, counsel for the applicant raised two grounds, namely:

(a) the judge misdirected himself as to whether the applicant could be regarded as having dealt with the proceeds of the US$1.9 million, when there was no evidence that the applicant had been aware of such sum and he had not been charged with conspiracy in respect of it.  Thus, the judge was in error in ruling that there was a case to answer; or alternatively when convicting the applicant; and

(b) the judge erred in his approach to the phrase ‘having reasonable grounds to believe’ in section 25(1) of the Organized and Serious Crimes Ordinance and applied the wrong test when determining whether the applicant had the necessary mens rea.

47. In support of the first ground of appeal Mr Bullet submitted that whilst the judge held that the applicant had dealt with the monies in the account on the basis that the applicant was in a similar situation to one who had lent his bank account to others he appeared to have overlooked this court’s judgment in HKSAR v Lau Sui Hing & Anor[1], where Yeung JA (as he then was) said at paragraph 61:

“If the defence, that the applicants had lent their accounts to Ah Chi and thereafter had paid no attention to them, and therefore had no knowledge about them, was true or could be true, the applicants could not be guilty of the charge as they had not dealt with the monies in their accounts and they could have no reason to believe the monies were proceeds of an indictable offence when they were not even aware of the existence of the monies.”

48. It was further submitted that the proposition that merely allowing others to use the account would satisfy the actus reus element of the offence was rejected by the court in HKSAR v Salim Majed[2], a judgment which was decided shortly after the applicant’s conviction and therefore not available to the trial judge.

49. Mr Bullet argued that in any event, the applicant’s situation differed from that of one who lends his bank account. The bank account was an account of the company set up by D1 and the applicant for Kinoshita Shunji.  There were numerous legitimate reasons for doing business through a company, and the situation was entirely different from borrowing someone’s bank account.  Given that the judge made his ruling on the basis that the applicant had no knowledge of the fraudulent bank draft and the money obtained thereby, Mr Bullet submitted that the ruling that the applicant had dealt with that money was in error and that there was no case to answer; or alternatively, the applicant should not be ultimately convicted.

50. In support of his second ground of appeal, Mr Bullet submitted that the judge’s application of the 2-stage test, which was propounded in the Court of Appeal’s judgment of HKSAR v Pang Hung Fai[3] was held by the Court of Final Appeal to be erroneous[4], shortly after the applicant’s conviction.

51. The Court of Final Appeal preferred a single test of whether the accused had reasonable grounds for believing, with the term “reasonable” meaning that anyone looking at those grounds objectively would so believe[5]. As to the standard to be applied when evaluating a reasonable person’s belief, the Court of Final Appeal in HKSAR v Pang Hung Fai considered the word “sufficient” to qualify the word “would”, such that it was equated with “could”, was wrong and went on to hold the “language of sufficiency”, as in the formula used by the judge, to be “inappropriate when determining the mental element of a criminal offence”[6]. Spigelman NPJ went on to say, at paragraph 77:

“By the imposition of the same penalty, the mental element of the ‘reasonable grounds’ alternative is regarded as being of the same level of moral obloquy as actual knowledge. A test that propounds a relationship between the existence of ‘grounds’ and a state of ‘belief’ in terms of possibility does not do that. Only a test which states that those ‘grounds’ would lead to the ‘belief’ does so.”

52. Mr Bullet further submitted that the position was summarized in HKSAR v Yeung Ka Sing Carson[7], at paragraph 106:

“The applicable standard was whether on the grounds available to him, the accused would have been led to have the requisite belief.”

53. Mr Bullet concluded that the judge was in error in his approach to determining whether the applicant had had the requisite reasonable grounds to believe.

The respondent’s submissions

54. In reply to ground 1, the respondent submitted that the judge, albeit there was an absence of direct evidence to show that the applicant had dealt with the US$1.9 million, implicitly rejected the applicant’s evidence that he had no knowledge about the transaction in the company’s account.  Hence, given that it was undisputed evidence that (i) the applicant was one of the signatories of the company’s account; (ii) that the applicant was the CEO of the company; (iii) that the applicant had been promised a commission of 2.5% of the money passing through the account; (iv) that a large sum of proceeds of a “cashier order fraud” was deposited into and withdrawn from the account; and (v) that the applicant returned Hong Kong on 20 December 2013 to collect the ATM card of the account (which showed that he had control of the account), the only reasonable and irresistible inference that could be drawn must be that the applicant knew of the transactions in the account and had dealt with the money in it together with D1.

55. In reply to ground 2, the respondent acknowledged that the judge had applied the 2-stage test which was subsequently disapproved by the Court of Final Appeal and, consequently, had misdirected himself in law.  However, the respondent submitted that the judge’s analysis of the evidence and his findings demonstrated that he did in fact consider those matters which he was required to consider, namely, (i) what grounds were known to the applicant at the material time; (ii) whether the grounds are reasonable; and (iii) the asserted personal beliefs or perceptions of the applicant.

56. The judge had set out in detail what facts and circumstances were known to the applicant, and went on to consider whether those circumstances provided reasonable grounds that a commonsense, right‑thinking member of the community would have believed that the money concerned represented the proceeds of an indictable offence.  He had also considered the state of mind of the applicant before he concluded that the applicant had reasonable grounds to believe the money deposited into the company’s account was the proceeds of an indictable offence.  The entire assessment was conducted from the angle of the applicant and it was clear that the judge had considered the asserted personal beliefs or perceptions that the applicant mentioned in his VRI and testimony.  The judge had, therefore, considered all of the matters required of him by the Court of Final Appeal judgments on this offence that post-dated the applicant’s conviction.

Discussion

57. The prosecution opening did not refer at all to the charge and contained no comment on the legal basis that the prosecution said caused the applicant to be criminally liable for the acts of dealing by D1.  However, it did conclude with the following statement:

“At all material times, both Defendants knew or had reasonable grounds to believe that the deposits into the Account of Evzen which they opened at the Citibank, in whole or in part, directly or indirectly represented proceeds of an indictable offences.”

On its face, this comment relating to the mens rea element of the offence might be taken as suggesting that it was the prosecution case that the applicant knew of the deposit that would be made to the Evzen account.

58. In his written closing Mr Parry for the prosecution wrote at paragraph 8:

“Prosecution case:

8.  The Prosecution case is set out in the Prosecution Opening, but in essence it is submitted that D2 opened the Citibank Account of Evzen so that he and/or others could access and use this account as a conduit for money which was the proceeds of an indictable offence.  He knew or had reasonable grounds to believe that the money passing through his account was the proceeds of such an offence.”

59. This statement does not specifically assert that the applicant knew about the US$1.9 million deposit and how it came into being.  On its face, it could be understood as alleging, as against the applicant, no more than that he was a party with others to bringing into existence a bank account which he knew would be used by others for the purpose of laundering non-specific amounts of money about whose provenance he may know nothing other than that he would have, at least, reasonable grounds to believe they were the proceeds of an indictable offence.  This basis of liability is consistent with what Mr Parry said in his oral closing submission.

60. The following passages from Mr Parry’s oral closing show how he put his case:

“Now, the reason I’ve highlighted the background here is because when one is looking at the guilt or innocence of a defendant in such a case, one has to look at the events leading up to the opening of the bank account and indeed the company itself, because it’s there, we say, that the suspicions arose, and they arose in the mind of the defendant, because we have to prove -- well, let’s look at what we don’t have to prove.

We don’t have to prove that there was a predicate or an underlying offence, but in fact I would submit that we have done that, and the underlying offence, we say, is fraud. But that’s not something that the defendant is charged with, and it isn’t the prosecution case, your Honour - I must make this clear - that he was necessarily aware of that fraud or, sorry, party to that fraud. It’s not our case and never has been that he was a party to that.

But I’ve just put the background there to highlight, and throughout here, his relationship with Mr Kinoshita, because that is important, because what we’re saying is that he has opened up a bank account -- well, a company and then in turn a bank account -- for the use of others, and that’s really the prosecution case; that he can use himself, of course, but we say that he would be using that. He never paid in any cheques. That doesn’t matter. It’s really not important, because he has opened up his bank account for others to use that account as a conduit, is the word I use, …

…

... having said that, we don’t have to prove who prepared the fraudulent document, but I will say, or the prosecution will say that the underlying offence was one of fraud.

As I say, we don’t have to prove it, but I do believe that we have proved it. …

…

The real issue here in this trial, your Honour, is one of knowledge, and that is the knowledge of the defendant, and it’s two limbs: is it knowledge, or reasonable grounds to believe. There is no direct evidence of knowledge, so we have to look at the other limb, and that’s reasonable grounds to believe, and I think that echoes the submissions of my learned friend - I don’t think there’s much dispute between the parties on that - and that is where the background and his dealings with others come into it.

…

Again, I’m not going to run through the law. It’s fairly straightforward, and I have put it down here. But I have applied it, your Honour, to this particular case, the law in that obviously there is the mens rea and the actus reus. The actus reus - I would say where is the dealing. Sorry, first of all, I’ve skipped over mens rea. I didn’t mean to do it so quickly. But the mens rea is coming down to the reasonable grounds to believe. The actus reus goes into the dealing, and that’s defined, as has come out earlier in this trial by my learned friend, but it’s defined in section 2(1) of Cap 455 and includes receiving or concealing or disposing or converting.

Well, the money has been received. He set up a vehicle for receiving the money, and the money was the bank account. So that’s where we say the dealing will lie. Even though he never paid the money into the account, it doesn’t matter. He doesn’t have to pay the money in. He set up the device for doing this.” (Emphasis added.)

61. Mr Parry’s very specific concession that the prosecution was not alleging that the applicant was a party to the fraud is consistent with the decision of the prosecution not to charge the applicant with D1 with the offence of using a false instrument in respect of D1’s negotiation of the forged cashier’s order.  But, if the applicantwas not a party to the fraud then the question arises of how he becomes, as a matter of law, criminally liable for D1’s acts of dealing with the proceeds of the negotiated cashier’s order?

62. The answer to this question would appear to be as set out in the last paragraph of the excerpt from Mr Parry’s oral closing address that is quoted at paragraph 60 above.  That is, the applicantis liable for D1’s criminal acts of dealing with the property on the basis that he set up the bank account into which the monies were deposited and subsequently withdrawn by D1.  Mr Parry’s comments would appear to suggest that he thought he was presenting a case that a person opening a bank account for another somehow made that person a party to every dealing that might thereafter take place in respect of that account, even though he was not involved in those subsequent dealings and had no knowledge of them.

63. But, this is merely a factual basis and makes no reference to legal principle.  It may be that coming to grips with the legal basis for the applicant’s criminal liability was at the heart of Mr Polson’s no case submission but, if it was, it does not appear to have been so understood by the judge and certainly did not have the effect of prompting him or Mr Parry to address the legal issue of how the applicant could be made criminally liable for the acts of another.

64. The first reference to legal principle did, in the end, come from the judge but, surprisingly, it is not found in his Reasons for Verdict but instead in his Reasons for Sentence.

65. In his Reasons for Sentence the judge described the culpability of D1 and the applicantin terms of participants in a criminal joint enterprise.  He said:

“D1 and D2 clearly joined together in this criminal enterprise for the purpose of laundering money from the proceeds of crime, though on the face of it D1 seemed to have done a little more than D2 (ie by presenting the forged cashier order), there was no significant difference between the two in terms of culpability, for in my view, they were simply playing different roles in executing their criminal plan. In a joint enterprise, one is always responsible for the acts of the other.”

66. But, the judge’s comments beg the question of what was the joint enterprise?  This question was not asked or answered but it would appear from the judge’s sentencing remarks that, at least in respect of D1, he regarded the joint enterprise as the fraudulent use of the forged cashier’s order.  This was the reason why, for D1, the judge ordered the sentences of each offence to be served concurrently with one another.  He said:

“The ‘black money’ in the instant case originated from a forged cashier order, and all that D1 did was to transfer it out of jurisdiction after the cashier order was cleared. Nothing sophisticated was done to conceal the source of the money. It was like one following the other. In the circumstances, it is right, in my view, to order concurrent sentence for the two offences, ie using false instrument and money laundering.”

67. The judge saw the two offences as linked together and in this respect he was obviously correct. 

68. On the evidence adduced by the prosecution this was a bank account set up for a specific purpose; namely to enable a particular fraud involving a specific sum of money to be successfully carried out.  The fraud required for its successful execution the use of a bank account to receive the proceeds of the fraud.  But in order to enjoy the fruits of their fraud, those involved had to get the money out of this bank account and out of Hong Kong.  This necessarily involved a dealing with property.  That is how the money laundering offence came to be committed - as the final act of the fraudsters in order to obtain the benefit of their illicit gain - and that is why the judge ordered concurrent sentences. 

69. In the present case the money laundering was simply a consequence or incident of the fraud.  It is precisely because the bank account was set up for the explicit purpose of receiving the proceeds of the forged cashier’s order that it was highly unlikely that it would be capable of long term use for a general money laundering purpose.  Once the fraud was discovered, as it inevitably would be, the account holders would be denied further use of the account.  And, of course, that was exactly what transpired.

70. The judge correctly recognised that there had to be a legal basis for the applicantto be liable for the actions of D1 in dealing with the property (the actus reus of the offence).  He was also correct in concluding that the charge alleged that the applicant was a party to a joint criminal enterprise and that this common law doctrine would make the applicant liable for D1’s acts in carrying out the crime to which he and Kinoshita were a party. 

71. This doctrine was recently explained by Ribeiro PJ in HKSAR v Chan Kam Shing[8]. In his judgment, with which the other members of the court agreed, Ribeiro PJ discussed the difficulties the common law faced in situations where a number of people participated in the commission of a crime but it was impossible to determine who committed the actus reus of the offence and also where, in the course of a crime being committed by more than one person, one of the number commits a further crime in response to situational exigencies.  At paragraphs 32 onwards of his judgment Ribeiro PJ explained how the common law had responded to these difficulties.  He said:

“32. The common law’s approach has been to evolve the doctrine of joint criminal enterprise, also referred to as the doctrine of ‘common intention’, of ‘common purpose’, of ‘acting in concert’ and of ‘common design’.

33. The doctrine of joint criminal enterprise is distinct from the traditional rules on accessorial liability, although there are situations where those rules may overlap.  It is important to note – since consequences flow from this – that under the doctrine of joint criminal enterprise, liability is not derivative: it is not dependent on proving that one person (the principal) committed the main offence and that another (the accomplice) assisted or encouraged its commission.  Liability is independently based on each defendant’s participation in a joint criminal enterprise with the requisite mental state to constitute the offence relevant to the defendant in question.

…

35. In McAuliffe v The Queen, the High Court of Australia explained that the doctrine of joint criminal enterprise provides an additional means of establishing complicity alongside the rules of accessorial liability:

‘... the complicity of a secondary party may also be established by reason of a common purpose shared with the principal offender or with that offender and others. Such a common purpose arises where a person reaches an understanding or arrangement amounting to an agreement between that person and another or others that they will commit a crime. The understanding or arrangement need not be express and may be inferred from all the circumstances. If one or other of the parties to the understanding or arrangement does, or they do between them, in accordance with the continuing understanding or arrangement, all those things which are necessary to constitute the crime, they are all equally guilty of the crime regardless of the part played by each in its commission. Not only that, but each of the parties to the arrangement or understanding is guilty of any other crime falling within the scope of the common purpose which is committed in carrying out that purpose.’”

72. Ribeiro PJ went on the explain how there were two forms of joint criminal enterprise.  At paragraph 41 of his judgment he said:

“41. The common law has developed two forms of joint criminal enterprise which may be referred to as the basic and extended forms.  The basic version involves the co-adventurers simply agreeing to carry out and then executing a planned crime.  As it was put in the joint judgment of French CJ, Kiefel, Bell, Nettle and Gordon JJ, in Miller v The Queen:

‘If the crime that is the object of the enterprise is committed while the agreement remains on foot, all the parties to the agreement are equally guilty, regardless of the part that each has played in the conduct that constitutes the actus reus.’”

73. When these principles are applied to the present case it becomes readily apparent that it was incumbent on the prosecutor to make clear in his opening that the prosecution was asserting that the applicant was criminally liable for the actions of D1 because they were, together with Kinoshita, participants in a joint criminal enterprise.  In the words of the High Court of Australia in McAuliffe v The Queen the prosecutor should have informed the judge that he was inviting him to find that the evidence proved that D1, the applicant and Kinoshita had reached “an understanding or arrangement amounting to an agreement … that they will commit a crime”

74. Having invoked the doctrine of joint criminal enterprise the prosecutor should then have identified the common purpose of the participants, setting out what, according to the evidence, were the terms of the agreement and what was the crime the participants agreed to commit.  In many basic joint criminal enterprises the crime to be committed will be obvious. But that was not necessarily so in the present case because of the lack of evidence linking the applicant to the forged cashier’s order and the prosecution not seeking to prove that the applicantwas involved in the negotiation of this false instrument.

75. Once the prosecutor sets out the legal basis of his case it is for the judge to decide, after his examination of the evidence, whether the prosecution has proven beyond reasonable doubt that there was a joint criminal enterprise, the terms of that enterprise and whether the applicant was a party to it.  All of these matters require findings of fact to be made by the judge.

76. In the circumstances of the present case there can be no doubt that the criminal joint enterprise to which D1 and Kinoshita were a party was the commission of the cashier’s order fraud in which the proceeds of the fraud would be deposited into the Citibank account and then transferred out of Hong Kong.  But the prosecution did not present a case that the applicantwas a party to this joint enterprise.  Was he then a party to a separate and different criminal joint enterprise with D1 and Kinoshita whereby, with limited knowledge of their plans, he became seized of reasonable grounds to believe in respect of future dealings by them of property that might be deposited or received into that bank account?

77. Because of the unclear way in which the prosecutor presented his case the judge failed to address the primary issue of the basis of the applicant’s criminal liability, and to analyse that basis in terms of the relevant legal principles and the application of those principles to the evidence in the case.  On this ground alone the conviction cannot stand.

78. For the sake of completeness, we should add that we would also allow the appeal on the basis of the applicant’s second ground of appeal.  The applicant raised in his evidence many areas of personal belief about Kinoshita and why he was favouring him which would need to be factored into the mens rea issue and considered by the judge before reaching a conclusion on the issue of whether the applicant had reasonable grounds to believe.  It is not a sufficient answer to say that it must be implicit in the conclusion the judge reached that he disbelieved the applicant, especially as, with the confusion over the basis of the applicant’s criminal liability, it is not clear that the judge did disbelieve the applicant, at least in respect of his denial of knowledge of the cashier’s order fraud.  The problem is that the judge never said explicitly what he accepted and what he rejected of the applicant’s evidence.  The applicant was entitled to have his evidence properly evaluated and a reasoned determination made as to his credibility.  This was not done.

79. It is not possible to say what the judge might have concluded had he the benefit of the Court of Final Appeal judgments on the mens rea element of the money laundering offence and had he properly applied the principles laid down in those judgments to the evidence of the applicant.

Conclusion

80. For these reasons we allowed the applicant leave to appeal his conviction out of time and treating the hearing of the application as the hearing of the appeal we allowed the appeal.