HKSAR v. SZE MEI MUN AND OTHERS

CACC 60/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 60 OF 2013

(ON APPEAL FROM DCCC 3 OF 2011)

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J U D G M E N T

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Hon Lunn JA (giving the Judgment of the Court) :

1. The applicants seek leave to appeal against their convictions after trial by District Court Judge Geiser of a charge of conspiracy to export unmanifested cargo, namely marked oil, contrary to section 18(1)(b) of the Import and Export Ordinance, Cap. 60 (“I & E Ordinance”) and section 159A of the Crimes Ordinance, Cap. 200 (Charge 1) and of various related charges of dealing with property known or believed to represent the proceeds of an indictable offence (Charges 2 to 8).

Charge 1

2. The Particulars of Offence of Charge 1 averred that between 31 and May 2009 and 1 February 2010 the applicants had conspired together and with Cheng Kam Shui, Feng Jiu, Chen Ruihong, Huang Shunping and Shi Rubin to export unmanifested cargo, namely marked oil.  The latter four stipulated names were Masters (“the four Masters”) of four fishing vessels on to which it was alleged that marked oil was loaded and then smuggled out of Hong Kong and into the Mainland.

Charges 2-8

3. The Particulars of Offence of each of Charges 2 to 8 averred that the named applicant(s) had dealt with the proceeds of an indictable offence, namely stipulated amounts of money, in various periods of time in the overall period 31 May 2009 to 3 May 2010.

(i) Charge 2 - 1^st and 2^nd applicants, $2,623,226,783 (between 31 May 2009 and 1 February 2010).

(ii) Charges 3, 4 and 5 were individual charges against the 3^rd, 4^th and 5^th applicants respectively for dealing with stipulated sums of money; namely

   Charge 3 - 3^rd applicant, $117,836,926 (between 31 May 2009 and 1 February 2010);

   Charge 4 - 5^th applicant, $46,151,014 (between 31 May 2009 and 1 February 2010); and

   Charge 5 - 4^th applicant, $103,802,315 (between 12 June 2009 and 31 January 2010).

(iii) 3 May 2010 - the day of the arrest of the applicants

   Charge 6 - 1^st and 2^nd applicants, RMB 7,141,300 and $9,812,800 at their home, Tower 8, Bel-Air on the Peak.

  Charge 7 - 1^st to 3^rd applicants $627,000 at Flat 1, 10/F, Mei Fung Court in Aberdeen.

  Charge 8 - 5^th applicant, $3,050,000 in a safe deposit box at a branch of the Bank of China at Tseung Kwan O.

Verdicts

4. All of the applicants were convicted of Charge 1.

5. The 1^st and 2^nd applicants were convicted of Charges 2 and 6; the 3^rd applicant of Charges 3 and 7; the 4^th applicant of Charge 5; and the 5^th applicant of Charge 4.  All of them were convicted by the judge on the basis that they knew that the property with which they dealt was the proceeds of an indictable offence, in particular that alleged in Charge 1.

6. The 1^st and 2^nd applicants were found not guilty of Charge 7 and the 5^th applicant found not guilty of Charge 8.

THE TRIAL

Personal relationships

7. The relationship between the applicants and with others was established by admitted facts.  At all material times, the 1^st and 2^nd applicants cohabited in a flat at Bel-Air on the Peak and had four children.  The 3^rd applicant was married to the 2^nd applicant’s younger sister, of which union the 4^th applicant was their son. Finally, the 5^th applicant married Cheng Kam Shui in 1988.

The prosecution case

Charge 1

8. The nub of the prosecution case was that the applicants conspired with each other, Cheng Kam Shui and the four Masters to export unmanifested, marked diesel oil from Hong Kong.  The four Masters said that they had been recruited to the conspiracy by Cheng Kam Shui, whom they knew by the nickname ‘Lack Chai’, in Ao Tou in the Mainland.  At his direction they loaded marked diesel oil onto the vessels under their command from one or other of three oil barges, namely Chi Shing, Chi Shing 18 and Chi Shing 28.  The three barges were moored at Pak Shek Kok in Hong Kong.  The ultimate object of the conspiracy was to effect the importation of that oil into the Mainland, where it was removed from the vessels.

Corporate information

9. The three oil barges were owned by Super Success (HK) Limited (“Super Success”, Right Kit Limited (“Right Kit”) and Chi Shing Development (HK) Limited (“Chi Shing HK”) respectively, each of which company was incorporated in Hong Kong and of which the 2^nd and 3^rd applicants were their directors.  The three oil barges were leased by Chi Shing Development Limited (“Chi Shing”).  The 2^nd and 3^rd applicants held equal holdings of all of the issued shares of Chi Shing and were its directors, whilst the 1^st and 2^nd applicants were the only two signatories of its bank accounts.  Chi Shing’s registered address was at Flat 1, 10/Floor, Mei Fung Court, Aberdeen Centre, 7 Nam Ning Street, Aberdeen (“Mei Fung Court”) and from June 2007 its business address, and those of Super Success, Right Kit and Chi Shing HK was at Flat 2, 21/Floor, Goodview Centre, 12 Wu Pak Street, Aberdeen (“Goodview Centre”).

The four Masters

10. The four Masters had been detained by the Mainland authorities on 31 January 2010.  Thereafter, in April 2010, on their pleas of guilty they were convicted of offences in relation to the import of the diesel oil into the PRC and sentenced variously to 12 or 13 years’ imprisonment.  However, beginning in May 2012, pursuant to a Letter of Request issued by the High Court of Hong Kong and on the direction of the Supreme Court of the People’s Republic of China the four Masters gave evidence in the Shenzhen Intermediate People’s Court before Judge Zeng and District Court Judge Geiser, sitting as a Commissioner.  In due course, the transcript of their evidence, and the exhibits that they produced, was remitted to the Registrar of the High Court in Hong Kong and admitted into evidence by the judge in the trial of the applicants in Hong Kong.[1]

VCS

11. The Voluntary Control Scheme (“VCS”) implemented by the Customs and Excise Department involved a system of reporting the sale of marked oil, first by the major oil suppliers such as Shell and second, by the companies operating oil barges who onsold the marked oil to vessels.  The purpose of the scheme was to combat the illegal use of marked oil, including smuggling it out of Hong Kong as unmanifested cargo and into the Mainland.  The three Chi Shing marked oil barges were registered participants and provided the Customs and Excise with details of the purchase and sales of marked oil.  That information was provided on documents relating to individual barges which were faxed by Chi Shing on a regular basis to the Customs and Excise Department.

12. In consequence of concerns arising from an increase in the sales of marked oil, the Customs and Excise Department issued a general circular dated 21 January 2009 to the owners and persons-in-charge of oil barges, advising them that the Department had found :

“ ...smuggling syndicates using fishing vessels licensed in (the) Mainland and Hong Kong with enlarged oil tanks for smuggling Red diesel. Those fishing vessels will frequently buy large amount of marked high sulphur diesel from oil carriers ….. for smuggling to the Mainland.”

The owners and persons-in-charge were enjoined to be “..alert to stay away from suspicious transactions”.[2]

13. At a meeting on 9 April 2009 with Customs and Excise Officer Lo Wing Nin, the 3^rd applicant had signed that general circular, and another circular setting out the purpose of the scheme, acknowledging that he understood its contents.

White and yellow Chi Shing invoices

14. On 3 May 2010, officers of the Customs and Excise Department conducted searches of Chi Shing’s registered address at Mei Fung Court, and its business address at Goodview Centre.

Mei Fung Court

15. On 3 May 2010, in the presence of the 2^nd and 3^rd applicants a large volume of white invoices in Chi Shing’s name for each of the three Chi Shing barges were seized at the Mei Fung Court address.  They encompassed the period January to March 2009[3] and July 2009 to January 2010.[4]

Goodview Centre

16. On 3 May 2010, a large volume of yellow invoices in Chi Shing’s name, together with completed VCS forms, for each of the three Chi Shing barges for the period June 2009 to January 2010 were seized at the Goodview Centre address.[5]  The VCS forms matched those for that period that had been received by fax at the Customs & Excise Department.[6] Also, seized at the premises were white Chi Shing invoices and related Daily Sales Transaction Summaries for the 3 Chi Shing barges for the month of April 2010.[7]  Partially completed VCS forms were found in a tray next to a fax machine.

17. The sales described in the yellow invoices supported the returns made in the VCS forms for that same period of time, whereas those described in the white invoices for the same date and barge were completely different and bore different invoice numbers.  Although the aggregate overall sales described in the two sets of invoices were broadly similar, the number of yellow invoices was about double that of the number of white invoices and the individual sales described in the yellow invoices were in respect of sales of about half the volume of those described in the white invoices.  Although there were yellow invoices for the time period prior to that stipulated in the Particulars of Offence of Charge 1, there were none found for the period after the arrest of Cheng Kam Shui and the four Masters, namely 31 January 2010.  Also, in the months following the latter date there was a collapse in the aggregate volume of marked diesel oil sales by the three Chi Shing barges.  The prosecution said that the inference to be drawn was that the arrest of Cheng Kam Shui and the four Masters brought the smuggling to an abrupt end and that, as a result, there was no longer a need to make false yellow invoices to support the false VCS forms faxed previously to the Customs & Excise Department.

18. It was the prosecution case that the yellow invoices were false and prepared to support the false individual sales described in the VCS forms faxed to the Customs and Excise Department and that the 1^st to 4^th applicant were a party to that enterprise.  In support of that submission, the prosecution pointed to the evidence of Mr Tse Chi Yan and Ms Kitty Law of Union Accountancy Services, who provided bookkeeping and auditing services respectively to Chi Shing.  Mr Tse said that the invoices provided to him by Chi Shing in respect of sales were white Chi Shing invoices.[8]  Prior to being shown them by officers of Customs & Excise he had never seen a VCS form or the attached yellow invoices.[9] Ms Law said that she inputted into the computer information from white Chi Shing invoices.[10]

White Chi Shing invoice signed by Feng Jiu : 28 November 2009

19. A white Chi Shing invoice dated 28 November 2009 was identified by Feng Jiu, one of the four Masters, as bearing his signature.  The invoice bore the number 65067 and was in respect of the sale of 120,800 litres of marked oil.  However, the Daily Sales Transaction Summary for the vessel Chi Shing to which it was attached, whilst describing that sale and the other sales evidenced by attached invoices for 28 November 2009, described it as a sale reflected in respect of an invoice which bore the number 82224.[11]  No other white Chi Shing invoices bore the prefix of ‘6’.[12]

‘Lack Chai’ notebook

20. The prosecution pointed to the discovery on 3 May 2010 in the master bedroom of the 1^st and 2^nd applicants at their Bel-Air flat of a notebook bearing the nickname of Cheng Kam Shui, namely ‘Lack Chai’, as evidencing a connection between them, Chi Shing and Cheng Kam Shui in the smuggling of marked diesel oil out of Hong Kong and into the Mainland.

21. The notebook records transactions that had occurred on five days in January 2010, namely 25 to 29 and 31 January 2010.  It was the prosecution case that those were sales of marked oil to vessels identified by a number code.  The record is in the nature of a running account in which money is described as “Owing”, “Received”, “Remaining only” and “Remaining balance”.  Many payments are described as being made in Renminbi.  All the sales were of huge volume, varying from 97,700 to 170,800 litres.  On some occasions sales of identical amounts were described as having been made to the same vessel on two occasions per day.  Entries in respect of two dates relate to the sale of two consignments of 120,800 litres.  The prosecution said that was consistent with the evidence of Feng Jiu, one of the four Masters, who testified that on occasions he would make a return journey to Hong Kong immediately on delivery of a consignment of marked oil to the Mainland.  That was the amount of marked oil described as sold in the white Chi Shing invoice dated 28 November 2009 which bore his signature.

Chi Shing bank accounts: 1^st and 2^nd applicants

22. There was no dispute that in the period 31 May 2009 to 1 February 2010 a total of $2,623,226,783 was deposited into the accounts in the name of Chi Shing with the Bank of China and HSBC, of which accounts the 1^st and 2^nd applicants were the only signatories.  All of the applicants were contributors to some of those deposits.[13]

The 3^rd applicant

23. There was no dispute that in the period 31 May 2009 to 1 February 2010 a total of $117,836,926 was deposited into an account in the name of the 3^rd applicant with the Bank of China. (Charge 3)  Of those monies, $69.9 million was received by way of transfer deposits from Remittance Agents and Money Changers and $46.1 million by other transfer deposits.[14] In the same period he deposited over $121 million into the two bank accounts of Chi Shing.

The 4^th applicant

24. The 4^th applicant was arrested on the morning of 3 May 2010 at the premises of Chi Shing at the Goodview Centre.  At that time and place a large volume of completed VCS forms and attached yellow invoices were seized.  It was an admitted fact that the 4^th applicant was employed as a clerk by Chi Shing.  Having been taken back to his home at Flat H, 19/Floor, Block 5, Uptown Plaza a Sony notebook computer was seized, from which was recovered two Excel files of data relating to sales by Chi Shing in November 2009.  The data matched that contained on white invoices and Daily Sales Transaction Summaries for Chi Shing 18, which records had been seized on 3 May 2010 at the Mei Fung Court address of Chi Shing.[15]  The prosecution said that it was to be inferred that the 4^th applicant was involved in the preparation of accounting records of the sale of marked oil by Chi Shing.

25. It was an agreed fact that in the period 12 June 2009 to 31 January 2010 the 4^th applicant made 100 cash deposits into the accounts of Chi Shing with HSBC to a total of $103,802,315.[16] (Charge 5)

The 5^th applicant

26. The prosecution case against the 5^th applicant was that she played an important role in assisting her husband, Cheng Kam Shui, who was based in the Mainland.  She did so by receiving deposits of money into her bank account from remittance agents, which monies she then deposited into the bank accounts of Chi Shing.  It was an agreed fact that two bank accounts in the name of the 5^th applicant, one with Bank of China and the other with the Hang Seng Bank, received deposits to a total of $46,101,014 in the period 31 May 2009 to 1 February 2010.[17] (Charge 4)  The overwhelming majority of those deposits were made by Remittance Agents and Money Changers.  In the same period, the 5^th applicant deposited $45,761,871 in the account of Chi Shing.[18]

27. Of the 5^th applicant’s knowledge of the circumstances and her participation in the conspiracy the subject of Charge 1, and in the related offence the subject of Charge 4, they pointed to the fact that in the period stipulated in the Particulars of Offence in Charge 1 the monies that she deposited into the account of Chi Shing increased by a multiple of 4.2 over the previous level of such deposits.  Also, the prosecution relied on the testimony of Chen Ruihong, who said that he had met the 5^th applicant in Hong Kong sometimes in the company of Cheng Kam Shui, and that in conversation with the 5^th applicant she had made it clear to him that she was aware that he was involved in smuggling marked oil and had assisted him by providing food for some voyages.

Charges 2 to 8

28. It was the prosecution case in respect of the various and different charges of ‘money laundering’ faced by the respective applicants that they knew or had reasonable grounds to believe that the monies were the proceeds of an indictable offence.

The defence case

29. None of the applicants availed themselves of the right to give evidence at trial.  However, Mr Lai Kam Wing was called to give expert evidence of the operation of the marked oil business in Hong Kong and the fishing industry in the case of the 1^st and 2^nd applicants. At trial, the other applicants adopted his testimony.

30. Of the cases of the applicants advanced in cross-examination and submissions, together with the testimony of Mr Lai Kam Wing, the judge noted :[19]

“ ...it is apparent from the way their individual cases were put and from the defence expert who was called on their behalf, DW1, Mr Lai Kam-wing, that they denied ever being involved in any conspiratorial agreement to export unmanifested cargo, nor did they admit dealing in any way with the proceeds, having any knowledge or belief that those monies represented the proceeds of an indictable offence.

19. Generally put, it is their case that at all times they were involved in the legitimate trading of marked oil which is a business involved in handling massive amounts of money needing a fast circulation of funds to purchase oil and operating at low profit margins.  It is also their case that it is very common for oil traders to sell extremely large quantities of marked oil to the operators of fishing vessels who have had their tanks converted in order for them to fish further afield.”

31. Of the defence case, insofar as it was articulated in cross-examination of the four Masters, the judge said :[20]

“ These four PRC witnesses were thoroughly cross-examined by all counsel for the defendants. It was generally put to each of them that they had lied, not only in the statements that they had made to the Shenzhen Customs and Anti-smuggling Bureau on 25 February 2010 and 25 March 2010, but they had lied also to the Shenzhen court in the hearing of their respective appeals and that they had lied in their testimony given at the commission hearing.

It was further suggested to them that they had everything to gain by co-operating with the authorities in the hope that they would gain early release from their incarceration.”

Grounds of Appeal against Conviction

32. Grounds of Appeal against conviction that are common to the applicants are advanced on their behalf.  Broadly speaking, they concern three issues.  First, it was submitted that the judge erred in determining in his Reasons for Verdict that by operation of section 94A of the Criminal Procedure Ordinance (“CPO”) it was not necessary for the prosecution to prove in Charge 1, “that there was no manifest”.[21]  Secondly, that the judge had erred in ruling admissible into evidence in the trial in Hong Kong the testimony of the four Masters, pursuant to section 77F(1) of the Evidence Ordinance, Cap. 8, given the undisputed fact that not all of the material potentially relevant to their testimony had been made available to the defence prior to their testimony.[22]  In particular, it was submitted that the refusal of the Mainland authorities to make available to the prosecution, the Court and the defence all previous statements of the four Masters to the authorities in the Mainland made the trial of the applicants unfair in that their right to a fair trial was breached.  Thirdly, that the judge erred in relying on the evidence of Mr Cheung Yuk Lam, called by the prosecution as an expert forensic accountant.

I.  Section 94A of the CPO

33. It was contended on behalf of the applicants that the judge erred in relying upon section 94A of the CPO to convict the applicants because that provision “is not applicable to the offence of conspiracy”.

34. It was said that the judge clearly did rely on that provision as is evidenced by his statements in his Reasons for Verdict :[23]

“ I pause here to comment that in the submissions of counsel for D1 to D4, there is a suggestion, I put it no higher than that, that somehow it is incumbent on the prosecution to establish that there was indeed no manifest on board any of the four vessels which, they say, exported the marked oil during the prosecution period. This is absolutely not the case. Negative averments are covered by section 94A of the Criminal Procedure Ordinance, Cap. 221, which states :

(1) It shall not be necessary in an indictment, charge, complaint or information alleging an offence to negative any exception or exemption from or qualification to the operation of the law creating the offence.

(2) For the avoidance of doubt, it is hereby declared that in criminal proceedings: (a) it is not necessary for the prosecution to negative by evidence any matter to which this subsection applies; and (b) the burden of proving the same lies on the person seeking to avail himself thereof.”

Subsection (4):

“ The matters to which subsection (2) applies are any licence, permit, certificate, authorization, permission, lawful or reasonable authority, purpose, cause or excuse, exception, exemption, qualification or other similar matter.”

Manifest in my judgment clearly comes within Subsection (4) and it is not necessary for the prosecution to prove that there was no manifest.”  [Italics added.]

35. Mr Blanchflower SC on behalf of the 1^st and 2^nd applicants submitted that the judge was in error to state that counsel for the 1^st to 4^th applicants had suggested that it was incumbent upon the prosecution to establish that there was no manifest on board the four vessels when oil was exported.  He, and counsel for the 3^rd and 4^th defendants at trial, did not do so.  Rather, in written and oral closing submission he had submitted that there was an absence of evidence from the prosecution about manifests or an agreement to export unmanifested oil.  Those submissions had been adopted by counsel for the other applicants.

36. In support of his submissions that the judge’s determination was an error of law, Mr Blanchflower drew the attention of this Court to the observations of Lord Woolf NPJ in the judgment of the Court of Final Appeal in HKSAR v Lam Yuk Fai.[24]  In that case, the appellant had been convicted of conspiracy to transfer diplomatic passport to other persons without reasonable excuse, contrary to section 42(2)(a)(ii) of the Immigration Ordinance.  As Lord Woolf NPJ noted, the judge directed the jury in these terms :[25]

“ Although I have told you that the burden of proving these charges remains on the prosecution throughout the trial, the burden shifts slightly here in relation only to the question of reasonable excuse. If you are satisfied that there has been the agreement and the intention to transfer these passports, you then have to consider the question as to whether or not the accused had a reasonable excuse to transfer them in the manner that he was proposing to do.

In doing that, the accused does not have to establish beyond reasonable doubt that this was the case.  All he has to do is show that it is more likely than not that this was the reason for his transferring the document, …”

37. Of the effect of the judge’s direction Lord Woolf NPJ said :

“ ..the judge was not only placing an evidential reverse burden of proof on the appellant she was placing a legal or persuasive burden on him to establish a reasonable excuse. In doing this, the judge had no doubt in mind s. 94A, Criminal Procedure Ordinance, Cap. 221...”

38. In the result, the Lord Woolf NPJ concluded :[26]

“ As Count 3 alleges a conspiracy, the task of the prosecution was to prove in the normal way the nature of the conspiracy; namely that: (a) there was an agreement alleged between the appellant and Philip Chu and; (b) the purpose of the agreement, which on the case for the prosecution, was that the passport should be used for an unlawful purpose and so without reasonable excuse (see for example Yip Chiu Cheung v R [1995] 1 AC 111). This conspiracy could not either under s. 94A or at common law give rise to any reverse burden. In view of the ingredients of the offence of conspiracy it is unlikely that any charge of conspiracy should give rise to any burden being placed on a defendant.” [Italics added.]

39. Mr Blanchflower invited the Court to note that, in the context of the offence of failing to comply with a notice issued under section 14(1) of the Prevention of Bribery Ordinance, Cap. 201, the statements of Lord Woolf NPJ had been cited with approval in the judgment of Ribeiro PJ in HKSAR v Ng Po On.[27]  Similarly, in the judgment of this Court delivered by Yeung VP in HKSAR v Yung Lai Lai[28]it was determined that section 118(3) of the Copyright Ordinance, Cap. 528, which places a burden on the defendant to prove that he did not know and had no reason to believe that the copy in question was an infringing copy of copyright work, could not be relied upon in the inchoate offence of conspiracy to sell infringing copies.

The proviso

40. Mr Blanchflower submitted that a consideration of the application of the proviso did not come into play because the judge’s error of placing a reverse onus on a defendant in a conspiracy charge was a fundamental error.  In support of that submission, Mr Blanchflower drew the Court’s attention to the statement of Lord Woolf NPJ in Lam Yuk Fai :[29]

“ We have considered whether the proviso should be exercised in the prosecution’s favour but have come to the conclusion that an otherwise perfectly satisfactory summing-up is critically flawed because it placed a persuasive burden of proof on the appellant.”

Mr McCoy SC, for the 3^rd and 4^th applicants, and Mr Donald, for the 5^th applicant, supported those submissions.

II.  The admission of evidence pursuant to section 77F(1) of the Evidence Ordinance

The prosecution failure to ascertain and disclose unused material-unfairness

41. Mr Blanchflower submitted that the judge was in error in admitting the evidence of the four Masters obtained pursuant to the letter of request, given that the prosecution had failed to ascertain the nature and extent of the undisclosed material and obtain that material for disclosure to the defence.  The “investigative prosecuting and judicial authorities” of the People’s Republic of China had failed to disclose that material.  In consequence, the prosecution had failed to discharge the duty of disclosure imposed on the prosecution.  Accordingly, the right of the 1^st and 2^nd applicants to a fair trial was breached.

No unfairness likely to occur

42. Furthermore, he submitted that the judge had erred in determining, pursuant to section 77F(1)(d)(iii) of the Evidence Ordinance, Cap. 8, that “no unfairness was likely to occur in those proceedings” consequent upon the evidence taken in the Mainland being admitted into evidence in the proceedings in Hong Kong.[30] Although the defence had been provided with the statements of the four Masters made to the Mainland authorities on 25 February and to the Hong Kong authorities on 25 March 2010, there was no dispute that the parties, and the Court itself, had not been provided with all of the disclosable unused material relating to the four Mainland Masters.  There was no dispute that they had made many other statements before and after those dates.  As a result, the defence was deprived of the full opportunity of demonstrating the unreliability and incredibility of those witnesses.

43. Mr McCoy submitted that, given that the undisclosed material related to four immunised accomplice witnesses, no judge could be satisfied that no unfairness was likely to occur in consequence of their testimony being admitted into evidence at the trial.

No unfairness : flawed and inadequate reasons

44. Mr Blanchflower and Mr McCoy submitted that, in ruling the evidence of the four Mainland Masters and related exhibits admissible in the trial in Hong Kong, the judge had taken into account “irrelevant matters and/or matters unsupported by evidence”.  Furthermore, it was contended that he had provided inadequate reasons for his determination that he was satisfied that no unfairness would result to the defence.

Credibility and reliability of the four Masters

45. Next it was submitted that the judge had failed to consider and evaluate matters relevant to his determination as to the credibility and reliability of the erred four Masters and, in consequence, had erred in finding that they were credible and reliable witnesses.  He failed to have proper regard to the fact that they had lied in the accounts that they had given to the Mainland investigating authorities, to the Mainland courts and in the commission proceedings.

III.  The judge’s reliance on the prosecution’s forensic accountant’s evidence

46. It was submitted that the judge erred in relying on Mr Cheung Yuk Lam, the prosecution forensic accountant, given that he had no experience in or knowledge of either oil trading or the fishing industry, whose opinions were based on incomplete evidence.

47. Then, it was contended the existence and use of white and yellow invoices by Chi Shing was not proof of the conspiracy alleged in Charge 1.  Similarly, it was submitted that evidence that the applicants permitted their personal accounts to be used to receive and make payments for Chi Shing’s business was not evidence in proof of the conspiracy or of their involvement thereto.  Next, it was said that Mr Cheung’s observations as to the rise in sales of marked oil at a time when there was a fishing moratorium were irrelevant since the moratorium which began on 16 May had ended on 1 August 2009, before any of the four fishing vessels conned by the four Masters began their smuggling voyages.  Also, it was contended that Mr Cheung did not have regard to all the relevant evidence, in particular the ambit of the moratorium and its effect on other marked oil suppliers.

48. Then, it was submitted that the judge erred in relying on Mr Cheung’s evidence that the total amount deposited into Chi Shing’s bank account was $228 million in excess of sales of marked oil over the same period.  That was factually wrong.

49. Further, it was contended that the judge erred in having regard to the disparity between the personal wealth of the 1^st and 2^nd applicants, having regard to their modest salaries and the annual profits of Chi Shing in the period 2007-2009.

50. Finally, it was submitted that the judge erred in having regard to the fall in the sale of oil by Chi Shing in the period immediately following the arrests of the co-conspirators, beginning on 31 January 2010.  Not all the relevant evidence had been considered, including the fact that : the period encompassed the Lunar New Year holidays; the 3 Chi Shing underwent maintenance and no comparison was made with the sales of other oil traders.

IV.  Other grounds of appeal

Charge 1

51. Praying-in-aid the matters canvassed earlier, it was submitted on behalf of all of the applicants that there was insufficient evidence to support a conviction in respect of the conspiracy alleged in Charge 1 or the participation of the respective applicants in that conspiracy.

52. Further, Mr Blanchflower submitted that the judge erred in placing reliance on the ‘Lack Chai’ notebook[31], which had been found at the home of the 1^st and 2^nd applicants on 3 May 2010, and the fact that one of the four Masters, Feng Jiu, had signed a white Chi Shing invoice dated 28 November 2009 for 120,800 litres of marked oil, for which $500,000 was payable,[32] and which had been seized at the Mei Fung Court office of Chi Shing on 3 May 2010.  There was no evidence that the notebook related to Charge 1.  It could have been a sale to another vessel belonging to Cheng Kam Shui.  The invoice only proved the sale on one occasion of marked oil to one of the four Masters.  It did not prove the existence of a conspiracy.

Charge 2-6

53. On the basis that the judge erred in convicting the applicants of the conspiracy averred in Charge 1, it was contended that it followed that he was in error in convicting them of the individual charges which they faced of dealing in monies that had their provenance in the sale of marked oil, respectively Charge 2 - 1^st and 2^nd applicants; Charge 3 - 3^rd applicant; Charge 4 - 5^th applicant; and Charge 5 - 4^th applicant.  The judge erred in finding that they ‘knew’ that the monies, with which they dealt, were the proceeds of an indictable offence.

The 5^th applicant

54. In addition, it was submitted on behalf of the 5^th applicant that the judge had failed to give weight to the fact that the 5^th applicant, the wife of Cheng Kam Shui, had assisted her husband in running their own fishing boats throughout the period, namely before, during and after that alleged in Charge 1.  Her role was to receive payments from remittance agents and to deposit cash into the bank account of Chi Shing as payment for marked fuel used on those vessels.  Further, the judge had failed to give adequate reasons for his findings.  Finally, it was contended that the judge was wrong to rely on the evidence of Chen Ruihong of the 5^th applicant’s knowledge of his role in smuggling and of her assistance to him.[33]

Charges 6 and 7 (3 May 2010)

55. It was submitted on behalf of the 1^st and 2^nd applicants (Charge 6) and the 3^rd applicant (Charge 7) that the judge erred in convicting the applicants of the respective charges.  The Court was asked to note that Charges 6 and 7 alleged offences of dealing in the proceeds of an indictable offence on 3 May 2010, whereas the conspiracy alleged in Charge 1 had come to an end on 1 February 2010.  The prosecution alleged that the impugned monies dealt with on 3 May 2010 came from the commission of that offence.  Then, it was pointed out that Chi Shing had continued its business of selling marked oil in the period of three months before the date of the offence.  Notwithstanding a sharp drop in the volume of sales of oil in those months, compared with the period of the conspiracy, nevertheless hundreds of millions of dollars of sales were generated in those three months and the pattern of depositing large amounts of money in cash with the bank continued.  The monies the subject of these charges could have had those legitimate sources as their provenance.

56. Finally, it was submitted that in convicting these applicants of these charges the judge had failed to give adequate reasons, in particular to address the issues raised on their behalf in submissions.

The Respondent’s Submissions

Section 94A of the CPO

57. On behalf of the respondent Mr Robert Lee SC submitted first that the judge’s reference to section 94A of the CPO was merely “a comment”.  He pointed out that that is how the judge had addressed the issue at the outset.  It was not to be taken as contradicting the statement he had made immediately before as to the ingredients of the offence, namely :[34]

“ For the 1^st charge, therefore the prosecution must prove beyond reasonable doubt the existence of an ongoing conspiracy to export unmanifested cargo; the defendants knew there were these ongoing smuggling activities and they each participated in it; and/or the evidence supports the drawing of an irresistible inference that the defendants were parties to the smuggling conspiracy.ˮ

58. It was submitted that the judge’s subsequent analysis in respect of the evidence relevant to the 1^stto 5^thapplicants in relation to Charge 1 was consistent with that direction.[35]　 No reference was made to the presence or absence of manifests.

59. Alternatively, it was contended by the respondent that section 18 of the I & E Ordinance is to be construed as creating an offence with an exception/exemption.　It was suggested that the section created an offence of exporting cargo.　　The exception/exemption to the commission of the offence was the preparation and use of a manifest.  It was acknowledged that this construction of the offence created by section 18 had not been advanced in the lower court.

60. Thirdly, it was contended that there was cogent evidence[36] from which an irresistible inference was to be drawn that no manifests had been prepared by the four Mainland Masters, so that in any event the proviso was clearly applicable.

The admission of evidence pursuant to section 77F(1) of the Evidence Ordinance

Disclosure

61. This Court was invited to accept as applicable to Hong Kong the principles in respect of disclosure identified in the judgment of the Court of Appeal of England and Wales in R v Flook[37].　 There is not an absolute obligation on the prosecution to disclose relevant material held outside the jurisdiction by those not subject to the jurisdiction of the Court. 　The obligation is to take reasonable steps to ascertain and obtain relevant unused material.[38]

62. The respondent submitted that the prosecution had discharged its duty of disclosure, in that it had taken reasonable steps to ascertain and obtain the unused material in the hands of the Mainland authorities, as evidenced by the Customs and Excise Department’s letter of 11 April 2012 to the Guangdong Sub-Administration Anti-Smuggling Bureau, in which they asked to be provided with a wide range of information and documentation including all statements made by the four Masters.

No unfairness likely

63. The respondent submitted that the key issue relevant to a determination of the admissibility of the evidence taken from the four Masters was a consideration of whether the unavailable undisclosed material held by the Mainland authorities was materially relevant to an issue in the trial such as to render a fair trial impossible. 　That is an issue of fact to be decided in the specific circumstances of the case. 　Here, it was not known what might be contained in the unavailable undisclosed material. 　The Court was invited to note that in HKSAR v Cheung Wai[39] this Court concluded that the unavailability of a bank security videotape, which had been sought by the defence only eight days before trial, the contents of which were not known because the tape had been destroyed as was the practice after 3 months, did not deprive the applicant of a fair trial.

64. It was submitted on behalf of the respondents that the only relevance of the unavailable undisclosed statements of the four Masters was in respect of their credibility. 　In that context, the Court was asked to note that the four Masters had been cross-examined at length and had given evidence in total over a period of eight days. 　Their respective statements of 25 February and 25 March 2010 had been used extensively in cross-examination of them.　 Further, it was to be noted that none of the　four　Masters　gave　direct　evidence　adverse　to　the　1^stto　4^th applicants.　　Only Chen Ruihong gave evidence adverse to the 5^th applicant.

65. Finally, it was submitted that the judge was clearly alive to the considerations relevant to the precondition provided by section 77F(1)(d), namely that he was required to be satisfied that no unfairness was likely to occur in the proceedings in consequence of admitting the testimony of the four Masters. 　He was entitled to rule the evidence admissible.

The judge’s reliance on the prosecution’s forensic accountant evidence

66. It was contended on behalf of the respondent that no expert evidence was required to analyse, compare and contrast the data recorded on the white and yellow Chi Shing Chi Shing invoices, together with the VCS forms. 　The available material was sufficiently complete to permit that comparison. 　That exercise by itself permitted the drawing of compelling inferences adverse to the applicants.

67. Of the evidence of the mixing of monies between the respective accounts of the applicants and the accounts of Chi Shing, it was contended that its relevance lay in the evidence of Mr Cheung that it was imprudent commercially and unnecessary since the monies could have been remitted directly to the accounts of Chi Shing.  Also, it was to be noted that there was a net flow of funds in the period 1 June 2009 and 31 January 2010 in favour of the 1^st and 3^rd applicants, respectively of $19 million and $9.1 million.

68. It was submitted that the increase in sales of oil by Chi Shing in the period 1 June 2009 and 31 January 2010 was relevant, in particular given the fact that a fishing moratorium was in place from 16 May to 1 August 2009.  Further, the sharp decrease in sales in February 2010 by 75%, coinciding with the arrest of Cheng Kam Shui, was an indication of the significance of his smuggling to the sales of Chi Shing.

69. It was contended that the relevance of the modest salaries of the 1^st to 4^th applicants lay in the fact of the acquisition of assets by the 1^st to 3^rd applicants and the deposit of monies into the bank account of the 4^th applicant.  Finally, it was submitted that the significance of an excess of deposits into Chi Shing’s bank accounts over sales of oil in the period 1 January 2009 to 3 May 2010 lay in the absence of any explanation in the Chi Shing Ledger for any source of income other than from the sale of oil.

The judge’s determination of the credibility and reliability of the four Masters

70. Mr Lee submitted that the judge made clear in his Reasons for Verdict that he was alive to the fact that the four Masters were accomplices, whose evidence he recognised required to be scrutinised “both critically and thoroughly”.  The judge acknowledged their possible motive of securing an early release from prison and the fact that there were inconsistencies between their out-of-court statements and their oral testimony.  Further, he noted that Fung Jiu and Chen Ruihong admitted that they had lied whilst at an early stage Huang Shunping and Shi Rubin were reluctant to disclose information to the Mainland authorities.  The judge was entitled to accept their testimony, as he did.

A CONSIDERATION OF THE SUBMISSIONS

The admission of evidence pursuant to section 77F(1) of the Evidence Ordinance

Letter of Request

71. In consequence of an ex parte originating summons, filed on 24 December 2010, the Secretary of Justice obtained an order from Pang J, filed on 6 January 2011 with the High Court, that a Letter of Request be issued to the Supreme Court of the People’s Republic of China for assistance in obtaining evidence in this case.  The order sought the examination of the four Masters and stipulated that the evidence to be obtained from each of them :

“ …is the subject matter referred to in his statement made on the 25^th day of March 2010 and any other matters arising therefrom.”

Provision was made in the order for the appointment of a District Court judge to assist in the examination of the witnesses.

Evidence taken on commission

72. By order of the Supreme Court of the People’s Republic of China effect was given to the letter of request and evidence was taken from the four Masters at the Shenzhen Intermediate People’s Court before Judge Zeng and Mr Commissioner Geiser on various dates on and between 14 and 18 May and 6 and 9 August 2012.  Mr Luk SC conducted examination on behalf of the HKSAR, whereas cross-examination of the witnesses was conducted by counsel for the applicants, respectively Mr Blanchflower for the 1^st and 2^nd applicants, Mr Delaney for the 3^rd and 4^th applicants and Mr Donald for the 5^th applicant.

Disclosure by the prosecution

73. The statements taken from the four Masters by the Mainland authorities on 25 February 2010 were provided to the defence by a letter dated 2 March 2012 from the Customs and Excise Department to solicitors representing the applicants.  That was more than 2 months in advance of the hearing in the Shenzhen Intermediate People’s Court.

Defence requests for unused material relevant to the four Masters and the response of the prosecution

74. At the oral hearing in this Court, although the Court repeatedly requested the parties to be provided with a complete account of the requests made by the applicants for disclosure of unused material and the responses of the respondent, together with correspondence and/or other relevant documentary records our request was not met in full. Following the oral hearing the Court invited the parties to comply with this request and was provided with more information and supporting documentation.

7 June 2011

75. The first request for disclosure of material to the defence was made on behalf of the 1^st to 4^th applicants of the prosecution by a letter from Littlewoods dated 7 June 2011.  Comprehensive and detailed requests for disclosure were made in respect of material in relation to Cheng Kam Shui and the four Masters.

15 August 2011

76. By a letter dated 15 August 2011 to the Anti-Smuggling Bureau of the Guangdong Sub-Administration General Administration of Customs, the Customs and Excise Department detailed the information they said that they had obtained from the latter in the course of their mutual investigation and asked to be advised, “whether the above information can be disclosed to the Defence”.  The letter stated that counsel for the defence had written to the Department of Justice requesting disclosure by them of all information obtained in the course of investigations relating to the four Masters and Cheng Kam Shui.  The information described as having been obtained in that exchange included written records of examinations of Chung To Yee, Cheng Kam Shui and Jiang Yan Qiong, but not in respect of any of the four Masters.

17 August 2011

77. By a letter dated 17 August 2011 to the Customs and Excise Department, the Anti-Smuggling Bureau of the Guangdong Sub-Administration General Administration of Customs replied confirming the exchange of information as described in the earlier letter and replying to the request for consent for disclosure to the defence :

“ In accordance with the Co-operative and Mutual Assistance Arrangement between the General Administration of Customs of the Mainland and Hong Kong Customs and Excise Department, the aforesaid information is for the sole purpose of intelligence, and not to be disclosed to third parties nor produced in court as evidence.” [Italics added.]

7 December 2011

78. By a letter to the Department of Justice, dated 7 December 2011, Littlewoods repeated their requests for disclosure set out in their letter of 7 June 2011, including that made in respect of Cheng Kam Shui and the four Masters.

6 January 2012

79. By a letter to the Department of Justice, dated 6 January 2012, Littlewoods complained that they had received no reply to their requests of 7 June and 7 December 2011.  Further, they asked for specific details to be provided of the steps taken by the Department of Justice “to obtain the requested information or material from the relevant Mainland authorities”.

13 January 2012 - hearing in the District Court

80. At a hearing before District Court Judge Anthea Pang, as she was then, the prosecution informed the Court that disclosure would be made to the defence the next day or soon thereafter of material obtained from the Mainland authorities. Mr Blanchflower informed the Court that the defence request for disclosure encompassed not only material in the possession of the prosecution but also material in the possession of the Mainland authorities, which the prosecution were requested to ascertain and obtain.

7 February 2012

81. By letter to the Department of Justice, dated 7 February 2012, Littlewoods complained that disclosure had not been made of the material requested of the prosecution in their letters of 7 June, 7 December 2011 and 6 January 2012, notwithstanding the statement of the prosecution at the hearing in the District Court of 13 January 2012 that the material would be disclosed in the near future.

2 March 2012 - disclosure

82. By a letter, dated 2 March 2012, from the Customs and Excise Department to solicitors representing the applicants[40], unused material was served on the applicants.  Included in that material, were the statements of the four Masters dated 25 February 2010, together with their consents to give evidence dated 19 April 2010.  Also provided were no fewer than 10 statements of Cheng Kam Shui, of which seven were taken in February, beginning 4 February, and three in March 2010, ending 6 March 2010, and his statement dated 25 March 2010.  The bulk of that material was described as having been provided by the Anti-Smuggling Bureau of Shenzhen Customs in March 2010.

83. No doubt in response to the request made in Littlewoods’ letter of 6 January 2012 for details of all actions taken to obtain “the requested information or material from the relevant Mainland authorities”, the letter set out a descriptive chronology of what was described as :

“ the actions that have been taken for the purpose of investigation and prosecution.”

84. In summary, using the acronyms used in the text, it was asserted that :

·  22 March 2010 - a request had been made of the Guangdong Sub- Administration of China Customs (“GSCC”) to interview Cheng Kam Shui and the four Masters, which had resulted in their statements dated 25 March 2010, those relating to the four Masters having been served in a Witness Statement Bundle;

·  19 April 2010 - Cheng Kam Shui and the four Masters had given their consent to give evidence in a Mainland court;

·  30 August 2010 - a request was made of GSCC for details of the places of detention of Cheng Kam Shui and the four Masters, which information was provided.  Information was received that Cheng Kam Shui declined to give evidence in proceedings involving his wife, the 5^th applicant;

·  15 August 2011 - a request was made of GSCC for consent to disclose “documents and materials from them to the Defence counsels”;

·  17 August 2011 - the request was denied by GAC[41];

·  23 November 2011 - a request was made of GSCC seeking information about the price of marked oil in the PRC;

·  7 December 2011 - that information was provided.

16 March 2012

85. By a letter dated 16 March 2012 Littlewoods, acting for the 1^st to 4^th applicants, wrote to the Department of Justice asserting that the prosecution had failed to discharge its duty of disclosure, including unused material.  It was noted that repeated requests for disclosure of that material had been made on 7 June and 7 December 2011, 6 January 2012 and 8 March 2012.  Obviously quoting from the request for disclosure of material in the letter dated 7 June 2011, it was asserted that disclosable requested material had not been disclosed, namely :

“ 5. All previous drafts of all witness statements, and prior statements for all prosecution witnesses, including notes, records, and memorandums, in whatever form (electronic or written).

6. Criminal records and disciplinary record, if any for all prosecution witnesses.

……..

8. All materials in relation to the investigation of those main conspirators other than D1-D5 in charge 1, namely: CHENH Kam-shui, FENG Jiu, CHEN Ruihong, HUANG Shunping, SHI Rubin (the latter four hereinafter as “PRC witnesses”).

9. In relation to the PRC witnesses, all information and materials, recorded in any form or by any means with regard to:

(1) All offences or contraventions in law that they have been investigated for and/or charged with and prosecuted in China at any time (collectively “PRC charges”) and the circumstances of their arrest, detention and punishment;

(2) All notes, records, memorandums or statements in whatever form (electronic or written) may directly or indirectly by any of them in relation to the PRC charges and Hong Kong offences;

(3) Whether any rewards or inducements, including but not limited to any actual reduction in sentence, promises not to investigate their families, promises for reduction sentence or more lenient treatment whilst in custody, were offered, or to be offered, or granted to them at any time after their arrests;

(4) The state of progress of the prosecution of them and their pleas regarding PRC charges, including any negotiations with any authorities in China;

(5) Contact details of the legal representatives(s) for the PRC Witnesses, and any submissions made on their behalf in court in China or to the prosecution or law enforcement authorities regarding the PRC charges;

(6) Information about all contacts, discussions, communications or meetings with the PRC witnesses by: (i) Hong Kong law enforcement or prosecuting authorities, and/or (ii) China law enforcement or prosecuting authorities, in relation to the PRC charges, the alleged offences in DCCC 3/2011, or any other offences, in Hong Kong or China; and

(7) Copies of all charges or accusation (or such similar document under the law in China) against the PRC Witnesses, as well as records or statements of the PRC charges.

10. All information and materials regarding Cheng Kam Shui - to the same scope of the information is requested in paragraph 9 above is applicable to him, including, but not limited to any investigation, arrests, charges, detention or prosecution against him .”

11 April 2012

86. In a letter dated 11 April 2012, the Customs and Excise Department asked the Guangdong Sub-Administration Anti-Smuggling Bureau to provide a wide range of information, including statements and documentation, in respect of the treatment of the four Masters and Cheng Kam Shui by the Mainland authorities following their arrests.  It was noted that the defence sought the provision of the material on the basis that it was needed on the “principle of fair trial”.  The material requested was :[42]

“ (1) Copy of all statements made by the person stated above;

(2) After their arrests, whether any rewards or inducements, including but not limited to any actual reduction and sentence, undertaking not investigating their families, undertaking producing their sentence all lenient treatment whilst in custody, has been offered will be offered;

(3) The circumstances of the arrests, detention and punishment of the person stated above;

(4) All notes, memorandums or statements [including written or electronic record] obtained directly or indirectly;

(5) Contact details for the legal representative(s) for the person stated above, and any statement submitted on their behalf to court(s), prosecution authorities or law enforcement authorities;

(6) The state of progress of the prosecution and pleas, including any plea negotiations with any Mainland law enforcement for prosecuting authorities.

(7) Record of information about all contracts, discussions, communications or meetings made with the Mainland law enforcement for prosecuting authorities;

(8) The relevant charge sheets [or such similar document under Mainland law], criminal records or statements; and

(9) The relevant decisions, judgments and sentence concerning the person stated above.”

25 April 2012

87. By a letter, dated 25 April 2012, the Guangdong Sub-Administration Anti-Smuggling Bureau advised the Customs and Excise Department :[43]

“ Pursuant to the provisions of the Criminal Procedure Law of the People’s Republic of China and Customs Co-Operative Arrangement between the Customs General Administration and the Hong Kong Customs and Excise Department, our side does not provide the materials requested in your letter.” [Italics added.]

26 April 2012

88. By a letter, dated 26 April 2012, the Department of Justice replied to Littlewoods letter of 16 March 2012, asserting that further unused material had been served on Littlewoods on 24 April 2012 and on the 5^th applicant on 23 April 2012.  In response to Littlewoods letter of 16 March 2012, it was asserted that :

“ Para 3:

………….

9. All information and material in relation to the PRC witnesses that are in the possession of HKCE have been provided to you (by way of service to March and 24 March 2012 (sic)) .

10. All information and materials relating to CHENG Kam shui have been provided to you on 2 March 2012 or been listed in the above updated List of Unused Material.

Para 5:

We do not have the judgment or ruling on the convictions of the 4 PRC witnesses and CHENG Kam shui in connection with the alleged smuggling of marked oil into PRC.  Nor do we have any statement/certificate of their respective sentences.”

27 April and 4 May 2012 - Pre-trial reviews

89. Pre-trial reviews were conducted by Judge Geiser on 27 April and 4 May 2012 in which the issues of disclosure of unused material were addressed.

27 April 2012

90. In the course of the pre-trial review conducted by Judge Geiser, Mr Blanchflower complained that “it would appear that the attitude of the prosecution is that that if they have in possession, it will be disclosed if they don’t have it in possession, it will not be disclosed.”  In the context of that assertion, he submitted that :[44]

“ prosecution has a duty in law to ascertain if disclosable material exists in Hong Kong or in the Mainland; disclose what is in its possession of, according to Hong Kong law, and I will come to that second point, because material is in the possession of Hong Kong prosecution; and third material in the Mainland to make those efforts to obtain.”

91. In the context of the letter, dated 25 April 2012, from the Guangdong Sub-Administration Anti-Smuggling Bureau advising the Customs and Excise Department of their negative response to the request for disclosure of material set out in their letter of 11 April 2012 and the reasons provided to explain that decision Mr Luk noted, “if we accept what they say in this letter, then it seems that according to their law, they will not provide those documents that we require.”[45] Nevertheless, Mr Luk undertook to make further enquiries, “all we can do is to try our best to make requests to the PRC side and if they refuse, I’m afraid there is nothing we can further do.”[46]

4 May 2012

92. On 4 May 2012, Mr Luk confirmed that all disclosable material in the possession of the prosecution, including that obtained from the various Mainland authorities, had been disclosed to the defence :[47]

“ …. there was a letter dated 17 August 2011 from the mainland refusing to disclose certain materials…refusing consent. And, nevertheless, the Hong Kong side on legal advice from the DOJ, since the Hong Kong C&E was in possession of some material, they provided all these to…in other words, they disclose all these to the defence despite the denial of consent from the PRC authorities.”

9 May 2012

93. On 9 May 2012, at the Shenzhen Intermediate People’s Court, at a meeting attended by counsel but not the Commissioner, Judge Geiser, the requests of 11 April 2012 were repeated to Senior Judge Qui and Judge Zeng and a copy of the letter of 11 April 2012 of the Customs and Excise Department and a translation provided to the judges.[48]

94. A letter to Littlewoods, dated 13 July 2012, from the Department of Justice addressed the circumstances of that meeting in some detail.  Of the request for the provision of previous statements of the four Masters, it was asserted that Vice President Yau (Qiu), of the Shenzhen Intermediate People’s Court, had said :

“ that under the PRC laws, only witnesses themselves, their lawyers or family members could have access right to their statements. Neither the HK prosecution team nor that HK defence team has the right to read their statements.”

95. Then, it was asserted that in the face of a renewed request for that material the “Vice President intimated that the documents……. were in the storage and he would seek instruction whether those documents could be provided to you.”  Further, the Vice President was described as having provided the defence with “the judgment and the charge sheet of the PRC case which involved all the four PRC witnesses” and having informed them that “…only CHENG Kam Shiu in his appeal was legally represented, the other four PRC witnesses did not have a lawyer at trial and their cases have been settled.”

14 May 2012

96. At the hearing on 14 May 2012, Mr Delaney, counsel for the 3^rd and 4^th applicants, asked Judge Zeng to request all the four Masters to consent to the release to the defence of all their statements.  Judge Zeng said that on an earlier occasion a negative response has been given to the requests.[49]

6 August 2012

97. At the hearingat the Shenzhen Intermediate People’s Court of 6 August 2012, a request was made on behalf of the 1^st to 4^th applicants to the Court for the disclosure of the particulars of the lawyers acting on behalf of the four Masters.

8 August 2012

98. Finally, a written request was made at the Shenzhen Intermediate People’s Court on 8 August 2012 for the disclosure of one of the witness statements of Huang Shunping, one of the four Masters, made prior to 25 February 2010.  On 6 August 2010, in the course of cross-examination on behalf of the 3^rd and 4^th applicants, he testified that in a statement made prior to 25 February 2010 he had mentioned having made payment for obtaining diesel oil and he gave his permission that it be disclosed to the defence.[50]

99. No reply was received to the requests of 6 and 8 August 2012.

Objection to the admission at the trial of the evidence of the four Masters

100. Counsel for the applicants informed the judge, sitting as a Commissioner in the proceedings in the Shenzhen Intermediate People’s Court, that objection would be taken to the admission of the evidence in the trial in Hong Kong.

101. In due course, on the penultimate day of evidence adduced in the prosecution case, objection was taken on behalf of the applicants[51] to the admission into evidence at the trial in Hong Kong of that evidence, referred to in the Certificate of the Registrar of the High Court dated 21 September 2012, issued pursuant to section 77F(5) of the Evidence Ordinance.[52]  Broadly, the grounds advanced before the judge of those that are advanced in this Court.

The trial : admission of the evidence taken pursuant to the letter of request

Ruling

102. The judge ruled the evidence admissible.[53]  In doing so, he adverted to the provisions of section 77F(1)(d) of the Evidence Ordinance, which provides that the Court be satisfied, having regard to the following matters :

“ (i) whether it is reasonably practicable to secure the attendance of the deponent, taking into account for that purpose his bodily or mental condition or the delay or expense likely to be caused in securing his attendance;

(ii) whether the deponent was cross-examined before such court or tribunal; and

(iii) any other matter which, in the circumstances, appears to the court to be relevant,

no unfairness is likely to occur in those criminal proceedings consequent upon the deposition and any document (if any) exhibited or annexed thereto being admitted in evidence under this section.”

103. Of the basis of the objection to the admission of the evidence, the judge noted of the four Masters whose evidence was in issue that :

“ ...apart from the two records of interview that each of the witnesses made on 25 February 2010 and 25 March 2010, each of them had made other statements after their arrests and up to the time of their trials in the PRC on 11 April 2011 which had not been disclosed.

Counsel submits that as a consequence of this, the admission of the PRC evidence would be likely to cause unfairness to the defendants.  In addition to this, counsel for D3 and D4 submits that a failure to exclude this evidence in the light of the undisclosed material would amount to a breach of Article 10 of the Hong Kong Bill of Rights.”

104. The judge observed that the application was made, not as a result of any non-disclosure by the Department of Justice but as a result of the authorities in the Mainland not releasing those statements to any of the parties.  He accepted that the prosecution had sought to secure material, but “..to no avail”.  Having noted that the four Masters had given evidence over a period of a total of eight days, the judge said :

“ Much of that time was taken up by the witnesses being thoroughly cross-examined inter alia on their statements made on 25 March 2010 and the fact, not the contents obviously, that other statements had been taken from them.”

105. Of those circumstances, the judge said : 

“ In my judgement, therefore, the taking evidence from the PRC witnesses was taken strictly in accordance with the terms of the request and is admissible. I am bound to say that the unavailability of other statements the witnesses have evidently made is unfortunate. However, one cannot speculate as to what they may or may not have said in those statements, nor indeed can one speculate as to what format they took, whether they were four witness statements or merely declarations.

The mere fact that there may be inconsistencies between the oral testimony of each of the individual PRC witnesses and their respective witness statements made on 25 March 2010 does not mean necessarily that other inconsistencies may exist in their undisclosed statements. This, once again, is mere speculation. But even if they did, this would go to the question of weight only.

I am not prepared to say that unfairness is likely to occur to the defendants by the admission of the evidence taken in the PRC, nor am I satisfied that there has been a breach of Article 10 of the Bill of Rights, and in the circumstances of this case I propose to admit the evidence taken in the PRC.”

The out-of-court statements of the four Masters

106. There is no dispute that the extent of the volume of out-of-court statements made to the Mainland authorities, other than those made on 25 February 2010, by the four Masters was established only in cross-examination of them on behalf of the applicants.  Of course, at the outset all the parties possessed the statements dated 25 March 2010 taken from the four Masters by officers of the Customs and Excise of the HKSAR.  All four Masters accepted in cross-examination that there were many other written statements, made from oral interviews of them by Mainland authorities after their arrest on 31 January 2010, which they had adopted.  Feng Jiu said there were “maybe seven”, although he was not clear.[54]  Chen Ruihong agreed that there it “should be the case” that there were more than five such written statements.[55]  Huang Shunping said that there were “as many as 10 to 20” written statements[56] and Shui Rubin said that, although he could not remember how many written statements had been made, there were many.[57]  Broadly, there was common ground as to the method by which the statements had been made : questions were asked and answers made and recorded in a computer; eventually, the record was printed out and after the witness had read the statement that witness adopted it by signing or placing his fingerprint on the document.[58]

The law : the ambit of the prosecution duty to disclose material to the defence

107. As Bokhary PJ observed in his judgment, with which all the other judges agreed, in the Court of Final Appeal in Hall v HKSAR[59] the “rationale, status, nature and scope of the prosecution’s duty of disclosure in Hong Kong” was addressed in the judgment of Sir Anthony Mason NPJ in HKSAR v Lee Ming Tee (No. 2).[60]  In his judgment, Bokhary PJ identified the salient features of that analysis :

“ Even if not attributable to any breach by the prosecutor of his duty of disclosure, the non-disclosure to the defence of relevant material can result in material irregularity and an unsafe conviction : pp.382J-383A.  The prosecution’s duty of disclosure is “based on the defendant’s common law right to a fair trial and on the principle of openness” : p.386 I.  This common law right of defendants is provided with constitutional underpinning by arts 39 and 87 of the Basic Law and art.11(2) of the Bill of Rights : p.387B-G.  The prosecution’s duty to disclose relevant material is preceded by a duty to “ascertain” what relevant material exists : p.390I.  And that is not limited to relevant material in the possession or control of the investigating agency concerned.  It extends to such material “in the possession or control of any other government department or agency if there are particular circumstances suggesting that it may have such material” : p.391B-C.  As to the scope of the duty, it is explained (at p.391D-E) that :

“ The prosecution’s duty is to disclose to the defence relevant material (including information) which may undermine its case or advance the defence case. The duty is not limited to the disclosure of admissible evidence. Information not itself admissible may lead by a train of inquiry to evidence which is admissible : R v. Preston [1994] 2 AC 130 at pp 163-164, per Lord Mustill. And material which is not admissible may be relevant and useful for cross-examination of a prosecution witness on credit.” ”

108. Of course, in both Hall and Lee Ming Tee the Court of Final Appeal was concerned with the duties of the prosecution in respect of the disclosure to the defence of material within Hong Kong.  None of the Hong Kong cases cited to us concerned the ambit of that duty in the context of material outside this jurisdiction.  In R v Flook the Court of Appeal of England and Wales addressed that issue in respect of such material located in South Africa, and therefore outside both the United Kingdom and the European Union, in which places different legal regimes obtained.[61]

109. The appellant, Flook, was convicted at trial of two counts of conspiracy to import dangerous drugs into the United Kingdom, namely 7.5 tonnes of cannabis (Count 1) and 165 kg of cocaine (Count 2).  The cannabis was found in a container shipped from South Africa on an inspection of it at Felixstowe Port.  The cocaine was found concealed in mirrors in a shipment destined to be shipped to the United Kingdom from South Africa.

110. After the discovery in June 2006 of the cannabis in the container, close cooperation ensued between the Metropolitan Police authorities and the South African police authorities.  Surveillance was maintained of the appellant when he visited South Africa that month, including his contact with a Mr Tutton and a Mr McKinnon.  In October 2006, the two police authorities made arrests : the appellant in the United Kingdom and Mr Tutton and Mr McKinnon in South Africa.  In response to the service of an International Letter of Request from the Crown Prosecution Service in United Kingdom, the South African authorities provided material that had been specifically identified but, in addressing a “general sweep up” request to be provided with “any other evidence which would be of use to the investigation”, the South African authorities declined to allow Metropolitan Police officers, who were permitted to inspect that material, to copy, make notes or list that material in a schedule.  That stance was taken to avoid compromising the prospective prosecution of Mr Tutton and Mr McKinnon, together with another person, in South Africa.

111. At the outset of the trial a request was made by the defence for disclosure.  Although no written response was made to the request, the defence was informed orally that the South African authorities would not hand over any other papers other than those served by the Crown on the defence.

112. On the appeal, issue was taken that the prosecution had failed in its duty to disclose unused material, such that the appellant did not have a fair trial.

113. In the judgment of the Court, Thomas LJ, as he was then, noted that the prosecution’s general obligations of disclosure are provided for by the Criminal Procedure and Investigations Act, 1996 together with the Code of Practice issued thereunder and the Attorney General’s Guidelines of 2005.  However, he noted that no special provision was made in relation to “material held by individuals or companies overseas or by foreign government authorities”.[62]  Furthermore, he said that whilst the Crown Prosecution ‘Disclosure Manual’ addressed international disclosure issues, requiring investigators to “pursue all reasonable lines of enquiry”, that manual was only “a service level agreement between the police and the Crown Prosecution Service.”[63]

114. Notwithstanding the fact that the legislation, Code and Guidelines were expressed only in a domestic context, Thomas LJ said it was clear that :[64]

“ the obligation of the Crown (whether investigator or prosecutor) is to pursue reasonable lines of enquiry in relation to material that may be held overseas states outside the European Union.... ........If it appears that there is relevant material, than the Crown must take reasonable steps to obtain it, either informally or making use of the powers contained in the crime (International co-operation act 2003 and international conventions.)”

115. Nevertheless Thomas LJ went on to say :

“ However, it is self evident that where there may be material relevant in that sense overseas outside the European Union, the power of the Crown and the courts of England and Wales to obtain material is limited. Essentially, if informal requests for the material are declined, the powers are limited to what is set out in the Crime (International Co-operation) Act 2003 and in relevant international conventions, such as the Drugs Convention. There may be cases where a foreign entity will simply not make the material available, a foreign court will not compel production under a Letter of Request and steps under the relevant convention will not produce the documents. There may be other cases where the authorities of a foreign state, though willing to show material to officers acting on behalf of the United Kingdom, will not allow the material to be copied or otherwise made available and the courts of the foreign state will not order its provision.

There cannot, for these reasons, be any absolute obligation on the Crown to disclose relevant material held overseas outside the European Union by entities not subject to the jurisdiction of these courts; the position is quite different to the position where the information is held in the United Kingdom or by a person amenable to the jurisdiction of these courts. As Sir Igor Judge said in R v Khyam [2008] EWCA Crim 1612 at paragraph 37:

‘ The prosecuting authorities in this jurisdiction simply cannot compel authorities in a foreign country to acknowledge, let alone comply with, our disclosure principles.’

The obligation is one to take reasonable steps.  Whether the Crown has complied with that obligation is for the courts to judge in each case on the provision of full information to the court.”

116. There is an absence in Hong Kong of any legislation in respect of disclosure of material by the prosecution to the defence or of any related Codes or Guidelines.  The Department of Justice’s ‘Statement of Prosecution Policy and Practice’ contains a chapter which addresses the ‘Duty of Disclosure’.  However, it does not purport to address the disclosure of material located outside the jurisdiction.  Nevertheless, the principles identified in Flook in respect of such material, namely that in such circumstances the prosecution’s duty is to “pursue reasonable lines of enquiry” to identify the material and “to take reasonable steps to obtain it” resonate with the principles in respect of disclosure identified in the judgment of Sir Anthony Mason NPJ in Lee Ming Tee (No.2).  We are satisfied that those obligations apply in like manner to the prosecution in Hong Kong.

Steps taken by the prosecution to identify and obtain disclosable material relevant to the four Masters

117. There is no dispute that the Customs and Excise Department were provided, inter-alia, with the statements dated 25 February 2010 of the four Masters by the Mainland authorities in March 2010, as asserted in their letter dated 2 March 2012 to the solicitors representing the applicants.  However, those statements were not stipulated as being in the material in respect of which on 15 August 2011 the Customs and Excise Department sought the consent of GSCC to disclose to the defence.  The statements of the four Masters dated 25 February 2010 were disclosed to the defence for the first time by the letter of the Department of Justice dated 2 March 2012.

118. It was apparent from the face of all of the statements of the four Masters dated 25 February 2011 that, as was noted by Littlewoods in their letter of 16 March 2012, earlier statements had been taken from them. Similarly, again noted by Littlewoods in that letter, that much was confirmed in respect of Feng Jiu by a reference in the penultimate question in his statement of 25 February 2010 to discrepancies between that account in respect of payments for marked oil and “previous written statements”.[65]

119. In his submissions in support of his application that the testimony of the four Masters be admitted into the trial in Hong Kong Mr Luk asserted that the “prosecution and DOJ had made several attempts to ask for previous statements, documents, notes, et cetera, to be disclosed to the Hong Kong side so we can forward that to the defence. Despite our efforts, we have failed to gain access to those documents.”[66] However, no details of such requests were provided, let alone any correspondence or attendance notes.  There does not appear to have been any evidence before the judge of any such requests prior to 11 April 2012.  The letter from the Customs and Excise Department dated 15 August 2011 to the Anti-Smuggling Bureau of the Guangdong Sub-Administration General Administration of Customs the Customs and Excise Department merely sought consent to disclose material already provided by the Mainland authorities to the Customs and Excise Department, it did not seek further disclosure.

120. There is no dispute that the prosecution, through the Customs and Excise Department’s letter of 11 April 2012to theGuangdong Sub-Administration Anti-Smuggling Bureau sought, to obtain for the defence a wide range of information, including documentation, in respect of the dealings with the four Masters by the Mainland authorities following their arrests.  It was stated in terms in that letter that the information was sought on the principle of fair trial.

121. At the pre-trial review of 27 April 2012 the prosecution was enjoined by the judge to renew its request of the Mainland authorities for the provision of the requested material in relation to the four Masters. At the pre-trial review of 4 May 2012, Mr Luk informed the Court that the prosecution had complied with the Court’s request but said that the renewed requests to be provided with that material had met with a negative response.  Again, no detail at all was provided of whom, by whom, when or how that request was made.  It is unfortunate that such obviously available detail was not forthcoming.  Nevertheless, it is clear that no issue was taken with the assertion.

Conclusion

122. In the result, having regard to the requests made of the Mainland authorities in the letter of 11 April 2012 and the subsequent repeated requests adverted to by Mr Luk on 4 May 2012, we are satisfied that the prosecution took reasonable steps to ascertain and obtain the material in the hands of the Mainland authorities relevant to the four Masters which was disclosable to the defence.  There is no dispute that the material lay beyond the powers of the Courts of Hong Kong to compel production and thereby to afford disclosure to the defence.  As Thomas LJ observed in Flook, as noted earlier, in such circumstances :

“ There cannot, for these reasons, be any absolute obligation on the Crown to disclose relevant material held overseas ...... by entities not subject to the jurisdiction of these courts.”

The admission of the evidence of the four Masters : no unfairness likely to occur

The Law

123. Obviously, the provisions of section 77F(1)(d) of the Evidence Ordinance stipulate preconditions for the admission of the evidence of the four Masters at the trial of the applicants.  There is no dispute that the general rule is that the party adducing evidence has the burden to prove any necessary preconditions.[67] When the party seeking to adduce the evidence is the prosecution, the appropriate standard is beyond reasonable doubt.  Although the judge did not advert to those matters, they being elementary matters of law, we have no doubt that he bore them in mind.  It was not submitted otherwise.

124. With respect to Mr Blanchflower, we are not assisted by the judgment of Lord Cameron in the High Court of Justiciary in Scotland in Muirhead, Petitioner[68]. In that case the petitioner was a defendant awaiting trial for fraud.  He sought the issue of a letter request to the Four Courts, Dublin seeking the taking of evidence by interrogatories from a witness.  The Crown opposed the application.  The application was made pursuant to the provisions of section 32 of the Criminal Justice (Scotland) Act 1980.  Section 32(2) provides inter-alia that the application may be granted only if the judge is satisfied that :

“ (b) there would be no unfairness to the other party were such evidence to be received in the form of the record of an examination conducted by virtue of that section.” [Italics added.]

125. As is readily apparent, the statutory provisions are quite different.  Section 32(2) requires that the judge be satisfied “there would be no unfairness to the other party”, whereas section 77F(1)(d) of the Evidence Ordinance requires that the judge be satisfied that “no unfairness is likely to occur in the proceedings”.  Clearly, it was the requirement of the former provision that led Lord Cameron to say of the statute “..it is that no unfairness will arise, not that the degree of unfairness is of relevance.  Thus the obligation on an applicant is a heavy one.”[69]

126. In his written reply to the respondent’s submissions Mr Blanchflower cavils with the respondent’s assertions that the undisclosed previous written statements of the four Masters was relevant to their credibility only.  However, that was the nub of the written submission he made objecting to the admission of that evidence at trial :[70]

“ The four witnesses are named co-conspirators in Charge 1.  They are important witnesses to the prosecution. Their credibility is a “prime issue.”

The prosecution obtained evidence from the witnesses based upon that 25 March 2010 statements and seeks to use the evidence against the Defendants.  However, without disclosure of the records of interviews the credibility of the witnesses cannot be effectively and fully explored by the defendants.”

127. We are satisfied that the potential significance of the undisclosed material relevant to the four Masters was correctly identified by Mr Blanchflower in his submission to trial.  The obvious relevance of such material lay in whether or not it might undermine the credibility of the accounts given by the four Masters.

The nature of the witnesses

128. That the judge was fully aware of the kind of witnesses that the four Masters were, was made clear in his Reasons for Verdict :[71]

“ ...no doubt they are scoundrels, indeed they are co-conspirators and took part in the implementation of the smuggling of marked oil on the instructions and at the behest of Cheng Kam-shui who employed them. Of this, I have no doubt at all.”

129. Having noted that they were accomplices in the conspiracy the subject of Charge 1, the judge said that “..he scrutinised their evidence both critically and thoroughly”.

130. The judge said that the unavailability of the other statements admittedly made by the four Masters was “unfortunate”.  No doubt, given the fact that submissions had been made on behalf of the applicants as to the relevance of those statements to the determination of the credibility of those witnesses, that determination was made in the context of the lost opportunity for the defence, and for that matter the Court, to have available to it all material potentially relevant to the credibility of those witnesses.  Equally, he was entitled to determine that it was not appropriate to speculate as to the contents of those statements.  That much was obvious.  Since they were not available, their contents were not known.  Similarly, he was right to say that if they did contain inconsistencies those were matters that went to “the question of weight only”.  No doubt, he meant by that that an inconsistent out-of-court statement was a matter that was relevant to the determination of the credibility and reliability of the evidence of a witness in court.

131. As noted earlier, the context in which the judge considered the issue of unfairness to the applicants, arising from the lost opportunity of using the other out-of-court statements of the four Masters in cross-examination of them, was the actual cross-examination which was conducted.  He was correct to take that approach.  Of their testimony, he noted that they had given evidence over a total of eight days, much of which was taken up with cross-examination.

The four Masters : the judge’s findings

132. As noted earlier, although the evidence of the four Masters had been taken on a total of eight days in May and August 2012 the judge was not called upon to rule on the admissibility of their evidence in the trial of the applicants until the penultimate day of the prosecution case, 22 October 2012.  After the Ruling, the remaining witness called to give oral testimony for the prosecution was an Immigration officer, who spoke to the uncontroversial issue of the provenance of the photograph of Cheng Kam Shui, which had been used for purposes of identification in the testimony of the four Masters.  Then, Mr Lai Kam Wing, an expert witness, was called as the only witness in the defence case.  It follows that at the time at which the judge made his ruling in respect of the admissibility of the evidence of the four Masters he was very well-placed to address the requirements of section 77F(1)(d) in the context of the evidence in the proceedings.

133. The judge’s findings in respect of the inconsistencies of the accounts given by some of the four Masters in testimony in contrast to their out-of-court statements and the lies that they had told were all matters established and, in effect, accepted in the course of the testimony of the four Masters and therefore known to him at the time of his ruling.  No doubt, it was with that in mind that in his ruling he referred to the length of their testimony and the ambit of cross-examination.  Clearly, that was the context in which the judge considered the issue of unfairness in determining to admit the evidence.  In the event, the Judge found :[72]

“ I have also considered most carefully the fact that there are inconsistencies between the PRC captains’ various written statements made to the PRC and the oral testimony they gave during the commission hearing. In addition, both PW197 and PW198 admitted that they had lied, whilst PW199 and PW200 had both displayed some reluctance to divulge information to the authorities in the earlier stage of the investigation. ”

134. On the other hand, the judge went on to accept the explanation that they gave for having told those lies :[73]

“ The captains testified that they had been threatened by Cheng Kam-shui not to reveal anything about him or the company. I found that this had a ring of truth about it and provided the explanation which I accept for their initial reluctance to be forthcoming with the PRC authorities...”

The ambit of the evidence of the four Masters

135. Although the judge did not advert to it specifically, another matter relevant to a determination that no unfairness was likely to enure to the applicants by the admission of the testimony of the four Masters was the significance of that evidence not only to the prosecution case but also to the cases of the individual applicants.  Obviously, their evidence, if accepted, established a conspiracy between Cheng Kam Shui and the individual Masters to smuggle marked oil into the Mainland and, more contentiously, a conspiracy to export unmanifested marked oil from Hong Kong.  It was their evidence that they were directed by Cheng Kam Shui to obtain marked oil from Chi Shing oil barges positioned at Pak Shek Kok in Hong Kong.  They identified photographs of three vessels, namely Chi Shing, Chi Shing 18 and Chi Shing 28 as the vessels from which they obtained marked oil on these voyages.[74]  Sometimes they obtained the marked oil on credit and on other occasions they paid in cash.  The former practice implied an arrangement between Cheng Kam Shui and Chi Shing.

136. None of the four Masters testified of any contact whatsoever with the 1^st to 4^th applicants.  By contrast, Chen Ruihong testified of direct dealings with the 5^th applicant, whom he met 20-30 times and knew to be the wife of Cheng Kam Shui in Hong Kong.[75]  He knew her as the ‘lady boss’ and identified her from a photograph.  He asserted that she knew that they smuggling.[76]  He explained that when he came to Hong Kong she would ask him “For this month, how many times have you done that?”[77]  Mr Donald did not cross-examine Chen Ruihong at all on behalf of the 5^th applicant.

The ambit of cross-examination of the four Masters

137. Much of the cross-examination of the four Masters was aimed at establishing the number of times they had been interviewed by the Mainland authorities at which statements had been made.  The statements of 25 February and 25 March 2010 were used with some of the four Masters to establish that they had lied to the Mainland authorities, either as to when they had become involved in smuggling[78] and as to their involvement in making payments of money for the marked oil[79].  They accepted that they were minimising their own culpability.  Similarly, they accepted, in effect, that there were deliberate omissions and lies in their statements, for example in respect of the full name of Cheng Kam Shui.[80]

138. For his part, Mr Delaney explored with the four Masters whether or not they had been involved in long distance voyages by fishing vessels.  No doubt, that line of cross-examination was relevant to the huge amount of marked diesel bought by the four Masters on each of their visits to Hong Kong.  Feng Jiu said that he had been as far as Hainan, but no further.[81]  Chen Ruihong said that he had been as far as the Philippines and Vietnam on fishing voyages on wooden hulled fishing vessels, which carried 40 tonnes of fuel at most.[82]  Huang Shunping said that the farthest he had travelled on his own boat was to Shanwei, a distance of about 40 nautical miles.[83]

139. Such challenge as was made to their substantive testimony was in respect of their testimony that the barges from which they had obtained the marked oil were Chi Shing barges.  The challenge was advanced on the basis of inconsistencies between the oral evidence of some of the Masters and their witness statements of 25 February and 25 March 2010. So, for example Feng Jiu had testified in examination-in-chief that he had obtained fuel in these voyages from three vessels, which he named as Chi Shing, Chi Shing 18 and Chi Shing 28 and which he identified from photographs.[84]  In cross-examination, Feng Jiu accepted that in his statement on 25 February 2010 he named only 2 vessels, namely Hoi Yeung and Chi Shing.[85]  He accepted that he had referred to the vessel Hoi Yeung again in his statement of 25 March 2010.[86]  Feng Jiu gave a non-responsive answer to the suggestion that he was mistaken about having obtained fuel from vessels other than the Hoi Yeung.[87]

140. Although Mr Blanchflower acknowledged in cross-examination of Huang Shunping that, consistent with his oral testimony, the witness had said in his statement of 25 March 2010 that he had obtained marked fuel from three vessels, namely Chi Shing, Chi Shing 18 and Chi Shing 28, he received an affirmative answer to this suggestion that he had not mentioned Chi Shing or Chi Shing 28 in the statement of 25 February 2010.  However, no specific challenge was made to his testimony of having obtained fuel from those three stipulated Chi Shing oil barges.  The omnibus question posed at the conclusion of cross-examination, namely that the witness “was not telling the truth to this Court” begged the question as to what.[88]

141. In his evidence-in-chief, Shi Rubin testified that he had obtained fuel from a vessel named Bao Shi or, if that vessel was not in position, from Chi Shing, Chi Shing 18 and Chi Shing 28.[89] However, he identified photographs of three vessels as being vessels from which he had obtained marked fuel.[90]  In cross-examination, he accepted that in his statement of 25 February 2010 he had named only Bao Shi as such a vessel,[91] although he had mentioned obtaining fuel from Chi Shing 18, but not Chi Shing 28, in his statement of 25 March 2010.[92]  The witness explained that at that time “he did not want to implicate the other oil vessels.”[93]  No specific suggestion was made to the witness that he had not obtained fuel from a Chi Shing vessel.  Mr Blanchflower’s cross-examination ended with the unspecified, general assertion that the witness was not telling the truth, which met with a negative response.  Again, the assertion begged the question, as to what?

142. Similarly, although Chen Ruihong testified in evidence-in-chief that he had obtained marked diesel oil from Chi Shing 28, Chi Shing 18 and Chi Shing and identified them in photographs,[94] he accepted that in his statements of 25 February and 25 March 2010 he had stipulated one of the vessels to be Hoi Yang and had not mentioned the vessel Chi Shing 18.[95]  Once again, the cross-examination culminated with a general assertion that the witness was not telling the truth.  That begged the question as to what?

Conclusion

143. In the result, we are satisfied that the judge was very much alive to the imperfections of the four Masters, and their possible motive of an early release from prison, and was correct to determine that no unfairness was likely to occur in the trial of the applicants in consequence of receipt of the evidence of the four Masters.

The four Masters : credibility and reliability

144. Further, having admitted the evidence at the trial the judge was entitled, as he did, to accept their explanation as to their initial lack of candour to the Mainland authorities as emanating in part from the fact that they had been threatened by Cheng Kam Shui not to make revelations if detained[96] and to determine that he believed their testimony.[97]

The judge’s reliance on the prosecution’s forensic accountant evidence

145. At trial the defence challenged Mr Chung Yuk Lam’s expertise to give the evidence articulated in his report, in particular in relation to the trend of sales of oil by the three Chi Shing barges.  Complaint was made then, repeated in this Court, that he had “no experience in or knowledge of oil trading business or the fishing industry”.  Also, complaint was made that part of his report involve no more than collating data in tabular form.  In consequence, before ruling on that issue the judge received evidence from Mr Chung Yuk Lam and submissions from the parties which occupied a whole day of the proceedings.

146. Mr Cheung testified that having graduated with a First Class Honours degree in Electrical and Electronic Engineering from Leeds University in 1987 he joined Ernst and Whinney on his return to Hong Kong.  Having worked with Esso Oil Company from 1990 to 1994, in that year he returned to public practice auditing with KPMG, qualifying as a Certified Public Accountant that year.  In 1998 he began working as a forensic accountant.  Now, he was a fellow member of the Chartered Accountants of Hong Kong and of the Chartered Accountants of England and Wales and a partner of the Forensic and Dispute Services team in China/Hong Kong of Deloitte Touche.  One side of his work as a forensic accountant was the investigation of accounting fraud, management fraud or employee misappropriation of assets and corruption cases, in respect of which he prepared reports for his clients many of whom were listed companies.  However, notwithstanding that breadth of experience, he said that he had never given evidence as an expert witness in a criminal trial.

147. In cross-examination by Mr Blanchflower, Mr Cheung accepted although, as stated in his curriculum vitae, he had experience working in different industries including the oil and gas industry that did not include the sale of marked oil to fishing vessels by oil barges in Hong Kong or the fishing industry in Hong Kong.[98]

148. Mr Cheung confirmed that his terms of reference were as described in his report and included :[99]

“ Giving my opinions in the following aspects of the Group and/or its Related Person(s)1 in connection with the period from 1 January 2009 to 3 May 2010 (“Review Period”):

a. the value/quantity of (i) marked oil and (ii) other oil products recorded to have been purchased by the Group from its suppliers (i.e. the major oil companies in Hong Kong);

b. the value/quantity of (i) marked oil and (ii) other oil products recorded to have been sold to its customers;

c. the value/quantity of marked oil recorded to have been sold to its customers based on the declaration record by the Group under the “Voluntary Control Scheme on selling Marked High Sulphur Diesel for Marine Use” (“VCS”);

d. the business trend of the Group in terms of value/quantity of marked oil traded;

e. the total transaction amounts recorded in the bank accounts of the Group and its Related Persons;

f. the fund flows and the sources of funds among the bank accounts of the Group and its Related Persons;

g. the possibilities of money laundering trends in the fund flows;

h. the possibilities of forged documents by comparing the seized sales records and the declaration records under the VCS of the Group; and

i. any other observations as a result of the above mentioned aspects.”

149. In his reserved ruling the judge said :[100]

“ Having regard to the almost overwhelming amount of commercial records in this case, which include bank statements, cash flows and transfers from one account to another, invoices, receipts, legends and other financial documents, am satisfied that it is proper for a witness with expertise in forensic accounting to be asked to testify in order to assist the court. Despite this witness having no prior experience in doing expert testimony in a criminal court Hong Kong, I am satisfied from his evidence as to his expertise and his CV, which he has referred to, that she is well able to give expert testimony on the matters that he has been asked to in these proceedings and I so rule.”

150. In the event, Mr Cheung gave evidence at trial over a period of nine days, during which he was cross-examined for five days.  Of that, the judge said :[101]

“ This witness was cross-examined extremely thoroughly by all defence counsel. It was generally put to the witness that he lacked independence, he had no experience in the trading of marked oil and fishing and he relied upon incomplete data in the preparation of his report. This latter point, the witness readily accepted. Indeed he made it perfectly clear that whilst inspecting the documents, it became apparent to him that some of the documents and information were incomplete.

With regard to the question of independence or lack of it, I say without hesitation that I do not accept that this witness lacked independence.”

151. In the result, the judge said of Mr Cheung :

“ ...I found his evidence to be measured and tailored in the way one would expect of an expert giving unbiased but factual evidence of the numbers he encountered in the multitude of accounts that he examined. He gave me his opinion and conclusions that he came to having examined those numbers and accounts resulting in the consequential fund flows that appeared in various tables in his written report, Exhibit P 711, and I accept his testimony in its entirety.”

152. Of the issue of the absence of certain records, the judge said :[102]

“ It is said, inter alia, due to the fact that some of the data that the witness relied upon in the completion of his report was unavailable, that in some way I should not rely on his report or the fund flows which were illustrated therein. I disagree. In a case such this which involves hundreds of millions of dollars and, quite literally, thousands of documents, it is inevitable, I find, that some documents may not have been made available to him for inspection for a variety of reasons. This does not mean, in my judgment, that when looked at in the round, Exhibit P 711 is unreliable and that I should give it no weight.”

153. Of the fact that Mr Cheung was not an expert in the fishing industry of Hong Kong the judge said :[103]

“ This point is misconceived because the prosecution’s case is not that this case is about the fishing industry or fishing practices, but rather a conspiracy to smuggle marked oil into China between the principal officials and a privately run company and others. Those accounts, that is, those of the company, the principal officials, and D5 were all the subject of scrutiny by the expert and to a large degree result in the consequential fund flows that are illustrated in his report.”

154. Of other criticisms made of Mr Cheung, the judge said :[104]

“ ....due to the fact that the witness had no prior exposure to the red oil business, and this was the first time that he had given evidence in a criminal case before, his methodology was criticized. For myself, I simply say that I find these criticisms unfair and unfounded and see nothing wrong with his methodology. The witness is a forensic accountant of a most reputable firm of worldwide accountants, he is perfectly entitled as such to examine the information provided to him and come to his conclusions and opinions based on admissible evidence. This is what he did and I accept his evidence and attach full weight to his report whilst ignoring those parts that I have referred to which are based on hearsay evidence.”

Conclusion

155. We are satisfied that the judge was correct to reject the criticism of the opinions expressed by Mr Cheung mounted on the basis that he had not given evidence as an expert witness before or that he had no specific expertise in the fishing industry of Hong Kong or the sale of marked oil to fishing vessels from barges in Hong Kong.  Clearly, as the judge determined, his role as forensic accountant was to collate and analyse data recorded in the various records available to him and, if appropriate, express his opinion.  Similarly, the judge was correct to reject the submission that the absence of some parts of some records impugned Mr Cheung’s report such that the Court should not rely on it.  So, in respect the sale of oil from the 3 Chi Shing barges that was available to him, although incomplete in parts, sufficient information from the white and yellow Chi Shing invoices, the VCS forms, the general ledger of Chi Shing and banking records for Mr Cheung to have an overview of the activity.  Where documentation was missing, he said so.  Where possible he had recourse to other documentation to fill a gap.  From that collated data he was able to compare the trend in sales of oil by Chi Shing barges in 2008-2009 and 2009-2010.

156. We will address these specific criticisms of the judge’s reliance on particular parts of Mr Cheung’s report and testimony later in the judgment.

The judge’s determination in respect of section 94A of the CPO

157. Section 18 of the I & E Ordinance provides :

“ Any person who -

(a) ……….

(b) exports any unmanifested cargo,

shall be guilty of an offence and shall be liable-

(i) ……….

(ii) on conviction on indictment to a fine of $2,000,000 and to imprisonment for 7 years.

(2) It shall be a defence to a charge under this section if the defendant proves that he did not know and could not with reasonable diligence have known that the cargo was unmanifested.”

158. There is no issue that at trial the prosecution did not seek to rely on section 94A of the CPO.  Although the judge was presented with very lengthy written closing submissions by the parties, supplemented by even more lengthy oral submissions the subject of section 94A was not raised by counsel or by the judge.

159. Mr Blanchflower did submit that there was no evidence from the four Masters in respect of the presence or absence of manifests on their vessels on the impugned voyages.  Perhaps, it was in that context that the judge was drawn into making what the respondent characterised as being a “comment” on the subject.  It is most regrettable that the judge did not raise the matter with counsel during their lengthy closing submissions or, indeed, subsequently.  As is clear from the written and oral submissions made by Mr Blanchflower in his closing speech, the issue was addressed on a broader front, namely that not only was there no evidence of manifests on the four vessels on their respective voyages during the material period but also there was no evidence of discussions let alone an agreement between the conspirators that the cargoes of marked oil would be exported from Hong Kong without the relevant manifests.

160. In his closing written submissions Mr Blanchflower said of the four Mainland Masters :[105]

“ …their evidence (if accepted) only shows that they belonged to a PRC conspiracy, and came to Hong Kong to purchase oil from CSDL’s barges and barges of other oil traders.

245. Importantly, they said nothing about agreeing to export oil without a manifest, or conspiring with the Defendants, nor were they asked.”

161. In making his oral closing submissions, Mr Blanchflower adopted the scheme of reading out the written submissions and adding, from time to time a further oral commentary.  Of this point, he added orally :[106]  “Not a question asked.”

162. Then, returning to his written submissions Mr Blanchflower went on to assert :[107]

“ Critically, there is no evidence from PWs 197-200 [the four Masters] about cargo manifests :

…..

(2) The prosecution did not even ask, and PWs 197-200 did not testify about their making or failing to make a manifest, or of any instructions from anybody to make or not to make a manifest for the marked oil;

(3)  ………There is no evidence of any discussion about manifests between PWs 197-200 and the crews.”

Finally, he concluded :[108]

“ Importantly, the Court may note that:

(1) No reference to a manifest was made in the prosecution’s written Opening.

(1) After a 50-day trial, there has been no evidence about the non-existence of manifests.

(2) The Prosecution’s Closing Submission, apart from one mention of “unmanifested cargo” (para 9(1)), does not refer to any evidence about manifests.

………………

258. Consequently, there is no direct or circumstantial evidence which may allow the Court to find as the only irresistible inference of an essential element of the conspiracy alleged in Charge 1, or of its existence.”

163. It is clear that, having considered the ambit and operation of section 94A of the CPO in the context of section 18 of the I & E Ordinance the crucial determination of the judge was that, “it is not necessary for the prosecution to prove there was no manifest.”[109]

164. Immediately before his digression into a consideration of the juxtaposition of those two sections of the two Ordinances, the judge had identified the elements of the conspiracy alleged in Charge 1, namely that the prosecution must prove beyond reasonable doubt :[110]

“ ..the existence of an ongoing conspiracy to export unmanifested cargo; the defendants knew there were these ongoing smuggling activities and they each participated in it; and/or the evidence supports the drawing of an irresistible inference that the defendants were parties to the smuggling conspiracy.”

165. At an early stage in his Reasons for Verdict, the judge had identified what he described as the “...issues this Court has to determine” in respect of Charge 1 :[111]

“ ..firstly, was there ever a conspiratorial agreement during the prosecution period in existence between the five defendants and the co-conspirators named in the charge? Second, were D1 to D5 members of that conspiratorial agreement? And, third, did they know and intend that marked oil would be exported from Hong Kong without a manifest?”

Findings

166. Having set out the issues relevant to Charge 1 and having recited the relevant evidence in narrative form, the judge moved to make his findings.  He said :[112]

“ I turn now to deal firstly with whether or not a conspiracy to smuggle marked oil out of Hong Kong and into the PRC ever existed at all and I say straightaway that I am so satisfied to the required standard. This is so because I have indicated earlier, I accept the evidence of the four PRC captains who each testified that they had been recruited by Cheng Kam-shui and employed as master of fishing vessels, who with the assistance of a crew, drove their vessels from their home port of Au Tou on the mainland to Pak Shek Kok in Hong Kong, collect oil from oil barges belonging to the Chi Shing group of companies, either Chi Shing, Chi Shing 18 or Chi Shing 28, PW200 also said a barge called Bao Shi, have the oil transferred from the oil barge to their fishing vessels that had their tanks enlarged in order to cope with the capacity of oil being transferred, up to 120,000 litres, and then drive their vessels back to the mainland where the oil was unloaded.

This happened on a frequent and regular basis of up to two times each day. The captains’ evidence which I have accepted is that the payment of the oil was given to them either before or during their trip by a speedboat and paid over in hundreds of thousands of RMB or Hong Kong dollars in batches of $100 and $1,000 notes.

The PRC evidence also establishes there was a credit system in place as occasionally it happened that no cash was paid over and simply the captain would sign on an invoice or note, as PW199 had testified, indicating that some prior agreement was in place between Cheng Kam-shui on the PRC side and those in control of Chi Shing barges in Hong Kong.”

167. It is clear that there is considerable force in the submissions of the applicants that the judge erred in his determination that section 94A of the Ordinance was relevant to Charge 1, a charge of conspiracy.  The authorities to which Mr Blanchflower has referred the Court speak with one voice as to that error.

168. In his judgment in the Court of Final Appeal in HKSAR v Ng Po On, with which all the other judges agreed, Ribeiro PJ noted the difference between a statutory substantive offence, containing a reverse onus provision, and a conspiracy to commit that offence :[113]

“ … if a defendant is charged with an inchoate offence of conspiracy, attempt or incitement relating to a statutory offence, it does not matter that the substantive statutory offence may, on construction, be found to contain a reverse onus provision. The inchoate offence exists at common law and, in accordance with the general common law rule, does not involve any reverse onus. This is unaffected by s. 94A.”

169. Ribeiro PJ went on to cite with approval the passages quoted earlier from the judgment of Lord Woolf in HKSAR v Lam Yuk Fai in which the latter had noted the nature of the conspiracy in that case, namely that it was an agreement between the parties, the purpose of which was that the passport should be used for an unlawful purpose, in consequence of which Lord Woolf said :[114]

“ …this conspiracy could not either under s. 94A or at common law give rise to any reverse burden. In view of the ingredients of the offence of conspiracy it is unlikely that any charge of conspiracy should give rise to any burden being placed on a defendant. ”

The construction of section 18 of the I & E Ordinance : an offence with an exemption?

170. In addressing the respondent’s alternative submission that section 18 of the I & E Ordinance is to be construed as creating an offence of exporting cargo, with an exception/exemption to the commission of the offence in the preparation and use of a manifest, it is necessary to have regard to the substance and reality of the language creating the offence, rather than its form, and to do so in the context of the legislation, having regard to its object and purposes.[115]

171. As Mr Blanchflower pointed out in his written reply, Patrick Chan J, as he was then, considered the elements of the offence in The Queen v Cheng Kai & Another :[116]

“ It is clear that the offence created by section 18 of the Import and Export Ordinance, that is exporting unmanifested cargo, is an offence of strict liability (See Lau Sai Wai [1985] HKLR 423 Lui Tak Hoi, unreported Magistracy Appeal No. 1 of 1993, C.A.). As such, it is not necessary to show that a defendant of this offence had intended that the cargo exported by him was to be unmanifested. Apart from showing that the cargo was not declared or properly declared in the manifest, the prosecution is only required to prove that he intended to and did export the cargo...”

172. With respect, that construction of the section and the identification of the elements of the offence is entirely consistent with the purpose and object of the I & E Ordinance identified in the preamble to the Ordinance, namely :

“ To provide for the regulation and control of the import of articles into Hong Kong, the export of articles from Hong Kong, the handling and carriage of articles within Hong Kong which have been imported into Hong Kong or which may be exported from Hong Kong, and any matters incidental to connect with the foregoing.”

In context, it is relevant to note that section 18(2) makes provision for a ‘due diligence’ defence.

173. Accordingly, we reject Mr Lee’s submissions that section 18(1) is to be construed as creating an offence of exporting cargo, together with an exemption or exception in the form of a manifest.

Conclusion

174. In the result, we are satisfied that in proof of the offence alleged in Charge 1, namely conspiracy to export unmanifested cargo, it was necessary for the prosecution to prove that the co-conspirators were parties to an agreement to do that unlawful act intending that it be done.  In that context : the statement of Ribeiro PJ is apposite, “The inchoate offence exists at common law and, in accordance with the general common rule, does not involve any reverse onus.  This is unaffected by s. 94A.”[117]  Accordingly, we are satisfied that the judge was in error in respect of a question of law in determining that by operation of section 94A of the CPO “it is not necessary for the prosecution to prove that there was no manifest.”

The ‘proviso’

175. In those circumstances it is necessary to consider the significance of the judge’s error in respect of the operative effect of section 94A of the CPO, in particular that “it is not necessary to the prosecution to prove there was no manifest”, in the context of the available evidence of the existence of a conspiracy to export from Hong Kong unmanifested marked oil.  Specifically, notwithstanding the wrongful imposition of a reverse onus provision on the applicants, is it appropriate to sustain those convictions by operation of the proviso?

Evidence of the four Masters : cargo manifests for marked oil

176. It was the written submission of the respondents in reply that there was “clear circumstantial and direct evidence from the PRC witnesses that they had not prepared or filed any document for C & E in respect of the marked oil.”

Direct evidence

177. The assertion that there was direct evidence from the four Masters of that issue is simply not borne out by examination of their testimony.  All four of the Masters testified in evidence-in-chief that they had been convicted and were serving long sentences of imprisonment in the Mainland for offences arising from “smuggling” marked oil into the Mainland.  It was that aspect of smuggling that was the focus of their evidence-in-chief.  The issue of any culpability arising out of their conduct in Hong Kong was hardly explored.

178. It was the common theme of their evidence that they had been recruited to smuggle marked oil from Hong Kong into the Mainland by Cheng Kam Shui.  They travelled from Ao Tou, Huizhou in the Mainland[118] into Hong Kong waters, at the direction by telephone of Cheng Kam Fai or Hu Ying Gao, to purchase marked diesel oil from specified Chi Shing oil barges, which they identified.  Then, after they had made payment in cash for that marked oil, or sometimes acquired it on credit, they steered their vessels back from whence they had come.  There, the oil was discharged ashore.  Fuel tank capacity had been enlarged on some of the vessels.[119]  Separate small fuel tanks provided fuel for the journey to and from Hong Kong[120] or a very small percentage of the fuel bought in Hong Kong was used on the voyage back to the Mainland[121].  The marked fuel was not used in fishing voyages.  Clearly, the irresistible inference was that the marked diesel oil was cargo, pursuant to the I & E Ordinance.

179. The issue of whether or not a manifest was carried on any of the voyages of the four Masters to the Mainland after they had bought marked oil in Hong Kong was raised with only one of the four Masters, namely Huang Shunping.  He was asked the single question : “When you transported oil from Hong Kong to the Mainland was a manifest on board?”[122]  In face of an objection by Mr Blanchflower, that the question was leading, Mr Luk abandoned that line of questioning, never to return to it.  The matter was simply not raised with any of the other Masters.  Similarly, the issue of the requirements of Hong Kong law in respect of the export of marked oil carried as cargo, rather than as fuel to be used in the voyage of the vessel, was never explored with the four Masters.  So, there was no direct evidence from any of the four Masters of an agreement between any of them and other co-conspirators to do the unlawful act, namely to export unmanifested cargo, intending that it be carried out.

Circumstantial evidence

180. On the other hand, there was evidence from the four Masters from which it might be inferred that not only were no manifests prepared and carried on the four vessels in respect of the export from Hong Kong of the marked oil as cargo but also that it was never intended that they be prepared and carried on the vessels and that was an unspoken agreement between the conspirators.  For example, the following interchange ensued in examination-in-chief of one of the Masters, Chen Ruihong :[123]

“ Q. Tell us what happened from the point that you arrived at Pak Shek Kok in Hong Kong. As far as you were concerned, what did you do?

A. Afraid of the Hong Kong Customs, if there were the people of the Hong Kong Customs present, we would not dare to approach. If there was no C & E or Marine Police around, we would approach to have oil loaded.

Q. From which one?

A. We could obtain oil from any of the vessels of the Chi Shing Company.”

Although the witness had raised the issue in terms that begged for the matter to be followed up with further obvious questions, none were asked.

The prosecution’s closing speech

181. Of the issue of the absence of manifests in respect of the cargo of marked oil on the fishing vessels, in its closing oral submissions the prosecution submitted :

“ ...taking into the account the entirety of the PRC evidence, your Honour, there is not the slightest suggestion that anyone was concerned with the drafting of any manifest for any of the trips or for any of the cargo, the marked oil, that’s being transported out of Hong Kong.”

182. In the context of the evidence of the four Masters having testified that they had been recruited to smuggle marked oil into the Mainland, it was asserted :

“ They knew that they were smuggling marked oil back into China. They had taken steps to avoid the authorities. They were under the control of Cheng Kam-shui or a man called Hu, Hu Ying-gao.

It is absurd to suggest that anyone contemplated the filing or the completion of any manifest in accordance with the legal requirements of Hong Kong law.”

183. However, counsel for the prosecution went on to say of the four Masters :

“ There is no suggesting (sic) that they knew that there was a requirement that a manifest should be on board their vessels after collecting oil and during the trip back to the Mainland with marked oil on board. So it is a non-point, in our respectful submission. It shows clearly that there would not be any manifest during any of the trips.”

184. The submission that there was no evidence that the four Masters were aware of a requirement to describe the marked oil cargo that they had loaded on their vessels in Hong Kong in manifests was at least consistent with the absence of any evidence to that effect.  As noted earlier, the prosecution made no or minimal attempt only to adduce evidence from the four Masters in that respect.  However, it was an issue that went to the heart of the conspiracy alleged in Charge 1. The prosecution was required to prove that the co-conspirators agreed to do the unlawful act (s), namely export unmanifested marked oil as cargo, with the intention of carrying out that/those act (s).

185. As noted earlier, the substantive offence created by section 18 of the I & E Ordinance is an offence of “strict liability”.[124]  Accordingly, liability follows even in the absence of mens rea.  However, as Yeung VP noted in HKSAR v Yung Lai Lai, in Churchill v Walton[125] the House of Lords determined that approach was inapplicable to a conspiracy to commit such an offence.[126]  Viscount Dilhorne said :[127]

“ ...mens rea is only an essential ingredient in conspiracy in so far as there must be an intention to be a party to an agreement to do an unlawful act; that knowledge of the law on the part of the accused is immaterial and that knowledge of the facts is only material in so far as such knowledge throws light on what was agreed.”

186. In giving focus to the terms or effect of the agreement between the parties, Viscount Dilhorne posed the rhetorical question :

“ ‘What did they agree to do?’ If what they agree to do was, on the facts known to them, an unlawful act, they are guilty of conspiracy and cannot excuse themselves by saying that, owing to their ignorance of the law, they did not realise that such an act was a crime. If, on the facts known to them, what they agreed to do was lawful, they are not rendered artificially guilty by the existence of other facts, not known to them, giving a different and criminal quality to the act agreed upon.”

187. Those principles are reflected in section 159A(2) of the Crimes Ordinance, Cap. 200 :

“ (2) 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 subsection (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.”

188. The issue that arises is whether or not there was evidence that the four Masters, or any one of them, was a party to an agreement with Cheng knowing of a fact or circumstance necessary for the commission of the offence, namely that their various cargoes of unmarked oil were not described in manifests whilst those vessels were in Hong Kong waters.

189. Having regard to all the evidence, notwithstanding the issue of their ignorance of the law, and the inexplicable failure of the prosecution to set out deliberately to adduce testimony relevant to the issue, nevertheless there was clear evidence of that.  The four Masters were in command of the respective vessels on their voyages out of Hong Kong with cargoes of marked oil.  They loaded the marked diesel onto their vessels and made payments, normally in large sums of cash, to the operators of the diesel barges.  The tenor of their evidence reflected a complete disinterest in such desultory amount of documentation as was produced to reflect the transactions.  Three of the four Masters said that they threw away the invoice/receipt provided to them by the Chi Shing oil barges.[128]  Chen Ruihong said that he did so on the instructions of Cheng Kam Shing.

The judge’s findings : a conspiracy to smuggle marked oil out of Hong Kong and into the PRC

190. The judge approached his findings in respect of the existence of a conspiracy as alleged in Charge 1 in stages.  First, he considered whether or not the four Masters and Cheng Kam Shui, were parties to that conspiracy.  Then, he considered whether the various applicants were co-conspirators in that conspiracy. Of the existence of the conspiracy, he said :[129]

“ ... I say straightaway that I am so satisfied to the required standard. This is so because I have indicated earlier, I accept the evidence of the four PRC captains who each testified that they had been recruited by Cheng Kam-shui and employed as master of fishing vessels, who with the assistance of a crew, drove their vessels from their home port of Au Tou on the mainland to Pak Shek Kok in Hong Kong, collect oil from oil barges belonging to the Chi Shing group of companies.......... have the oil transferred from the oil barge to their fishing vessels that had their tanks enlarged in order to cope with the capacity of oil being transferred, up to 120,000 litres, and then drive their vessels back to the mainland where the oil was unloaded.

This happened on a frequent and regular basis of up to two times each day.  The captains’ evidence which I have accepted is that the payment of the oil was given to them either before or during their trip by a speedboat and paid over in hundreds of thousands of RMB or Hong Kong dollars in batches of $100 and $1,000 notes.”

191. Earlier, the judge determined of the four Masters :[130]

“ ....they are co-conspirators and took part in the implementation of the smuggling of marked oil on the instructions and at the behest of Cheng Kam Shui who employed them. Of this, I have no doubt at all.”

192. The judge went on to find :[131]

“ I might just add here that having accepted the PRC captains’ evidence as to their fishing vessel’s oil tanks having been modified or enlarged to enable them to transport huge quantities of marked oil, I dismiss the proposition that the oil was required by their vessels for the purposes of fishing in far off waters. They all testified that it was offloaded from their vessels in the PRC.”

193. It is correct, as Mr Robert Lee submitted, that nowhere in that analysis, or indeed in respect of the considerations of the separate cases of the various applicants, did the judge advert specifically to his determination that it was not necessary for the prosecution to prove “that there was no manifest”.  More particularly, he did not state that he relied on that determination to find, first that there were no manifests and, secondly that the fact of their absence was evidence which supported a finding that there was an agreement among some or other of the conspirators to export unmanifested marked diesel oil from Hong Kong as alleged in Charge 1.

194. On the other hand, he did identify clearly what evidence he did rely on to make his finding.  Having stated that he accepted the evidence of the four Masters, the judge said that he found that there was “a conspiracy to smuggle marked oil out of Hong Kong and into the PRC.”[132]  He accepted that they had been recruited by Cheng Kam Shui and had collected marked oil from oil barges in Hong Kong belonging to Chi Shing and paid for it, when they did so, with monies provided to them either before the voyage or in a rendezvous with a speedboat.  He found that the fact that some oil was provided on credit[133] indicated an agreement between Cheng Kam Shui and those in control of Chi Shing barges in Hong Kong.[134]  On return to the Mainland, the oil was simply off-loaded.

‘Lack Chai’ notebook and 28 November 2009 white Chi Shing invoice

195. The judge identified the ‘Lack Chai’ notebook and the white Chi Shing invoice, dated 28 November 2009 as demonstrating “a clear link between the activities of Cheng Kam Shui on the Mainland and Chi Shing in Hong Kong”.[135] First, he accepted the evidence of the four Masters that ‘Lack Chai’ was the nickname of Cheng Kam Shui.  Then, he noted that the former “contains records of oil sales transactions” and had been found in the home of the 1^st and 2^nd applicants and that the latter had been found at the Mei Fung Court registered address.

‘Lack Chai’ notebook

196. Although the ‘Lack Chai’ notebook did not identify the particular vessels to which sales were made and covered only five trading days, it described patterns of large daily purchases of oil, sometimes twice a day.  Given that was obviously linked to Cheng Kam Shui, its significance lay in the fact that, on the evidence of the four Masters which was accepted by the judge, he was the organiser of the smuggling activities of the four Masters, in which he directed that they purchase marked oil from Chi Shing barges.  The huge volume of individual purchases was consistent with the evidence of all four Masters, whereas the twice-daily purchases were consistent with the evidence of Feng Jiu in respect of some of his purchases.[136]

197. Taken overall, the purchases attributed to individual vessels in the notebook were obviously not consistent with the purchase of fuel to be used for purposes of fishing voyages.  For example, ‘Vessel 1’ was described as having loaded eight consignments of 120,800 litres, a total of 966,400 litres on and between 25 and 31 January 2010.  On three of the dates it took on two consignments of 120,800 litres each.  That was wholly consistent with the oil being offloaded in the Mainland and the vessel returning to Hong Kong to load yet more oil.

28 November 2009 white Chi Shing invoice

198. As noted earlier, the white Chi Shing invoice dated 28 November 2009, identified by Feng Jiu as having been signed by him, bore the invoice number 65067 and related to the sale of 120,800 litres of oil, whereas in the Daily Sales Transaction Summary for that date there was no reference to invoices with the prefix ‘6’.[137]  Similarly, the VCS form faxed to the Customs and Excise Department in respect of sales by Chi Shing for that date does not refer to that invoice number nor does it stipulate any sale of more than 68,000 litres of oil.[138]

Yellow/white Chi Sing invoices and VCS forms

199. The general context in which the judge found that not only was there a conspiracy to smuggle oil out of Hong Kong and into the Mainland at which Cheng Kam Shui was at the centre but also that there was a link between the conspirators and Chi Shing was the judge’s earlier determination that he accepted the evidence of Mr Cheung Yuk Lam, the prosecution expert witness.[139]  In his report and oral testimony Mr Cheung collated the information contained in the white and yellow invoices and the VCS forms. 

200. Mr Chung testified that of the 10,812 yellow invoices, all but four of them were reflected, as to invoice numbers and date, in the information contained on the VCS forms faxed to the Customs and Excise Department.  Similarly, all but 39 of those yellow invoices reflected the quantities of oil said to have been sold on those occasions.[140]

201. The particular context was the judge’s acceptance of Mr Cheung’s evidence in respect of the white Chi Shing invoices when compared with the yellow Chi Shing invoices and the VCS forms.  There was a positive correlation in the data contained in the latter two documents : the yellow Chi Shing invoices supported the declarations made in the VCS forms.  By contrast, although the aggregate volume of oil sales described in the white Chi Shing invoices were broadly similar to those described in the yellow Chi Shing invoices, individual oil sales were quite different.  Of that, the judge found in respect of the 1^st to 3^rd applicants :[141]

“ It is beyond peradventure, in my judgment, that D1 to D3 holding the positions that they did in the company, could have been unaware of the improper practice with regard to the yellow invoices and the VCS forms faxed to the Customs & Excise Department which quite deliberately under-reported the sales of oil over the prosecution period.” [Italics added.]

202. Of their respective positions in Chi Shing, the judge observed earlier :[142]

“ D2 and D3 are the sole directors of this company CSDL in which each held 50 per shareholding. There are only two signatories to the bank account of the company, those being D1 and D2 who are husband and wife. D3 is D2’s brother-in-law.

D1, D2 and D3 effectively control CSDL and, as such, would have been actively involved in the day-to-day business of the company.  D1 and D2 being the only two signatories to the company’s bank account control the financial affairs of the company.”

203. The general circular issued by the Customs and Excise Department dated 21 January 2009, acknowledged by the 3^rd applicant in his own hand on 9 April 2009, made it clear that a major concern of the Department in respect of smuggling of marked oil was the use of the enlarged fuel tanks.  Clearly, a system of deliberately underreporting individual sales to the Customs and Excise Department had the effect of concealing from them information that might have alerted them of large sales of marked oil.

The 3^rd applicant

204. Of the role of the 3^rd applicant in Chi Shing, it is to be noted that it was the evidence of Customs and Excise Officer Lo Wing Nin that the occasion for the meeting on 9 April 2009 between him and the 3^rd applicant had come about in the context of the 3^rd applicant pursuing an application to have the registration of Chi Shing 28 to sell oil reinstated, it having been cancelled because those operating it had sold oil outside a designated area.  In that context, he said that the 3^rd applicant “wrote many documents and faxed many documents to our office asking for reinstatement.”[143]

205. Having determined that the 1^st to 3^rd applicants “could not have been unaware of the improper practice with regard to the yellow invoices and VCS forms faxed to the Customs & Excise Department” the judge said that other factors identified in Mr Cheung’s evidence, coupled with that primary finding, led him “to draw the irresistible inference” that those applicants were “actively engaged in a conspiratorial agreement to smuggle marked oil”.[144]  As examples, he identified :[145]

“ · the mixing of personal account and company account,

·the huge increase in sales of oil during the prosecution period despite the fishing moratorium between May 2009 and August 2009,

·the total deposits to CSDL’s bank account of HK$3.7 billion, some 228 million more than sales of oil over the same period, and

·the disparity between their personal wealth on the one hand and modest salaries from the company,

·together with modest reported annual profit of the company, particularly for the years 2007 to 2008 and 2008 to 2009 on the other.

[Bullet point lay out added.]”

The mixing of accounts

Deposits into the bank accounts of Chi Shing

206. In his report Mr Cheung presented the collated information in respect of the provenance of the deposits into the two Chi Shing bank accounts in the period 1 June 2009 and 31 January 2010 in a table at 8.4.[146]

Items	Amount involved (HKD)	Appendix CYL- 22
RAMC cash deposits to Chi Shing BOC	1,000,000	Column 1
RAMC transfer deposits to Chi Shing BOC	960,513,374	Column 1
D2 transfer deposits to Chi Shing BOC	5,203,921	Column 1
D3 transfer deposits to Chi Shing BOC	114,138,000	Column 1
D5 transfer deposits to Chi Shing BOC	45,761,871	Column 1
Chi Shing BOC received transfer deposits	447,459,444	Column 1
Chi Shing BOC received cash deposits	28,105,919	Column 1
RAMC cash deposit to Chi Shing HSBC	78,368,455	Column 2
RAMC transfer deposit to Chi Shing HSBC	24,765,577	Column 2
D1 cash deposits to Chi Shing HSBC	12,400,000	Column 2
D2 cash deposits to Chi Shing HSBC	1,495,000	Column 2
D3 cash deposit to Chi Shing HSBC	7,162,150	Column 2
D4 cash deposit to Chi Shing HSBC	104,742,315	Column 2
CHUNG Hiu-ching cash deposit to Chi Shing HSBC	3,920,000	Column 2
D1 and D2 transferred to Chi Shing HSBC	24,000,000	Column 2
D1 transfer deposit to Chi Shing HSBC	75,000,000	Column 2
Chi Shing HSBC received transfer deposits	177,256,624	Column 2
Chi Shing HSBC received cash deposits	511,934,133	Column 2
Total	2,623,226,783

[RAMC was the acronym used for Remittance Agents and Money Changers.]

Deposits into the bank accounts in the name of the 3^rd applicant

207. In a table at paragraph 8.5 of his report Mr Cheung described the monies received into the bank accounts in the name of the 3^rd applicant in the period 1 June 2009 to 31 January 2010.

Items	Amountinvolved (HKD)	Appendix CYL- 22
RAMC transfer deposit to D3 BOC	69,997,415	Column 3
Chi Shing BOC transfer deposit to D3 BOC	15,000	Column 3
BOC received cash deposits	1,643,100	Column 3
D3 BOC received transfer deposits	46,181,411	Column 3
Total	117,836,926

Deposits into the bank accounts in the name of the 4^th applicant

208. Although in the period 1 June 2009 to 31 January 2010 the 4^th applicant deposited over $103 million into the HSBC bank account of Chi Shing, in the greater period encompassing 1 January 2009 to 3 May 2010 deposits of only $662,435 were made to his bank accounts.[147]

209. In his Reasons for Verdict the judge noted of Mr Cheung’s analysis of the personal bank accounts of the applicants that there were a large number of business payments and receipts being transacted through the accounts with no apparent justification.  He labelled this as “highly usual (sic) if not suspicious”. Further, he noted that whilst Mr Cheung accepted that it was not unheard for directors or employees of companies to handle small amounts of the company’s money through their personal accounts it was his evidence that “the sheer magnitude of the transaction through personal accounts was unusual as it would expose the company to unnecessary risks.”[148] Of the issue or whether the deposits made into the accounts of the 3rd applicant, subsequently paid into the accounts of Chi Shing, might have been payments by customers of Chi Shing who preferred to pay the 3^rd applicant directly, the judge noted that Mr Chung said that “would be extremely unlikely” and that it would be “stupid” of customers to do so.[149]

Increased sales of oil

210. The judge’s reliance on the evidence of increased sales of oil in the period 1 June 2009 to 31 January 2010 as part of the circumstantial evidence from which he drew inferences adverse to the 1^st to 3^rd applicants was, as he said, based on the findings of Mr Cheung.  Earlier in his Reasons for Verdict the judge found of Mr Cheung’s evidence :[150]

“ ...it is quite clear on the evidence of this witness that there was a significant increase in the volume of sales indicated in both the white and yellow invoices during the prosecution period and this, he remarked, did not appear to have been affected by the fishing moratorium period in South China Sea announced by the PRC Ministry of Agriculture which was from 16 May 2009 to 1 August 2009.

He noted particularly that during the period from April to December 2008 Chi Shing’s sales ranged between HK$38 million and HK$194 million, whilst in the same period of 2009 the sales fluctuated from HK$154 million to HK$454 million, spiking at over 500 million in January of 2010. There was then a spectacular drop in sales from January 2010 to February 2010 of 75 per cent which, once again, coincided with the arrest of Cheng Kam-shui. He also noted the high sales in August 2009 of HK$273 million to be “completely out of sync” with the expectation of low sales during a moratorium period.”

211. It is clear that the judge’s reference to high sales in August 2009 of $273 million was a slip on his part, for what ought to have been a reference to July 2009.  Mr Cheung conducted a comparative analysis of monthly sales by the three Chi Shing oil barges.  Of monthly sales in the period 1 June 2009 to 31 January 2010, he noted that :[151]

“ ...the fishing moratorium period in 2009 was from 16 May to1 August. Sales in value in May, June, July and August 2009 were approximately HKD 143 million, HKD 174 million, HKD 273 million and HKD 189 million respectively. Except for July, the sales in these months were comparable to the neighbouring months of April and September 2009 (of HKD 187 million and HKD 158 million respectively). For the month of July, the sales in value were greater than the months of April, May, June, August and September. The sales in the months of May to August 2009 did not therefore appear to have been affected by the fishing moratorium period. The high sales in July (being in the middle of the moratorium period) appear to be completely out of sync with the expectation of lower sales during a moratorium period.”

212. The four Masters described commencing their smuggling activities for Cheng Kam Shiu at different times.  Feng Jiu said in evidence in chief as he began to smuggle in 2008.  In cross-examination by Mr Blanchflower he said that his assertion in his statement of 25 March 2010 that he began to smuggle at the end of October 2009 was true.  In re-examination he said that it was in the latter half of 2008.[152]  Chen Ruihong said that he began smuggling in February 2009 but, because the vessel was often out of order, he began smuggling formally in September 2009.[153]

213. In evidence-in-chief Huang Shunping testified that he began smuggling “roughly in July 2009”.  In cross-examination he accepted that in his statement of 25 March 2010 he had said that he had first boarded the vessel on which he smuggled in October 2009.  However, he went on to explain “..in July, it did happen but I mean at that time the account books were not shown to me”.  He added “..we thought that the relevant authorities have not found out the truth..... subsequently we were shown what had been found out... so it was impossible for us to deny it.”[154]  He accepted that his assertion in the 25 March 2010 statement that he began smuggling in October was a lie.  For his part, Shi Rubin said that he began smuggling in “August, September 2009”.[155]

Deposits of $228 million into the accounts of Chi Shing in excess of sales of oil

214. The judge’s reference to total deposits to Chi Shing’s bank accounts as being $3.7 billion was clearly a reference to paragraph 7.3 of Mr Cheung’s report in which he calculated that the total deposits to the bank accounts of Chi Shing, with eliminations, in the period 1 January 2009 to 30 April 2010 was $3,727,645,646.  Mr Chung made it clear that, since he did not have data for the months of April to June 2009, those months were excluded from his comparison.[156]  In reaching that total of ‘Deposits to Chi Shing’, he stated “April-June excluded”.  Similarly, in respect of the monetary value of the sale of oil for those same months ‘Sales amount’ he stated “No data”, noting that there were neither white Chi Shing invoices nor General Ledger entries for those months.  He stated that his calculation of sales was based on white Chi Shing invoices, save for February 2009 in respect of which he had relied on data from the General Ledger.  Finally, in his calculation of ‘Deposits in excess of sales’ for those months, he stated “Not comparable”.  Accordingly, it is clear that his calculation that deposits into the bank accounts exceeded sales of oil by Chi Shing by $228 million referred to the period 1 January 2009 to 30 April 2010, excluding April to June 2009 inclusive.

215. It follows that the judge was not in error to state that “over the same period” there were deposits of $228 million more than sales of oil.  Of more importance was the relevance of that evidence to the issues the judge was addressing.  Clearly, the period of time encompassed months that lay outside the period stipulated for the existence of the conspiracy, namely 1 January to 31 May 2009 and 1 February to 30 April 2010.  Also, the period 1 April to 30 June 2009 was excluded in the absence of data.  Further, it is to be noted that in April 2010 deposits of monies to the bank accounts of Chi Shing exceeded the sale of oil by $106 million.  Nevertheless, as Mr Blanchflower conceded in the period of the conspiracy, excluding June 2009, deposits of monies to the accounts of Chi Shing exceeded sales of oil by $72 million.

216. The significance of that evidence lay in the evidence of Mr Chung to the effect that in a business of the size and with operations similar to Chi Shing “there should not be significant differences between the overall sales total receipts over a period of time”.  He suggested that the discrepancy might be explained by the fact that a portion of the bank receipts were not related to its normal operations or that the white Chi Shing invoices, upon which he had based his analysis, did not reflect the full scale of sales by Chi Shing.[157]

Salaries : personal wealth

217. No doubt, the judge’s observation in respect of their modest salaries[158] was made having regard to the Employer’s Return of Remuneration made to the Inland Revenue by Chi Shing for the year ended 31 March 2010[159], to which the judge had referred earlier.[160]  There, the 2^nd and 3^rd applicants were described as receiving salaries for the year of $240,000, the 1^st applicant $210,000 and the 4^th applicant $225,200.  The annual profits before tax declared to the Inland Revenue by Chi Shing for the years ended 31 March 2008 and 2009 were $2,462,975 and $1,597,747.66 respectively.[161]

218. As the judge noted,[162] the 1^st and 2^nd applicants had acquired their Bel-Air home and 3 car parking spaces in November 2009 for $36 million, only $15 million of which was by way of mortgage, whereas the 3^rd applicant had acquired around $10 million HSBC shares in March 2010.  Although the 4^th applicant’s annual salary was $225,200 in the period 1 January 2009 to 3 May 2010 he withdrew $661,500 from his bank account.

Conclusion

219. We are satisfied that, in the context of his finding that the 1^st to 3^rd applicants were aware of the making of yellow Chi Shing invoices which supported the VCS forms which were faxed to the Customs and Excise thereby deliberately under reporting the sales of oil, the judge was entitled to have regard to the various matters that he enumerated and from which he drew the irresistible inference that they were all “actively engaged in a conspiratorial agreement to smuggle marked oil.”  That evidence was circumstantial in nature and gave context and perspective to the deliberate underreporting of individual sales of oil.

The 4^th applicant

220. Having noted though that it an agreed fact that the 4^th applicant had made cash deposits to Chi Shing’s HSBC account of $103,802,350 in 100 transactions in the period 12 June 2009 to 13 January 2010, the judge noted that those payments stopped immediately after the arrest of Cheng Kam Shui from which he inferred :[163]

“ that a significant proportion of D4’s deposits were linked to Cheng Kam Shui during the prosecution period.”

221. Next, the judge determined that the discovery of a Sales Transaction Summary for the month of November 2009 on the 4^th applicant’s computer, which was identical to the Sales Transaction Summary of the white Chi Shing invoices linked the 4^th applicant “to the preparation and creation of accounting documents”.

Deposits into the bank accounts in the name of the 4^th applicant 

222. In the period 1 June 2009 to 31 January 2010 the 4^th applicant deposited over $103 million into the HSBC bank account of Chi Shing.  In the greater period, encompassing 1 January 2009 to 3 May 2010, deposits of $662,435 were made to his bank accounts.[164]  The judge noted that Mr Cheung expressed the opinion that those deposits into the account in the name of the 4^th applicant were “inconsistent” with his annual salary from Chi Shing of $225,000.[165]

223. Finally, the judge said that in reliance on those facts he drew the :

“ ...irresistible inference that the 4^th defendant was indeed an active participant in a conspiratorial agreement to smuggle oil from Hong Kong to China.”[166]

The 5^th applicant

224. In his consideration of the case of the 5^th applicant the judge acknowledged that, given that she had no role whatsoever in the operations of Chi Shing, she occupied “a different position” from the other applicants.[167]  However, he noted that she had made what he described as “massive” deposits of $45,761,871 to the accounts of Chi Shing in the period the subject of the conspiracy.

225. In cross-examination by Mr Donald, Mr Cheung confirmed that the aggregate payment of $45,761,871 to the account of Chi Shing by the 5^th applicant had been made by 10 separate payments.[168]  A schedule of those payments from the Bank of China account of the applicant was set out at paragraph 37 of the affirmation of Wong Kit Ying.[169]  From that schedule, it is apparent that in the period on and between 2 and 21 November 2009 the 5^th applicant deposited no less than $21,358,311 into the account of Chi Shing.  Equally apparent from the schedule, was the fact, noted by Mr Cheung, that the aggregate of payments made by the 5th applicant to Chi Shing in the period April to December 2008 inclusive was less than one quarter that made for the same months in 2009.

Deposits into the bank accounts in the name of the 5^th applicant

226. The provenance of the monies received into the bank accounts in the name of the 5^th applicant in the period 1 June to 2009 to 30 January 2010 was described in a table at paragraph 8.6 of Mr Cheung’s report.

Items	Amountinvolved (HKD)	Appendix CYL- 22
RAMC transfer deposit to D5 BOC	34,307,769	Column 4
D5 BOC received cash deposits	1,779,119	Column 4
D5 BOC received transfer deposits	3,960,328	Column 4
RAMC transfer deposit to D5 HSB	91,018	Column 5
D5 HSB received cash deposits	2,295,128	Column 5
RAMC cash deposit to D5 HSB	1,201,350	Column 5
D5 cash deposit to D5 HSB	370,000	Column 5
D5 & CHENG KS HSB transfer deposit to D5 HSB	500,000	Column 5
D5 HSB received transfer deposits	1,646,302	Column 5
Total	46,151,014

227. Of the fact that a large proportion of those monies were remittances from Remittance Agents and Money Changers, and in the context of his rejection of her assertion in out-of-court statements that those remittances and payments to Chi Shing of $45,761,871were made at the behest of her husband and were for oil to be used for legitimate fishing voyages of Cheng Kam Shui’s fishing fleet, the judge determined :[170]

“ It makes no sense at all as I see no reason for D5 to be involved in making or receiving payments assuming this to be a perfectly legitimate enterprise. Cheng Kam-shui could simply have paid CSDL directly in RMB or through RAMCs in order to pay for the oil.”

228. Notwithstanding that finding, it is clear that the judge was aware that the 5^th applicant had made payments to Chi Shing from her accounts in the period prior to that commencing on 1 June 2009.  Earlier, he had noted of the evidence of Mr Chung :[171]

“ ...between April and December of 2008, the net total outflow to Chi Shing was $10,233,820 equating to $1,137,091 per month whereas for the same period in 2009 the net outflow to Chi Shing was $43,421,888 equating to $4,824,680 per month, 4.2 times that of 2008.”

229. The payment of $21,358,311, noted earlier, made by the 5^th applicant to Chi Shing in the three-week period in November 2009 was about double that of the net aggregate payments made to Chi Shing in the nine months period April to December inclusive of 2008.  Mr Cheung had observed in his report that there was no evidence at all of a commensurate increase in the fishing business of Cheng Kam Shui.[172]  Clearly, in all circumstances the judge was entitled to reject the out-of-court assertions of the 5^th applicant as having no weight, namely that the payments that she made in the period of the conspiracy were for legitimate fishing activities.

230. In convicting the 5^th applicant of the 1^st charge the judge found that, being aware of the smuggling activities, she had participated in those activities “...by making these massive deposits to CSDL’s Bank of China account over the prosecution period and also assisted the crew members by purchasing food for them prior to them embarking on their smuggling activities.”[173]

231. Clearly, the judge’s reference to the assistance given by the 5^th applicant to the crew of the vessels used for smuggling by purchasing food for them on their voyage was to the testimony of Chen Rhuihong. As noted earlier, it was his evidence that she knew of their smuggling activities, she having asked him, “For this month, how many times have you done that”?[174] In that context, he said of their departures from Hong Kong on such smuggling expeditions, “at the time when we were leaving she would buy us some food for cooking... also if we had any need we would tell her.”[175]  Given that the judge’s findings that the 5^th applicant not only knew of the smuggling activities but also participated in the conspiracy by making massive deposits of monies to the bank accounts of Chi Shing, the judge was entitled to regard the assistance rendered to Chen Rhuihong and his crew as further acts in furtherance of the conspiracy.

CONCLUSION

The proviso

232. Notwithstanding our finding that the judge’s determination, that section 94A of the Criminal Procedure Ordinance operated so that it was not necessary for the prosecution to prove that manifests were carried on the vessels, was “a wrong decision on a question of law”[176], nevertheless we are satisfied that it is appropriate to apply the proviso, given that we are satisfied that no miscarriage of justice has actually occurred.  The test to be applied in cases in which the proviso is invoked is as set out in the judgment of Sir Anthony Mason NPJ, with whom all the other judges agreed, in the Court of Final Appeal in Launder v HKSAR, namely :”[177]

“ whether a reasonable jury, properly instructed would, on the evidence, without doubt convict or would inevitably come to the same conclusion.”

233. In the first place, although the judge’s determination was wrong on a question of law, we are satisfied that he did not apply that erroneous determination of the law to his analysis of the facts of the case.  Certainly he did not state that he did so.  In that context, it is significant to note the language that he used in his preamble to making his determination, namely :[178]

“ I pause here to comment that in the submissions of counsel for D1 to D4, there is a suggestion, I put it no higher than that, that somehow it is incumbent on the prosecution to establish that there was indeed no manifest on board any of the four vessels...”

The tenor of the judge’s determination resonated with the judge traversing what he determined to be an erroneous submission by counsel.  Secondly, for the reasons set out above, we are satisfied that there was overwhelming evidence to support the judge’s finding that each of the applicants was a party to the conspiracy alleged in Charge 1, so that a jury or a judge would have inevitably come to the same conclusion.

Charges 2, 3-5

234. No issue was taken in behalf of the applicants to the validity of their convictions respectively on Charge 2 (1^st and 2^nd applicants), Charge 3 (3^rd applicant), Charge 4 (5^th applicant) and Charge 5 (4^th applicant), if their convictions on Charge 1 were sustained.  With respect, that was the correct approach.  In those circumstances, we are satisfied that those respective convictions were entirely justified.

Charge 6 (1^st and 2^nd applicants)

235. Charge 6 concerned a total of RMB 7,141,300 and HK$9,812,800 in cash found on 3 May 2010 in the Bel-Air home of the 1^st and 2^nd applicants, most of which was contained in commonplace red, white and blue nylon bags placed on the floor in the master bedroom.  There was force in the submissions made by Mr Blanchflower on the behalf of the 1^st and 2^nd applicants that, given the hiatus between the end of the conspiracy alleged in Charge 1, namely 1 February 2010 and the commission of the offence the subject of Charge 6, namely 3 May 2010, it was necessary for the judge to examine with care the issue of the provenance of those monies.

236. There was no dispute that considerable amount of money was found packaged in bundles of notes.  As Mr Blanchflower pointed out, given the fact that five bundles of RMB 100,000 each were packaged with strips of paper that bore dates in the period 31 March to 13 April 2010, there was a strong inference that some of the monies at least had their provenance other than from the smuggling the subject of Charge 1. Also, having regard to the undisputed evidence of a pattern of behaviour of the applicants, including the 1^st and 2^nd applicants, of regularly exchanging large amounts of Renminbi for Hong Kong dollars, it was suggested that there was no reason why, if the provenance of those monies lay in smuggling, they would have been kept for about three months.

237. Furthermore, there was no dispute that even legitimate sales of marked oil by Chi Shing generated large payments in cash in both Renminbi and Hong Kong dollars.  In that context, it is to be noted that Mr Cheung found that the white Chi Shing invoices available for April 2010 detailed sales of over $213 million of marked oil.[179]  Those VCS forms received by the Customs & Excise Department from Chi Shing for April 2010 stipulated the sale of 36,370,261 litres of marked oil, whereas VCS forms found in the Goodview Centre stipulated sales of 44,515,229 litres of marked oil.

238. Although these considerations and other issues were raised in closing written and oral submissions by Mr Blanchflower, the judge had adverted to none of them in his Reasons for Verdict.  Having found that the 1^st and 2^nd applicants knew that the $2,623,226,783 received into the two accounts of Chi Shing in the period 31 May 2009 to 1 February 2010 (Charge 2) were the proceeds of an indictable offence, namely smuggling the judge went on to say simply :[180]

“ I say exactly the same with regard to Charge 6 which relates to the very large amount of cash both in Hong Kong dollars and RMB found in the Bel-Air premises belonging to D1 and D2, cash in the sum of RMB 7,141,300 and HK$9,812,800. Having found as I have in relation to D1 and D2 in Charge 1, I say that I am satisfied beyond all reasonable doubt that both D1 and D2 knew these monies represented the proceeds of an indictable offence and I convict them both accordingly.”

239. With respect to the judge, the issues raised on behalf of the 1^st and 2^nd applicants required addressing.  The judge was not entitled, as he did, to ignore those issues.  The factual circumstances obtaining in the period the subject of Charge 2 no longer obtained on 3 May 2010.  With the arrest of Cheung Kam Shui and the four Masters the smuggling conspiracy had come to an abrupt end three months earlier.  The sharp drop in the volume of sales of marked oil by Chi Shing in the ensuing months spoke eloquently of that fact.

240. Although the circumstances giving rise to Charge 6 were suspicious, given the judge’s failure to address the plausible submissions advanced on behalf of the 1^st and 2^nd applicants, let alone give any reasons for rejecting them, we are unable to say that their convictions on Charge 6 are safe.

Charge 7 (1^st, 2^nd and 3^rd applicants)

241. Charge 7 concerned $627,000, comprised of 627 $1,000 notes, found in a black briefcase in a wardrobe in the Mei Fung Court premises on 3 May 2010.  There was no dispute that on the discovery of the briefcase and its contents, the 3^rd applicant had responded to an enquiry of a Customs and Excise officer to the effect that the briefcase belonged to him.

242. As the judge noted, no issue was taken with the evidence of several Remittance and Money Changers that in the period July 2009 to January 2010 the 3^rd applicant, in common with the 1^st and 2^nd applicants regularly exchanged large amounts of Renminbi for Hong Kong dollars.[181]  Similarly, there was no dispute that those applicants and the 4^th applicant regularly made large deposits of Hong Kong dollars, comprised of bundles of $1,000 and $100 notes, to the accounts of Chi Shing.[182]

243. In his Reasons for Verdict, the judge dealt with Charge 7 very briefly.  Having noted that the 1^st and 2^nd applicants were the owners of the Mei Fung Court premises in which the black briefcase containing $627,000 was found, he said :[183]

“ D3 has admitted that the briefcase belonged to him and whilst there is no admission from him that the money belonged to him or that he knew that it was in the briefcase, I find there is an irresistible inference which arises that with the briefcase being his, that is that of D3, that he must have known that the cash was inside.

That being the case, the 3^rd accused had clearly dealt with the money and, once again, as I have convicted him of the 1^st charge of conspiracy, I find that it is beyond peradventure that he knew the money was the proceeds of the smuggling activities.

Despite the fact that the briefcase was found inside the Mei Fung Court premises, I do not find that necessarily any inference arise in relation to D1 and D2, and I therefore am prepared to give D1 and D2 the benefit of the doubt that I find arises so far as they are concerned in relation to this charge.  I acquit D1 and D2 on Charge 7.” [Italics added.]

244. No issue was taken at trial or in this Court to the drawing of the inference, as the judge did, that the 3^rd applicant knew of the presence of the cash inside his black briefcase.  Very much at issue was the provenance of the monies.  The matters to which we adverted in our consideration of Charge 6 are equally relevant to a consideration of Charge 7 : the conspiracy the subject of Charge 1 had come to an end more than three months earlier with the arrest of Cheng Kam Shui and the four Masters on 31 January 2010; nevertheless, in that period Chi Shing continued to sell hundreds of millions of dollars of oil; and large deposits in cash were made to Chi Shing’s bank accounts.[184]

245. The judge was required to address those matters, they having been raised squarely by counsel for the 4^th applicant. Clearly, he did not do so or attempt to do so.  In those circumstances, we are not satisfied that the conviction of the 3^rd applicant of Charge 7 is safe.

CONCLUSION

246. In the result, we grant all the applicants leave to appeal against conviction.  We dismiss the appeals of all the applicants in respect of Charge 1, the appeal of the 1^st and 2^nd applicants in respect of Charge 2 and the appeals of the 3^rd, 4^th and 5^th applicants in respect of Charges 3, 5 and 4 respectively.  We allow the appeal of the 1^st and 2^nd applicants in respect of Charge 6 and the appeal of the 3^rd applicant in respect of Charge 7 and quash those convictions.