HKSAR v. LIN KEI TAT

[ENGLISH TRANSLATION - 英譯本]

CACC 11/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 11 OF 2013

(ON APPEAL FROM DCCC NO 869 OF 2011)

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JUDGMENT

Hon Yeung VP (giving the judgment of the Court):

Introduction

1.  The appellant (Lin Kei-tat) pleaded guilty before District Judge E Yip (the trial judge) to two counts of offences (the 3^rd and the 5^th charges), both of which were the offence commonly known as “money-laundering”, and was sentenced to imprisonment for a total of 3 years and 6 months.  The allegations in the two “money-laundering” offences were respectively that between 2 January 2004 and 12 January 2010 and between 12 October 2006 and 28 January 2009, the appellant “laundered” “illicit money” of around HK$25,190,000 and around HK$14,450,000, amounting to a total of around HK$39,700,000.  In addition, pursuant to sections 8, 11 and 13 of the Organized and Serious Crimes Ordinance (the Ordinance), the trial judge found that the appellant had benefited from the “money-laundering” offences and that his proceeds of the offences were in total in the amount of at least $100,000, and the trial judge assessed the value of the appellant’s proceeds of the offences at HK$39,700,000 odd.

2.  On 30 November 2012, the trial judge made a confiscation order by which the property under the appellant’s name was confiscated.  As the amount that might be realized at the time the confiscation order was made was only HK$10,334,866.76 (HK$10,300,000 odd), which was less than the HK$39,700,000 odd the court assessed to be the value of his proceeds of the offences, the appellant was only required under the confiscation order to pay HK$10,300,000 odd to the Government of the Hong Kong Special Administrative Region before 31 May 2013; in default of such payment he had to serve 5 years’ imprisonment and this term of 5 years was to be served consecutively to the sentence of 3 years and 6 months imposed on him.

3.  On 7 January 2013 the appellant filed an application for leave to appeal against the sentence and the confiscation order.  The Secretary for Justice (the respondent) objected to his application.

4.  On 11 September 2013, a single Justice of Appeal dismissed the appellant’s application for leave to appeal against the term of imprisonment of 3 years and 6 months but granted him leave to appeal against the confiscation order. Therefore, we only need to deal with the trial judge’s confiscation order that the appellant was to pay HK$10,300,000 odd, otherwise he had to serve an additional term of 5 years.

5.  Mr Robert Pang SC acted for the appellant, while Mr Keith Yeung SC, Director of Public Prosecutions, Mr Martian Hui, Senior Assistant Director of Public Prosecutions, and Ms Winnie Lam, Senior Public Prosecutor acted for the respondent.

Facts of the case

6.  The undisputed facts showed that the appellant engaged in illegal off-course gambling activities, including illegal bookmaking in relation to horse races and soccer matches.  Bookmaking was operated through two bank accounts under the appellant’s name (a Bank of China account and a HSBC account).  At the material times the appellant dealt with sums of money paid into the Bank of China account and the HSBC account, i.e. the “illicit money” involved in this case.

7.  During the period when the appellant committed the 3^rd charge, i.e. between 2 January 2004 and 12 January 2010, a total of HK$25,192,368.53 was paid into the Bank of China account and a total of HK$21,905,498.14 was withdrawn from it.

8.  During the period when the appellant committed the 5^th charge, i.e. between 12 October 2006 and 28 January 2009, a total of HK$14,458,749.77 was paid into and a total of HK$14,437,606.83 was withdrawn from the HSBC account.

9.  During the above-motioned periods, the appellant did not file any tax return, but the total amount of money paid into the Bank of China account and the HSBC account under his name was as much as HK$39,700,000 odd.  The appellant admitted that the whole of this sum of HK$39,700,000 odd was made up of bets illegally received by him.

10.  After conviction, the amount that could be obtained by realizing the assets under the appellant’s name consisted of:

(1)	bank deposits	$7,538,663.84
(2)	cash	$196,222.92
(3)	bail money	$250,000
(4)	real property under his name (the property)	$2,300,000
(5)	a watch of a famous brand	$50,000
		___________________
		total: $10,334,886.76
		==================

11.  The property was purchased by the appellant in 1996 at the price of HK$2,198,100. All the money required for purchasing it had been paid.  The market value of the property as at 21^st August 2012 was HK$2,300,000.

Prosecution’s position

12.  The prosecution asserted that all the HK$39,700,000 odd paid into the Bank of China account and the HSBC account at the material times was the appellant’s proceeds of the offences, but that these proceeds of the offences exceeded the amount obtainable by realizing the assets under the applicant [sic]’s name, namely HK$10,300,000.  The prosecution took the view that according to the Ordinance, all the above-mentioned realisable assets of the appellant should be confiscated, and that therefore the court should make a confiscation order to confiscate the total sum of HK$10,300,000, being the amount that might be realized as against the appellant.

Findings made by the trial judge

13.  The trial judge found that any payments received by the appellant in connection with the offences were his proceeds of the offences; that all the monies, which amounted to HK$39,700,000 odd, paid into the Bank of China account and the HSBC account in this case were payments received by the appellant in the course of his commission of the “money laundering” offences; and that therefore they were all his proceeds of the offences.  In addition, the trial judge assessed the value of the appellant’s proceeds of the offences at HK$39,700,000 odd. Therefore, he granted the prosecution’s application and made a confiscation order to confiscate the whole sum of HK$10,300,000 that might be realized from the assets under the appellant’s name.  At the same time he ordered that if the appellant failed to pay HK$10,300,000 odd to the Government of the Hong Kong Special Administrative Region before 31 May 2013, he had to serve an additional term of 5 years’ imprisonment.

Grounds of appeal

14.  Mr Pang considered that the approach taken by the trial judge was wrong.  He submitted that before the confiscation order could be made, the trial judge had to be satisfied that the appellant had benefited from the offences in question and that his proceeds of the offences were in total at least $100,000.  Mr Pang pointed out that the court was first required to determine whether the appellant had benefited and whether the proceeds of the offences were at least $100,000, and only after he had determined that the answers were in the affirmative could he proceed to assess the value of the proceeds of the offences. Mr Pang complained that the trial judge did not follow this procedure.

15.  Mr Pang stressed that the object to be confiscated under the authority of the confiscation order should only be the “rewards” obtained from the criminal acts in question, and not the payments obtained simply because of the criminal acts.  Mr Pang submitted that the trial judge did not consider whether the money sought to be recovered under the confiscation order made against the appellant had any of the characteristics of a reward.

16.  Mr Pang cited HKSAR v Li Kwok Cheung George (2014) 17 HKCFAR 319 in support of his argument.

17.  Mr Pang pressed the point that in Li Kwok Cheung the Court of Final Appeal held that “proceeds of an offence” meant property generated or obtained by the doing of certain acts, and he argued that given that “a person’s proceeds of an offence” was defined to be “any payments or other rewards received by him in connection with the commission of that offence”, what was required under the law was that the payments received by the appellant had to be in the nature of a “reward” before they could be qualified as “proceeds of an offence”.  In Mr Pang’s view, according to the Ordinance, the court should have confiscated only the “net profit” made by the appellant from the commission of the offences.  His reason was that the wording used in the Ordinance, including “benefited from”, “proceeds”, “rewards”, fit in perfectly with his view.

18.  Mr Pang relied particularly on the following passages of the judgment of the Court of Final Appeal in Li Kwok Cheung George in advancing his argument:

“As a matter of language, those words (payment or other reward) make it clear that the contemplated payment must be in the nature of a reward. It must in particular be a payment having the quality of a reward received in connection with commission of the relevant offence.” (para 30)

“For a payment to have this character, it has, for instance, to be a recompense or return or remuneration or incentive for or in connection with doing or having done something.” (para 32)

“The provisions governing confiscation orders are aimed at depriving a defendant of his proceeds of the relevant offence to the extent that he has benefited from such offence. … Benefit is therefore fundamental to the confiscation jurisdiction. If satisfied as to such benefit, the court proceeds to determine the amount to be recovered from that defendant.” (para 40)

“The statutory purpose of targeting persons to the extent that they have benefited from crime is also evident from the ancillary powers conferred in aid of the confiscation jurisdiction. … Similarly, special procedures have been laid down to help to determine whether a defendant has benefited from the crime and the value of his proceeds,” (para 41)

“That the legislative intent is that such proceeds should reflect the ‘benefit’ gained by the defendant from the offence is put beyond doubt by section 2(8) which provides:

‘For the purposes of this Ordinance, a person who has ... received any payment or other reward in connection with the commission of an offence or an organized crime has benefited from that offence or organized crime, as the case may be.’ ”(para 42)

19.  Mr Pang placed emphasis on the holding of the Court of Final Appeal that in dealing with the provisions of the Ordinance, a purposive interpretation should be adopted, and he agreed with the proposition quoted below:

“… when section 25(1) and section 2(6)(a) are construed in the light of that purpose, the inevitable conclusion is that the word ‘proceeds’, both for the purpose of establishing the section 25(1) offence and of making confiscation orders, has to be construed as referring only to money or property which represents an economic benefit gained by the relevant defendant in connection with the commission of the predicate offence. The entire scheme of the Ordinance is aimed at depriving defendants of such ill-gotten benefits and criminalising the laundering of those gains.”

20.  Mr Pang contended that when the trial judge made the confiscation order, he did not consider whether the HK$39,700,000 odd in the present case was in the nature of a “reward”, whether the appellant had “benefited” from the offences, and, if so, whether his proceeds of the offences were in total at least $100,000.  Mr Pang asserted that the trial judge failed to properly deal with the issues involved in this case; that the confiscation order he made targeted assets which had no connection with the appellant’s criminal acts; and that therefore, it was not supported by a sound basis.

Discussion

21.  The appellant engaged in illegal gambling activities.  He received bets on off course horse races and soccer matches.  As repeatedly pointed out by Mr Pang, even if all the monies paid into the two bank accounts of the appellant at the material times were bets, it does not mean that what the appellant gained from his illegal activities was equivalent to the amount of such deposits.  The reason is that he had to pay out dividends in relation to those bets.

22.  Between 2 January 2004 and 12 January 2010, HK$21,905,498.14 was paid out from the Bank of China account and HK$14,437,606.83 was paid out from the HSBC account.  It is very likely that most of these two sums of money was money used for distributing dividends.

23.  If the above observation is correct, it follows that the “profit” gained by the appellant from his illegal gambling activities was only HK$3,000,000 odd.  If the amount that could be recovered under the confiscation order should only comprise the appellant’s “proceeds” of the offences in question and “proceeds” were identical with his “profit”, then probably the amount recoverable under the confiscation order should have been only HK$3,000,000 odd.

24.  In the Ordinance, different expressions are used to represent the advantage obtained by an offender from committing the offence in question, including “benefited”, “proceeds”, “other rewards”, but the word “profit” has never been used, nor is there a requirement that the court has to assess the value of the “profit” gained by the defendant from the commission of the offence.  The word “benefited” used in the Ordinance refers to the advantage obtained by the defendant in connection with the commission of the offence.  If Mr Pang’s primary argument is that the words “benefited”, “proceeds” and “other rewards” used in the Ordinance refer to the “profit” gained by the defendant in connection with the commission of the offence, then his primary argument is incorrect.

25.  In fact, Mr Pang’s argument that the purpose of the Ordinance is to deprive a defendant of the “profit” he made in connection with the commission of the offence had been made in quite a few English cases dealing with similar provisions, and had been considered by the superior courts in England.  In the end, many senior English judges, like speaking in one voice, firmly rejected this argument.

26.  Mr Yeung referred this court to a number of English cases, including R v Currey (1994) 16 Cr App R (S) 421, R v Patel [2002] 2 Cr App R (S) 10, R v Sharma [2006] 2 Cr App R (S) 416 and Smith (David) [2002] 2 Cr App R (S) 37.  I am not going to relate the facts of and the holdings made in these cases.  Suffice it for me to cite part of the endnote made by Lord Bingham of Cornhill in R v May (HL(E)) [2008] 1 AC 1028, which the Court of Final Appeal endorsed in Li Kwok Cheung George, the authority that Mr Pang so heavily relied.  In paragraph 58 of the judgment, Ribeiro PJ and Fok PJ agreed with the following comment made by Lord Bingham in May:

“The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means. It does not provided for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine. The benefit gained is the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses or any amounts payable to co-conspirators.”

27.  In HKSAR v Shing Siu Ming & Ors (No2) [2000] 3 HKC 83, it was also held by the court that the phrase “benefited from drug trafficking” in the Drug Trafficking (Recovery of Proceeds) Ordinance meant the aggregate value of the payments or other rewards made to a defendant in connection with drug trafficking, and that it was directed to the gross payments received in relation to drug trafficking, not merely “profit”.

28.  At issue in this appeal is how to calculate the amount to be recovered under the confiscation order when the court is to confiscate in accordance with the Ordinance the “proceeds” derived by the appellant from the offences which he committed.  The court must act on the basis of the purpose of the Ordinance and the relevant provisions, giving effect to the true meaning of the expressions “benefited”, “proceeds of an offence” and “other rewards”.

29.  In section 2(6)(a) of the Ordinance, “a person’s proceeds of an offence” is defined as “(i) any payments or other rewards received by him at any time (whether before or after 2 December 1994) in connection with the commission of that offence; (ii) any property derived or realised, directly or indirectly, by him from any of the payments or other rewards; and (iii) any pecuniary advantage obtained in connection with the commission of that offence”.

30.  We consider that the definition of “proceeds of an offence” provided in the Ordinance is clear and specific.  According to this definition, “any payments received in connection with the commission of that offence” is different from the “profit” made in connection with the commission of that offence.  Any profit made in connection with the commission of an offence is certainly “proceeds of an offence”, but “proceeds of an offence” does not consist solely of “profit”; it also encompasses “any payments or other rewards received”.  When it comes to consider “benefited”, “proceeds” and “other rewards” mentioned in the Ordinance, the court must go by the basic definition of “proceeds of an offence”.  In the light of the foregoing analysis, “benefited”, “proceeds” and “rewards” all refer to the payments or other pecuniary advantage obtained in connection with the commission of the relevant offence and are not confined to “profit”.

31.  We do not overlook the fact that the Ordinance is not just directed against “illicit money” derived from the offence of illegal bookmaking.  “Illicit money” can come from the commission of other offences, including trafficking in dangerous drugs, fraud, kidnapping, blackmail, robbery and living on earnings of prostitution (see Schedule 1 of the Ordinance).  When the court is to make a confiscation order in relation to the “laundering” of “illicit money” which has its source in one or more of these offences, is the court required to first, work out the amount of money which might be realized as against the defendant; second, deduct from it the cost incurred in committing the relevant offence or offences (for example, the cost of buying materials for manufacturing drugs, payments to couriers who delivered the drugs, or even the money spent on buying weapons used in a robbery); and only then can it confiscate the remaining sum of the money which might be realized as against the defendant?  We consider that the answer must be “no”, which is plain and obvious and is a matter of course.

32.  If a confiscation order made under the Ordinance targets only the “profit” gained in committing an offence, then what needs to be written down in the Ordinance would merely be that the “profit” gained by a defendant in connection with the commission of the offence shall be confiscated, and there is no need to specify that what is to be confiscated is the amount that might be realized as against the defendant.

33.  We agree that it might be regarded as unjust where the “profit” a defendant actually gained from the offence in question is rather small but the total amount of money that might be realized as against him is to be confiscated.  However, we take the view that in interpreting the Ordinance, the court should not be overly affected by the special circumstances which might exist in some extreme cases.  In any event, when a defendant, who knew very well what possible consequences the commission of an offence could lead to, nevertheless chose to commit that offence, he has only himself to blame if in the end he has to face a harsh punishment.

34.  As pointed out by the Court of Final Appeal in Li Kwok Cheung George, the court needs to adopt a purposive approach in the interpretation of the Ordinance to give effect to the core object that underlies the Ordinance.  In our judgment, the legislature, in order to effectively combat organized and serious crimes, enacted harsh provisions for confiscating all the proceeds of an offence of a criminal, and if the amount that might be realized is less than his proceeds of the offence, then the whole of the amount that might be realized is to be confiscated.

35.  In Li Kwok Cheung George, which Mr Pang has so earnestly prayed in aid, the focus was not on payments or rewards derived from a predicate offence, but money used in furtherance of such an offence, i.e. the so-called “clean money”.  What the Court of Final Appeal confirmed was only that section 2(6) of the Ordinance targeted “tainted money” i.e. money which was derived from or resulted from a predicate offence, but not “clean money”.  The judgment of the Court of Final Appeal must be understood and interpreted on this factual basis.

36.  In our view, the judgment of the Court of Final Appeal, properly understood, does not support the position advanced by Mr Pang.  According to the legal principles laid down therein, the HK$39,700,000 odd paid into the account at Bank of China and the account at the HSBC was certainly “tainted money”, not “clean money”; it was money derived and resulted from the appellant’s commission of the relevant offences and generated by the relevant offences. Therefore, it was “proceeds of an offence” referred to in section 8 of the Ordinance.  At the time of the appellant’s conviction, the amount that might be realized as against him was only HK$10,300,000, which was less than the amount of his proceeds of the offences.  For this reason, the trial judge made the confiscation order that the whole amount that might be realized as against the appellant, namely HK$10,300,000 in total, be confiscated.  This was a correct decision and we endorse it.

37.  Pursuant to section 13 of the Ordinance, when the court makes a confiscation order, it shall at the same time make an order that the defendant shall pay the amount specified in the confiscation order within a fixed period, and that if the defendant cannot pay off the whole amount of the money within the fixed period, he is to serve an additional term of imprisonment.  The Ordinance does not prescribe the shortest term of imprisonment that should be imposed for this purpose, but in the TABLE in section 13(2) of the Ordinance the following terms of imprisonment are set out:

An amount not exceeding $200,000	12 months
An amount exceeding $200,000 but not exceeding $500,000	18 months
An amount exceeding $500,000 but not exceeding $1 million	2 years
An amount exceeding $1 million but not exceeding $2.5 million	3 years
An amount exceeding $2.5 million but not exceeding $10 million	5 years
An amount exceeding $10 million	10 years

38.  The amount involved in the present case is HK$10,300,000, which can attract the maximum term of 10 years imprisonment to be served in default of compliance with the confiscation order.  The TABLE only sets out the maximum terms of imprisonment in default, relating to various bands of sums of money for which the defendant is liable under a confiscation order.  The court should not work out a term of imprisonment in default just by simple arithmetic.  For any band of amounts, the court can of course set a term shorter than the corresponding maximum term.  We consider that the court also has a discretion to adjust the term of imprisonment downward so that it is closer to the term applicable to the confiscation amount immediately below that which is being considered.  However, given that in that section each band of confiscation amount is linked up with a corresponding term of imprisonment, we think that unless there are special circumstances, the court should not readily exercise this discretion, otherwise it may contradict the legislative intent.

39.  In R v Szrajber [1994] 15 Cr App R (S) 821, at page 824 the English Court of Appeal had this to say:

“… the Court when imposing a period of imprisonment in default was to have a discretion below that maximum period. Normally the Court is likely to determine that the appropriate period in default will fall between the maximum for the band immediately below that which was being considered and that band itself.”

40.  As pointed out by Mr Yeung in his supplemental skeleton submission, the approach described above was widely adopted in similar cases (see R v John Smith [2009] EWCA Crim 344; R v Pigott [2010] 2 Cr App R (S) 91).  We agree that this is a suitable approach.

41.  o order that a defendant who fails to pay the amount he is liable to pay under a confiscation order shall serve an additional term of imprisonment is to give an incentive to the defendant to comply with the confiscation order.  If the defendant has the ability to pay what he is liable to pay under the order but wilfully refuses to obey the order, then it is unavoidable that he will serve the additional term.

42.  The realizable assets under the appellant’s name are worth about HK$10,300,000, which is sufficient to pay the amount specified in the confiscation order.  If the appellant refuses to pay the amount in the confiscation order, it is certain that he wilfully refuses to comply with the order.

43.  The court must fix a term of imprisonment shorter than the maximum term in default applicable to the amount of $10,300,000, but long enough to compel the appellant to realize his assets to pay off the amount specified in the confiscation order.  The court should not make an order which will encourage a defendant to choose to serve an additional term of imprisonment rather than complying with the order to pay the money which is to be confiscated.  The court must ensure that nothing is to be gained by the defendant if he refuses to comply with the court order (see John Smith, Pigott and R v Simon Price [2010] 2 Cr App R (S) 283).

44.  On the basis of the above analysis, we hold that a term of imprisonment to be served in default of compliance with a confiscation order is separate from the sentence imposed for the relevant offence, and that in fixing a term of imprisonment in default, the court is not required to observe the principle of totality.

45.  The approach mentioned above, i.e. fixing a term of imprisonment to be served in default of payment of a confiscation order is not required to have regard to the question of totality in relation to the sentence imposed for the substantive offence and the period imposed in default, has been confirmed in many decided cases.

46.  The court made the following observations in paragraph 8 of the judgment of John Smith:

“There is some suggestion that the judge should have had regard to the overall totality of the sentence of 13 years imposed for the substantive offence and the period to be imposed in default. That argument was not pursued before us and it was accepted that it was wrong in principle to take into account in fixing the default term the pervious sentence. We consider that the concession was rightly made, as the purpose of the sentence of imprisonment was to punish him for his drug dealing; the purpose of the sentence for confiscation was the purpose we have set out, namely to ensure compliance with the order of confiscation. The sentences have completely different purposes and therefore it was right in principle to concede that an argument on totality could not properly be advanced.”

47.  The amount to be recovered under the confiscation order in the present case is HK$10,300,000, to which the maximum default term of 10 years is applicable.  According to the TABLE in section 13(2), the maximum default term for the band immediately below, i.e. an amount exceeding $2.5 million but not exceeding $10 million, is 5 years.

48.  We agree that the fact that the “net profit” gained by the appellant from his criminal act is less than the amount specified in the confiscation order is not a reason to reduce the term of imprisonment in default.  We do not discern any special reason whereby the term of imprisonment to be served by the appellant in default of paying the $10,300,000 as ordered in the confiscation order can be set below 5 years.  In fact, if the amount sought to be recovered by way of the confiscation order exceeds $10,000,000, or if the case is exceptionally serious or if aggravating factors are present, the court can fix the default sentence at a term far more than 5 years.

49.  Having considered all the circumstances of this case, we find that the default term of 5 years fixed by the trial judge was correct.  There is no basis for us to change it.

50.  For the above reasons, we dismiss the appellant’s appeal against the confiscation order.  We give him three months to comply with the order.  The appellant shall pay HK$10,334,886.76 to the Government of the Hong Kong Special Administrative Region before 10 June 2015, in default of such payment he shall serve 5 years’ imprisonment and the term of 5 years shall be served consecutively to the sentence of 3 years and 6 months imposed in respect of the two “money laundering” charges.