HKSAR v. CHAN KIM CHUNG, NELSON

CAC C 432/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 432 OF 2010

(ON APPEAL FROM DCCC NO. 772 OF 2010)

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J U D G M E N T

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

Introduction

1.  On 23 November 2010 the applicant pleaded guilty before Judge Anthea Pang in the District Court to two charges of blackmail, contrary to section 23(1) and (3) of the Theft Ordinance, Cap. 210 (Charges 1 and 3) and one charge of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25 (1) and (3) of the Organized and Serious Crimes Ordinance Cap. 455 (Charge 2).

2.  He was sentenced to a total of four years six months’ imprisonment and now seeks leave to appeal against sentence.

The facts

3.  The facts are helpfully summarised by the judge in her Reasons for Sentence:

“2. The facts which were admitted by the Defendant and which formed the basis of these charges are as follows : the victim, X, was a senior marketing director of an investment bank. In the course of his work, X came across a client surnamed LIU, and LIU’s assistant, Raymond. In early 2006, Raymond told X that LIU wished to obtain a diplomatic passport. As a result, X introduced Stanley, another client of his, to Raymond and LIU so that the arrangement could be made. Although X knew that Stanley and LIU had signed two agreements in July 2006 for Stanley to provide LIU with the passport at the cost of US$500,000, X was never a party to those agreements and he did not get any benefit from that.

3. In the afternoon of 22 December 2008, the Defendant and two other males arrived at X’s office. They produced the aforesaid agreements to X and told him that they were instructed to collect a debt of US$350,000 from X. In reply, X said he was not the one responsible and asked them to look for Stanley. However, one of the males in the Defendant’s group told X that if he failed to settle the debt, they would have X’s limbs cut off and X would not be able to leave Central. A further threat of splashing red paint at X’s home was also issued. X asked for more time to deal with the matter and the three of them then left. This is the subject matter of charge (1). Later, when X proposed to make the payment by instalments, the male from the Defendant’s group told X over the phone that if X did not want any mishap on his wife, he better made the payment quickly.

4. Fearing that his family members might be harmed, X decided to make the payment of US$350,000 demanded by the Defendant’s group. Negotiations then took place between 27 and 29 December 2008 as a result of which X and the Defendant’s group of three met up on 29 December 2008. X then followed the Defendant to Hang Seng Bank where he transferred HK$1,000,000 to the Defendant’s account. Subsequently, on 20 and 22 January 2009, X transferred two further sums of HK$1,003,000 and HK$712,500 to the Defendant’s account. Amongst the payments made, a sum of HK$3,000 was paid as “tea money” to the Defendant’s group as demanded by them. Therefore, X had transferred a total of HK$2,715,500 to the Defendant’s bank account. This is the subject matter of charge (2). The relevant bank transaction records showed that once the deposits were made, the Defendant withdrew cash from his account on the same day.

5. In the afternoon of 22 January 2009, one of the males from the Defendant’s group called X again and asked X to meet him. X turned up and was asked to make a further payment of HK$5,000 as “tea money”. As X only had HK$2,000 with him at that time, the male took that sum from X. Shortly afterwards, the Defendant and two other males, who had not appeared before, then arrived. The Defendant told X that his boss requested X to pay HK$3,000,000 to him as interest and again produced to X the agreements between Stanley and LIU. At that time, one of the two males who arrived with the Defendant asked X to give them the personal particulars of his family members. When X refused, X felt a hard object being pressed against his waist. X was shouted at and eventually, X surrendered the particulars to them out of fear. The Defendant’s group then escorted X to his residence in order to have his address verified. X made a report to the police on 24 January 2009. This is the subject matter of charge (3).”

4.  At the date of the offences, the applicant was aged 38 years.  He was not a person of previous good character in that he had previous offences for dishonesty but these were somewhat stale.

Mitigation

5.  His mitigation was that he needed money for a wedding banquet and had been promised a reward of $50,000 to help collect a debt.  He said that he was not aware that any hard object was pressed against X in the course of the second blackmailing episode.  As for the money-laundering charge, he contended that he merely allowed his own bank account to be used and it was accepted by the prosecution that $1.9 million found its way to the man Liu.

The sentencing

6.  In her sentencing remarks, the judge noted that in the blackmail episodes the applicant acted with others, this constituting an aggravating feature; that in the course of the first offence serious threats were made and that in the course of the second blackmail offence (the third charge) threats were made in relation to the victim’s family, buttressed by a trip to his home to verify his address.

7.  In relation to Charge 1, the judge took a starting point of 3 years’ imprisonment and, giving credit for the plea of guilty, imposed a term of 2 years’ imprisonment for that offence.

8.  In relation to Charge 3, the judge adopted a starting point of 4 years’ imprisonment and imposed a sentence, after plea, of 32 months’ imprisonment.

9.  In relation to Charge 2, the s. 25 offence, the judge noted that the applicant not only allowed his account to be used but that he himself withdrew the sums involved and was well aware of the serious offences represented by the funds deposited.  She adopted a starting point of 3 years’ imprisonment and imposed, in the light of the plea of guilty, a term of 2 years’ imprisonment.

10.  She took the view that since the offences were separate and distinct, the sentences for them were amenable to consecutive orders, though wholly consecutive sentences would result in an excessive totality.  She considered the appropriate totality to be 54 months’ imprisonment and, accordingly, ordered that 16 months of the two-year term in respect of the second offence was to run consecutively to the term imposed in respect of the first; and that 14 months of the 32-month term in respect of the third offence was to run consecutively to the terms imposed in respect of the first and second charges; this making a total of 54 months’ imprisonment.

Money-laundering and the predicate offence

11.  Two grounds of appeal are advanced by Mr Surman on behalf of the applicant: the first is that the sentence for the second offence ought not to have been ordered to run consecutively, even in part, to the sentence imposed for the first since the sums in the applicant’s bank account with which the applicant dealt were merely the fruit of the first blackmail; a normal attribute or consequence of a successful demand with menaces and therefore part and parcel of the blackmail offence itself.

12.  The problem raised by this ground of appeal stems from the fact that s. 25 of the Organized and Serious Crimes Ordinance, Cap. 455, is broadly drafted so that it is capable of including a wide range of conduct by the perpetrator of the predicate offence some of which is beyond what most people think of as money laundering.  This is because the mens rea of the s. 25 offence is concerned only with the state of mind of the defendant in respect of the source of the money.  Once he is proven to have the requisite state of mind and “deals” with the property he commits the offence, irrespective of his purpose in dealing with the property.

13.  What most people understand as money laundering, however, is where the proceeds of crime are dealt with for a specific purpose, namely, to create distance between the crime and the profits it generates so that no link between the two can be detected.  This, necessarily, involves acts of dealing with the proceeds of crime but the acts of dealing are directed at a particular end and may involve multiple “dealings” designed to create a number of layers between the crime and the profits it has generated.  By a process of transferring the money between accounts, both domestic and international, converting the monetary profits into other forms of property or washing the money through legitimate businesses, a series of layers are created that conceal the origin of the criminal proceeds and that they are in fact the proceeds of crime.  This renders detection of the crime and the recovery of its proceeds the more difficult.  This we shall refer to as a dealing with the proceeds for a money laundering purpose.

14.  When money laundering in this sense takes place then it should be separately charged because it represents a course of criminal activity that is clearly additional to the criminal acts that make up the predicate offence.  In such a case, the money laundering offence is entirely freestanding and does not give rise to the issue presented in the instant case.

15.  The present issue may arise in any course of criminal activity that is composed of a number of acts each of which constitutes a separate criminal offence.  Perhaps the most obvious example is the offence of conspiracy to defraud.  The overt acts committed in carrying out such a conspiracy may include forgery, false accounting, theft, obtaining property by deception or more.  However these substantive offences will not be charged in order to reflect the criminality of the offenders, for this is achieved by charging the conspiracy.  Substantive offences might be laid by the prosecutor but that will be for other prosecutorial reasons; often to prevent a complete acquittal where the prosecutor envisages difficulties in proving that there was a conspiracy or that a particular accused was a co-conspirator.

16.  Because of the breadth of s. 25 it is likewise likely that on many occasions the criminal activity underlying a predicate offence that has generated proceeds of crime will include an act by one of the participants in that offence that constitutes a dealing, under s. 25, with those proceeds.  As in the conspiracy to defraud example, there may be quite proper reasons why the prosecutor might want to charge the s. 25 offence other than for the purpose of revealing to the court the full extent of the accused’s criminality.  But where no such reasons are present then the prosecutor should consider whether such a charge is needed.  It will only be needed in order to reflect the full culpability of the accused and to enable the court to sentence for that culpability.  In other words, in the absence of a prosecutorial reason for laying a s. 25 charge, in the situation where the s. 25 conduct was not a dealing for a money laundering purpose, the court will not usually need to have before it a s. 25 charge in order to be able to punish appropriately the offender’s conduct.  Where a court finds itself faced with a predicate offender against whom the prosecution has also laid a s. 25 offence, the prudent course for the trial judge is to enquire from the prosecutor at the outset what additional culpability the s. 25 offence is laid to meet.

17.  These considerations lead naturally to the approach which a court should adopt in sentencing an offender who is guilty both of the predicate offence and a connected s. 25 offence.  The question for the purpose of sentence of the s. 25 offence must always be whether its commission adds anything to the culpability disclosed by commission of the predicate offence.  If it does, then that extra culpability must be reflected in the overall sentence imposed. If, however, the s. 25 offence adds nothing, then an effective additional sentence for the s. 25 offence should not be imposed, for doing so would in effect be to punish the offender twice the same conduct.  This is an echo of decisions in other jurisdictions: see, for example, R v Greaves and others [2011] 1 Cr App R (S) 72; and R v Thorn [2009] NSWCCA 294.  It also reflects a fundamental principle which applies generally to sentencing for more than one offence: see HKSAR v Ngai Yiu Ching CACC 107 of 2011, 3 October 2011, unreported.

18.  Where the s. 25 offence adds nothing to the culpability of the conduct involved in the primary offence, it will be appropriate either to say that “no separate penalty” is imposed for the s. 25 offence or to impose a sentence for the s. 25 offence but order it to run concurrently with that imposed for the predicate offence.

19.  In the normal course of events the use of an account to conceal the proceeds of a crime, to disguise them, or transfer them or remove them, or the conversion of the proceeds into some other form of property, so as to facilitate the crime’s commission or render its detection more difficult will constitute material additional culpability.  Conversely, where the s. 25 offence evidences no more than the mere obtaining of funds already reflected in the predicate offence, it is unlikely – unless the prosecutor is able to show otherwise – that additional culpability is demonstrated.  In this latter regard, we recognize that it may be said that the mere deposit of illicit funds into a bank or other financial institution itself taints the integrity of the system, and that by its sentence the court should strive to deter any misuse of Hong Kong’s banks and financial institution by those who have profited from crimes.  But that is not a basis upon which the respondent has invited the court to act nor is that an approach adopted elsewhere.  Whether the use by an offender of Hong Kong’s banking and financial system for a non-money laundering purpose, such as to enable the crime to be more easily or effectively committed, should be regarded, without more, as adding to an offender’s culpability is a consideration which may have to be visited at some future point.

The present case

20.  In the present case, counsel for the respondent only sought to justify the sentence for the section 25 offence on the basis that the sentencing for the first blackmail had not reflected the payment by the victim of the demanded sum and its receipt by the applicant.  He did not seek to justify the existence of the section 25 offence on the charge sheet by reference to any culpability beyond that.  We make the obvious point that sentencing for a blackmail offence will inevitably take into account whether the illicit demand for money has been successful, how much was obtained and whether the money has been recovered.

21.  Furthermore, in this particular case, the identity of the person in whose favour the money was demanded was never a secret and there was no attempt to “wash” the money in the usual sense.  Reading between the lines of the admitted facts, it is clear enough that the money eventually went to Liu as was conceded by the prosecutor.  Apparently, the money was demanded and went to Liu because the passport for which it was paid was never delivered and the money not returned.  Quite why the offenders demanded the money from X rather than from Stanley, is not clear.  There is no suggestion that the money went into the applicant’s bank account in order to hide its destination or in order to render detection of the offence more difficult.

22.  There was some suggestion that the charge sheet included the s. 25 offence in case some problem was encountered in proving the blackmail as against this applicant.  But for that consideration, the merits of which are not necessary for us to determine, a separate charge was not justified.

23.  As we shall shortly indicate when dealing with the second ground of appeal, it appears to us that the sentence for the first blackmail offence was markedly low.  That no doubt happened because the judge was faced with a somewhat unrealistic presentation of the case whereby she was asked to sentence for the first blackmail offence disregarding the fruits of the blackmail and then, separately, in relation to Charge 2, to sentence for the receipt of the fruits of the blackmail.  With the benefit of the analysis presented to us and our consideration of it, the judge would no doubt have imposed a sentence for the first blackmail offence which took into account the receipt of the very substantial proceeds of the blackmail and either imposed no separate sentence on Charge 2 or a sentence of imprisonment which would have been ordered to run concurrently with the appropriate sentence on Charge 1.

24.  So, in the result, Mr Surman’s first ground has merit in principle; but the proper application of the principle does not avail his client.

Penalties for the blackmail offences

25.  The second ground is that the sentence in respect of the third charge was manifestly excessive.  It is said that the judge erred in using the features identified by her in aggravation of the starting point and, secondly, that the sentence is out of line with sentences in other blackmail offences.  It is also argued that the sentence for the third offence should have been ordered to run concurrently with that imposed for the first.

26.  We do not agree with these contentions.  The offences were a particularly serious form of blackmail.  

27.  The first charge concerned a substantial sum of money, a visit to the applicant’s office, a threat to cut off his limbs and to detain him, a threat to harm his wife, and a further threat of daubing his home with paint.  Monies were then garnered from the victim on three occasions with the applicant close to hand.  On the approach to the first and second charges which we have advocated as the appropriate approach, a starting point much higher than 3 years was warranted.

28.  There is a feature of the 1^st and 3^rd charges that require special mention.  Threats involving family members are not to be tolerated and must be met with strongly deterrent sentences.  Not only were such threats made in this case but in relation to the 3^rd charge they were backed up by a visit to the applicant’s residence.  Furthermore the fact that a second threat was made, a month or so after the first offence, must have led this victim to fear that there might be no end to the blackmailing course of conduct.  It avails little in such cases to refer to other blackmail cases where the facts are materially different.  The starting point for Charge 3 was in our opinion manifestly too light. 

29.  In our judgment, the appropriate starting point in relation to Charge 1 was 6 years’ imprisonment; and 5 years’ imprisonment for Charge 3.  The appropriate sentences after discount for the pleas of guilty are 4 years 10 months; and 3 years 4 months, respectively.  Following our suggested approach to the s. 25 issue, no additional penalty is warranted on Charge 2.

30.  The resulting totality, were we to order the sentences to run consecutively, would obviously be too high.  We think that in the circumstances of this case a total sentence of 6 years’ imprisonment could not be said to be manifestly excessive.

31.  In the court below, the totality imposed was one of four years six months’ imprisonment.  We were minded to exercise the powers granted us under section 83I of the Criminal Procedure Ordinance, Cap 221 to increase the totality and invited counsel to address us on this issue.  With some reservations we have decided not to do so.  The main thrust of the application for leave to appeal related to the additional penalty imposed in relation to the money-laundering offence and that argument has succeeded as to principle but, in correct pursuit of that point, sight was lost of the practical effect of an appropriate approach having regard in particular to the very serious nature of the blackmail offences.

Result

32.  We think that this is a case in which the record should reflect more accurately the seriousness of the individual blackmail offences, though we emphasise (see para 30 above) that no complaint would be justified by a total higher than that upon which the circumstances of this appeal have persuaded us to settle.  Accordingly, in exercise of our powers under section 83I of the Criminal Procedure Ordinance, Cap 221 we quash the sentences in relation to Charges 1 and 3, the blackmail offences, and substitute sentences of 4 years and 3 years four months respectively. In order to achieve the result upon which we have determined – in other words the same totality as that imposed in the court below – we order 6 months of the sentence in relation to Charge 3 to run consecutively to the sentence imposed in relation to Charge 1; that the remainder of those sentences shall run, concurrently with the sentence imposed for Charge 1; and that the sentence imposed in respect of Charge 2 shall run concurrently to both.