HKSAR v. WAN YET KWAI

CACC 372/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 372 OF 2008

(ON APPEAL FROM DCCC NO. 962 OF 2007)

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J U D G M E N T

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Hon Hartmann JA (giving the judgment of the Court):

1.  On 13 August 2008, following a trial in the District Court before Deputy Judge Yau, the applicant was convicted of one count of dealing with property knowing or having reasonable grounds to believe that it represented the proceeds of an indictable offence, contrary to s.s. 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap. 455.  He was sentenced to a term of two years’ imprisonment.  The property that formed the basis of the conviction was a sum of $1.7 million in cash found by police in the applicant’s home.  The applicant has sought leave to appeal his conviction.

2.  In the early hours of the morning of 27 December 2005, police executed a search warrant at residential premises in Aberdeen.  Inside the premises, the police found a paper bag containing $1.7 million in cash.  The police also found a deposit slip evidencing the fact that about a week earlier a sum of $500,000 in cash had been paid into a bank account in the applicant’s name.  The applicant was not at the premises but was arrested elsewhere at about the same time.  At the time of his arrest, a sum of about $11,000 cash was found on him together with two mobile telephones.

3.  Under caution, the applicant admitted that he lived in the Aberdeen premises where the search warrant had been executed and that the $1.7 million in cash belonged to him.  As to its provenance, he said only that it was a loan from a friend.

4.  Later investigations revealed that neither the applicant nor his wife had submitted tax returns for the past five years.  While the applicant owned two cars of unstated value, there was no record of either himself or his wife owning any real estate in Hong Kong.  The premises where they lived, a modest unit in a former housing estate, was rented by the applicant.  Under caution, the applicant had described his occupation as that of a cook.

5.  Yet, as the judge observed, these ostensibly humble circumstances were belied by the fact that, first, the applicant had been found with $11,000 cash on his person when he was arrested along with two mobile telephones; second, about a week earlier he had deposited $500,000 into a bank account in his name and, third, in his home was found the paper bag containing the sum of $1.7 million in large denomination bills.

6.  At trial the applicant chose not to give evidence.  Nor, to support what had been said in his cautioned statement, was any friend called to give evidence that he had lent the $1.7 million in cash to him.  There was therefore no evidence from the person who had supposedly lent such a large sum of money in cash to the applicant to explain the source of that money and why, and upon what terms, it had been supplied to the applicant.  Nor was there any evidence from the applicant himself, a person of apparently limited means, as to why and upon what terms he had come to be the recipient of such a very large amount of cash.

7.  Only one witness was called for the defence, a man named Ma Tak Wah, an acquaintance of the applicant.  Ma testified that he worked for a commercial enterprise that ran a casino ship known as the Neptune and that one of his bosses was a man named Cheung, a shareholder in the enterprise.  Ma said that, to his knowledge, the applicant and Cheung were good friends.  He recalled that from time to time the applicant had introduced gambling customers to Cheung.

8.  Ma said that, on 24 December 2005, Cheung had instructed him to deliver a sum of $1.7 million in cash to the applicant by way of a loan.  The full amount was to be in cash because apparently the applicant required the money urgently.  Ma testified that he was told no more by Cheung and made no further enquiries.

9.  The following day, said Ma, in compliance with his instructions, he went out to where the Neptune was moored and obtained the $1.7 million in cash from a Ms Leung in the cashier’s office.  He testified that he understood that the cash was drawn on an account of Cheung’s and not that of the business enterprise itself.  He then returned to his office where he met the applicant and handed him the cash which was contained in a paper bag.

10.  Ma said that, when he took the money from the cashier’s office, he also took a ‘standard form’ acknowledgement of debt on which, as a heading, was printed the name of the gambling ship, the Neptune.  Beneath this was printed the words: “Credit Loan Bill.  IOU”.  Ma produced this document into evidence.

11.  In accordance with the requirements of the form, it was signed by three people.  Ma said that the first was Ms Leung, the cashier who had made over the cash, the second was himself as ‘manager’ and the third was the applicant as the one who received the money.  The body of the IOU, partially in print and partially in handwriting, recorded that the applicant had received a loan in the sum of $1.7 million.  Ma testified that, after the applicant had signed the IOU, he then returned it to the cashier’s office on the Neptune.

12.  In light of Ma’s evidence that to his understanding, the money had been drawn on an account held by Cheung, the judge observed that the IOU did not in fact state in specific terms to whom the sum of $1.7 million was owed.  Neither Cheung’s name nor any reference to him appeared on the face of the document.  The only name was that of the ship, the Neptune.  On its face, therefore, at best, the IOU indicated that a loan had been advanced to the applicant by the business enterprise running the gambling ship.

13.  The judge found Ma to be a credible and reliable witness.  It is plain, however, that he found Ma’s evidence to be of limited value, doing no more than demonstrating the mechanics of how Ma came into possession of the $1.7 million in cash.  On a consideration of all the evidence, the judge found that the $1.7 million in cash had not constituted a legitimate loan to the applicant, rejecting as a lie the assertion made in the applicant’s cautioned statement that it was a loan.

14.  In coming to this determination, the judge disregarded as hearsay evidence both Ma’s testimony that he had been told by Cheung that the money to be given to the applicant was a loan and also the contents of what was printed or written on the face of the IOU.  Being hearsay, neither the testimony nor the IOU could speak to the truth of their contents.  As the judge expressed it:

“[Ma] simply acted as a courier who delivered the money.  He could not testify as to whether the $1.7 million was given to [the applicant] as a loan because he was only told that it was a loan by Cheung.  The document he produced is also inconclusive, it is merely an IOU.  It does not state clearly to whom the money is owed, in fact this document is more akin to a receipt.  Furthermore, the maker of the IOU [Ma] did not have first hand knowledge that [the money] was in fact a loan ….”

15.  In our view, the judge was correct in his assessment of the evidential nature of both the oral and written evidence.  The hearsay rule never makes a reported statement or a document inadmissible for all purposes.  It renders them inadmissible for a particular purpose; in the present case as evidence that a particular reported statement and the contents of a particular document were true.  If they are relevant to an issue in some other way then they are admissible for that purpose; in the present case to demonstrate why Ma acted in the way he did, why he collected the cash and why he obtained the applicant’s signature on a form of IOU.

16.  In the present case, as to the fact of the true source of the money and the true purpose for which it was given to the applicant, on the basis of what was before the court, it appears that only two persons were able to speak to those matters: Cheung himself and the applicant.  But, as we have said, neither testified.

17.  Mr Plowman SC, for the applicant, accepted that what Ma remembered Cheung telling him was hearsay.  He further accepted that the IOU on its own was not capable of proving the truth of its contents; namely, that a loan of $1.7 million had been made by Cheung to the applicant.  It was his submission, however, that the judge had fallen into error in ignoring for all purposes both the hearsay testimony and the hearsay document.

18.  As we understand it, it was the broad thrust of Mr Plowman’s submission that Cheung’s reported instructions to Ma also went to prove the purpose of, or reason why, Cheung himself had acted in the manner he did.  We do not agree.  That reported statement was incapable of proving anything concerning Cheung’s state of mind.  In the factual context of the present case, only Cheung himself could speak to the true reason why he gave Ma the instructions he did.  Nor could the fact that the applicant acted in the way he did by accepting the $1.7 million in cash from Ma and signing a form of IOU be the gathered up with the earlier evidence as a basis for drawing the possible influence that the $1.7 million was in truth a loan and that the applicant had in truth requested payment of that loan in cash.

19.  There is no need to examine in detail the complex architecture of Mr Plowman’s submissions.  Suffice to say that, in the factual context of this case, we are satisfied that the judge was correct when he found that both Cheung’s reported instructions to Ma and the IOU were not admissible, either directly or indirectly, to prove the truth of their contents.

20.  The offence with which the applicant was charged was an offence under s.25(1) of the Organised and Serious Crimes Ordinance.  The sub-section reads:

“… a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.”

21.  The phrase “having reasonable grounds to believe” is not new to Hong Kong’s criminal statutes.  It is now well settled that having “reasonable grounds to believe” involves both subjective and objective elements.  Objectively, it requires proof that there are grounds that a common sense, right-thinking member of the community would consider sufficient to lead a person to hold a particular belief.  Thereafter, subjectively, it has to be proved that these grounds were known to a defendant.

22.  The judge correctly identified the two-stage test.  As neither the applicant nor Cheung had testified, there was no admissible evidence as to their state of mind at the material time.  The judge, dealing with what he acknowledged were “fragments of facts”, had to determine therefore what a common sense, right thinking member of the community could reasonably infer from those facts.  He came to the following conclusion.

“The [applicant] and his wife did not file a tax return for the past five years.  They live in a modest property that they do not own.  The [applicant] owns two cars and cash in the sum of $500,000 [had been] deposited into the defendant’s account in one go.  Cash in the amount of $1.7 million was also given to him in one go, purportedly as a loan without any terms of repayment or requirement for collateral.  There is no apparent need him to borrow the $1.7 million.  The money was left in the premises instead of deposited in a bank.  The purported loan was made in cash instead of by way of a bank transfer which is much safer.  I find that a right-thinking member of the community can only come to one conclusion, that there was something dodgy about the money, that the $1.7 million delivered to him must be wholly or partly proceeds of an indictable offence.  The [applicant] was aware of all those facts at all times.”

23.  In our view, in the context of those facts, fragmentary or not, the judge was fully entitled to conclude that, on any rational objective assessment, a right-thinking member of the community would be bound to find that “ there was something dodgy about the money”.  We take the word “dodgy” in this context to mean tainted by crime.  But that raises the question, tainted in what way; tainted by reference to its source or by reference to its intended purpose?

24.  On his assessment of the evidence, the judge concluded that a right-thinking member of the community would be bound to come to a single conclusion; namely, that the money was tainted by crime in that, wholly or in part, it represented the proceeds of an indictable offence.

25.  It was argued by Mr Plowman, however, that, having regard to all the evidence, the judge fell into error in failing to take into account that a common sense, right-thinking member of the community would have reasonable grounds to believe that the $1.7 million had come from a legitimate source even if there was a suspicion that it was to be used for a criminal purpose.  A distinction had to be drawn, he said, between property which comes from a lawful source but may be intended for a criminal purpose and property which is itself the proceeds of crime.  The offence is not one of dealing in property which a person knows or has reasonable grounds to believe is either the proceeds of an indictable offence or is intended for use in a criminal purpose.  

26.  That of course is correct.  Section 25(1) looks to the source of identified property not to its intended use.  Accordingly, if a common sense, right-thinking member of the community would consider that on the evidence there could only be grounds for one reasonable belief; namely, that the identified property was from a lawful source but was intended for investment in crime, then there would be no offence under s.25(1).

27.  Bearing in mind that the judge accepted Ma as a witness of the truth, a number of facts arose from his testimony which, even though open to attack as to their true weight, may indicate that the source of the $1.7 million was lawful.  For example, the $1.7 million was drawn from the coffers of the Neptune, a ship which legitimately on the high seas operated as a casino.  In addition, on the face of it at least, the money had been withdrawn by Ma in an open manner; that is, through the agency of a cashier, an employee of the business enterprise which operated the Neptune.  It may also be said that the delivery of the cash to the applicant had also been evidenced in an open manner by the applicant’s signature being placed on a document purporting to be an IOU, a document which, according to Ma, he had returned to the cashier’s office.

28.  We accept that the judge did not refer to these matters in his Reasons for Verdict.  But does the fact that there are reasonable grounds to believe one scenario mean, by the fact alone, that there can be no reasonable grounds to believe in another scenario?

29.  That question was considered by this Court in HKSAR v Yam Ho Keung (unreported) CACC 555/2001, the court accepting that the analysis of the judge at first instance, Judge Line, had been correct.  In his Reasons for Verdict, Judge Line had said the following:

“Does the fact that there were reasonable grounds to believe a limited number of scenarios mean that the defendant did not have reasonable grounds to believe in any one of them?  To pose the question is really to answer it.  It seems clear to me that when any event can reasonably be explained on the basis of a few grounds, the man contemplating the issue holds reasonable grounds for belief in them all.  By using the term “having reasonable grounds to believe” the draftsman and the legislature clearly made a conscious departure from the old phrase “knowing or believing”.  The effect is to make the offence a wide one.  It means that people who deal in cash in circumstances which produce the limited list of explanations as arises here are caught by the section.  Another way of putting it is that the words of this section are aimed at condemning the man who reasonably forsees that he may be dealing in the proceeds of an indictable friends yet nevertheless goes on to do it.”

30.  The court rejected the contention that this analysis wrongly elevated ‘mere suspicion’ into ‘reasonable grounds to believe’.  Mayo VP, giving the judgment of the court, expanded on the analysis in the following manner:

“… grounds can exist to support a reasonable belief that X has happened even though X has not in fact happened.  In such a situation the person who has reasonable grounds to believe that, for example, goods are stolen but who does not know that they are, may well say to himself: ‘I believe that I may well be dealing in goods that have been stolen as there are good grounds for such a belief.  I cannot say that I believe I am in fact dealing in stolen goods as there are other possibilities.’”

31.  It is, we think, self evident that having reasonable grounds to believe something indicates a firmer state of mind than having reasonable grounds to suspect it.  But that being said, having reasonable grounds to believe something rests on more slender evidence than being sure.  Accordingly, depending on the circumstances, a person may have reasonable grounds to believe something even though those grounds leave something to surmise or conjecture.  In this regard see George v Rockett 93 ALR 483 at 490, judgment of the High Court of Australia (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).

32.  In summary, to employ the analysis of Judge Line, if a person, although he cannot know for certain, nevertheless has reasonable grounds to believe that, having regard to all the circumstances, he may well be dealing in the proceeds of an indictable offence, and if that person goes ahead and deals then he commits an offence under s.25(1).  This is so even if there also exist reasonable grounds for believing in some alternative scenario.

33.  What cannot be ignored is that the money laundering is invariably a devious activity, its purpose being to appear what it is not.  In our view, it would therefore undermine the purpose of the legislation if a person was able to ‘turn a blind eye’ to a reasonably held belief that certain property represents the proceeds of an indictable offence by being able to focus instead on some alternative reasonably held belief as to its provenance.

34.  What then of the present case?  In everyday business affairs of a lawful nature, absent special circumstances, such a large amount of money as $1.7 million would normally be transferred from one person to another by way of bank transfer; first, for reasons of security and, second, in order to provide an unequivocal record.  In the present case, however, as the judge noted, without any admissible evidence of special circumstances, the full sum of $1.7 million was delivered in cash to the applicant, a man of ostensibly humble circumstances, who then kept the money in his apartment, a unit in a former housing estate.  Delivery of such a very large sum of cash to a person of the applicant’s circumstances was made the more difficult to comprehend in the context of any lawful activity by the fact that there was no evidence of any reason for it.  The applicant had signed a document in the form of an IOU but, as the judge again noted, if the cash did constitute a loan, it was one without any known terms of repayment or requirement for security.

35.  As we have indicated earlier, we are satisfied that the judge was entitled to conclude on the evidence before him that a common sense, right-thinking member of the community would consider that evidence sufficient to found a belief that the $1.7 million, wholly or in part, represented the proceeds of some kind of serious crime.  That being the case, even if on the evidence it could be said that there was reasonable grounds to believe also in some alternative scenario, it would not assist the applicant.

36.  We accept that in many instances the evidence will give rise to only one reasonable ground of belief.  In the present case that was clearly the determination of the judge.  But even if it could be said that he was wrong in this regard and that there may have been reasonable grounds to believe also in some alternative scenario, on the facts of the present case we are satisfied that it would not have assisted the applicant.

37.  For the reasons given, the application is dismissed.