HKSAR v. CHAN WAI MING

CACC 208/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 208 OF 2012

(ON APPEAL FROM DCCC 137B OF 2011)

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REASONS FOR DECISION

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1. The applicant was convicted after trial in the District Court of two counts of dealing with property known or reasonably believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crime Ordinance, Cap. 455. On 28 May 2012, he was sentenced to a total term of 3 years and 9 months imprisonment. He has applied for leave to appeal against conviction. The application will be heard on 10 July 2013.

2. The applicant applied for bail pending appeal.  After hearing counsel’s submissions, I refused the application. My reasons appear below.

3. Bail pending appeal is exceptional.  Bail is generally granted where prima facie the intended appeal is likely to be successful or where there is a risk that the sentence or a substantial part of it would have been served by the time the appeal is heard. 

Time

4. In this case, by the time the appeal is heard in July, the applicant will have served about 14 months of imprisonment, which cannot be said to be a substantial part of the sentence, even taking into account the usual reduction.  This is not a case for granting bail on the “time” basis.  

Merits of the appeal

5. I turn to consider the “merits” basis.  The two charges (Charges 2 and 3) concern transactions in two bank accounts (“BOC accounts”) maintained with Bank of China, of which the applicant was at all material times an authorized signatory.  The other authorized signatory is Choi Chun Yin, the 1^st defendant in the case below.  The holder of the BOC accounts is Chun Shing Investment Company (“Chun Shing”), a company in Hong Kong.

6. Charge 2 relates to six transfer deposits totalling US$1,005,100 and six transfer withdrawals in the same total amount made between 23 September and 15 October 2008.  The money withdrawn was paid into the bank account of a company in Jiangmen on the mainland.  Charge 3 relates to: (i) two transfer deposits totalling HK$8,000,200 on 1 November 2007, followed by a remittance out to a bank account in Shenzhen of HK$8,000,000 on the same day; and (ii) three transfer deposits totalling HK$8,000,000 on 25 January 2008, followed by the remittance out to another account in Shenzhen of three sums totalling HK$8,000,000 on the same day.  All the withdrawals were made by the applicant.

7. The applicant does not dispute dealing with the monies in question.  He elected to give evidence at the trial.  His defence is that the monies deposited into and transferred out of the BOC accounts were related to a joint venture business that he had with a mainlander surnamed Chan.  The business was to assist others to obtain cross-border vehicle permit.  According to the applicant, the mainland has introduced a policy to encourage foreign investment. Under this policy, if a foreign company (which includes a Hong Kong company) invests $8 million in a mainland company, it will be eligible to a cross-border vehicle permit.  Accordingly, for each of the permit applications carried out by the joint venture business, Chan would provide $8 million which would be deposited into one of the BOC accounts.  The money would then be transferred to the bank account of a mainland company.  After the cross-border vehicle permit was issued, it would be sold at a profit.  As to the $8 million, it would be returned to Chan shortly afterwards.  For each new application, a new Hong Kong company with the same English name as Chun Shing would be registered so that the deposits and remittances could be done through the BOC accounts maintained by Chun Shing.  The applicant says that he believes it is a legitimate business and that the monies provided by Chan for fulfilling the requirement of the mainland policy came from legitimate sources as he had understood Chan to be a wealthy businessman.

8. The trial judge accepts the applicant’s version that he and his associates operated a scheme to obtain cross-border vehicle permits and the monies that were deposited and transferred out of the BOC accounts were to meet the $8 million overseas investment requirement under the mainland policy.  He found it was a dishonest scheme to deceive the mainland authorities into believing that there were genuine overseas investments and consequently to issue the cross-border vehicle permit.  He also found the applicant knew that it was a fraudulent scheme and he, together with his associates, intended to deceive the mainland authorities.  The trial judge concluded that this amounted to the common law offence of conspiracy to defraud the mainland officials with acts done in Hong Kong.  He held that the monies deposited into the BOC accounts and transferred out by the applicant (which form the subject matter of charges 2 and 3) were proceeds of an indictable offence within the meaning of section 2(6)(a) of Cap. 455.  On these bases, he held that the applicant had dealt with the monies particularized in the two charges, knowing that they represented proceeds of an indictable offence.  The trial judge further held that, if he were wrong on the interpretation of section 2(6)(a), the evidence shows that the applicant had reasonable grounds to believe that the monies he dealt with were partly the proceeds of an indictable offence, being the illicit profits from the previous fraudulent transactions.

9. The Amended Perfected Grounds of Appeal put forward 9 grounds of appeal.  Grounds 1 and 5 complain of unfairness arising from a shift in the prosecution case. It is said that the prosecution opened its case on the basis of movements of large sums of monies in and out of the two bank accounts controlled by the applicant so that in the absence of reasonable explanation, he must have known or had reasonable grounds to believe that the monies represented proceeds of an indictable offence.  In the closing submission, however, the prosecution counsel contended that on the basis of the applicant’s own evidence, he had dealt with the monies which he knew were proceeds of an indictable offence.

10. The trial judge had dealt with this complaint at paragraphs 84 to 88 of the Reasons for Verdict, relying on Hau Tung Ying & Another v HKSAR [2011] 2 HKLRD 782.  Mr Wong who appears for the applicant in this application referred to several authorities of the Hong Kong & English Court of Appeal to support his argument that it is unfair to permit the prosecution to change its case or to introduce a new case.  It is to be noted that the Court of Final Appeal had pointed out in Hau Tung Ying (paragraphs 45, 51 & 53) that it is open to a trial judge, in appropriate cases, to consider the case on a basis different from that presented by the prosecution in its opening and that whether such a course is permissible must depend on the fairness of the case.  In this case, the change in the basis of the prosecution stems solely from the evidence given by the applicant and the prosecution could not have anticipated it.  Further, defence counsel was afforded an opportunity to make submission on the new basis.  Mr Wong said that, had it been known that the prosecution would run the new case, the applicant would be advised to adduce evidence as to whether his and his associates’ activities amount to an offence on the mainland and/or whether the mainland authorities would regard this as deception or fraud. The applicant is, however, presently not in a position to say that such evidence will be forthcoming.  The trial judge was of the view that it was most unlikely that the mainland authorities would still issue the cross-border vehicle permit even if they knew that there was in no genuine foreign investment.  I am bound to say that this accords with common sense.  I do not accept the complaint of unfairness under Grounds 1 and 5 are likely to succeed.

11. Ground 6 concerns a related complaint that it is unfair and a contravention of section 54(1)(f) of the Criminal Procedure Ordinance, Cap. 221 to allow the prosecution to cross-examine on his involvements in the scheme to obtain cross-border vehicle permit by deceiving the mainland authorities.  Mr Man who appeared for the respondent submitted that the applicant’s involvements in the scheme, his understanding of it and of the mainland policy in issuing cross-border vehicle permits to overseas companies are relevant to his knowledge of the nature, purpose and use made of the monies that he had dealt with.  As such, the cross-examination is permissible under the exception in section 54(1)(f)(i).  There is force in this submission.

12. Grounds 2 to 4 challenge the trial judge’s finding that there was a conspiracy to defraud the mainland authorities by acts done in Hong Kong.  Mr Wong argued that without expert evidence on the PRC law, the trial judge had no basis for finding that the mainland authorities had been defrauded and that the activities amount to an offence under the PRC law.  Mr Man referred to sections 6(1)(c), 7(1) and 8 of the Criminal Jurisdiction Ordinance, Cap. 461 as providing the basis for the trial judge’s finding in the absence of expert evidence on the PRC law.  Mr Wong complained that these provisions had not been argued by counsel or considered by the trial judge at the trial.  Given this is a question of law, the appellate court will not be precluded from considering the combined effects of these provisions.  Mr Wong also argued that these provisions do not apply to an offence under section 25 of Cap.455.  However, Mr Man’s purpose of referring to these provisions is to meet the objection that there is no expert evidence as to whether the activities of the applicant and his associates constitute the offence of fraud or conspiracy to defraud under the PRC law. I do not consider that the appeal is likely to succeed on Grounds 2 to 4.

13. Turning to Ground 7, it challenges the trial judge’s holding that the monies dealt with by the applicant falls within the meaning of proceeds of an indictable offence under section 2(6)(a) of Cap. 455.  Reliance was placed on the passage in Chan PJ’s judgment in HKSAR v Yan Sui Ling (unreported) FACC 6/2011 at para. 47 that “Money laundering usually involves a scheme whereby the proceeds of crime are “laundered” by transforming them into other types of property so that they are clothed with legitimacy and their origin is concealed” and the provision under section 102(1)(c) of the Criminal Procedure Ordinance for confiscation of property used in the commission of an offence. 

14. In coming to his conclusion, the trial judge had considered R v Gertrude Osei [1988] 10 Cr App R 289, 293 and R v Lo Chak Man & Anor (unreported) CACC 744/1995 which approved and adopted the construction of the word “payment” made by the English Court of Appeal in Osei in construing section 25(1) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405.  In HKSAR v Tsang Wai Lun Wayland & Ors CACC 96/2010, arguments not dissimilar to what is advanced by Mr Wong had been considered and this part of the appeal did not succeed.  The Court of Appeal was not prepared to accede to the request to hold that the approach and reasoning in Osei and Lo Chak Man were wrong.  In my view, having regard to the part of Stock V-P’s judgment at paras. 141 to 162, the applicant will face an uphill task.

15. As to Ground 8, it complains about the trial judge’s finding that the monies dealt with by the applicant came from the illicit profits of the previous fraudulent transactions and his failure to consider the defence of an honest belief that the monies were from legitimate source.  It has to be noted that in paragraph 77 of the Reasons for Verdict, the trial judge had rejected the applicant’s evidence that he believed that the monies provided by Chan came from legitimate sources.  The trial judge also did not accept that he honestly believed he was conducting a legitimate business (paragraphs 54 to 56 of Reasons for Verdict).

16. Finally, Ground 9 complains that the trial judge had not given himself the appropriate directions on credibility and propensity in assessing the applicant’s evidence having regard to his clear record.  The trial judge had in the Reasons for Verdict referred to the applicant having a clear record.  He was thus clearly aware of the applicant’s previous good character.  As a professional judge, he would have borne this in mind when assessing the applicant’s evidence.  I do not consider there is merit in this ground.

17. For the above reasons, the applicant has not demonstrated that his intended appeal is likely to be successful.  The application for bail pending appeal is therefore dismissed.