HKSAR v. YAN SUI LING

CACC435/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 435 OF 2009

(ON APPEAL FROM DCCC 904 OF 2009)

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REASONS FOR JUDGMENT

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Hon Lunn J (giving the judgment of the Court) :

The applicant seeks leave to appeal against her conviction on 4 December 2009 by District Court Judge A. Wong of a single charge of dealing with property knowing or having reasonable grounds to believe that it represented the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap. 455. There is no appeal against the sentence of 18 months imprisonment imposed on the applicant in consequence of her conviction.

THE TRIAL

1.  The applicant stood trial together with her co-accused, Ni Han Bin.  Each of them faced a separate charge, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap. 455.

The 2^nd charge

2.  By charge 2, it was alleged against the applicant that, on and between 3 and 6 March 2009 :

“… knowing or having reasonable grounds to believe that a property, namely a sum of $2,361,335 Hong Kong currency, in whole or in part directly or indirectly represented the proceeds of an indictable offence, namely fraud, dealt with the said property.”

The prosecution case

3.  It was the prosecution case that the sum of $2,361,335 received on 3 March 2009 into the HSBC bank account of the applicant had its provenance in a mortgage fraud perpetrated on the Fubon bank. Masquerading as Mr Bobby Lin Suen Kwok, the owner of a flat in the Bel Air development, a “wanted” person had obtained a loan of $8.6 million by way of a mortgage.  In doing so, he presented various false documents including a false identity card in the name of the owner of the property.  On 26 February 2009, the loan was drawn down and, having been paid in full to his solicitors, $8,591,000, being the loan less fees and expenses, was paid into a bank account with Fubon bank opened by the “wanted” person in the name of Mr Bobby Lin. On 2 March 2009, a cheque in the sum of $2,300,000 drawn on the account was deposited into a bank account of the 1^st defendant at trial with HSBC.  On 3 March 2009, a cheque drawn on that account of the 1^st defendant in the sum of $2,361,335 was deposited into the HSBC bank account of the applicant, which account the applicant had opened in May 2007.  On 6 March 2009, the applicant transferred the sum of $2 million to her sister’s HSBC account.  On 12 June 2009, the applicant was arrested when she entered Hong Kong from the Mainland.

The defence case

4.  The applicant and the 1^st defendant at trial are citizens of the PRC and at all material times were resident in the Mainland.  They both testified in the trial.

The 1^st defendant

5.  The 1^st defendant, a man of 29 years, testified that he was involved in several businesses in Shenzhen.  One of those businesses was trading in computer products.  He had and used in his business an account in his name in Hong Kong dollars with HSBC.  The receipt in his HSBC bank account of a cheque in the sum of $2.3 million drawn on the account of Mr Bobby Lin was a payment made by a customer, Lam Hoi Shu, for his purchase from the 1^st defendant of computer components.  He was not aware that the payment would be made by way of cheque and, having made enquiries subsequently, had been told by Lam that he had asked a third person to make the payment.  The 1^st defendant explained his payment of a cheque in the sum of $2,361,335 in favour of the applicant as being a payment that he had made on the instructions of a Madam Chu, with whom he had a long-standing arrangement in which she made available renminbi (“RMB”) on the Mainland on his payment of Hong Kong dollars into a stipulated bank account in Hong Kong.  He did not know the applicant and had no dealings with her prior to the events the subject of the charges.

The applicant

6.  The applicant, a middle-aged woman, testified of her involvement in various businesses in the Mainland.  Also, since 2007 she had invested in the Hong Kong stock market.  She held a degree in accountancy.  Since 2004 she had used first Mr Ting and then his wife Madam Chu to obtain foreign currency, in particular Hong Kong dollars which were credited to her HSBC bank account in Hong Kong.  For her part, she deposited an equivalent amount in RMB into Madam Chu’s account in the Mainland.  The deposit, on 3 March 2009, in five tranches of money to the credit of her account with HSBC, together with a remittance of $150,000 on 5 March 2009, to a total of $3,511,355 was part of this arrangement with Madam Chu for the remittance of monies so that the applicant could buy H shares.  For her part, she had transferred 3 million RMB from her mother’s account to an account stipulated by Madam Chu, namely Cheuk Yin Mui.

7.  Of the fact that one of the five credits to her account on 3 March 2009 was a cheque drawn on the HSBC bank account of the 1^st defendant, the applicant said that she did not know him.  She knew none of the drawers of any of the cheques deposited into her account on that date.

REASONS FOR VERDICT

8.  The judge noted that the applicant’s account with HSBC was used actively in trading shares.  He found that the deposit of sums of monies into that account in odd figures was consistent with her assertion of currency exchange.  Having noted that the applicant had testified that she did not know whether or not Madam Chu was licensed to perform foreign currency remittances, the judge determined that an ordinary and reasonable person would not expose himself to that risk.  Moreover, he noted that the applicant was an experienced university trained accountant.  Similarly, he did not believe the applicant’s account that in the course of informal exchange remittances she deposited monies into accounts stipulated by Madam Chu, not knowing who those persons were.

9.  Next, he found that the fact of multiple deposits of monies into the applicant’s HSBC account to make up a single remittance transaction “cried out for inquiry”.  He did not believe the applicant’s account of her confidence in the mechanics of the system, namely that Madam Chu could organise multiple deposits of monies into her account exactly matching the money total required under the agreed exchange rate.  In the context of the applicant’s initial answer that she did not know whether the exchange rate offered by Madam Chu resulted in her paying more than she would have had to pay through a bank, the judge found her subsequent answers as made up as “she went along”.

10.  In the result, he rejected the applicant’s evidence as a “desperate attempt to account for the cheque deposited into her account.”  In particular, he rejected her evidence that her receipt of the 1^st defendant’s cheque of $2,261,335 was part of an arrangement for currency exchange for 3 million RMB.  Whilst the judge determined that there was no evidence that the applicant “knew the illegal origin of this fund”, nevertheless he found that the applicant had knowingly received a cheque for a substantial sum of money from a person she neither knew or about whom she made enquiries.  He found that those circumstances would cause a “right-thinking member of the community” to have reasonable grounds to believe that such monies “represented in whole or in part directly or indirectly proceeds of an indictable offence” and that the applicant was aware of those grounds.

GROUNDS OF APPEAL AGAINST CONVICTION

Ground 1

11.  Noting that the Particulars of Offence of charge 1 stipulated of the indictable offence that it was a “… fraud”, it was submitted by Mr M.K. Wong, SC that, having found that there was no evidence that the applicant knew the illegal provenance of the monies, the judge’s findings of fact did not substantiate the charge.

Grounds 2 and 3

12.  By Ground 2, it was submitted that, having rejected the applicant’s testimony that the receipt into her account of the cheque drawn on the 1^st defendant’s account was part of a currency exchange, the judge erred in relying nevertheless on parts of her testimony, in particular that she had knowingly received the cheque from an unknown source without making enquiries.  By Ground 3, it was contended that, there being no dispute that the applicant had never handled the cheque deposited into her account physically, it having been deposited by an associate of the 1^st defendant, there was no evidence that she knew in advance or even afterwards of the fact of its deposit into her account.  In consequence, the judge erred in determining that the applicant had “knowingly” receive the cheque.

Ground 4

13.  By Ground 4, it was contended that the judge’s determination in respect of the operation of an underground banking system that he would “take no heed of it since there is no evidential basis to say so” was a material irregularity.  There was no issue between the parties as to the existence of such a system.  The judge had erred in making that determination without affording an opportunity to the applicant to be heard on the issue.

Ground 5

14.  By Ground 5, it was submitted that the judge had erred in rejecting the applicant’s evidence and that the reasons that he advanced for so doing were flawed.

A CONSIDERATION OF THE SUBMISSIONS

The need for proof of the indictable offence as particularised

15.  There is no dispute that there is no requirement that the “Particulars of Offence” of the charge stipulate the indictable offence alleged to be the provenance of the property dealt with by the defendant. [See the Determination of the Appellate Committee of the Court of Final Appeal in HKSAR v Wong Ping Shui (2001) 4 HKCFA of 29 and in Lam Hei Kit v HKSAR (unreported) FAMC27 of 2004].  The prosecution does not have to prove that the property represented the proceeds of an indictable offence.  [See the judgment of McHugh NPJ in the Court of Final Appeal in Oei Hengky Wiryo v HKSAR (2007) 10 HKCFAR 98.]

16.  It follows, that the stipulation in the Particulars of Offence of Charge 2, that the indictable offence was “fraud”, was otiose.  It was not a matter of which proof is required.

17.  The prosecution evidence led, in proof of the fact of the fraud practised on the Fubon bank, gave context, in particular chronological context, to the subsequent movement of the property.  However, the evidence that the 1^st defendant and the applicant gave that they did not know each other, was not challenged.  Unsurprisingly, it was not suggested it to the applicant in cross examination that she was aware of the fraud practised on the bank.  The prosecution case as put was that, given the circumstances and the size of the deposit of the cheque drawn on the account of the 1^st defendant, namely $2,361,335, the applicant knew or had reasonable grounds to believe in dealing with that property that it was the proceeds of indictable offence.

18.  Having regard to the fact that the applicant was represented by experienced senior counsel at the trial, we reject the submission made on her behalf in this court that she was somehow misled by the manner in which the “Particulars of Offence” had been particularised into testifying at the trial in the belief that :

“… if her evidence could convince the court that she had nothing to do with the mortgage fraud, she would be acquitted.”

As noted, her evidence was to the effect that the deposit of monies in her bank account on 3 March 2009 was part of an exchange currency. She had no knowledge of the provenance of the monies or control over the deposits made into her account

Grounds 2 and 3

19.  There is no merit in the complaint made on behalf the applicant that the judge erred in having regard to aspects of the applicant’s testimony, notwithstanding the fact that he had rejected her primary case, namely that the deposit of monies in her account on 3 March 2009 was part of an arrangement by which Hong Kong dollars was made available to her in Hong Kong following a deposit of an equivalent amount in RMB stipulated account in the Mainland.  The judge was entitled to have regard to and rely on the applicant’s testimony that she had learned of the fact of the five deposits into her account by accessing her account by the Internet prior to receiving a paper bank statement.  From the Internet she knew not only that there were five separate deposits but also the amount of those deposits.  In particular, she came to know that one of the five deposits dwarfed all the others in that it was a deposit by cheque of $2,361,335.  In context, that enquiry is to be viewed having regard to the evidence of the transfer by the applicant on 6 March 2006 of no less than $2 million to the newly opened bank account in her sister’s name with HSBC of which she was the signatory.  The judge was entitled to find, as he did, that the applicant was knowingly in receipt of this huge deposit of monies into her account by cheque and to have regard to her evidence that she made no enquiries whatsoever as to its provenance.

Grounds 4 and 5 : an “underground” banking system; the rejection of the applicant’s case

An “underground” banking system

20.  In his consideration of the case advanced by the 1^st defendant at trial, having noted his “business experience”, the judge rejected his evidence that he had drawn a cheque on his own account for $2,361,335 and caused it to be deposited into the account of the applicant as part of an arrangement of currency exchange with Madam Chu. The judge noted that it was a payment to a person that the 1^st defendant did not know and that he did not have anything in writing to the effect that Madam Chu accepted the arrangement.  He concluded :

“It was a risk too great to take.”

In that context, he went on to say :

“Even bearing in mind the foreign exchange restriction in the mainland, such practice involving such a substantial sum of money created at great risk to D1. There was nothing in evidence which shows that it was a risk which is necessary for a person engaging in ordinary and legitimate business to take. Learned counsel for the prosecution mentioned the operation of underground banking in his submission. I take no heed of it since there is no evidential basis to say so.” [Italics added.]

21.  It is to be remembered that the testimony of the 1^st defendant related to what the judge described as “legitimate business in ordinary course of ordinary transaction”.  No doubt, it was in that context that the judge had regard to what he found to be the unnecessary risk involved in the use of underground banking.  Nevertheless, it is difficult to understand on what basis the judge rejected counsel for the prosecution’s assertion of the “operation of underground banking”.  After all, the judge had averted to the evidence of “foreign exchange restriction” a few sentences prior to that passage.  Indeed, he went on to repeat that consideration in his examination of the case against the applicant (paragraph 109). It is common experience that foreign-exchange restrictions or currency controls beget underground banking.

Rejection of the applicant’s case

22.  However, it is clear that the judge’s rejection of the applicant’s evidence as to the circumstances of the deposit of a total of $3,511,355 on 3 and 5 March 2009 was not based on a finding that such a system did not or could not exist, rather it was on the basis that a combination of factors, specific to the evidence relevant to the applicant’s case, of risk and the extraordinary coincidence as to exactly matching amounts of money deposits rendered her evidence incredible.  As counsel for the prosecution suggested in his closing speech, the applicant’s case was in effect that she evaded foreign exchange restrictions in the Mainland, by depositing monies in RMB in a stipulated account in the Mainland and obtaining funds in Hong Kong dollars in Hong Kong, so that she could invest in Hong Kong in the stock market.

Risk

23.  Of the issue of risk involved in the foreign currency exchange mechanism described by the applicant, the judge posed a rhetorical question, which he answered in the negative :

“Would an ordinary person engage someone who he was not sure was properly participating in the trade to deal with such a large amount of money?”

No doubt, the judge had in mind that the risk to the applicant, on her account, was established at the outset by her transfer on 3 March 2009 of 3 million RMB into the account stipulated by Madam Chu, namely Cheuk Yin Mui. The judge noted that the applicant did not know Cheuk Yin Mui. By contrast, on that day her account with HSBC in Hong Kong received only two deposits in cash, namely $300,000 and $18,231. Obviously, the five cheques deposited into her account in the late afternoon of that day, to a total value of $3,043,104, would require time to “clear”. On 3 March 2009, it was not certain that they would be honoured. Further, none of the drawers of the cheques was known to the applicant. In any event, on the account of the applicant, the deposits into her account in Hong Kong dollars did not match the 3 million RMB payment that she had made until the deposit of $150,000 in her account on 5 March 2009.

Coincidence

Exchange rate

24.  Of his determination that the applicant’s account, that the five cheques, two amounts in cash and a telegraphic transfer exactly matched the equivalent of 3 million RMB at a pre-agreed exchange rate, was incredible, the judge said :

“... it will require an incredibly high degree of coincidence or high degree of coordination or both, for Madam Chu to make arrangements with different parties to come up with the right amount to deposit.”

25.  Of the issue of the method by which the exchange rate was agreed between the applicant and Madam Chu, the judge rejected the applicant’s testimony on the basis that she was, “making up her answers when she went along” (paragraph 116).  He was entitled to make that finding.  In cross-examination, in response to the suggestion that she had to pay slightly more than the bank offered as an exchange rate, the applicant said :

“I don't know. She gave me an exchange rate and then I gave her RMB and she exchanged the money for me.”

When it was suggested to her that in doing so she was accepting an exchange rate without checking other exchange rates, the applicant said :

“I did not. She gave me two exchange rates, one was that of the bank and one was from herself.”

26.  Of the applicant's testimony of the various “foreign exchange” transactions that she said that she had with Madam Chu, the judge noted :

“… she could supply supporting documents only in relation to some of the transactions. Besides, even those supporting documents fell short of proving that the money did go to Madam Chu. They only show withdrawal or transfer of a sum … the evidential value of the document produced is, in any case, limited.”

As noted earlier, the judge rejected the applicant's account in this respect, noting that the “risk involved was too great”.

27.  Mr Wong is correct in saying that the judge had erred in stating, at paragraph 54 of his Reasons for Verdict, that the statement for the bank account of the applicant with HSBC 4 March 2009 stipulated that the remittance of $150,000 on 5 March 2009 by telegraphic transfer came from the 1^st defendant.  It did not.  Its provenance was not established in evidence.  Immediately prior to that statement the judge had noted correctly that the applicant had said she did not know from whom those monies came.  It is to be noted that those statements were made in the part of the Reasons for Verdict where the judge was reciting the evidence, in particular the case of the applicant.

28.  Importantly, nowhere in the his subsequent analysis of the applicant’s case, either under the rubric “Credibility of D2” or “Charge 2, against D2”, did the judge in any way advert to his erroneous determination that the provenance of the $150,000 deposited into the applicant’s account to count on 5 March 2009 was the 1^st defendant.  In any event, in finding the applicant guilty in respect of charge 2, it is to be noted that the judge said (paragraph 135) :

“Even if all the other transactions in the HSBC account of D2 were legitimate, and I do not hold that they were not…”

In the result, we are satisfied that, although the judge’s finding was in error, it played no part in his determination of the case against the applicant.

CONCLUSION

29.  For the reasons we have given, we are satisfied that there are no merits in the “Grounds of Appeal against Conviction”.  Accordingly, we refuse the application to leave to appeal against conviction.