HKSAR v. LEUNG SHUN WING

HCMP 1160/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 1160 OF 2015

(ON AN INTENDED APPEAL FROM HCMP NO 121 OF 2013)

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J U D G M E N T

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Hon McWalters JA (giving the judgment of the court):

Introduction

1.  On 23 January 2013 the respondent applied ex parte for a restraint order over the applicant’s property under section 15 of the Organised and Serious Crimes Ordinance, Cap 455 (“the ordinance”).  The application was granted.

2.  On 18 July 2013 the applicant was charged with the offence under section 25(1) of the ordinance that is commonly known as money laundering.

3.  On 2 February 2015 the applicant applied to P Li J (“the judge”) to discharge the restraint order and on 18 March 2015 his application was refused.  On 29 April 2015 the applicant applied to the judge for leave to appeal that decision but his application was refused.

4.  On 12 May 2015 the applicant applied to the Court of Appeal for leave to appeal against the judge’s refusal to discharge the restraint order.  The parties agreed that this application should be determined by the Court of Appeal on the papers without an oral hearing.  After a consideration of the materials filed with the court this is the judgment of the court.

The background facts

5.  The restraint order is in respect of the credit balance of a bank account, cash, watches and jewellery totalling in value approximately HK$4 million.

6.  A financial investigation of the applicant’s bank account revealed that from May 2006 to December 2011 there were 439 deposits into the savings account totalling HK$97,861,276.11.  The deposits were made by cash, cheque and transfer.  Each deposit was in the sum of HK$100,000 or more.  In the same period there were 531 withdrawals and nearly all the money deposited was withdrawn.  About 90% of the money deposited was withdrawn on the same day or within two weeks after the deposit.

7.  The applicant was arrested and interviewed under caution but he exercised his right to remain silent.  Records from the Inland Revenue Department showed that the applicant and his companies had no income from 2004 to 2011. 

The application to discharge the restraint order

8.  The application to discharge the restraint order was based upon two grounds.  The first was that the facts could not support the inference that the applicant had reasonable grounds to believe that the property in his bank accounts represented the proceeds of an indictable offence.  The second ground was that the charge was duplicitous but this ground was temporarily abandoned to await the outcome of the Court of Final Appeal’s decision in another case. 

9.  This second ground having fallen away the application to discharge was based upon one ground only which was essentially that there was insufficient evidence to prove the mens rea element of the section 25(1) offence.  In respect of this contention counsel for the applicant, Mr C Y Wong SC, argued that the reasonable grounds must be linked to the dealing with the property and that anything which was not so linked could not be a reasonable ground.

The judgment of P Li J

10.  The judge applied the law in relation to the phrase “reasonable grounds to believe” as laid down by Spigelman NPJ in HKSAR v Pang Hung Fai (2014) 17 HKCFAR 778.  In applying this judgment the judge said the scope of evidence to be considered as to what constitutes reasonable grounds is very wide and that all relevant evidence must be considered including the defendant’s perception and interpretation of the circumstances. In this respect he said the Inland Revenue Department records “may be relevant background information related to the source of the deposits and the activities in the account”.  The judge thereupon concluded, on the balance of probabilities, that, in the words of section 14(1)(c)(ii) of the ordinance, there was reasonable cause to believe that the applicant had benefited[1] from a specified offence, namely the offence of money laundering in section 25(1) of the ordinance.

The grounds of appeal

11.  There are only two grounds of appeal.  Both attack the judge’s conclusion that there was sufficient evidence to establish, on the balance of probabilities, reasonable cause to believe that the applicant had benefited from a specified offence, which in the present case was the section 25(1) money laundering offence. 

12.  The first ground of appeal is that, as a matter of law, the judge erred in rejecting the applicant’s submission that the “reasonable grounds to believe” must be linked to the dealing.  The second ground of appeal is that there was insufficient evidence on which the judge could find prima facie proof of reasonable grounds to believe.

Discussion

13.  In its Determination in HKSAR v Wong Ping Shui & Another (2001) 4 HKCFAR 29 the Appeal Committee of the Court of Final Appeal discussed the actus reus and mens rea elements of the section 25(1) offence.  Ribeiro PJ, in giving the judgment of the court, said of section 25(1) that it:

“does not define the actus reus as dealing with the proceeds of an indictable offence. It defines it as dealing with ‘property’ which the defendant knows or has reasonable grounds to believe represents the proceeds of an indictable offence. The quality of the goods being such proceeds is therefore an element in the mens rea but not the actus reus.”[2]

14.  This decision was confirmed by the Court of Final Appeal in the judgment of McHugh NPJ in Oei Hengky Wiryo v HKSAR (No 2) (2007) 10 HKCFAR 98 and this decision remains unaffected by the subsequent Court of Final Appeal judgment in the Pang Hung Fai case. 

15.  What this means in a nutshell is that the offence is composed of dealing with property (the actus reus) whilst possessed of a certain mental state in respect of the property (the mens rea).  That mental state can be either knowledge or an awareness of the existence of reasonable grounds to believe.  But the knowledge or the reasonable grounds to believe relate not to the act of dealing with the property but rather with the character of the property, that is that the “property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence”.[3]

16.  Clearly there is a link or connection between the act of dealing and the mental state but it is only the usual temporal one that the criminal law requires, namely that the mens rea element of the offence, here the existence, known to the defendant, of reasonable grounds to believe in respect of the property, coincides with the commission of the actus reus, the dealing with the property.

17.  In respect of the first ground of appeal the aspect of the Pang judgment that is particularly relevant is that part where Spigelman NPJ focuses on the importance of distinguishing between “grounds” and “facts” for the former, he said, are broader in scope than the latter.  Spigelman NPJ was of the view that it was crucial to maintain this distinction precisely to avoid the risk that a judge or jury might unwittingly limit the breadth of matters that they took into account in determining the existence of reasonable grounds to believe.  In disapproving the use of the word “facts” as opposed to the statutory term “grounds” in the Shing Siu Ming[4]test, hesaid in respect of the word “facts” :

“The latter term is narrower. While all ‘facts’ may be ‘grounds’, not all ‘grounds’ are ‘facts’. Accordingly, the range of relevant circumstances is restricted.”

18.  There is no warrant for saying that the grounds can only be matters relating to the dealing.  The grounds can be the unusual nature of the request such as a request to borrow a bank account or the character of the person making the request such as was the position in Pang Hung Fai where this person was a friend of the defendant and about whose character the defendant held a favourable belief.  What constitutes a ground will be a case sensitive matter and will fall to be determined in the particular circumstances of each defendant.  In seeking to limit the scope of reasonable grounds to believe to only those matters that relate to the dealing with the property the applicant is advancing a proposition that is contrary to the approach espoused by Spigelman NPJ.  We see no reasonable prospect of this argument of the applicant succeeding on appeal.

19.  In respect of the second ground of appeal it is well to remind ourselves that a restraint order is made only after the court concludes that there is reasonable cause to believe that the defendant who has been charged with a specified offence had benefited from that specified offence.  As Andrew Cheung J (as he then was) said in Secretary of Justice v Wu Li Hui [2009] 1 HKLRD 78 this presupposes that the court is satisfied that there is reasonable cause to believe that the defendant has committed that offence. What this means for a judge who, as here, is tasked with adjudicating upon an application to discharge the restraint order was explained by Andrew Cheung J at page 85, paragraph 22:

“For those reasons, the Judge was quite correct to ask herself whether, on the entire evidence before the Court, she was satisfied that there was reasonable cause to believe that the respondents had reasonable grounds to believe that the monies they dealt with represented the proceeds of an indictable offence (in other words, she was asking herself whether there was reasonable cause to believe that the respondents had committed a s.25 offence – the specified offence in question), apart from asking herself whether she was satisfied that there was reasonable cause to believe that the respondents had benefitted from the s.25 offences.”

20.  In the present case the evidence before the judge consisted of there being large amounts of money passing through the applicant’s bank accounts and a pattern of conduct in relation to that money.

21.  If there was evidence before the court to show that the applicant had a legitimate business capable of generating large amounts of money then there would not necessarily be anything suspicious about either the applicant’s receipt of such large amounts of money or his subsequent dealings with those monies.

22.  But there was no such evidence; rather the evidence was to the contrary. Records of the Inland Revenue Department showed that none of the known businesses of the applicant had any income that was subject to income tax. There may be a number of explanations for this but in the absence of any explanation from the applicant a court would be entitled to draw the inference that the applicant did not have any legitimate business capable of generating the large amounts of monies flowing into his accounts.

23.  Likewise, in respect of the conduct of withdrawing the monies from the account.  For a legitimate businessman there is nothing suspicious, in itself, about not leaving monies in a bank account.  He may need the monies to finance his business, he may wish to invest the monies or there may be other innocent and perfectly normal commercial explanations for not leaving the monies in the account.

24.  But when this conduct takes place in respect of monies that do not appear to have a legitimate business origin then one of the inferences available is that the account is being used to wash the monies as they progress to their final destination.

25.  Whether this evidence will be sufficient to convict the applicant at his trial is quite another matter.  What inferences can then be drawn, to the higher standard of beyond reasonable doubt, in the light of all the evidence, including, perhaps, evidence from the applicant, is not relevant to the present application.  In respect of this application the standard of proof is only the balance of probabilities and the inferences that might be drawn are based on the limited primary facts currently before the judge.  True it is that at trial those facts might ultimately be shown to be incomplete.  But we are concerned with the evidence as it currently stands and on that evidence, the adverse inferences to which I have referred are clearly available.

Conclusion

26.  For these reasons we refuse the application for leave to appeal.  We direct that within 7 days of this judgment the respondent file with the court and serve on the applicant a statement of its costs for the purpose of gross sum assessment.  The applicant must then respond to this statement of costs within 7 days of service of it upon him.