HKSAR v. TAM HUNG

CACC 127/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 127 OF 2010

(ON APPEAL FROM DCCC NO. 941 OF 2008)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Tang VP (giving the reasons for judgment of the Court):

1.  The Defendant was convicted, after trial in the District Court, of three charges 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 Crimes Ordinance (Cap. 455) ("OSCO"), and was sentenced to 4 years' imprisonment.

2.  He was granted bail pending appeal by Yuen JA on 7 September 2010. 

3.  On 20 July 2011, we granted leave to the Applicant to appeal against his conviction and, treating the hearing of the application for leave as the hearing of the appeal, allowed his appeal.

4.  These are our reasons.

5.  The charges covered the period between October 2005 and March 2007, and concerned three accounts.

6.  The first charge concerned an account with the Hang Seng Bank, and alleged that the Defendant had between 15 March 2006 and 7 March 2007, dealt with money in the aggregate of about HK$182,800,000 in that account, which, in whole or in part directly or indirectly, represented the proceeds of an indictable offence.

7.  The second charge concerned an account with the Wing Hang Bank, covering the period between 28 October 2005 and 5 March 2007, and involved a sum of about HK$43,800,000.

8.  The third and final charge concerned another account with the Wing Hang Bank, involved a sum of about HK$87,500,000.

9.  At trial, it was admitted under section 65C of the Criminal Procedure Ordinance (Cap. 221) ("CPO") that between 2005 and 2007, the Applicant had operated casinos at Maijayang and Muguaba in Kachin State in Myanmar.  The casinos were known as the New Eastern Hotels and New Eastern Casinos respectively, and had employed "several thousand employees".  Kachin is in the northernmost part of Myanmar and shared a border with China to the north and east.

10.  It appears that these casinos were run by New Eastern Group, of which the Applicant was the Chief Executive. 

11.  In paras. 43, 46 and 49 of the Admitted Facts, it was admitted that the Defendant knew the moneys in the accounts, the subject of the charges, came from his profits in the two casinos as well as bets received from accounts in the PRC in connection with gambling via network[1]（包括在內地銀行戶口收到從事透過網絡參賭的賭注）.

12.  The Admitted Facts also described the so-called gambling methods in the casinos, and this is what the learned judge said in this judgment[2].

"8.     There were two ways to gamble in the casino in Maijayang, namely gambling on the spot and gamble through network video link.

9.      One of the Maijayang online gambling website was www.388388388.com. If the gamblers would like to gamble through the network, they must get a relevant account number and the fax number of the company through the casino's chip office.  After the gambler had deposited or remitted the money into the designated account, the receipt would be faxed to the chip office of the casino. Upon confirmation of receipt by the chip office, the online account and password would be issued to the gamblers.  Then the gamblers could log into the website and see the inside situation of the casino from the website.  The gamblers could then choose a table to gamble and bet via the 'gunner' to bet for them.  These 'gunners' were those who were present at the casino and would bet according to the instructions given by the gamblers.  These 'gunners' in Maijayang were arranged by the gamblers themselves.

10.   There were three ways to gamble in the casino in Muguaba, namely gambling on the spot, asking 'gunners' to bet for them through network video link and direct click betting through websites.  The bets through websites were placed with the casinos.

11.    The websites used in Muguaba were www.883883883.com,  www.988988988.com, www.881881881.com,  www.xdf188.com, www.188188188.com,  www.369369369.com, www.338338338.com.  If the gamblers would like to ask a 'gunner' to bet for them through network video link, the procedures were the same as mentioned above in the casino in Maijayang.  The only difference here was that the 'gunners' were arranged by the casino.

12.    Click to bet via the internet was introduced in 2006 in Muguaba.  If the gamblers would like to bet by using this method, similarly, an account number provided by the casino was necessary in order to deposit or transfer gambling money into that account.  [The gamblers] needed to obtain the online account and password provided by the casino, log in the website and observe the card distributing situation of the gamble tables, then confirm the amount of bet, and then click on the webpage to bet.  The amount in the account and the amount bet could be shown on the webpage.  They were shown in the Renminbi currency.

13.    To advertise and to let more people to know about online gambling, at the end of 2006, computers were installed in the casino in Maijayang and provided to be used by gamblers.  One of the computers was used to demonstrate the bet through a 'gunner' after watching online image in the casino of Maijayang.  The other two computers were used to demonstrate the Direct click to bet through the websites in Muguaba."

13.  To facilitate gambling on the internet, accounts were set up in the Mainland as described by the learned judge in the following paragraphs.

"14.   The employees of both casinos in Maijayang and Muguaba would provide their identity cards to the company, for the convenience of opening bank accounts in China.  If the amount of gambling money remitted was below $100,000, the chip office could provide the account directly to accept the deposit.  But if the amount of gambling money remitted was more than $100,000, the chip office had to ask for instructions from Xue Chung-chao and use the account he provided.

15.    Before September 2006, the passwords of the frequently used accounts of the casino in Maijayang were kept in the chip office.  The chip office could arrange the subordinates of Xue Chung-chao to withdraw the money from the banks in China and bring it back to the casino.  Later in mid-October 2006, the Defendant made an arrangement that all accounts for receiving gambling money would be under Xue Chung-chao.  Only Xue Chung-chao knew the passwords of these accounts."

14.  At trial, it was the prosecution's case that gambling in Myanmar was illegal.  See para. 44 of the opening.

15.  In order to prove that gambling was illegal in Myanmar, Mr Aye Maung Thnn (PW2) was called.  In his police statement, PW2 said he had an undergraduate degree in Science, and that he had been the Director of The Bureau of Special Investigation since 2007.  The Bureau was under the supervision of Ministry of Home Affairs, the Government of the Union of Myanmar.  His daily duties included supervising the investigation of different types of cases including criminal, financial and anti-corruption cases of the State and Division under his supervision.  He was also the Deputy Leader of Financial Intelligence Unit and had to investigate Money Laundering cases as a Leader of Investigation Body and sometimes as a secretary of the Preliminary Scrutiny Body.  He was authorized by the Myanmar Government to give evidence in the case, "on behalf of the Myanmar Government", and produced an authorization letter by the Myanmar Government dated 25 December 2009.  That document stated that PW2 was appointed to represent the Government of the Union of Myanmar at the Applicant's trial.  PW2 also produced (as Annex II to his police statement) a copy of what purported to be the gambling law of the Socialist Republic of the Union of Myanmar which bore the date of 20 October 1986.

16.  It is sufficient for present purpose to say that the gist of PW2's evidence is that at the relevant time (between 2005 and 2007) gambling was prohibited by law in Myanmar, the relevant law was enacted in 1986, a copy of which he produced as Annex II to his police statement, and that the law applied to the Kachin State.

17.  On the basis of such evidence, the learned judge held that as a matter of the law of Myanmar, gambling, including gambling in casinos, was unlawful in Myanmar which included Kachin.

18.  The Defendant is represented on appeal by Mr Ching Y Wong SC, Mr Philip Dykes SC, Mr Adonis Cheung and Mr Vincent Chen.

19.  Mr Dykes, who has responsibility for this aspect of the appeal, submitted that whether gambling was lawful or not in Myanmar, is a matter of foreign law, and as such must be proved in Hong Kong by expert evidence.  For this proposition, he relied on Dicey, Morris & Collins on the Conflict of Laws (14^th Ed.), in particular para. 9-013.  Statement to similar effect can be found in para. 10-43 in the Hong Kong Archbold.  Mr Dykes went on to submit that PW2 could not be regarded as a competent expert for the purpose.  See para. 9-014 in Dicey.  Moreover, if PW2 were to be regarded as an expert, section 65DA(1) of the CPO had not been complied with.  Nor was leave applied for or given under section 65DA(5).  Section 65DA(5) provides:

"(5) A party who seeks to adduce expert evidence in any proceedings and who fails to comply with subsection (1) shall not adduce that evidence in those proceedings without the leave of the court."

20.  It is clear from the judgment that PW2 was not regarded as an expert witness.  The learned judge said:

"… I do not think that any expert witness is needed to give expert evidence. …"

21.  The learned judge felt able to rely on the evidence of PW2 because:

"124. … He is just giving evidence as a Director of the Investigation Department (who is a law enforcement official). …

125.  … Therefore, with the office similar to the chief officer of the police force, in considering whether gambling is prohibited in his country, I think he definitely has the ability to give authoritative evidence in this aspect.  I think PW2 of course does not need to give in-depth legal analysis in this aspect, nor was it necessary for him to explain the contents of relevant anti-gambling laws, or to analyze whether relevant anti-gambling laws are applicable in the Kachin state.

As his identity is the chief officer of law enforcement department and director of the investigation department, from what he daily deals with and his responsibility, he definitely has the ability and suitability to give factual evidence on whether gambling is prohibited in his country.  I do not think that any expert witness is needed to give expert evidence in this aspect.

……

127.  … If a sovereign state sends a government representative telling the court that certain act is prohibited in his country, and he can provide relevant laws, and he has experience in handling such illegal activities in his daily routine, I really can't find any reason in not believing or not accepting this person's evidence. … on the crux matter, that is whether gambling is prohibited in Myanmar, PW2's evidence is not only credible and is also accepted by the court."

22.  With respect, the learned judge was wrong.  We agree with Mr Dykes that whether gambling was unlawful in Myanmar is a question of foreign law which must be proved by expert evidence.  On the available material we do not believe PW2 could be regarded as an expert.  In any event, he was not tendered or regarded as an expert. 

23.  On the basis of PW2's evidence the learned judge found that the activities of the casinos was illegal.  Para. 148.  The learned judge went on to find that the Defendant knew that the moneys in the relevant accounts were derived from the activities of the casinos, and since gambling in Myanmar was unlawful, the Defendant knew that the proceeds in the relevant accounts represented proceeds of an indictable offence.

24.  Mr David Leung, SADPP, appearing for the prosecution, submitted that the prosecution's case is not that even if gambling in casinos were lawful in Kachin, an offence under section 25 would be committed if the proceeds of such activities were paid into the Defendant's accounts in Hong Kong because gambling in casino in Hong Kong is unlawful.

25.  Mr Leung accepted, for example, a person who gambled in a legal casino in Macao and then returned to Hong Kong with his winnings, would not be guilty of an offence under section 25.

26.  Mr Leung's concession is rightly made and is consistent with HKSAR v Wan Yet Kwai, CACC 372/2008 (unreported, 5 May 2009) (Stuart-Moore VP, Stock JA and Hartmann JA) where at para. 27, Hartmann JA, giving the judgment of the court, said:

"27.   … a number of facts … 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. …"

27.  Re SJM Holdings Ltd [2009] 1 HKLRD 321, another decision of this court, also supports Mr Leung's concession.

28.  Since we have no doubt that the learned judge's finding that gambling was unlawful in Kachin could not be supported, insofar as he has convicted the Defendant on the first limb of section 25(1), the conviction must be quashed.

29.  However, the learned judge held, in the alternative, that, even if it was not proved that gambling was unlawful in Kachin, the Defendant had reasonable grounds to believe that the moneys were the proceeds of an indictable offence.  The learned judge dealt with this briefly.  He said:

"151. In other words, if the Defendant is held to have operated casinos illegally according to the evidence (and if this ruling is right), the Defendant will also be held that he 'knew'.  That means that the element 'knowledge' in the particulars of charges will also be proved.  But if my ruling is wrong regarding the legality of the casinos, in accordance with Lok Kar Win[3], I will have to continue considering the other basis of prosecution, that is, whether there are reasonable grounds for the Defendant to believe what he handled was 'illegal money'.  When I consider this, if I can still hold, according to the relevant evidence, that the Defendant must have known that his operating method (meaning depositing from outside the borders and using staff accounts and different means to transfer money to his accounts managed in Hong Kong) of the casino business was extraordinary.  All of the evidence in fact was pointing to one inference, and this inference is also the only logical inference, which a right-thinking reasonable man with common sense would also think that there were reasonable grounds to believe that these money directly or indirectly, in whole or in part, related to the proceeds from an indictable offence.  Under these circumstances, the objective test was established.

152.   The defendant was the operator and the Chief Executive of the Group.  According to the Admitted Facts and all the evidence accepted by the court, he of course knew about the transfer of money and the operation at the relevant time.  In other words, the Defendant would also have known any circumstances capable of leading a reasonable man to have reasonable grounds to believe.  Therefore the subjective test is also established.  Even my decision regarding whether gambling is legal or not is wrong, I still hold that there are sufficient evidence to reach the conclusion in relation to the Defendant's guilt."

30.  With respect, we do not believe the learned judge had given the alternative basis adequate consideration.

31.  On this alternative case, we proceed on the basis that there was no evidence that gambling in casinos in Myanmar was unlawful. 

32.  The defence can be briefly stated.  It is that the casinos were operated under licence granted by the Kachin Independent Organization ("KIO") to whom taxes were paid.  In other words the moneys were derived from a legitimate business.  As noted, the Defendant's casinos employed several thousand employees.  Also, the evidence showed quite clearly that the Defendant's casinos were substantial and operated openly.  The evidence also showed that apart from the Defendant's casinos, there were other casinos. 

33.  The evidence on the status of KIO is not clear, PW2 was cross-examined by Mr C Y Wong at trial about KIO.  PW2 said KIO "is a legitimate organisation" (T 38K), "they are fighting for their independence" (T 38O), "after 1988, they ceased fire and come in peace with our government" (T 39P). But they were allowed to exist as a legitimate organisation after the cease fire (T 38T-39A). 

34.  It appeared to be PW2's evidence (though not clearly so) that in 1947, it was agreed that Kachin should have full autonomy (T 43Q); that there was a constitution in 1947, another one in 1974 (which presumably had abrogated the 1947 constitution).  It appeared that the Kachin Independence Army ("KIA") then fought "for their independence" (T 45I).  But that the "1974 constitution is not active since 1988" (T 44M).  When pressed by Mr Wong on the question whether Kachin State is ruled by KIA with the KIO, PW2 said:

"This is politics and I am not a politician."  (T 46Q)

35.  PW2 said, however, Maijayang and Muguaba are special regions (T 47T); that although they are within Kachin, they are special regions (T 48U); he was excused from answering questions about the constitution, the learned judge said:

"PW2 seems to be saying that certain areas of your cross-examination, these areas touch upon certain matters where, for example, internal matters, complicated sensitive matters in his country; therefore he either says he is not sure or that he dare not give any comment." (T 72L)

36.  In re-examination, however, he said KIO "can collect the tax for the government" (T 76V).

37.  The evidence shows that there was little border control, and one could simply walk from China into Kachin.  It also appears that the casinos catered mostly for Chinese visitors and that RMB was the preferred money currency. 

38.  Returning to paras. 151 and 152 of the judgment.  With respect, we have difficulty with them.  Given that it was an admitted fact that the moneys were paid into the various accounts for gambling in the Defendant's casinos, the learned judge had not explained why "the only logical inference" when such moneys were later paid into the relevant accounts was that there were reasonable grounds to believe that these moneys directly or indirectly "related to the proceeds from an indictable offence".  Nor, had he explained what were "all of the evidence" in para. 151 or "any circumstances" in para. 152.

39.  With respect, the learned judge was probably influenced by his earlier finding that gambling was unlawful in Kachin.  But in respect of the second limb of section 25(1), we believe the learned judge ought to have considered whether the fact that the casinos operated openly, displayed a licence on the premises, and paid taxes were such as would have led a reasonable person to believe that they were lawful establishments. Furthermore, from the evidence, it is clear that Kachin is poor and underdeveloped.  The casinos buildings would have been some of the most substantial buildings in the area.  It is inconceivable that they could have been operated without the permission of the local authorities.  Bearing in mind that there is no admissible evidence of any Myanmar law prohibiting casinos, we believe the only reasonable or the more probable inference is that the casinos were lawful.

40.  In para. 133 of his judgment, the learned judge was critical of the fact that employees' names were used to open bank accounts for the purpose of gambling.  However, the explanation given on behalf of the defence was not unreasonable.  The evidence was that in the PRC, a corporate account could only receive deposits from another corporation, thus, a gambler who wishes to deposit money into an account of the casino would not be able to do so.  A multitude of personal accounts was used, paras. 8 to 13 of the judgment quoted in para. 12 above, provide the context.  Also, the use of the names of the different employees was to avoid confusion.  It was admitted that a person who has deposited money into a designated account would fax evidence of the deposit of money to the casino, after which gambling would be permitted to take place. On the basis that gambling is legal, it is difficult to understand how one could conclude, as the learned judge did, that the only logical inference was that there were reasonable grounds to believe that "these moneys directly or indirectly … related to the proceeds from an indictable offence".  

41.  It is unnecessary for us to go on to consider Lok Kar Win, on which we have received no meaningful submission.  Lok Kar Win is not concerned with a case where the defence is that the money was derived legitimately.  Lok Kar Win throws little light on whether it is a defence under the second limb of section 25(1) that contrary to suspicious circumstances, the Defendant knew and could prove that the moneys were actually not the proceeds of any indictable offence, foreign or domestic.  It is not necessary to go into this in the present case.

42.  Mr Leung submitted that the fact that a nominee account is used is evidence which is consistent with money laundering.  That may be so.  But in this case it was an admitted fact that the moneys were deposited by customers of the casinos for the purpose of gambling in the casinos, and the moneys were actually used for the purpose.  Moreover these facts must be considered with all the relevant evidence.  This the learned judge had singularly failed to do.

43.  Also, the Admitted Facts stated that the documents seized from the Defendant included a licence apparently issued by the Industrial and Commercial Administrative Management Bureau, Economic Development Region of Kachin State (Exhibit P6).  The licensed business was stated to be gambling and the registered capital RMB300,000,000. 

44.  There is a video of the foundation laying ceremony for the New Eastern Hotel showing that the persons attended included the省書記(presumably of the Kachin State) as well as the 縣長 and other representatives of the People's Government of the relevant area.

45.  The learned judge said that he doubted the authenticity of the licence because it was poorly made.  But the learned judge had not taken into consideration the fact that the police has had copies of the license since about 2008, and there was no evidence from the prosecution to show that the licence is not authentic.  The licence might not have been well made or used expensive paper, but all the evidence show that Kachin is poor and it is unreasonable, in the absence of evidence, to presume that the licence was unreliable.  Moreover, his rejection of such defence must have been influenced by the evidence of PW2, whose evidence, the learned judge preferred.  But the evidence of PW2 regarding the legality of gambling in Kachin should have been disregarded.

46.  Mr Leung accepts that in deciding whether there are reasonable grounds, one does not look at one or two matters in isolation, one has to look at all the relevant evidence.  The evidence was that the casinos were run with apparent official blessing or permission in Kachin.  Why these officials felt able to issue a licence for gambling purpose, is not for a Hong Kong court to decide.  That is no evidence to show that that was done improperly.  We add the prosecution could have adduced admissible evidence on the matter.

47.  For the above reasons, we were of the view that insofar as the learned judge had convicted the Defendant on the second limb of section 25(1) he was also wrong.