HKSAR v. MAK LAI YEE KENMIE

DCCC 1071/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1071 OF 2014

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Reasons for Verdict

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1.  Miss Mak faces two substantive charges of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to sections 25(1) and 25(3) of OSCO, Cap 455. Those are Charges 1 and 18.

2.  The defendant also faces a total of 21 alternative charges:  2 through to 17 are alternatives to Charge 1; 19 through to 23 are alternatives to Charge 18.

3.  I have reached the conclusion that all these charges should be dismissed.  I will give my reasons for that now.

4.  The charges arise out of the operation of two of the defendant’s bank accounts over a period of about six years.

5.  For the first account, the defendant was the holder and sole signatory of a Hong Kong Dollar Savings Account maintained with the Hang Seng Bank Limited.  Between 1 January 2005 and 7 September 2011, a total of $6,390,053 was deposited into the account.  Totally, $4,987,380 (78 per cent of that) was deposited by way of 181 cash deposits.  This forms the substance of Charge 1.  Charges 2 through 17 form 16 deposits totalling $1,915,000.

6.  For the second account, the defendant was also the holder and sole signatory of a Hong Kong Dollar Savings Account with the Hang Seng Bank Limited.  Between 1 January 2005 and 23 September 2011, a total sum of $2,001,467.99 was deposited into account 2.  Of this, $681,000 (that is, 34 per cent of this total) was deposited by way of six cash deposits.  This forms the substance of Charge 18.  Charges 19 through 23 particularise five of the cash deposits.

7.  The prosecution say that the court can from the nature and frequency of the cash deposits draw the only conclusion that the cash deposits were the proceeds of an indictable offence and the defendant must have known or believed this to be so.

8.  Unusually in this case, the defence say the cash deposits have a legitimate origin and represent ongoing payments by a Mr Suen for the defendant’s investment in a red minibus company in 2002, that the payments made to her in cash were the proceeds of Octopus payments made to the minibus company.  They therefore cannot be known or believed to be the proceeds of an indictable offence. 

9.  The issue in this case therefore is factual. Has the defendant raised reasonable doubt as to the fact that she knew or had reasonable grounds to believe that the monies in the charges were the proceeds of an indictable offence?

10.  The prosecution case is adduced largely by way of admitted facts.  The existence and operation of accounts 1 and 2 was admitted.  The prosecution called one witness, who simply conducted some analysis of the two accounts.  Those analyses were produced as spreadsheets (Exhibits P2, P3).  PW1 did evidence that he had been told by the defendant the source of her income was a Mr Suen Shing-yat and he confirmed that he had interviewed Mr Suen on two occasions, and had been shown documents by him. These were settlement records from Octopus company to Trade Smart Investment Limited for January and February of 2012.

11.  The prosecution also produced records of interview with the defendant on 8 February 2012. 

12.  In summary, the defendant said between 1992 and 1997 she worked as a public relations in a nightclub.  In 1997 to 98 she worked in real estate and in early 2004 to 2005 in a beauty salon.

13.  In 2002 she made a $200,000 investment in a minibus company with a friend, a Mr Suen Shing-yat.  The business involved Mr Suen leasing and renting red minibuses on red minibus routes.  She had received a profit share of 1 million in cash from Mr Suen and a profit share of 5 to 6 hundred thousand dollars from Mr Suen in 2006.  She also received roughly 70,000 per month in cash from Mr Suen. 

14.  She also had some income from holding and playing stocks between 2007 and 2011.  Her residence in Tai Po was a gift from a gentleman friend.  It was valued at 1.4 million at the time of purchase.  She owned a flat in Discovery Park, for which she had taken out a 1.5-million mortgage and a sum of 1.1 million in cash from her share in the minibus trade. Her other income came from “red packet” money given to her daughter and rental income from her flat in Discovery Park.

15.  The defendant’s tax records for the relevant period were produced, along with information about her real property.  Tax records showed no declaration in respect of the minibus investment.  It was never established, in fact, whether that would need to be declared. 

16.  The defence case was advanced by way of her cross-examination of the first prosecution witness and the record of interview, and also the evidence of a defence witness, DW1, who produced business records of Trade Smart for the relevant period in the indictment.

17.  In the cross-examination of PW1, it was elicited that the defendant was interviewed on 8 February 2012.  The police  were then investigating a period between 23 December 2004 and 24 August 2011, and we know at that time the defendant gave the source of the cash deposits as being from her investment in the minibus trade and said they related to purchase sales and minibus routes.  She also said the minibus vehicles had been rented to others on a route from Sheung Wan to Tsuen Wan.  There were sales and purchases of minibuses and an income every month.

18.  Now, PW1 also confirmed Mr Suen had confirmed the defendant’s earlier assertion that he had paid money to her and, in fact, the defendant was released from police bail and investigation on 13 April 2011.  Clearly, Mr Suen’s statements do not form evidence of the truth of their contents.  They do provide evidence they, however, were said, and can provide evidence of consistency of the defendant’s account.

19.  Also, Mr Suen’s interview, PW1 confirmed that Mr Suen produced documentation which showed Octopus payments to the company called Trade Smart.  They related to a period outside that being investigated. However, PW1 did conduct analysis on the documents.  He confirmed Trade Smart received an income through Octopus in early 2012 at a rate of HK$2 million per month, which would amount to $120 million over a five-year period. 

20.  A number of documents of Trade Smart Limited, which were later proved by the first defence witness, were put to PW1.  Amongst others, there were D2, the Hang Seng Bank account records of Trade Smart; D3, the DBS bank account records of Trade Smart.  It was shown that the Octopus Card Limited settlements were paid into the Hang Seng savings account, D2, averaging HK$2 million per month.  They show that totally, during the period of Charge 1, Trade Smart received $174,233,079.  That was shown through D4, an Excel chart of the payments.  PW1 was also shown D5, an Excel chart showing withdrawals of some 77,004,996.50 cents from D2 and D3. 

21.  PW1 further interviewed Mr Suen in March 2012 and was given the address of a garage at which the minibus PLB trade operated. It appears to be that no enquiries were ever made of this company, although the receipts of the business were seized.  These were in fact produced as D6 during cross-examination.  It also appears that D7 was shown to PW1 by Mr Suen during the interview.  This document showed the profit share for the company.

22.  PW1 confirmed that Mr Suen’s demeanour during the interview could lead to the conclusion that Mr Suen and the defendant had a relationship - I think he specifies boyfriend/girlfriend relationship.  It is also confirmed that there was and is a route from Sheung Wan to Tsuen Wan in operation by red PLB minibuses at and during the material times.

23.  As part of the defence case, the first defence witness 1 was called.  He was the accountant or bookkeeper of Trade Smart and worked there since 2004.  He evidenced that Mr Suen was the person in charge of the company.  In the Octopus services agreement (that is, D11), Mr Suen signs on behalf of Trade Smart.  The first defence witness had been himself a director of Trade Smart.  He was able to identify Defence Exhibits 1, 2, 3, 6, 7, 11, 13, 14 and 22 as Trade Smart business records.  He confirmed the accuracy of the Excel charts produced.  He produced D12, which related to two monthly accounts of money owed to the defendant and, in relation to Exhibit D21, DW1 confirmed that Mr Suen was active in the sale and purchase of PLB or minibus licences and that he bought and sold minibuses through a company known as Rejoint. 

24.  Eventually, through somewhat lengthy series of questions and answers, DW1 explained that Trade Smart operations largely involve the re-renting of minibuses.  The minibuses were rented on a long-term basis, with Trade Smart renting the Octopus machines.  The vehicles were then re-rented to a driver.  After expenses, the amount received is profit.  That was shown between the defendant and Mr Suen and recorded on Exhibit D7.  DW1 also evidenced that Trade Smart ran three PLB routes, with the Sheung Wan-Tsuen Wan route making a profit, which is why Trade Smart as a whole did not make a profit during the operative period.

25.  We already had, in terms of the defendant’s record of interview, evidence from her that she had made the $200,000 investment in the minibus business with Mr Suen, and that involved the leasing and renting of minibuses, red minibuses.

26.  As far as the legal position is concerned, the defendant is facing two substantive charges under Section 25(1) and (3) of Cap 455, and 21 alternative charges.  Although the offence itself is described as “dealing with property known or believed to represent proceeds of an indictable offence”, it is clear from recent authority that it is not necessary for the prosecution to prove as an element of the Section 25 offence that the property dealt with by the defendant in fact represents the proceeds of an indictable offence.  It is only necessary for the prosecution to prove that the accused dealt with certain property in circumstances where he or she knew or had reasonable grounds to believe that such property represented the proceeds of an indictable offence. 

27.  In respect of that described mental element, to convict, the tribunal of fact has to find the accused had grounds for believing, for so believing, and - this is the original requirement - those grounds must be reasonable.  That is, that anyone looking at these grounds, what is known,  objectively, would so believe, would so believe that these monies were the proceeds of an indictable offence.

28.  It is also clear to me that Charges 1 and 18 do not offend against the rule against duplicity, as the individual deposits are acts of a similar nature and can be seen to be part of one transaction.

29.  The parties’ position is as follows. 

30.  The prosecution say that the withdrawals from the Trade Smart account and cash deposits to the defendant’s account cannot be linked.  The reason for this is obvious, as the deposits to the defendant’s account are in cash.  They say that, save for Mr Suen’s assertion, there is no evidence that Trade Smart money ever ended up in the defendant’s account. Also, they note that in some of the tax returns of Trade Smart in 2006 and 7, DW1, in fact, said it was not his signature.  I do know that is quite a common feature of tax returns in this jurisdiction.

31.  So the prosecution say the tax returns in Exhibit P15 show losses in 2006/7, 2007/8, and Mr Suen has declared an income in those periods with 580,000 and 780,000 dollars respectively.  Between 2005 and 11, as an employee, Mr Suen only ever earned $96,000 a year.

32.  As I have said, it was submitted that, in respect of those two bank accounts that form the subject of Charges 1 and 18, all the deposits were in cash.  There are no receipts or supporting documents to demonstrate any legitimate source of funds.

33.  They say the frequency and quantity of these deposits are inconsistent with the defendant’s position as a single, unemployed mother for some of the time.  They point to the fact that there is no reference to the defendant’s cash income in the defendant’s tax returns and, generally, that her income and property purchases are simply not commensurate with her declared income.  They say there is no documentary support for the alleged agreement with Mr Suen and that the amount derived from that investment bears no relationship to the initial deposit.  There is no document to support Mr Suen’s cash payment to the defendant and that Trade Smart has not made a profit since 2004.

34.  The defence broadly say that the court must not ever lose sight of the fact that the offence is dealing with property known or believed to represent the proceeds of an indictable offence, and there has never been any suggestion to the court as to what that indictable offence might be or who committed it, or how the defendant came into receipt of the funds.

35.  These are facts, of course, the prosecution does not have to prove, but the prosecution is asking the court to draw an inference in this case about the state of the defendant’s belief, and these are factors that are highly relevant to drawing that conclusion, especially when the conclusion has to be, as a matter of inference, the only reasonable conclusion that can be drawn.

36.  The defence say that the aggregate sums the defendant is charged with can easily be covered by her known share of the proceeds of the re-renting of minibuses, and, as I have said earlier, the prosecution cannot point to any predicate offence. 

37.  In a case such as this, where there is a clear alternative explanation, in the absence of the existence of such an offence, the court has little basis to draw a conclusion that these sums flow from the commission of indictable offence or offences.  They say the prosecution case is entirely based on the cash deposits.  The provision or existence of real property in the defendant’s name lies outside that enquiry. 

38.  Having been put on notice that the defence case is that, from an early stage of the defence case, is that these sums are legitimate, the prosecution cannot show that the cash deposits do not originate from the re-renting of minibuses or the trading of minibuses.  Given that this was a legitimate business and it has always been said that the monies given to her by Mr Suen purported to be from this business, there has not been and could never have been any basis for the defendant or for the court to support a belief that the monies were the proceeds of an indictable offence or offences.

39.  It is said the defendant pointed to two sources of the cash deposits:  the renting of minibuses and the purchase and sale of minibuses.  It is said that a combination of the evidence of the defendant’s record of interview and the first defence witness create a clear evidential possibility that the cash deposits are from a legitimate origin, and therefore, on that basis, the court cannot conclude that any reasonable person would reach the conclusion that the cash deposits were the proceeds of an indictable offence.

40.  I find that the salient features of this case are the absence of any predicate offence and the response of the defendant when first taxed with the allegation, and the subsequent investigation of Mr Suen.

41.  The defendant’s explanation has never changed. She gave an explanation which was capable of investigation.  The initial investigation appeared to broadly confirm the explanation given in the cautioned statement and there is some support for them by the documents produced by DW1.

42.  The nature of the documents and the failure of Mr Suen to provide evidence in person is questioned by the prosecution. However, to a certain extent, these observations appear to reverse the burden and standard of proof which lies on the prosecution. 

43.  Once the defendant intimated in her record of interview that the monies were received from Mr Suen pursuant to investment of minibus business, the correct approach is the prosecution call Mr Suen to rebut that proposition raised evidentially by the defendant’s record of interview.  A failure to do this leaves the evidential proposition unrebutted.

44.  In fact, the defendant has gone further than that by calling DW1, who confirmed Mr Suen’s position in Trade Mart and the nature of that company’s business and the arrangement with the Octopus company.  He particularly identified D7 as a Trade Smart business record, which allocates a share profit to each share, which is supported by D12, which shows the connection of cash withdrawals from Trade Smart’s account and the allocation of profits to the shareholders.  The profit has been distributed equally, as shown in D7.

45.  The defence evidence taken together, I find, allows the court to draw the conclusion  that is, there is a reasonable possibility that the cash sums, the subject of the main Charges 1 and 18 can derive from the operation of Trade Smart and originate as Octopus payments made to the minibus company.

46.  That being the factual matrix, it would appear that when the defendant says that she believed that the cash deposits were from a legitimate source, she could not herself have had any reasonable grounds to believe the cash deposits themselves represented the proceeds of an indictable offence or offences, nor would a reasonable person of the same state of information, knowledge or belief reach that conclusion.

47.  That being my conclusion in respect of the money shown in Charges 1 and 18, clearly that would apply also to the alternative charges which, as I have indicated, will all be dismissed.