HKSAR v. WONG PING SHUI ADAM AND ANOTHER

CACC 251/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 251 OF 2000

(ON APPEAL FROM DCCC 84/2000)

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J U D G M E N T

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Seagroatt J (giving the judgment of the Court):

1. Both these Applicants appeared for trial before His Honour Judge Alan Wright in the District Court on a charge of conspiring with each other, and with Chu Hak-lan, between 1 December 1998 and 4 March 1999, to deal with property knowing or having reasonable grounds to believe that that property, in whole or in part, directly or indirectly, represented a person's proceeds of an indictable offence. Both were convicted on 9 June 2000 and both were sentenced to terms of 5 years' imprisonment on the following day. The offence was contrary to section 159A(1) of the Crimes Ordinance (Cap. 200) and section 25(1) of the Organised and Serious Crimes Ordinance, (Cap. 455).

The Background

2. Apart from the two Applicants, there were three other personalities involved in this conspiracy, all of whom gave evidence for the prosecution. They were:

"Richard" - an ICAC informer of Russian origin or extraction;

Chu Hak-lan - the co-conspirator identified in the charge, who is a former inspector with the Customs & Excise Department;

and

"Arkady", an American undercover agent posing as a Russian link-man with a gang of Russian criminals who wanted to launder "black money" from Russia, being the proceeds of serious crime.

3. "Richard" met Chu sometime after arriving in Hong Kong in 1994. They had contact for a variety of reasons, some of them relating to certain immigration offences by "Richard".

4. Sometime in late 1998, "Richard" contacted the ICAC as a result of his friend Chu inviting him to become involved in some money laundering activities. Under ICAC supervision "Richard" explored this proposed criminal enterprise with Chu. There were many meetings between them which were recorded contemporaneously. Other meetings were minuted afterwards.

5. "Richard", for his part pretended to be the middle man or go-between for an interested party - the Russian connection - which had funds derived from criminal activities in Russia which it wished to have laundered. The nature of the illegal activities producing the money was stated by "Richard" to Chu to be protection or extortion and prostitution.

6. The scheme as expounded by Chu to "Richard" involved the transfer of substantial sums of money to casino operators in Hong Kong and Macao who were to take a 9 per cent commission and then return the balance of the money duly laundered. Chu gave "Richard" a card on two occasions on which was printed the name of the first Applicant. Arrangements were discussed for a visit by the Russian funds holder, "Arkady".

7. In the meantime in December 1998, Chu had a meeting with his two contacts, the architects and operators of the scheme, the two Applicants. At that meeting, Chu was told by the second Applicant, Leung, that there were two methods which could be used - one was via a casino; the other was via the 'front' of a joint venture enterprise with one of three named companies. These companies were printed on the name cards of the two Applicants. The second Applicant also referred to a casino in the USA which could be used in a similar way to the casino in Macao. Chu was also told by the second Applicant of the existence of a bank official who would facilitate the scheme.

8. When describing the source of the funds, Chu did not repeat what he had been told by "Richard" but referred to 'smuggling operations'. This appears to have prompted the second Applicant to ask Chu to obtain more precise information about the source as, if, for example, he suggested the money was from sale of drugs, there was a more appropriate method of laundering it.

9. Eventually Chu took "Richard" to the offices of the two Applicants in the Shun Tak Centre in mid-January 1999, probably the 15 January, where "Richard" was introduced to the first Applicant. The second Applicant was not present apparently at that introductory meeting.

10. "Arkady", the undercover agent, appeared on the scene in early February and "Richard" introduced him to Chu in the Conrad Hotel on 18 February. Chu said he had in the meantime kept the first Applicant in the picture as to progress and the imminent meeting with "Arkady".

11. On 22 February 1999 all five met at the offices of the Oriental VIP Club in the Shun Tak Centre, the offices also of the two Applicants. At that meeting the first Applicant spoke of money being laundered through a casino or a bogus joint venture agreement with repayment by telegraphic transfer. There was a discussion of the amounts to be put through the system and "Richard" raised the question of banks reporting large sums going through. The first Applicant responded to the effect that the Manager of the Shun Tak Centre branch of the Hong Kong Bank worked for them and that he would ensure that there was no report of the transaction or, at least, alert them to any problem that arose. It was decided to do a trial run with a low amount: $50,000.00 (US) in the first instance.

12. The first Applicant also referred to a casino in the USA which could be used as a vehicle for the laundering exercise saying that there existed good relations with a banker there. He gave "Richard" a brochure on the casino, this being an exhibit in the proceedings in the District Court. A discussion ensued in respect of the commission to be paid between Chu and the two Applicants - the basis was that the Applicants would receive 6 per cent with "Richard" and Chu sharing the other 3 per cent. It appeared that the first Applicant always consulted the second Applicant on any matters questioned and the second Applicant made a major contribution on the matter of the commission, which was of course at the heart of the Applicants' benefit from the scheme. For it to be worthwhile to the Applicants with the risks involved and the arrangements to be made which would involve payments to those concerned, substantial sums would have to be put through the system. At the end of that meeting, "Richard", Chu and "Arkady" were introduced to the Manager of the Hong Kong Bank at the Shun Tak Centre branch, a man named Ho.

13. Three days later on the 25 February 1999 there was a further meeting of all except the 2nd Applicant at the Grand Hyatt Hotel. For the trial run only US$20,000.00 were available perhaps because the ICAC had some reservations as to whether the money could be recovered if the plan misfired. The money was handed over to the 1st Applicant who left for the bank in the Shun Tak Centre, with "Richard", Chu and "Arkady" following in another taxi.

14. At the bank a Demand Draft was obtained in the sum of US$18,200.00 as a result of an application in the name of Oriental Crown Luck Tobacco International Company, a company controlled by the Applicants. When they returned to the Shun Tak Centre, US$720.00 was duly handed over to Chu, representing the agreed 3% commission, and 10% of the 6% commission retained by the Applicants, this 10% being an introductory fee.

15. The final meeting took place on 3 March 1999 in "Arkady's" room at the Conrad International Hotel. All attended except for the 2nd Applicant. Future transactions were discussed. "Arkady" purported to have a suitcase of US currency. The proceedings were brought unceremoniously to a halt. The ICAC Officers emerged from their hiding places and the trap had been sprung. Chu and the 1st Applicant were arrested and the 2nd Applicant shortly afterwards.

The Trial and the Judgment

16. The meticulous and lucid judgment of the trial judge demonstrates that he applied his mind to each and every aspect of the law and to the personalities as well as the evidence of all the witnesses. Only the 1st Applicant gave evidence.

17. At the outset of his judgment the Judge reviewed comprehensively the law in relation to conspiracy and the specific elements of the charge on which the Applicants stood trial. The fact that conversation was variously conducted in Cantonese, Russian, occasionally Ukrainian, and English, called for care in the consideration of what if any misunderstanding may have existed between the five participants. The judge clearly had such matters in mind.

18. At some stage the application appeared to be based in part on the suggestion that the Judge did not direct himself fully or at all in relation to section 159A(2). We will deal with the importance, such as it is, of this particular section at a later stage but in our view the Judge was alert to all possible implications of the law involved. Mr M K Wong, who appeared on behalf of the 1st Applicant at trial, and as junior Counsel to Mr Ching Y Wong SC for both Applicants before us, had made submissions on the law to the Judge for a total of more than 3 1/2 hours over two days. The fact that Mr Wong started on what is clearly an erroneous basis - namely that there is no offence of conspiracy in existence where the 'mens rea' is knowledge or belief on reasonable grounds - may have caused him to take so long. He clearly had an uphill task to advance this novel proposition.

19. The Judge set out the material aspects of the evidence of the prosecution witnesses and evaluated it fully in the light of the matters which he clearly had in mind as well as in the context of the cross-examination. He applied equal care and thought to the evidence of the first Applicant. He then, applying the law, and the cases of both Applicants set out in comprehensive and logical progression his findings applying the appropriate tests.

The Appeal

20. Mr Ching Y Wong SC for the Applicants divided his submissions into two main grounds.

21. The first revolved around a discussion of the principal elements of an offence - the 'actus reus' and 'mens rea'. We were invited to consider these elements in relation to an offence of handling stolen goods where the status of the goods in question formed part of the 'actus reus', but the mental element ('mens rea') was on an alternative basis - knowing or believing the said goods to be stolen.

22. There is of course a clear distinction to be drawn between the offence of handling stolen goods under section 24 of The Theft Ordinance and section 25(1) of the Organised and Serious Crimes Ordinance. The 'actus reus' in the latter offence is "dealing with that property". There are no words qualifying or restricting that property. It is not open to the interpretation that "that property" is confined to property which must have been or can only be the proceeds of an indictable offence. The reference to 'proceeds of an indictable offence' is in the context of what the accused knew or had reasonable grounds to believe. Mr Ching Y Wong rightly drew the distinction between knowledge of a fact and reasonable grounds for belief.

23. It is of course unarguable that a person can know only a fact or state of affairs but the draftsman clearly had in mind that the gravamen of the offence to be identified in section 25(1) is the criminal scheme to deal with property that was known or believed to be proceeds from an indictable offence.

24. Our attention was directed to the Court of Appeal judgment (Mayo JA as he then was) in HKSAR v. Li Ching [1997] 4 HKC 108 where the Court held in accordance with the position we have set out above - in other words, it is not necessary for the prosecution to prove that the indictable offence had been committed (and therefore that the proceeds in fact came from such an offence). It was necessary only to prove (inter alia) that the accused had reasonable grounds for believing that the proceeds were from or of an indictable offence. Mr Ching Y Wong sought to argue that that decision was wrong. It is not open for him to do so in this Court and in any event we consider that there is no basis for the argument. The scheme or system by which money is laundered is intrinsically a criminal scheme. It is not necessary to launder money which is legitimately and honestly acquired. Criminality is implicit in such an enterprise: proscribing it is what the legislature intended and what the draftsman set out to achieve.

25. Mr Ching Y Wong referred to the preamble as supporting his argument. It may well be that the preamble was not altered when other sections were altered but that is of no consequence. It is widely drawn and it is certainly true that it identifies only one offence, and that in general terms is to create an offence of assisting a person to retain proceeds of crime. However it embraces much else in the collective phrase "and for ancillary and connected matters".

26. Few modern public general Acts contain a preamble but historically it has been a preliminary statement of facts or reasons which are thought to have made the passing of a statute necessary or desirable. A preamble may be used as an aid in interpretation so far as it provides a reliable guide - "as a key to open the minds of the makers of the Act, and the mischiefs which they intended to redress" but courts are reluctant to allow a preamble to override inconsistent operative provisions. We see nothing inconsistent between the preamble and the contents of the ordinance itself and in any event the operative provision of section 25(1) is so clear cut that even if the preamble were to be regarded as inconsistent effect would be given to the section. Simple deficiency in the preamble, if such could be asserted, has no significance. For section 25(1) to come any where near the interpretation argued for by leading Counsel for the Applicants, specific words would have to be inserted - for "that property" would have to be substituted "those proceeds of an indictable offence", or some such similar words, as indicated by Mr Kevin Zervos for the prosecution in his comprehensive written submissions.

27. Mr Zervos has also supplied us with a copy of the section 25 of the original Ordinance (as enacted) which is entitled "Assisting a person to retain proceeds of an indictable offence"; this was the offence identified in the preamble. He rightly points out that although this section was repealed and replaced by the section 25(1) with which we are concerned the preamble understandably remained unaltered. In our view this effectively disposes of any point made in respect of the form and content of the preamble.

28. Mr Ching Y Wong also drew our attention to a decision of the Court of Final Appeal in Lok Kar Win and Others v. HKSAR 25 November 1999 and [2000] 1 HKLRD 733 when it was asked to certify two points of law, the second of which was:

"Whether it is necessary, to establish an offence under the section (25(1)) for the prosecution to prove that the property, the subject of the charge, represents the proceeds of conduct which, if occurring outside, Hong Kong, was an offence where it occurred."

The answer given was 'No'. That is not of course the issue in this submission but the words of Litton PJ were extracted to lend support for Mr Wong's submission:

"It is plain from the wording of s. 25 that the section aims at criminalising dealing in Hong Kong with property derived from conduct which is indictable here ...."

29. The Court of Final Appeal was not concerned with the issue advanced here and in our view those words of the learned Judge cannot be used as a judgment by that court to determine that "that property" means actual proceeds of an indictable offence. The emphasis of the section is on what the accused knew or believed on reasonable grounds the property to be when he dealt with that property.

30. Section 25(1) is the substantive offence, but the offence of which the Applicants were convicted was under section 159A of the Crimes Ordinance, a conspiracy. The agreement is the 'actus reus'. In this case the agreement is to deal with property which may or may not be the actual proceeds of an indictable offence. In our view since the mischief aimed at is the conspiracy to put into effect a criminal enterprise, the argument that the proceeds have to be those of an indictable offence is unsustainable at law.

31. Section 159A(1)(b) provides confirmation of this if confirmation be needed. It reads:

"..... if a person agrees with any other person or persons that a course of conduct shall be pursued which, if the agreement is carried out in accordance with their intentions, either ...

(a) will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement;

or

(b) would do so but for the existence of facts which render the commission of the offence or any of the offences impossible."

If, for the substantive offence, it was necessary for the property actually have been proceeds from an indictable offence, that fact would make no difference to the count of conspiracy. The Applicants would still have committed the offence despite the property having been provided by the ICAC.

32. The second ground relates to the meaning of section 159A(2), to which section 159A(1) is made subject. The clause, though somewhat convoluted on the face of it, means that although an accused may be guilty of a substantive offence despite not knowing of a fact essential for its commission, he will not be guilty of conspiracy to commit that offence unless, he and another party to the conspiracy either intended or knew that the fact shall exist at the time when the conduct necessary for the commission of the offence is to take place [Note underlining]. That cannot aid these Applicants. This sub-section cannot be construed so as to provide for the opposite to the clear, unambiguous meaning of section 159A(1)(b). That would make a nonsense of the drafting of the prime section. An example of the situation envisaged by section 159A(2) may be seen in this slightly re-drafted form:

"The applicants may be liable for an offence under section 25(1) without knowledge of the fact that the property was not the proceeds of an indictable offence but would not be guilty of a conspiracy to commit that offence unless he and at least one other party to the agreement intended or knew that such property shall or will exist at the time when the conduct constituting the offence is to take place."

On the evidence, and as so found by the Judge, the Applicants intended that the property should be proceeds of an indictable offence. As we have stated earlier, that was an integral part of the criminal scheme.

33. At an earlier stage we referred to the Judge's careful and comprehensive directions on the law. There is no doubt that his review encompassed all necessary considerations under section 159A and it was not necessary for him to make specific reference to the subsection. In our view, given the situation envisaged by section 159A(2), he cannot be faulted.

34. Some implied criticism is made of the Judge because in his Reasons (at page 38 line 9 - 17) he said:

"This evidence establishes beyond all reasonable doubt that the agreement between the conspirators was to deal with the moneys made available to them by persons who claimed variously that the source of those moneys was protection or extortion and prostitution; that the moneys came from Russia; and that this was known to them from the outset." [Note the underlining]

And then went on to say:

"There were clearly reasonable grounds for them to believe that that property, in whole or in part, directly or indirectly, represented a person's proceeds of an indictable offence."

It was suggested that the Judge was confused over knowledge and reasonable grounds for beliefs. He was not. A careful reading of what he said makes it clear that it was the claims which were known, and that these claims gave rise to the reasonable grounds for belief. This was not a good point on behalf of the Applicants.

35. The final point advanced by Mr M K Wong who followed Mr Ching Y Wong in submitting these points in respect of the Judge's Reasons, was an argument that the reference to the money coming from smuggling activities would not give rise to a reasonable belief that the money was the proceeds of indictable offences. Mr Wong identified 15 sections of the Import and Export Ordinance which appeared to identify only summary offences, or some which could be tried either way. This is to ignore reality. The scheme developed by the Applicants and the preparatory steps to ensure its covert activity required substantial sums of money. Such substantial sums were the topic of discussion in any event. The sections cited by Mr M K Wong related to technical offences aimed at the compliance with statutory requirements such as licences, security devices, records of ports of calls, cargo manifests, interference with locks or seals, storage and the provision of misleading information. Smuggling has a clear practical implication. It involves to the common observer importation or exportation of drugs, liquor, cigarettes and, for a variety of purposes, people such as illegal immigrants, prostitutes, and slave labour. These illegal activities which are indictable in Hong Kong and in other countries involve substantial sums of money. The suggestion that the smuggling operations have to be identified specifically so as to see what are the corresponding indictable offences in Hong Kong, is in law untenable and in practice, unrealistic. Out of such activities has arisen the desire of criminals to launder their financial profits. From such extended criminal activities has come the need for legislation in the form of the Organised and Serious Crimes Ordinance.

36. There was no material irregularity in the trial of these Applicants. There is nothing unsafe or unsatisfactory in the convictions recorded. There is not the slightest justification for the suggestion of a 'lurking doubt', that make-weight of appeals against conviction. There is not the slightest shadow of a doubt. These applications are dismissed.

The Appeal against Sentence

37. Having been reminded of the Court's power under section 83I of the Criminal Procedure Ordinance Mr Ching Y Wong took instructions from his clients and sought leave to abandon their appeals against sentence. We considered that a very wise action. We granted leave and these appeals were also dismissed. In our judgment the sentences were not one day too long.