HKSAR v. HARJANI HARESH MURLIDHAR

CACC 352/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 352 OF 2015

(ON APPEAL FROM DCCC 1047 OF 2014)

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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):

1.  The appellant faced a single charge of conspiracy to deal with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 and sections 159A and 159C of the Crimes Ordinance, Cap 200. The appellant pleaded not guilty to the charge and was tried in the District Court before District Judge J Lam (“the judge”). On 4 August 2015, he was convicted as charged and, on 7 October 2015, he was sentenced to 3 years and 9 months’ imprisonment.

2.  On 14 October 2015, the appellant filed a Notice of Application (Form XI) for Leave to Appeal against Conviction and on 3 November 2015, filed another Form XI for leave to appeal against his sentence. At a hearing on 22 March 2017, leave to appeal his conviction on ground 1 of his Perfected Grounds of Appeal was granted.[1] Leave to appeal was refused in respect of the appellant’s other grounds of appeal against conviction and in respect of his application for leave to appeal against sentence.  No application was made to renew those other grounds or the application for leave to appeal against sentence. 

3.  At the hearing of the appeal we reserved our judgment and said we would hand it down at a later date.  This we now do.

The charge

4.  The re-amended particulars of the charge alleged that the appellant had, between 26 April to 21 July 2014, conspired with Castelino Brian Mario, Dialbo Ibrahima and other persons unknown, to deal with property, being the sum of US$539,375.  In the original charge there was only one unindicted named co-conspirator and this was Castelino Brian Mario.  However, another unindicted named co‑conspirator, Dialbo Ibrahima, was added to the charge in the course of the trial.  This person was originally a prosecution witness, called as “PW10” in the prosecution case.  Prior to calling him the prosecution appears to have lost confidence in him as a witness worthy of belief when shown by the defence records of conversations that he had with the appellant and which were stored in the appellant’s computer.  Nevertheless, PW10 was tendered for cross-examination. After he had given evidence in the trial, the prosecutor concluded that he had conspired with the appellant and thereafter applied to amend the charge sheet to include him as an unindicted named co‑conspirator.

The prosecution case 

5.  The following summary of the prosecution case draws heavily on what is set out in the judgment on the application for leave to appeal.  The prosecution case concerned an email fraud relating to a genuine transaction.  A company by the name of Dragon Asia Fertilizer Limited (“Dragon Asia”) contracted to buy fertilizer from Dohigh Trading Limited (“Dohigh”) which is a subsidiary of Sinochem Fertilizer Limited (“Sinochem”).  Sinochem was the supplier of the fertilizer but it was routing all contractual payments through Dohigh.  Dragon Asia was not the end user of the fertilizer and was in fact on-selling it to a company in Bangladesh; hence, Sinochem was required to ship the fertilizer from China to Bangladesh.  The value of the contract was US$10,788,000.  Under the terms of the contract, Dragon Asia was required to make a down payment of 5% of the contract sum, US$539,400, with the balance to be paid to Dohigh by means of a letter of credit. 

6.  By hacking the email account of Sinochem the fraudsters were able to deceive Dragon Asia into paying the required deposit to a bank account of Sino Investment and Trading Limited (“SIAT”) and nominating SIAT as the beneficiary of Dragon Asia’s letter of credit.  SIAT was incorporated in Hong Kong in 2012 by the appellant and the unindicted named co‑conspirator Castelino Brian Mario. 

7.  The appellant had arrived in Hong Kong on 12 July 2014 but at all times Castelino remained out of Hong Kong.  The amount of down payment, less bank charges of US$25, was deposited into a bank account of SIAT (referred to at trial as “Account A”) on 9 July 2014.  This came to US$539,375 and between 9 July and 17 July 2014, Castelino transferred US$327,175 of this sum out of Account A.  A further US$38,500 was transferred to another account of SIAT (referred to at trial as “Account B”) and between 15 July and 18 July 2014 the appellant made withdrawals from Account B.  It was when he was attempting to withdraw some of those monies on 21 July 2014 that he was arrested.

8.  In his record of interview, the appellant claimed that he had come to know an agent called “Daniel” and he provided the police with Daniel’s mobile phone number and email address which began with the identifying name “coolsaintt”.  He maintained that it was Daniel who introduced him to the fertilizer contract and it was Daniel who made all the contacts with Dragon Asia.  He claimed he was providing a legitimate business service of inspecting the fertilizer at the time of its shipment and handling the documents for the letter of credit.  He said SIAT would get 15% of the invoice value, 12% for itself and 3% for Daniel, and the USD539,375 that he received as the down payment was part of that 15% if the deal went through.

9.  When PW10 was called, the appellant’s trial counsel, Mr Beel, who also appeared for the appellant on this appeal, revealed to the prosecutor a large number of Skype and email records of communications with Daniel that had been stored in the appellant’s computer.  As we have mentioned, at the end of PW10’s evidence, the prosecutor disavowed any reliance on him and added him to the charge as an unindicted named co-conspirator.

The defence case

10.  The appellant elected to testify at trial.  He did not dispute that Dragon Asia and Sinochem had been deceived by fraudsters but contended that he had also been a victim of the fraud.  The appellant maintained that he was a legitimate businessman who had been deceived by PW10 into believing that he was engaged to provide assistance in the fertilizer transaction.

11.  The appellant testified that he would ultimately get 12% of the value of the contract for confirming that the fertilizer had been successfully loaded in China for shipment to Bangladesh, obtaining all documentation required under the letter of credit, negotiating the letter of credit and receiving the proceeds of the letter of credit into SIAT’s bank account before finally disbursing the monies to the supplier.  The appellant said he believed that the supplier would have its own reasoning in nominating SIAT as the beneficiary of the letter of credit.  Although he personally did not know what the reasons were, he did not feel the need to enquire further about this from “Daniel”. 

12.  All the monies under the contract, both the down payment and the proceeds of the letter of credit were to be paid to SIAT’s account and the appellant would, after deducting his 12% commission and forwarding to Daniel his 3% fee, remit the balance of the monies to the supplier. 

13.  In support of his defence the appellant relied on the contents of the Skype conversations and emails with Daniel that were stored in his computer.  These were proven by Further Admitted Facts and adduced as exhibits in the defence case.

14.  The appellant said he would only disburse the money when he had received from Daniel an authorization from the owners of the money.  Because he never received such an authorization he kept the money.  The appellant did not dispute the transfers of monies out of SIAT’s accounts.  He said he and his partner, Castelino, treated the money as part of their 12% fee and used it to pay debts, cover their operating expenses in respect of their businesses and also to cover some personal liabilities.

The judge’s Reasons for Verdict

15.  The judge found that PW10 was the person Daniel who was known by his Skype address as “coolsaintt” or “saint cool”.  He inferred that PW10 knew there was a fraud taking place and that was why he could not expose his true identity to the appellant.  The judge believed that the appellant had, in respect of certain past transactions, been a legitimate businessman and genuinely wanted to set up an office in Hong Kong for his company.  He accepted that the appellant had engaged in many businesses including what the appellant called confirming-house business.

16.  However, the judge also found that the appellant was a person willing, for reward, to lend his bank accounts to others so that money could be transferred into them.  He said ample evidence of this could be found in the Skype and email communications between the appellant and Daniel, under his pseudonym “coolsaintt”.

17.  The judge rejected the appellant’s explanation that his correspondences with “coolsaintt” related to providing confirming-house business for him.  He said there was nothing in the email exchanges in which the purchasing of merchandise was discussed.  The judge referred to the service that Daniel was seeking as money-conduit business.  The judge said in his Reasons for Verdict:

“180. It is apparent from their Skype and email communication that Defendant offered different accounts in different places for reward upon coolsaintt’s request. I do not accept Defendant’s explanation in court that it was for the buyers in confirming-house business to send in money for the merchandize. There was no discussion at all of who was to buy what. … I am sure in those Skype and email discussions Defendant and coolsaintt were talking about money conduit or money moving for reward. In this case, the two had reached an agreement, which was for Defendant to use his SIAT account to receive the down payment and the L/C money as the named beneficiary of the Contract and the L/C. Then Defendant had to transfer the money (after deduction of 12% for SIAT and 3% for coolsaintt) to other accounts according to coolsaintt’s instruction...

…

182.   I am sure it was only because Defendant could offer SIAT’s account as available for coolsaintt’s side to use that account to receive money for conduit. That was the reason (and the only reason) why SIAT was named as beneficiary on the Contract and the L/C. I am sure Defendant was aware of such reason.”

18.  The judge could not be satisfied that the appellant was one of the fraudsters responsible for deceiving Dragon Asia but he was satisfied that PW10, if not himself one of the fraudsters, was at least their knowing agent[2]. As a consequence of not being satisfied that the appellant was one of the fraudsters, the judge held that the appellant could not be proven to know that the US$539,375 represented the proceeds of any indictable offence.  He then went on to address the question of whether the appellant had reasonable grounds to believe that this property was the proceeds of an indictable offence.

19.  In doing so the judge referred to the defence’s contention that the appellant believed the money was legitimate and of this assertion, the judge said:

“202. … The whole situation here is, however, so questionable that it calls for immediate rigorous proof or due diligence enquiry. Someone for no good reasons wanted to use SIAT’s name on the Contract and the L/C as beneficiary and required SIAT’s account to receive the down payment and the L/C money. A huge and totally disproportionate reward (12% of USD10,778,000) was offered to Defendant. Defendant in such circumstance ought to think or dig deep into the matter. Yet, he did not but simply turned a blind eye to the situation. He chose not to perform any due diligence enquiry. He was unreasonably contented with the scarce information he had of the highly suspicious deal coolsaintt brought him. His belief that the money was legitimate was, therefore, ill-founded.”

20.  The judge went on and applied the ‘reasonable grounds to believe’ test to the appellant’s belief in the following way:

“203. The ‘having reasonable grounds to believe’ test is anyone looking at the grounds Defendant had would believe the property Defendant dealt with represented proceeds of an indictable offence. Defendant’s belief (even mistaken or fallible) is a ground that has to be taken into consideration. However, it is not an over-riding or determinative ground. I am sure anyone looking objectively at the grounds Defendant had would believe differently from Defendant, who was in fact turning a blind eye to a highly questionable situation which he must have so appreciated. Anyone looking objectively at such grounds Defendant had would believe the money involved represented in whole or in part, directly or in directly the proceeds of an indictable offence. Defendant ought to have known that but he chose not to. He was only concerned with the profit.”

21.  In respect of PW10, now an unindicted named co-conspirator, the judge found:

“210. … Coolsaintt (PW10) took instruction from these fraudsters. He lured Defendant into letting them to use SIAT’s account (Account A) to receive the money. I am not sure whether coolsaintt was in fact one of the fraud gang but I am sure he was at least a knowing agent.

211.  I accept that coolsaintt had not told Defendant the fraud but Defendant in the circumstance as he was aware ought to have known the money he was asked to deal with represented proceeds of an indictable crime.”

22.  In addressing the appellant’s mens rea and the argument that the appellant could not be guilty of the offence if he honestly held the belief that the money was legitimate, irrespective of how unreasonable that belief might appear to be to others, the judge referred to the decision of the Court of Final Appeal in HKSAR v Yan Suiling[3] and said:

“223. … The highest court was not saying if a defendant was found to hold an honest belief, then he/she must be acquitted. That cannot be the right interpretation. Otherwise, the test propounded in Pang Hung Fai (FACC 8/2013) would be watered down to a purely subjective test. The approved test on ‘having reasonable grounds to believe’ is that the jury should consider such grounds the accused had for believing and that anyone looking at those grounds objectively would believe the property represented proceeds of an indictable offence. An alternative interpretation is whether the accused ought to have known the property represented proceeds of an indictable offence.

224. The accused’s belief is certainly a ground that must be considered but it is just one of the grounds. It is not to be deemed as an over-riding or all-decisive ground. …

…

227. As said in para. 202, Defendant’s so-called ‘belief’ was ill-founded. It was no more than a thought casually held as a result of lack of due diligence enquiry, which enquiry a person in Defendant’s position and with his capability ought to have made and could have made. …

228.  … In the present case, I find Defendant’s so-called ‘belief’ was just ill-founded and equivalent to turning a blind eye to obvious suspicion. It, therefore, could hardly be said to be sincere or in good faith.”

23.  The appellant was then found guilty and convicted as charged.

The Amended Perfected Grounds of Appeal Against Conviction

24.  Mr Beel’s Amended Perfected Grounds of Appeal contain a number of grounds of appeal but only one in respect of which leave has been given and which the appellant intends to pursue.  It is that the judge failed to properly take into account the evidence of the appellant’s beliefs and perceptions so as to wrongly find that the appellant had reasonable grounds to believe that the property in question was the proceeds, in whole or in part, of an indictable offence and thereby the judge erred in law and or the conviction recorded against the appellant was unsafe or unsatisfactory.

25.  Mr Beel submitted that the judge did not disbelieve the appellant on the issue of his state of mind and only found that his belief was ill-founded.  He argued that the judge misdirected himself when he said:

“The highest court was not saying if a defendant was found to hold an honest belief, then he/she must be acquitted. That cannot be the right interpretation.”

26.  In determining the question of whether the appellant had reasonable grounds to believe the judge misdirected himself that the belief held by the appellant was not an over-riding or determinative ground and that anyone looking objectively at the grounds known to the appellant would have believed that the money was the proceeds of an indictable offence.  Having found that the circumstances of the deal were highly suspicious and called for the appellant to conduct due diligence, his failure to do so caused the judge to find that his belief that the money was legitimate was ill-founded.

27.  In respect of due diligence, Mr Beel submitted that the judge failed to see that a businessman would often not ask the question “why me”.  In reality, a businessman’s confidence often exceeds his ability and, as can be seen from the appellant’s messages to PW10, he was exuding confidence that he was up to the task.  It was further submitted that many of the matters to which the judge referred when discussing the appellant’s state of mind in fact went to show that the appellant believed that he was involved in a legitimate business deal. 

28.  Mr Beel submitted that a reading of the Reasons for Verdict clearly shows that the judge accepted the appellant’s claim as to his belief but found that it was not a belief that any reasonable person would hold.  Accordingly, paragraph 118 of the Court of Final Appeal’s judgment in HKSAR v Yeung Ka Sing Carson[4] should apply in the appellant’s favour.  At paragraph 118 of the Court of Final Appeal said:

“If, on the other hand, the evidence provided by the defendant as to what he perceived and believed is accepted as true or as evidence which may be true; and if true would be inconsistent with him having reasonable grounds to believe that the property in question represents the proceeds of crime, an acquittal is called for since an essential mens rea element cannot be established against the defendant.”

29.  At paragraph 119 of its judgment the court further explained:

“No difficulty arises if the defendant’s evidence provides a plausible explanation for his dealing with the property. But what if the situation where the defendant’s asserted perceptions or beliefs, even though believed, would strike others as excessively naïve or gullible or foolish in the light of objective facts known to the defendant which would have led others readily to believe that reasonable grounds existed to believe that the property was tainted? … The principle which requires the focus to remain on whether the defendant had the requisite reasonable grounds to believe dictates that even in such cases, the offence is not made out.”

The respondent’s submissions

30.  Ms Vinci Lam, Senior Assistant Director of Public Prosecutions, for the respondent, submitted that there was nothing in the appellant’s evidence that lent support to his belief that the property he dealt with was legitimate.  The defence case was really that the appellant was duped by PW10 and therefore he did not have any reasonable grounds to believe that the property in question represented the proceeds of crime. 

31.  Ms Lam argued that, notwithstanding the fact that the Yeung Ka Sing Carson judgment had not been released on 4 August 2015 when the appellant was convicted, the choice of words and the reference the judge made to HKSAR v Pang Hung Fai[5] in the Reasons for Verdict clearly showed that he had applied the test as propounded by the Court of Final Appeal in Pang Hung Fai, namely, that in order to convict, the jury had to find that the accused had grounds for believing; and there was the additional requirement that the grounds must be reasonable – that anyone looking at those grounds objectively would so believe.

32.  Regarding the appellant’s ‘perception’ and ‘belief’, Ms Lam submitted that the judge had considered them together.  In his Reasons for Verdict, the judge stated that the appellant’s belief:

“… is certainly a ground that must be considered but it is just one of the grounds. It is not to be deemed as an over-riding or all-decisive ground.”

33.  Based on his analysis of the highly suspicious nature of what the appellant was asked to do by PW10, the judge concluded that the appellant’s so-called ‘belief’ was ill-founded.

34.  Ms Lam argued that the judge had, in effect, rejected the appellant’s so-called ‘belief’ of the legitimacy of the matter and found him having deliberately turned a blind eye to the illegitimacy of it.  As there was nothing in the evidence which lent support to the appellant’s alleged belief, it was in fact no more than a groundless bare assertion.  This, she submitted, is even more apparent when regard is had to the following factors:

(a) the knowledge of the transaction was all coming from PW10, through email, Skype and SMS messages, with whom the appellant did not have any long term business relationship;

(b) the relatively more solid documentary proof, ie the alleged letter of credit PW10 had sent him contained mistakes;

(c) when the appellant asked about the inspection he was supposed to conduct, PW10 sidestepped the issue by saying that they should get the money first;

(d) the appellant was an educated businessman; and

(e) the huge and totally disproportionate reward the appellant / SIAT would receive and the unreasonably lucrative and highly suspicious nature of the matter.

35.  Ms Lam submitted that by weighing the above factors, it was only natural and reasonable for the judge to infer and conclude that the truth was that the appellant did not want to ask PW10 anything which would jeopardize the business[6] and that he knew that he or SIAT was chosen only because of the availability of SIAT’s account to receive the down payment and the money from the letter of credit[7].  The appellant was unreasonably content with the scarce information he had[8] and any belief in the legitimacy of the property that the appellant might have held was ill‑founded[9].  He was “turning a blind eye to the obvious suspicion.”[10]

36.  Ms Lam further submitted that the judge was plainly correct in finding that there were reasonable grounds for the appellant to believe that the property represented the proceeds of crime on which the conviction was found.  As the Court of Final Appeal stated in Yeung Ka Sing Carson[11]:

“ There may of course be instances where the defendant’s avowed beliefs are so far-fetched and bizarre that no one could be expected to regard the matters relied on as displacing the reasonable grounds which he obviously has for believing that the property stems from indictable offences. In such cases, the Court is likely to disbelieve the defendant rather than to find itself having to resolve a tension between his asserted beliefs and the proposition that, on the grounds available to him, he would reasonably have been led to believe that the property dealt with was tainted.”

37.  Ms Lam says the present case is such a case.

38.  Finally, Ms Lam submitted that in light of the foregoing, even with the benefit of the Yeung Ka Sing Carson judgment, the judge would have expressly rejected the appellant’s so-called ‘belief’ and gone on to convict him.  There was no miscarriage of justice in the appellant’s conviction.  In the event that this court finds that the judge misapplied the law, as it now is, in respect of an appellant’s beliefs and perceptions, Ms Lam submitted that this court should apply the proviso.

Discussion

39.  The only issue in this appeal is whether the judge correctly applied the law when determining the issue of whether the appellant had reasonable grounds to believe that the property in respect of which he conspired to deal “in whole or in part directly or indirectly represented the proceeds of an indictable offence.”

40.  As a result of the Court of Final Appeal decision in Yeung Ka Sing Carson the law is now settled on the mens rea element of the section 25(1) OSCO offence. 

41.  When a defendant gives evidence and testifies as to his perceptions and beliefs in respect of the property with which he dealt, or as here conspired to deal, the court is called upon to determine two issues, namely:

(i) does it accept that the defendant’s evidence is true or may be true; and

(ii) if it does so accept, would that evidence be inconsistent with the defendant having reasonable grounds to believe that the property in question represents the proceeds of crime?

42.  If both questions are answered in the affirmative then the defendant will be entitled to an acquittal.  The second question will almost inevitably be answered in the affirmative as the whole purpose of the defendant testifying will be to advance a defence which, if accepted, will secure his acquittal.

43.  Thus the primary focus of the court will be on the first question.  The judgments of the Court of Final Appeal, both in Pang Hung Fai and in Yeung Ka Sing Carson, make it clear that it is for the court to assess the claim made by a defendant as to his perceptions and beliefs and to decide what weight it should give to that claim.  

44.  In Pang Hung Fai, Spigelman NPJ, in giving a judgment with which the other members of the court agreed, emphasized that having regard to a defendant’s perceptions and beliefs did not mean that those perceptions or beliefs were “entitled to weight let alone determinative weight.”[12]  He went on to say at paragraph 85 of his judgment:

“85. When assessing the whole of the evidence, the judge or jury can give such weight to an accused’s belief, perception or prejudice as s/he believes is warranted. No doubt, in many cases, that decision maker will entirely discount such evidence of the accused. Nevertheless, they are ‘grounds’ which stand or fall by the test of reasonableness.”

45.  Thus, as with the testimony of any witness, it falls to the judge to determine whether what the defendant said is true or, where the witness is a defendant, might be true.  In performing this task the judge, again as with any witness, has regard to the inherent plausibility of the defendant’s testimony.

46.  The more reasonable a defendant’s testimony the more plausible it will be and the more plausible it is the more the court will be inclined to accept that it is or may be true.  In this way the reasonableness of a defendant’s claim as to his perceptions or beliefs is relevant to the court’s determination of whether the defendant’s evidence as to his perceptions and beliefs is true and that he did genuinely hold the perceptions or beliefs that he claims he held.

47.  However, what the court cannot do is require that the defendant’s perceptions or belief be reasonably held in addition to being genuinely held.  This was made clear by the Court of Appeal in Yeung Ka Sing Carson at paragraph 119 of its judgment which is quoted earlier in this judgment at paragraph 29.

48.  The issue in the present appeal is whether the judge used reasonableness in the permissible way as a means of assessing the plausibility of the appellant’s evidence en route to determining whether it was or might be true, or whether he used it in the impermissible way of requiring that his asserted beliefs be not only genuinely held but also be reasonably held. 

49.  The starting point to answering this question is to ascertain the positions adopted by the parties at trial for this provides part of the context for the judge’s subsequent comments on the position that he adopted.  At paragraph 115(b) of his Reasons for Verdict the judge set out the submission of Mr Beel and contrasted it with that of the prosecution.  He said:

“In court, Counsel says even if Defendant just honestly (but not reasonably) believed the money was from a legitimate source, that would suffice as a defence to the substantive offence of money laundering as well as to conspiracy to launder money. (Prosecutor disagrees. He says it is only a valid consideration for either offence if Defendant was honest and reasonable in holding his belief of the source of the money as legitimate).”

50.  This would suggest that Mr Beel was urging upon the judge a correct statement of the law whilst the prosecutor was inviting the judge to apply the law in an incorrect manner.

51.  The judge then went on to analyse the evidence and make findings in respect of it which then formed the factual foundation for his determination of whether the appellant had reasonable grounds to believe.  In summary these findings were:

(i) PW10 was Daniel/coolsaintt/saint cool.  Although it was not clear that PW10 was part of the gang carrying out the fraud it was an irresistible inference that he knew a fraud was going on;[13]

(ii) the appellant was involved in the business to which Tam testified and genuinely wanted to set up an office in Hong Kong and had been previously engaged in confirming-house business;[14]

(iii) it is apparent from the Skype and email communication between the appellant and PW10 that the appellant, in response to PW10’s request, had offered him different accounts in different places for reward.  In these discussions PW10 and the appellant were talking about money conduit or moving money for reward.  They reached an agreement for the appellant to use his SIAT account to receive the down payment and the letter of credit money as the named beneficiary of the contract and the letter of credit;[15]

(iv) SIAT was not a letter of credit specialist and it made no sense to engage SIAT to execute the letter of credit and pay it 12% of the contract sum to do so.  This prompted the judge to conclude at paragraph 182 of his Reasons for Verdict:

“I am sure it was only because Defendant could offer SIAT’s account as available for coolsaintt’s side to use that account to receive money for conduit. That was the reason (and the only reason) why SIAT was named as beneficiary on the Contract and the L/C. I am sure Defendant was aware of such reason.”

(v) the appellant was not a member of the fraud gang;[16]

(vi) the appellant cannot be held to know the US$539,375 represented the proceeds of an indictable offence;[17]

(vii) there was no reason why the appellant should not ask PW10 why he was choosing SIAT to help with the execution of the letter of credit.  The appellant’s explanation for why he did not do so was rejected and the truth was that the appellant did not want to ask coolsaintt anything which would jeopardize their business.  The judge repeated his finding as to the appellant’s knowledge, saying at paragraph 197 of his Reasons for Verdict:

“I am sure Defendant knew he/SIAT was chosen only because of the availability of SIAT’s account to receive the down payment and the L/C money. To get the latter sum, Defendant would have to execute the L/C.”

52.  Against this factual background the judge then addressed the appellant’s asserted belief in the legitimacy of the monies.  His comments in paragraphs 202 and 203 of his Reasons for Verdict are quoted earlier in this judgment at paragraphs 19 and 20.

53.  The judge then turned to discuss a number of legal issues in the case and in doing so returned to the reasonable grounds to believe form of mens rea for this offence.  This legal discussion of reasonable grounds to believe took place under the heading “Honest and Reasonable Belief”.  The judge said:

“Honest and Reasonable Belief

220. Defence Counsel submits that Defendant honestly and reasonably believed the money was legitimate. Therefore, Defendant cannot be found guilty of laundering the money or conspiring with others to do so. Counsel says even if Defendant’s belief was not reasonable due to lack of due diligence, merely an honest belief would be a defence to both the substantive charge and the alleged conspiracy.

221.   Prosecutor disagrees. He says only an honest and reasonable belief can be considered as a valid ground. A mere honest view cannot be sufficient. Prosecutor contends that Defendant was neither honest nor reasonable in his belief.”

54.  The judge then referred to passages relied on by Mr Beel in the cases HKSAR v Yan Suiling[18]and Karmara v DPP[19].

55.  In respect of the comments relied on the Yan Suiling case the judge said:

“223. In that expression in Yan Suiling, the highest court was deciding whether the trial judge was unreasonable not to accept that defendant’s belief. That was clearly a matter of fact finding. The highest court was not saying if a defendant was found to hold an honest belief, then he/she must be acquitted. That cannot be the right interpretation. Otherwise, the test propounded in Pang Hung Fai (FACC 8/2013) would be watered down to a purely subjective test. The approved test on ‘having reasonable grounds to believe’ is that the jury should consider such grounds the accused had for believing and that anyone looking at those grounds objectively would believe the property represented proceeds of an indictable offence. An alternative interpretation is whether the accused ought to have known the property represented proceeds of an indictable offence.

224.   The accused’s belief is certainly a ground that must be considered but it is just one of the grounds. It is not to be deemed as an over-riding or all-decisive ground. Justice Spigelman NPJ in Pang Hung Fai had this to say, ‘That does not mean that any such ‘perception or evaluation’, to use the words of the ground of appeal, is entitled to weight, let alone determinative weight.’  (Para 83 of the judgment.)”

56.  The judge then went on to apply these legal principles to the appellant’s asserted beliefs saying:

“226. In the present case, Defendant pleads he had a sincere belief of the nature of the fertilizer deal and thus the source of the money and the L/C.

227. As said in para. 202, Defendant’s so-called ‘belief’ was ill-founded. It was no more than a thought casually held as a result of lack of due diligence enquiry, which enquiry a person in Defendant’s position and with his capability ought to have made and could have made. Defendant in the circumstance ought to have come to alert as early as coolsaintt offered him the 12% reward. It was unreasonably lucrative and highly suspicious. Defendant ought to have known there was something highly irregular in the deal and, therefore, he ought to have known the USD539,375 represented in whole or in part, directly or indirectly the proceeds of an indictable offence.

228. … In the present case, I find Defendant’s so-called ‘belief’ was just ill-founded and equivalent to turning a blind eye to obvious suspicion. It, therefore, could hardly be said to be sincere or in good faith.”

57.  In our view there is no doubt that between the two competing views advanced by Mr Beel and the prosecutor the judge chose that advanced by the latter.  He required that any genuinely held belief by a defendant must also be reasonably held.  This is wrong.  The correct approach, as we have explained, is to use those facts that suggest that no reasonable person would believe in the legitimacy of this transaction as part of his assessment of the credibility of the appellant’s claim that he in fact genuinely held beliefs about the legitimacy of the transaction.

58.  Having misdirected himself on the correct way to determine whether the appellant had the requisite mens rea under the reasonable grounds to believe element of the offence, we are satisfied that there has been a wrong decision on a question of law which, subject to one other matter, would have led us to quashing the conviction.

59.  Notwithstanding that the judge misapplied the law did he nevertheless reach a concluded view on whether the appellant did truly hold the belief that he claimed?  If he did reach such a view and if it was a view that the appellant did not truly hold the belief he claimed, did the judge reach that concluded view by a permissible use of the reasonableness of such a belief in the circumstances of this case?

60.  Answering these questions requires an examination of what the judge said in respect of the appellant’s beliefs.  At paragraph 182 he said:

“I am sure it was only because Defendant could offer SIAT’s account as available for coolsaintt’s side to use that account to receive money for conduit. That was the reason (and the only reason) why SIAT was named as beneficiary on the Contract and the L/C. I am sure Defendant was aware of such reason.”

He made the same point at paragraph 197 where he said:

“I am sure Defendant knew he/SIAT was chosen only because of the availability of SIAT’s account to receive the down payment and the L/C money. To get the latter sum, Defendant would have to execute the L/C.”

61.  At various times in his Reasons for Verdict the judge commented on the appellant turning a blind eye to the obvious.  At paragraph 202 he said:     

“He chose not to perform any due diligence enquiry. He was unreasonably contented with the scarce information he had of the highly suspicious deal coolsaintt brought him. His belief that the money was legitimate was, therefore, ill-founded.” (Emphasis added.)

And at paragraph 203 he said:

“I am sure anyone looking objectively at the grounds Defendant had would believe differently from Defendant, who was in fact turning a blind eye to a highly questionable situation which he must have so appreciated.” (Emphasis added.)

And at paragraph 211:

“… Defendant in the circumstance as he was aware ought to have known the money he was asked to deal with represented proceeds of an indictable crime.”

62.  Regard should also be had to paragraph 227, which is quoted above, after which the judge finally concluded in paragraph 228:

“In the present case, I find Defendant’s so-called ‘belief’ was just ill-founded and equivalent to turning a blind eye to obvious suspicion. It, therefore, could hardly be said to be sincere or in good faith.”

63.  By his repeated use of the word “ill-founded” the judge is saying there is no basis for the belief. This is consistent with, and indeed naturally flows from, his earlier finding that the appellant knew he was only being engaged by PW10 because he was willing to make SIAT’s bank account available to receive deposits of money.  The judge’s repeated use of the phrase “turning a blind eye” is a conclusion that the appellant was aware of the reality of the situation but chose to ignore it.  Finally, the judge’s finding that the appellant’s belief was not sincere or in good faith is a finding that it was not truly held.

64.  In our view it is quite clear that the judge did not believe the appellant’s testimony and did not accept his claim that he held a genuine belief in the legitimacy of this transaction.  It is also clear that although he relied upon the surrounding circumstances to form a view of the reasonableness of the appellant’s belief that was done as part of the process of determining the plausibility of his evidence in the process of reaching a concluded view in respect of the truthfulness of his testimony.

65.  It follows from what we have said that notwithstanding that the judge erred by not applying the correct law to his assessment of how the appellant’s claim as to the beliefs he held impacted upon proof that he had the mens rea of reasonable grounds to believe, the appeal must be dismissed.  This is because, by a perfectly proper route, the judge reached a concluded view that the appellant’s claim as to his beliefs was not truthful. Having properly rejected that claim the judge correctly applied the Pang Hung Fai law in finding that the mens rea element of the offence had been proved beyond reasonable doubt.  

Conclusion

66.  For these reasons we dismiss the appeal.

[1] By McWalters JA

[2] AB 34Q – 35B

[3] (2012) 15 HKCFAR 146

[4] (2016) 19 HKCFAR 279

[5] (2014) 17 HKCFAR 778

[6] AB 80N – P

[7] AB 80Q – S

[8] AB 82D – F

[9] AB 82E – F

[10] AB 90O – Q

[11] (2016) 19 HKCFAR 279, paragraph 120.

[12] (2014) 17 HKCFAR 778 at 805, paragraph 83.

[13] Reasons for Verdict, paragraphs 120 and 123.

[14] Reasons for Verdict, paragraph 125. 

[15] Reasons for Verdict, paragraph 180. 

[16] Reasons for Verdict, paragraph 189. 

[17] Reasons for Verdict, paragraph 191. 

[18] (2012) 15 HKCFAR 146

[19] [1974] AC 104 at 119H