HKSAR v. NG YUET FEI AND ANOTHER

CACC 294/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 294 OF 2012

(ON APPEAL FROM DCCC NO. 1381 OF 2011)

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REASONS FOR JUDGMENT

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Hon McWalters J (giving the reasons for judgment of the court):

Introduction

1.  The applicants were tried in the District Court before District Judge Browne on a charge sheet containing six counts.  On the first count the 1^st applicant was charged with dealing with property known or reasonably 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.  The 2^nd applicant was charged with a similar offence in the second count of the charge sheet.  Both applicants were jointly charged with another money laundering offence in the third count of the charge sheet and in the fourth to sixth counts of the charge sheet both applicants were jointly charged with three separate offences of managing a vice establishment, contrary to section 139(1)(b) of the Crimes Ordinance, Cap 200.  Each of these vice offences referred to different premises.

2.  On 20 July 2012 both applicants were convicted of all the offences with which they had been charged.  On the same day they were sentenced to a total sentence of 4 years and 6 months’ imprisonment.  These sentences were composed of sentences of 3 years 6 months’ imprisonment in respect of counts 1 and 2 on the charge sheet and a sentence of 4 years and 6 months’ imprisonment for count 3. These sentences were ordered to be served concurrently and therefore each applicant was sentenced on the money laundering charges that they each faced to a total sentence of 4 years and 6 months’ imprisonment.  In respect of the managing vice establishment offences each applicant was sentenced to concurrent sentences of 12 months’ imprisonment on each of count 4 to 6.  The judge further ordered that the sentences for these counts should also be ordered to be served concurrently within the sentences on counts 1 to 3.  As a consequence of these orders the total period of imprisonment to which each applicant was sentenced for all the offences was 4 years and 6 months.

3.  Both applicants appealed their convictions and their sentences but on 19 April 2013 the 2^nd applicant filed a notice of abandonment in respect of her application for leave to appeal her sentence and on 22 April 2013 the 1^st applicant likewise filed a notice of abandonment in respect of his application for leave to appeal his sentence.  As a consequence their appeals against sentence were then marked dismissed.  However, both applicants subsequently filed applications to reinstate their appeals against sentence on charges 1 and 3 for the 1^st applicant and charges 2 and 3 for the 2^nd applicant which were the sentences for the offences of dealing with the proceeds of an indictable offence.  In effect the applicants were applying for this Court to treat their abandonments as nullities.

4.  We granted the application to treat the abandonments as nullities but dismissed the applications by both applicants for leave to appeal their convictions for all offences and their sentences for the money laundering offences.  Furthermore, we ordered that the applicants pay the respondent’s costs of the appeal.  We said we would given our reasons for the orders we made in this appeal and this we now do.

The Charges

5.  The first money laundering charge was count 1 on the charge sheet and it was against the 1^st applicant only.  It covered the period from 1 January 2004 until 4 June 2011 and related to a sum of $4,107,353.77.

6.  The second charge which was against the 2^nd applicant only concerned the laundering of an amount of $6,587,805.87 between 1 January 2004 and 3 May 2011.

7.  The third charge, the final money laundering charge, was against both applicants and covered the period from 29 April 2010 to 18 June 2011 and related to a sum of $10,123,609.04.

8.  The vice offences, counts 4 to 6, covered periods of 4 November 2010 to 14 September 2011, 4 May 2011 to 14 September 2011 and 12 August 2011 to 14 September 2011 respectively.  The three premises were located at 2/F, No. 168 Shau Kei Wan Road (count 4), Flats A and B, 1/F, Fu On Building, Nos. 1-3 Shing On Street, Shau Kei Wan (count 5), and Shop No. 1, 1/F Coronet Court, Nos. 321-333 King’s Road, North Point (count 6).

The Trial

9.  The prosecution case, in a nutshell, was that the applicants, who were co-habitees, were the managers of vice establishments located in three different premises and that the monies the subject of the money laundering offences were the profits from these illegal enterprises.

10.  In proof of the vice offence charges the police conducted an undercover operation in respect of each of the three premises.  Undercover officers visited the premises on 14 September 2011 and each officer was offered sexual services by a Mainland prostitute.  Over a period of time a total of seventy seven Mainland prostitutes were arrested, sixteen on the day of the raid alone.

11.  There was no doubt that these premises were being used for the provision of prostitution services and this was not disputed at trial.  What was disputed at trial was whether these premises were vice establishments, as opposed to lawful one-woman brothels, and even if this was so whether they were being managed by the applicants.

The evidence of the vice offences

12.  Once the police operation was turned overt the three premises the subject of charges 4 to 6 were searched by police officers.  During their search they seized a number of video recordings made by the closed circuit television cameras (“CCTV”) that were installed in each of the premises.  They also found in the premises a substantial number of condoms, all of which were of the same brand.  Many tubes of lubricants were also recovered.  In respect of two of the premises the police also encountered what were described, somewhat coyly, as “working dresses” which were garments and lingerie of a sexually alluring nature.

13.  Each of the premises was sub-divided into self-contained rooms with en-suite bathrooms.  The premises the subject of count 4 had ten rooms, the premises for count 5 had seven rooms and the premises for count 6 had three rooms.  Each room had its own doorbell and inside of each room there were condoms of the same brand and lubricant jelly.  Each of the rooms was equipped with a CCTV screen providing video images of the corridor outside the rooms and these screens were connected to video recording equipment housed in a separate control room at each of the premises.

14.  What linked the applicants to these premises was the fact that they owned two of them and that they were observed from time to time to be present in each of them.

15.  The premises they owned were those which were the subject of counts 4 and 6.  The property the subject of charge 4 was owned by the applicants jointly.  One of the companies they owned was a company by the name of China Genius Investments Limited (“CGIL”) and it owned the premises the subject of charge 6.  The only property they did not own was the premises the subject of charge 5.  In respect of the property the subject of charge 5 the police found a notebook at these premises and page 3 of this notebook bore the right thumbprint of the 1^st applicant.  Furthermore the evidence revealed that the electricity accounts of these premises were in the 1^st applicant’s name.

16.  The presence of both applicants in each of the premises on a number of different occasions and their conduct within the premises was proven by the CCTV footage which captured their images when they attended the premises.  In conducting themselves in what can only be described as a proprietorial way, they were seen to enter the individual rooms where sexual services were provided, to enter a storeroom at the count 4 premises and an unnamed room at the count 6 premises.  They carried items to and from the rooms, obtained items from the control room which they gave to the prostitutes, including a two-piece set of underwear, dealt with the laundry, handed out items of clothing, disposed of the garbage and swept the floors of the premises.  It was the prosecution case that their actions provided strong evidence that they were managing these premises.

The evidence of the money laundering offences

17.  The police discovered that there were nineteen bank accounts operated by both applicants either in their own names or by companies controlled by them.  Of the nineteen bank accounts, three belonged to the 1^st applicant, five to the 2^nd applicant and eleven were held jointly by them or companies controlled by them.  It was not disputed that during the relevant period $17.7 million was deposited by way of cash into these accounts.  Many of the payments into the accounts were small cash amounts of $3,000 that were deposited at ATMs.  It was an admitted fact that up to thirty notes can be deposited in this way at any one time and on many occasions there were several such deposits made on the same day.

18.  The flow of funds through the various bank accounts was proven by bankers’ affirmations and the information in these affirmations was reduced to a number of schedules that were part of the Admitted Facts.  These schedules were described by the judge in his Reasons for Verdict as follows:

“55. Schedule 2 shows that the total monthly cash deposits into D1’s three bank accounts increased from approximately HKD20,000 before August 2009 to HKD75,400 in August 2009 and as much as HKD270,000 in April 2010.

56. Schedule 3 shows that the total monthly cash deposits into D2’s five bank accounts increased from less than HKD10,000 before September 2005 to HKD397,800 in January 2010.

57. Schedule 4 shows that the total monthly cash deposits of D1 and D2 into the eleven joint bank accounts ranged from HKD48,500 to HKD1,722,220 during the fifteen month period that the joint accounts were opened, making an average cash deposit of HKD639,350 per month.”

These schedules showed a dramatically large gap between the rent from the properties, the only known legitimate sources of the applicants’ incomes, and the deposits into the bank accounts.

19.  The admitted facts revealed the extent of the properties owned or controlled by the two applicants.  There were eight in total.  The 1^st applicant did not own any property in his own right.  He owned two properties jointly with the 2^nd applicant, the premises the subject of the fourth charge and a property (property No. 4) located at Tsuen Wan.  In addition the 2^nd applicant owned properties at Yuen Long and Reclamation Street, Kowloon.  Other properties in which the two applicants had an interest were properties owned through their company, CGIL.  These were the sixth count premises and properties at Sai Wan Ho Street, Shanghai Street Kowloon and the Imperial Cullinan Kowloon.  Their property portfolio was as follows:

Property     No.	Address of Property	Date of Purchase	Owner of Property	Rental Income [1]
1	50 Ma Tin Road, Yuen Long	November 2005	The 2nd applicant	$7,000 - $8,000
2	215 Reclamation Street, Kowloon	April 2006	The 2nd applicant	$15,000
3	2/F, 168 Shau Kei Wan Road (the premises the subject of the 4th count)	December 2009	The two applicants jointly	$90,000
4	Cheuk Ming Building, 22-26 Chuen Lung Street, Tsuen Wan	September 2010	The two applicants jointly	$27,000
5	76 Sai Wan Ho Street	February 2011	CGIL	$15,000
6	Shop No. 1, 1/F Coronet Court, Nos. 321-333 King’s Road, North Point (the premises the subject of the 6th count)	November 2010	CGIL	$24,000
7	434 Shanghai Street, Kowloon	April 2011	CGIL	$16,000
8	Imperial Cullinan, Kowloon	July 2011	CGIL	Nil

20.  It was proven that the 1^st applicant had not filed any tax return with the Inland Revenue Department for the years 2004/5 and 2008/9.  For the financial year 2009/10 his declared income was $180,000 as a leasing officer at a company called Chun Sum Property Development Limited.  The 1^st applicant declared that there was no rental income derived from the Tsuen Wan property jointly owned by he and the 2^nd applicant.  For the financial year 2010/11 the 1^st applicant declared a rental income of $22,000 being half the monthly rental in respect of the Tsuen Wan property owned by him and the 2^nd applicant.  The total annual income declared between 2004/2011 was therefore $202,000.  On 10 April 2010 and 20 May 2011 the 1^st applicant declared that Property 3 was not rented out.  This was contradicted by what the 1^st applicant said in his video record of interview.

21.  The 2^nd applicant did not file a tax return between the years 2004 and 2009.  For the financial year 2009/10 her declared income was $108,000 which she claimed was earned by her as an administrative assistant at Chun Sum.  She declared that the property jointly owned by her and the 1^st applicant which was the subject of charge 4, was not rented out during the financial years 2009 to 2011.  For the financial year 2010/11 the 2^nd applicant, like the 1^st applicant, declared an income of $22,000 for the property in Tsuen Wan.  The total declared income, therefore, for the 2^nd applicant between 2004 and 2011 was $130,000.

22.  In their interviews with the police, the 1^st applicant gave exculpatory explanations whilst the 2^nd applicant exercised her right to remain silent. As neither applicant gave evidence at trial the defence case was the evidence of the 1^st applicant that was contained in his video record of interview.

The 1^st applicant’s record of interview

23.  In his video recorded interview the 1^st applicant sought to explain the source of the funds in his personal bank accounts and his joint bank account with the 2^nd applicant.  He said that his income in the seven years from 2004 was derived from five sources.  They were:

(i) his business as a contractor engaged in renovation work;

(ii) his salary as a director of a company called Wise Success Engineering Limited;

(iii) his rental income from property he owned;

(iv) profits from investment in the stock market; and

(v) profits from investment in real property.

24.  The 1^st applicant claimed that his monthly income from his renovation business ranged from several hundred thousand to $1,000,000 a month over the previous seven years.  He said he did not have any records of his business and that he had not declared his total income to the Inland Revenue Department because he thought that he was only required to declare income paid to him by a company but not from other sources.  The 1^st applicant claimed that he did not know he had to declare this income and he was unable to recall any work, not even work he did as recently as the week previously.  He employed one staff, a Mr Wong, who handled all work for him and whom he paid in cash. He could not remember Mr Wong’s full name.

25.  The total monthly rental income, as stated by the 1^st applicant in his record of interview, that could be derived from the seven properties would have varied from $8,000 per month, starting in November 2005 when only one property was owned, to a $195,000 from April 2011 to the present when they held seven properties.

26.  In respect of his share portfolio he was unable to remember any details of the shares that he held.

27.  In respect of his contention in his video record of interview that part of his income was investment in real property, he was unable to produce any documentation in support of his claim, and referred to only one property, the one he was living in at the time of his arrest, as an example of his real estate investment activity.

The Reasons for Verdict

28.  In a commendably succinct and focused set of Reasons for Verdict the District Judge commenced by summarising the case, setting out the directions on law that were relevant to his determination of guilt or innocence and then embarking upon an evaluation of the evidence.

29.  He had no difficulty in coming to the finding that the women working at the premises were working as prostitutes.  In determining whether these premises were being managed by the applicants he noted that they were self-contained rooms and that when the applicants attended the premises there was no evidence of any vice activities taking place at that time.  The transactions between the prostitutes and their clients were handled directly by each prostitute with each client and there was no evidence of shared earnings between the prostitutes. However, there was the evidence that the main doors to each of the premises were kept open.  These premises were, of course, in respect of charges 4 and 6, owned by the applicants.  In respect of the premises the subject of charge 5 the link to the applicants was the presence of the 1^st applicant’s fingerprint on a notebook recovered from these premises.

30.  However, what was clearly of significance to the District Judge was the activities of the applicants at these premises as observed from the CCTV recordings made at the premises on different occasions that the applicants attended them. These were summarised by the District Judge as follows:

“68. CCTV video recordings made at the three premises on various dates in August and September shows visits by D1 and D2 to each of the three premises. Not only do they assume responsibilities for such matters as cleaning the corridors, rubbish disposal and laundry collection, they go into the various rooms and interact with the scantily dressed women inside the rooms. On a number of occasions they are seen to hand underwear and other items to the women. Boxes of condoms and sets of underwear are found in storerooms. I took into account the layout of the three premises and the contents of the rooms. I considered the photographs produced – exhibit 274.”

31.  Unsurprisingly, the District Judge found that the two applicants knew that the three premises were being used for the purposes of prostitution.  He further concluded that the irresistible inference was that the three premises the subject of charges 4 to 6 were being run as a group operation and were vice establishments.  He had no doubt that the two applicants were managing these establishments.

32.  In respect of the money laundering offences a conviction was inevitable once the judge concluded that the applicants were managing these vice establishments. The evidence that was adduced to prove the money laundering offences was essentially not contested.  The explanations in the record of interview of the 1^st applicant were clearly unbelievable and could not credibly account for the huge sums passing through the accounts that he and the 2^nd applicant operated.  The failure by him to provide any accurate information to the Inland Revenue Department in his income tax returns was also telling.

The Grounds of Appeal

33.  There are only three grounds of appeal.  The first two grounds attack the convictions for charges 4 to 6, that is the charges of managing vice establishments.

34.  The first ground of appeal complains that the judge wrongly found that the premises were vice establishments as opposed to one‑woman brothels.

35.  The second ground of appeal complains that the judge erred in finding the applicants were managing these premises even if they could properly be found to be vice establishments.

36.  The third ground of appeal presupposes success on either the first or second ground of appeal and is simply to the effect that the judge erred in finding that the bank deposits were the proceeds of an indictable offence.

37.  These convictions, it is claimed, fall away once the convictions for the managing vice establishments are found to have been improperly entered.

38.  There is also a ground of appeal against sentence.  However, as mentioned earlier, the applicants abandoned their appeals against sentence but now they both apply to treat their abandonments as nullities insofar as they concern charges 1 to 3.  The ground of appeal filed in respect of the sentences for the money laundering offences asserts that the sentences for these offences should have been no greater than the sentences for the managing of vice establishments offences.

Discussion

39.  The grounds of appeal essentially raise two issues only.  The first is whether the judge erred in finding that, on the evidence presented to him, the three different premises could be said, as a matter of law, to be vice establishments.

40.  The second issue is whether the judge erred by finding on the evidence, that the applicants managed the vice establishments.  These issues, on the facts of the case, are very much interconnected.  It was being alleged that these premises were set up to be brothels and both applicants were actively managing them as such.  Evidence of their activity in managing these establishments was also evidence that was relevant to proving that the premises were in law vice establishments.  The fact that they were actively involved in assisting the women carry out their business contradicted the superficial appearance of the women acting as one-woman brothels.

Were the premises vice establishments?

41.  In support of this ground of appeal Mr Davies argued that the premises were being used by women, acting individually, to separately and independently provide prostitution services.  The premises were not, therefore, vice establishments for the purposes of the Crimes Ordinance, Cap 200.  Here Mr Davies was referring to the provision in section 117 of the Crimes Ordinance which says that premises shall not be treated as vice establishments unless:

“(a) the premises … is used wholly or mainly by 2 or more persons for the purposes of prostitution; or

(b) the premises … is used wholly or mainly for or in connection with the organizing or arranging of prostitution.”

42.  Mr Davies argued that the rooms at each of the three premises should be regarded as separate, individual one-woman brothels rather than each premises being regarded as a vice establishment.  He relies upon the following passage from Strath v Foxon [1995] 3 WLR 659 at page 663:

“In view of these authorities it is clear that premises cannot be regarded as a brothel if they are used by one woman only. The only question, therefore, is whether the two flats in question were separate premises. Each of these cases must depend on its own facts, and it might well be that in some cases the evidence would be such that the court would find that the arrangements made were a subterfuge to avoid the consequences of section 13.”

43.  Two things are clear from this passage.  The first is that the issue is an issue of fact to be resolved by a consideration in each case of the totality of the evidence.  The second is that a court is not bound to accept a factual circumstance at face value but by a scrutiny of all of the evidence determine the reality of a particular premises.  These points were emphasised by Sacks J in his judgment in Donovan v Gavin [1965] 2 QB 648, another judgment on which Mr Davies relies.

44.  Against the backdrop of these legal principles Mr Davies argues that there is no basis for concluding that the subdivision of the premises into separate units with their own ensuite bathrooms, and with each resident having their own access to their particular unit, was just a subterfuge to disguise what was really taking place, namely the operation of a brothel.  He said there was no evidence to show that the women who occupied these rooms were not acting independently in receiving clients and no evidence that the applicants were receiving any share of the profits being earned by the women.

45.  What was being alleged here was that the applicants were not passive landlords who were ignorant of what was taking place in their premises or even knowing of the women’s activities simply acquiesced in what was happening.  Rather, they were the owners of brothels and were actively involved in the operations of them.

46.  The applicants owned two of the three premises, they subdivided them into rooms with ensuite bathrooms and installed at each premises a CCTV system which could monitor the staircases of the buildings and the corridors of the premises.  The CCTV equipment was stored in a separate room at each premises and items needed for the provision of sexual services were stored in these rooms.  These items included condoms, lubricant jelly and transparent lingerie. From this evidence it can be inferred that the landlord was not letting individual rooms to women who all, coincidentally, were prostitutes, but rather that the landlord had deliberately set up the premises to be run as a brothel. This fact alone distinguishes this case from the facts of Strath v Foxon where the trial magistrate concluded that the evidence before him revealed a landlord involved in separate lettings.  But the evidence does not stop there.

47.  Here, there was also evidence that the applicants regularly attended the premises and kept them stocked with the items, mentioned above, needed for the operation of a brothel.  They were also seen to be taking these items from the storerooms and entering the different rooms with them.  Their interactions with their ‘tenants’ was again something which went far beyond what could be regarded as normal for a landlord.

48.  If it was open to the judge to find on this evidence that the applicants were operating a brothel then it does not matter to what lengths they went in order to disguise that fact; all their actions to that end will not avail them and their actions will be regarded as nothing more than a subterfuge.

49.  Here, there was ample evidence to entitle the judge to regard the premises the subject of charges 4 - 6 as vice establishments as opposed to one-woman brothels.  Here it would be quite unrealistic to regard what the applicants were doing as simply landlords renting out rooms to women as individual tenants.  The fact that the applicants were not seen at the premises when the women were engaged in vice activities is of little moment when it is clear that they knew what was taking place and were actively assisting the women.  The only reasonable inference is that they created a premises that could be used for the provision of vice services, stocked them with prostitutes and then managed the premises as vice establishments.  There is no merit in this ground of appeal.

Were the applicants managing the vice establishments?

50.  As we have said the evidence for the first two grounds of appeal overlap and for the same reasons that there is no merit in the first ground of appeal there is likewise no merit in the second ground of appeal.  The only issue before this Court is whether any of the findings of fact made by the judge were plainly wrong in that they were not findings reasonably open to him to make on the evidence before him.  Here, not only were the findings clearly open to the judge, it would have been surprising if he had not made them.

51.  The judge, after considering the evidence, found that the women tenanting the rooms were prostitutes and that the applicants knew that the three premises were being used for the purpose of prostitution.  As already mentioned the conduct of the applicants went far beyond mere acquiescence in the use of their premises for the purposes of prostitution.  By their conduct the applicants showed themselves to be actively involved in assisting the women to carry on their business.

52.  But in addition to this evidence there was also the evidence of the bank accounts.  This evidence was not just relevant to the money laundering offences but also to the vice offences for here the prosecution case was that the monies being laundered were the applicants’ profits from managing the vice establishments.

53.  What the bank account records revealed were essentially two things.  The first was that the applicants were in receipt of a very substantial income that bore no relation to what they had declared to the Inland Revenue Commissioner. The second thing the bank records proved was that the applicants were depositing significant amounts of monies, in multiple small deposits, through ATM machines.  As the admitted facts revealed that a depositor may only deposit thirty notes at a time in each ATM deposit transaction and as the deposits were often only $3,000 the applicants were frequently depositing $100 notes.

54.  The inferences that can be drawn from these facts are:

(i) the applicants were in receipt of a substantial income;

(ii) the applicants did not wish to reveal this income or its source to the Inland Revenue Commissioner; and

(iii) the income being generated was in the form of cash and frequently in small denomination notes.

55.  These inferences are strongly probative of the allegations that the applicants were deriving income from the operation of these three vice establishments and laundering these profits through the banking system.

56.  After reviewing the evidence the judge said:

“Taking into account the totality of the evidence, I was irresistibly drawn to the conclusion that the three premises the subject of charges 4 to 6 were run as group operations and were vice establishments. I also had no doubt that both D1 and D2 were managing such establishments.”

57.  We can find no error by the judge in his analysis of the evidence, findings that he made or conclusions that he reached.  We, therefore, find no merit in the first and second grounds of appeal which seek to overturn the convictions for the vice establishment offences.

The third ground of appeal

58.  The third round of appeal, which challenges the convictions for the money laundering offences, can only succeed if the first and second grounds of appeal succeed.  If those grounds fail the applicants accept that the third ground must also fail.  The first two grounds having failed we find no merit in the third ground of appeal.

59.  We, therefore, dismissed the applications by both applicants for leave to appeal their convictions in respect of all offences.

The Appeals Against Sentence

60.  In support of the application by both applicants to treat the abandonment of their applications to appeal against sentence as nullities each applicant filed an affirmation.  Both affirmations were to the same effect, namely that the written signed instructions they gave to their solicitors was that they only intended to abandon their sentence appeals in respect of the sentences for the vice offences.  Copies, with translations, of their signed instructions were exhibited to their affirmations and the instructions supported their contentions.  When they each signed the respective Notices of Abandonment they both believed that the Notices faithfully implemented their instructions and were confined solely to their applications for leave to appeal the sentences imposed for their vice establishment convictions.

61.  The respondent, quite properly, did not oppose the applications and, in these circumstances, it being clear that the applicants’ minds did not go with their acts of abandonment, this Court ordered that their Notices of Abandonment be treated as nullities.

62.  As previously mentioned both applicants were convicted of three vice establishment offences and two money laundering offences.  They received sentences of 12 months’ imprisonment for the vice offences, 3 years 6 months for one of the money laundering offences and 4 years 6 months for the other money laundering offence.  All sentences were ordered to be served concurrently and so the total sentence was simply the length of the longest sentence, namely the longer of the two money laundering sentences.  The difference in length of sentence for the two money laundering offences is explained by the difference in amounts of money being laundered.  Charge 1 (the 1^st applicant) involved $4,107,353.77 and charge 2 (the 2^nd applicant) involved $6,587,805.87; but charge 3 (both applicants) involved $10,123,609.04.

63.  The ground of appeal in respect of the money laundering offences complains that the terms of imprisonment for these offences should not be significantly greater than the terms imposed for the managing vice establishment offences.  The applicants argue that they did not attempt to conceal the funds or launder the funds and their money laundering activities amounted to nothing more than depositing monies they obtained from renting out rooms to prostitutes.  He relies for support upon the decision of this Court in HKSAR v Chan Kim Chung Nelson [2012] 2 HKLRD 263.

64.  In that case this Court deprecated the over-use by prosecutors of the money laundering offence when in reality it added nothing in revealing the culpability of the defendant’s conduct.  In that case the applicant had been convicted both of blackmail and laundering the proceeds of the blackmail offence once the monies had been paid by the victim.  The court said that unless the money laundering conduct added to the defendant’s overall culpability it would not need to have before it a money laundering charge in order to be able to punish appropriately the defendant’s conduct.

65.  Underlying the court’s comments was the concern that when an unnecessary money laundering offence is before the court, there is a risk that, in arriving at an appropriate punishment for the defendant, the sentencing judge may inadvertently punish the defendant twice for the same conduct.  However, although the fact that a money laundering offence has been laid, has been separately punished by the trial judge and that the sentence for the money laundering offence has been made consecutive to the sentence for the predicate offence may raise the concern of double punishment, it does not necessarily follow that double punishment has taken place.  When looking at what has transpired in the trial court, the Court of Appeal will come to its own assessment of the culpability of the offender and in the light of that assessment determine whether the punishment is appropriate.  If it is manifestly excessive then that may or may not be because double punishment has occurred.

66.  Here the applicants were engaged in substantial vice activities whose scale is evidenced, in part, by the size of the profits they generated.  If all that took place here was conduct by the applicants in making use of the banking system more efficiently to run their illicit business then, subject to the caveat in the Chan Kim Chung Nelson case, namely whether abuse of the banking system for the purpose of more effectively carrying out their criminal activities could, by itself, be an additional form of culpability, that conduct does not add to their culpability.  Depositing the profits of their vice activities into the banking system and employing the services of that system other than for a money laundering purpose, as that term was explained in the Chan Kim Chung Nelson case, will not, without more, justify the laying of an additional money laundering charge.  In such a situation the offenders’ overall culpability can be adequately reflected by the prosecution simply charging the predicate offences.  The question is whether the instant case was such a situation.

67.  Here it can properly be said that the applicants’ dealings went beyond the mere deposit of monies into a bank account and the use of banking facilities for normal commercial purposes.  For here there was a deliberate concealment of receipt of the monies by the decision not to reveal them to the Inland Revenue Commissioner and there was, additionally, the deliberate use of ATMs to make multiple deposits of small amounts.  This latter action can only have been done in order to avoid having to make large cash deposits that might attract undesired attention.

68.  There was, therefore, conduct by the applicants which can be properly characterized as money laundering conduct thus justifying the laying of the charge and the imposition of an additional punishment.

69.  However, looked at in the round we are of the view that the main culpability of the applicants lay in their management of a highly organized and sophisticated, large scale vice operation.  The judge’s sentences of 12 months’ imprisonment did not meet the seriousness of this aspect of their culpability, more especially as he made the three sentences all concurrent with one another.  This area of their criminal conduct should have attracted a heavier punishment.  In this regard we note that the maximum punishment for each vice establishment offence is, when tried on indictment, 10 years’ imprisonment.

70.  Notwithstanding that we might differ with the judge on the sentences he has imposed for these offences we are satisfied that the total sentence was not manifestly excessive.  Nor do we think that there is present in his sentence any element of double punishment.  The applicants’ overall culpability was of a high level and warranted a significant custodial sentence.  There is no merit in the ground of appeal.

Conclusion

71.  For the reasons we have given we dismissed both the applicants’ applications for leave to appeal their convictions in respect of all offences and their applications for leave to appeal their sentences for the money laundering offences.

72.  Thereupon, the respondent applied for its costs of the appeal.  The power of this Court to make an award of costs to the prosecution can be found in section 13(c) of the Costs in Criminal Cases Ordinance, Cap 492.  There are only two conditions precedent to the making of an award of costs and that is that the application for leave to appeal is unsuccessful and the Court of Appeal is satisfied that the application is without merit.  That we were of the view that the applications were without merit and the reasons why we were of that view are apparent from our reasons, as set out herein, in dismissing the applications.

[1]       These amounts are taken from the 1^st applicant’s video record of interview.