HKSAR v. Tong Lai also known as Tong Kin Ying

DCCC 679/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 679 OF 2014

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Reasons for Verdict

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1.The defendant faces a single charge under section 25(1) and (3) of Cap 455 of dealing with property known or believed to represent proceeds of an indictable offence.

2.The period of the offence is between 29 April 2006 and 13 July 2012, and covers a total of $2,562,107.85 in a Hong Kong and Shanghai Bank account in the defendant’s name.

3.The defence essentially says the moneys are not the proceeds of an indictable offence or offences, but the proceeds of businesses run by her husband throughout that period, and alternatively it is posited or could be posited that even if grounds did exist to reach the conclusion that the proceeds may directly or indirectly represent the proceeds of an indictable offence, that it could not be inferred that the defendant would have that knowledge.

4.The defendant was arrested on 21 August 2013 at her home in Tseung Kwan O for this offence.

5.The prosecution proved that the defendant had opened the relevant HSBC account on 18 August, year 2000.  Between 1 May 2006 and 13 July 2012, there were deposits into the account of some $2,563,107.85 by 264 transactions into the account.  Of these, 192 were cash deposits totalling HK$1,642,600, that being 73 per cent of the total transactions and 64 per cent of the total deposits.  There were also three cheque deposits of $226,400, and 58 deposits by transfer totalling $694,080, and 436 withdrawals from the account totalling $2,564,174.14. 300 withdrawals were by transfers totalling $1,196,853.14.  There were 133 cash withdrawals totalling $1,140,921.

6.The prosecution based their case essentially and largely on the features of the operation of the account, and they were, firstly, the frequent cash deposits and withdrawals, particularly after year 2007; secondly, that the total withdrawals almost match the total deposits; thirdly, that over 90 withdrawals of identical amounts were transferred out within one day or a few days; fourthly, a further 60 withdrawals where after moneys were deposited amounts similar were transferred out within one or a few days; fifthly, most cash deposits were made by instant deposit machines and withdrawals by ATM; sixthly, from March 2007, there were more than 60 deposits of over $10,000, some exceeding $100,000, and ranging up to a quarter of a million; seventhly, there were 28 deposits by transfers from 20 different accounts ranging in value between $2,500 up to $50,000; and finally, withdrawals were made to 36 accounts within the range of 5,000 to HK$113,000.

7.The defendant made a video-recorded interview after her arrest and she said she had been married to her husband, Mr Chau Tak-kwan, for some four to five years.  She had a recycling firm in Tseung Kwan O which opened in the year 2000.  She had changed the proprietorship to an employee, but it was her husband who was responsible for the business.

8.The evidence showed the defendant was the sole proprietor of Sun Son Recycling Company which had opened on 14 December 2006.  In May 2011, the defendant wrote to the Inland Revenue Department, saying the company had been closed for two years due to poor business.  The company ceased business on 11 December 2011, according to business registration records.  The defendant never filed any personal tax returns.

9.The defence case was established by the defence witness, Mr Chau Tak-kwan, the defendant’s husband.  It was he who claimed to have operated the account throughout the relevant period.  The defence commented that this did not appear to be seriously challenged.  The defence witness met his wife, the defendant, in mid-2006.  From the end of 2006 they lived together.  At that time, the defence witness ran a restaurant on the mainland.  He also set up a recycling business, as there had been such a business in the family before.  He registered the business in the defendant’s name and also used her HSBC account.

10.The defence witness said this was because he had a poor financial history.  He was unable to get loans.  He did not specify in his evidence whether he had been bankrupted, or whether he just simply had a poor loan history.  The defence witness said he ran the business and dealt with the HSBC account.  The defence witness did open another account with Bank of China in Sun Son’s name, which was used to receive cheques.

11.At its peak, the business ran some four trucks in 2008.  It also made MPF contributions for the defence witness.

12.The defendant and the witness married in 2009, the same year the business closed and was disposed of.

13.The defence witness used and operated the deposits and withdrawals on the account by using ATM machines.  The defence witness gave evidence they were downstairs from where they lived at the time. He even took photographs of the particular machines that were used.

14.The defence witness gave evidence of deposits and withdrawals from this account.  They were identified as follows.  There were withdrawals between 6 June 2007 and 24 May 2012 for rental payments.  There were a total of $326,308 assigned to that figure.  There were 116 entries that were dealt with respecting utilities and other payments, and those entries were all identified.  There were six entries for the truck, MV‑1675, totalling $27,504.  There were identified personal deposits, totalling 17, totalling $758,800.  There were identified personal withdrawals, a total of 12, for a total of $559,500.  They were contained in schedules produced by the defence.

15.The defence witness was able to produce documentary evidence for the existence of Sun Son and the four trucks owned in 2008.

16.After the close of Sun Son, the defendant sold lunchboxes to construction workers at the Kai Tak construction site, and from 2012, the couple operated the Tong Ki fruit stall at Choi Ming Court wet market.

17.As far as the legal requirements of this case are concerned, the prosecution is required to prove the charge beyond reasonable doubt.  The burden to prove the charge remains on the prosecution at all times.

18.On the charge the defendant faces, it is not necessary for the prosecution to prove as an element of 25(1) that the property dealt with by the defendant in fact represents the proceeds of an indictable offence.  It is only necessary for the prosecution to prove that the accused dealt with certain property in circumstances where she had grounds to believe that such property represented the proceeds of an indictable offence. 

19.On the second leg, to convict her, it must be found that the accused had grounds for believing, and the grounds must be reasonable.  That is that anyone looking at those grounds objectively would so believe.

20.The prosecution say that the operation of the account shows features characteristic of money laundering; that the defendant is the sole holder and signatory of the account.  She said in the video-recorded interview that she used the account for personal convenience.

21.The prosecution also submitted that the defence witness’ evidence should be rejected.  It was said there is no corroborative documentary evidence for the operation of Sun Son beside the business record and the purchase of the four trucks; that the defence witness himself is an unsavoury character with an extensive criminal record; and that his evidence should not be accepted.

22.The defence say the defence witness has accounted for a portion of the deposits and withdrawals in the account.  The business of Sun Son was undoubtedly in operation, and a recycling business would use and receive cash payments.  It is unsurprising there is little documentary evidence some nine years later, especially where no tax form was ever submitted, given the business losses.  In any event, the defendant herself would have no grounds to believe the moneys in the account were the proceeds of an indictable offence, because the transactions of the account were mixed with domestic personal transactions.

23.As far as the resolution of these issues is concerned, it is first necessary to resolve any issue of fact arising out of the evidence.  It would appear the prosecution evidence was essentially not in dispute, nor could it be disputed.  The operation of the account is a matter of record.  We can see the deposits and the withdrawals.

24.What is disputed is what, if any, inferences can be drawn from the prosecution.  The prosecution evidence was, in effect, the defendant’s ownership of the account, the transactions recorded in it, coupled with the defendant’s status at the time as a housewife; a person with no apparent means of support, or certainly whatever means she had was said to be insufficient to support the transactions in the account.

25.Thus, the disputed area of evidence in this case must be the evidence of the defence witness.  The prosecution indicated they did not accept any of his evidence, and called for the court to reject his evidence.  There was no attempt to specify which parts of his evidence might or might not have some validity.  It was said his poor character and the lack of other supporting evidence or corroborative evidence rendered his testimony unreliable.

26.However, this approach seems to ignore or minimise the potentially indisputable nature of some of what the defence witness said.  The defence witness spent a considerable part of his evidence going through transactions in his account that were readily contradictable, such as payments of rent and utilities and payments of hire purchase of a vehicle.  Furthermore, the defence witness gave extensive and lengthy evidence on his operation of the account, going as far as to taking photographs of the ATMs he had used to pay in cash and make cash transfers from the account, these ATM machines being downstairs from the matrimonial flat.

27.In effect, the defence witness was saying that he and his business, Sun Son, were the actual operators of the account.  Thus it would appear that the defence witness’ evidence at the minimum raises an evidential burden that the utility payments and insurance payments set out in the defence schedule so made between 4 May 2006 and 23 March 2012 are as described and represent outgoings from the account.  These payments total about 55,000.  The payments show the characteristics of recurrence and similarity in amount to support the defence witness’ evidence in this matter.

28.Furthermore, it is now 2017.  The defendant was arrested in 2013.  These payments have been available for a search inspection for a considerable period.  The prosecution do not, in effect, seem to be in a position to contradict or rebut this aspect of the defence witness’ testimony.

29.There are personal dealings described as deposits and withdrawals, those being deposits of 758,800, and withdrawals of 559,500.  Again, these come into the category of the defence witness having discharged at least an evidential burden.  Finally, there are rental payments totalling 326,380 which fall into the same category.

30.It would appear also from the defence witness’ description of the operation of this account and his intimacy with its details that his evidence that he was the actual operator of the account is also capable again of at least raising an evidential burden on this aspect of the evidence.

31.Thus the uncontroversial and, I would say, uncontroverted aspects of the defence witness’ evidence are as follows:  that he operated this account, which was his wife’s account, using it for Sun Son and his other businesses, from 2006 to 2012; that he used the account to pay rent and utilities in the region of $400,000 during that period; that he received a further 758,000 accountable deposits and there was something just short of $1 million in outgoings that were accounted for.

32.This does, however, on my accounting, leave some 1.7 million in deposits and 1.5 million in withdrawals that are not specifically dealt with within the six-year period of the charge on the indictment.  The defence witness says these represent operating income and expenditure for his business within this period.  The only really tangible support for this proposition comes from the business registration of the company in the defendant’s name and the purchase and ownership of the four trucks in 2008.

33.The prosecution say this is insufficient; the business must have generated other documentary evidence over that period. Furthermore, the defence witness said this account merely dealt with the day-to-day cash transactions using the ATMs downstairs; there were other accounts for cheques.

34.Besides the defence witness’ evidence, there is little to support the evidence that the remaining unaccounted withdrawals and deposits were all the consequences of Sun Son’s cash business.  The size and synchronicity and lack of documentary support is certainly suggestive that a part of these payments is not accounted for by the running of Sun Son and are currently unexplained.

35.This leads to the question of how does this affect the case as against this defendant.  There are two questions at issue for her.  Firstly, did this defendant deal with the money in her account; and secondly, did she have reasonable grounds to believe that those moneys, or a part of them, were proceeds of an indictable offence?

36.The first issue - that of did the defendant deal with the money in her account - is easily proved by the prosecution and not seriously contested.  Letting another person have use of your bank account to deposit or withdraw money amounts to dealing with the property.  Even on the defence case, the defence witness was using the defendant’s account without her objection.

37.However, did the defendant, when dealing with the property - that is, letting the defence witness use the account for his transactions - in doing that, did she have grounds to believe the property represented the proceeds of an indictable offence?

38.This of course would require an inference to be drawn, as there is no direct evidence of this.

39.In the case of HKSAR v Wong Chor Wo and Another CACC 314/2006, it was said:

“In the normal course of events, if a man allows another person to use his bank account to deposit and withdraw funds, in the absence of evidence to the contrary, the inevitable inference will arise that the holder of the bank account had reasonable grounds to believe that the funds passing through the account represent the proceeds of an indictable offence. That the account is used to conceal transactions is an inference which inevitably arises from the fact that a person uses another’s bank account to undertake transactions without any explanation to the holder of the bank account. From the fact that the transactions are concealed in the absence to the contrary the inference inevitably arises that some offence is being committed in relation to the transactions that require to be concealed.”

40.In relation to that case, it was said:

“When the funds are of the magnitude as in this case, the inference is that the offence will be an indictable offence.”

41.It is clear that the irresistible inference outlined in the Wong case, drawn against the account holder as opposed to the account user, flow from the use of the account by another; what is described as the, in that case, concealment of the transactions, and also the magnitude of the transactions that have taken place.

42.In this case, the relevant authority, the holder of the account, and the user account, are known to one another.

43.In the case that I am dealing with, they are, during the relevant period, man and wife, or common law man and wife.  The question arises where that relationship exists:  can the court necessarily infer matters in the same way; that the primary reason for the separation of the account holder and user is to conceal the identity of the user so that the user can launder the proceeds of an indictable offence?

44.The reasons that have been given in this case for the defence witness to use his wife’s account are his poor loan history, and, secondly, convenience.  Thus it can be said the defendant is permitting the defence witness to use the account to conceal his identity from creditors or people who loans would be sought from.

45.This may not, in itself, be an illegal act. Furthermore, it is also clear the same operation exists with the business registration of Sun Son.  She is not involved in the running of the company at all, on the evidence, yet the business stands registered in her name.

46.The next issue raised in the Wong case and from which inference is drawn is of course what is described in that case as the magnitude of the transaction.  The potentially unaccounted transactions amount to some $1.7 million‑odd over six years, which is somewhat just less than $300,000 per annum, or some $25,000 per month.  If the operative period of Sun Son from 06 to 09 is considered, then the figures are double that; some $600,000 per annum, and $50,000 per calendar month.

47.I have really heard no evidence about what the necessary sums that might be used as cash elements of recycling businesses are; the cash element of a recycling business involving the use of up to four vehicles, which is what has been established on the evidence.

48.It does not appear to me that the adverse inference, which is an inference that has to be drawn beyond reasonable doubt, can be as easily drawn in this case given the level of the transactions.

49.Furthermore, I have considered the question of what could be described as agency, which is the fact that the account user and the account holder are different people, and can the adverse inference which would normally be drawn against the account holder be necessarily drawn against this defendant in this case.  It appears to me there are difficulties in drawing that inference to a criminal standard, and they are as follows. Firstly is the relationship of the parties.  They are man and wife.  Husbands and wives can often be in a position to use each other’s accounts for the sake of convenience, and it can be difficult for a wife to prevent her husband using her account.  Secondly, the reasons given by the defence witness to use the account as evidenced:  his poor credit history and the convenience of ATMs for that bank being downstairs from their flat.  Thirdly, substantial withdrawals and deposits to the account concern domestic matters such as the payment of utilities, rent, depositing of money from the sale of businesses; in one case, a retention of bail money, or the return of bail money.

50.This means the account has a mixed use, in any event.  Fourthly, the defendant has undoubtedly permitted her name to be used for the registration of Sun Son.  It has not been argued, as far as I am aware, that this is other than innocuous, but it confirms the evidence of the defence witness that the defendant was the nominal owner of the company to facilitate its financial affairs.  Fifthly, the transactions in question are not of sufficient magnitude to necessarily induce the belief to a person in the defendant’s position to conclude an irresistible conclusion they could not be the cash elements for the existing business given the other considerations I have outlined.

51.Finally, the use by a husband of a wife’s account does not necessarily irresistibly lead to the conclusion of concealment and illegality.  That was the ratio of the court’s decision in the case of Wong Chor Wo and Others.  Thus, where the inference must be drawn to a criminal standard, there cannot be any other equally reasonable conclusion to be drawn.

52.I find the grounds possessed by the defendant and her actions do not irresistibly lead to the inference that she would have known or believed those moneys in the account to be necessarily the proceeds of an indictable offence.

53.Those conclusions may of course not necessarily apply to the user of the account, but as far as she is concerned, I have reached the conclusion that in this case, the case is not necessarily proved against her beyond a reasonable doubt, and she will be acquitted.