HKSAR v. Luan Gang and Another

DCCC 788 & 790/2015

[2018] HKDC 1040

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASES NOS. 788 & 790 OF 2015

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DECISION ON COSTS

1.D1 and D2 were found not guilty of the respective conspiracy to commit money laundering charge(s) after a lengthy trial, which lasted for more than 4 calendar months.

2.Upon their acquittals, their respective leading counsel applied for costs, excluding the costs related to the 5 unsuccessful applications made by defence during the trial (collectively "the 5 Applications"), namely :-

(i)   application to exclude the "impugned evidence" of Madam LI Sanyue (PW7);

(ii)   application to admit LIU Yi's covert audio recording (which involved calling of witnesses);

(iii)   application to oppose the Letter of Request evidence;

(iv)   application to exclude the documents seized by China Customs (which invoked the Jerry Lui principles); and

(v)   stay application.

The prosecution objects to this application for costs.

3.All parties agreed to deal with this application on paper.  Having considered their written submissions, I now give my decision.

4.I have summarized the facts of this case at paragraphs 2 to 7 in my Reasons for Verdict[1].  I need not repeat them here.

5.In this application, the issue is whether D1 and D2 have brought suspicion upon themselves and have misled the prosecution into thinking that the case against them is stronger than it really is.

6.On this matter, the Court of Final Appeal in TONG Cun Lin v HKSAR [2000] 1 HKLRD 113 held :-

"When a defendant has been brought to trial upon particular charges and is then found not guilty it is clearly right that he should normally be compensated out of public revenue for the costs incurred in defending those charges.  In considering whether, despite this general rule, he should be deprived of all or part of his costs, the judge exercising the discretion must obviously look to his conduct generally, so long as such conduct is relevant to the charges he faced.  This cannot be confined to any particular period of time.   . . . it follows that, generally speaking, the conduct most relevant to the matters under consideration must be the defendant’s conduct during the investigation and at the trial.   . . .Wrapped up with this is the strength of the case against the defendant and the circumstances under which he came to be acquitted . . . "[2]

7.Regarding a defendant's conduct which brings suspicion upon himself, Li CJ in TING James Henry v HKSAR (No.2) (2007) 10 HKCFAR 730 held :-

"It may often be the case that a defendant's conduct during the investigation and at the trial is such that it brings suspicion on himself, providing a ground for refusing him costs.  Such conduct has been described as 'most relevant' to the discretionary exercise.  However, it is incorrect to suggest (and the authorities give no warrant for suggesting) that a defendant can only be regarded as having brought suspicion on himself by virtue of his conduct during the investigation or at trial and not otherwise.  The discretion is not bounded by any such inflexible rule. By his conduct prior to the investigation and trial stages, including conduct which formed part of the setting for the charges laid against him, the defendant may plainly have brought suspicion upon himself.  There is no reason to ignore such conduct in the exercise of the court's discretion on costs following an acquittal on the charges laid, provided always that the discretion is not exercised so as to undermine the presumption of innocence, and in particular, provided that its exercise does not involve the court in adopting a position at variance with the defendant's acquittal by the tribunal of fact."[3] (Emphasis added)

8.There is no dispute that D1 had moved his assets (which were derived from his business revenue) out of Hong Kong; and D2 had assisted him in the process.  The arguments raised at trial were (i) whether any predicate offence(s) in relation to the importing of offshore oil engineering vessels and machinery into China waters by D1's companies were committed; and (ii) whether the revenue of D1's companies constituted proceeds of the predicate offence(s) described in (i) above.

9.The alleged predicate offence(s) are primarily offence(s) under mainland laws (although the prosecution argued that the relevant conduct would also amount to certain indictable offence(s) in Hong Kong, had it taken place here locally). I have stated clearly in my Reasons for Verdict that when a criminal offence has allegedly taken place in the mainland, the best way to resolve the matter would be through a trial in a mainland court applying mainland laws[4].

10.In the trial of this case, I had a rather awkward and embarrassing task of assessing the evidence of a China Law expert (PW9 Mr. CHEN) under the Hong Kong legal framework (which included the burden and standard of proof in criminal trials as well as the jurisprudence of contract and statute interpretation).

11.I cannot stress enough that notwithstanding the findings I have made on the relevant issues, my assessment of Mr. CHEN's expert opinion is not binding on any mainland court and has no bearing (to say the least) on any mainland law enforcement agency.  The verdicts I reached in this case are by no means any reflection of what the correct outcome should be had the matter been dealt with in the mainland. Based on the evidence before me, the alleged predicate offence(s) may well have been established in the eyes of a mainland court applying mainland laws, especially when an expert in China Law says so.  In other words, for the purpose of this costs application, I cannot ignore the possibility that had there been a trial in the mainland court, the alleged predicate offence(s) could have been proved.  And if so, even though D1 might not have personally committed those offence(s) as argued by his counsel at trial, he could have still been found having knowledge of such offence(s), thus acquiring reasonable grounds to believe regarding the illicit nature of his business revenue.

12.The alleged predicate offence(s) took place in the mainland and were investigated by China Customs. It is unfair to those mainland officials involved in this case that their investigation had to be scrutinized under the Hong Kong criminal justice system.  Concepts such as "chain of evidence" and "hearsay" may not be relevant in the mainland.  But when it comes to this application, I cannot ignore the fact that 2 different sets of contract in relation to the Assisterand the Challenger were found[5].

13.D1 engaged in business activities in the mainland; he should have submitted to and respected the mainland rules and regulations.  He cannot on one hand gain financial benefits generated from his business but reject the mainland governance on the other.  If there were disputes with mainland law enforcement agencies, he should have remained in the country and sorted out those disputes in accordance with mainland laws.  What happened in the mainland should have stayed in the mainland.  I accept that subjectively, D1 might have considered himself being unfairly treated by the mainland authorities[6].  Objectively, however, fleeing the country and transferring assets to another jurisdiction are acts which brought suspicion upon himself and resulted in his extradition-related expenses.

14.Mr. CHEN's expert opinion is the crux of the prosecution case. The prosecution should have thoroughly examined the basis of his opinion, knowing that his expert evidence would be assessed in accordance with Hong Kong standard.  The queries raised by Ms. Draycott, SC and Mr. Harris, SC during their cross-examination of Mr. CHEN were not unknown to the prosecution[7].  Those issues should have been dealt with before he went into the witness box.  The prosecution is entitled to clarify with its own expert any ambiguities in conference in advance.  The prosecution also has a duty to continuously assess the strength of the evidence of its witnesses, needless to say an expert witness.  To me, the contract interpretation aspect was an obvious flaw in Mr. CHEN's opinion[8] under the scrutiny of the Hong Kong legal framework, which should have been addressed before he began his evidence.  Thus, the prosecution should bear the consequences of its decision to rely on Mr. CHEN's opinion. 

15.Based on the reasons stated above, I make the following orders in respect of D1 :-

(i)   D1 be entitled to 50% of his costs of this trial, except the costs arising from and occasioned by the 5 Applications; amount to be taxed, if not agreed; and

(ii)   For the avoidance of doubt, D1 shall not be entitled to any of his costs incurred before the information related to this case was laid in the magistracy.

16.As I have found all D2 did was to assist her elder brother (D1) to transfer his assets out of Hong Kong; and there is insufficient evidence to prove that she had participated in or had any knowledge of D1's business affairs, I see no reason not to award costs to her. I make the following orders in respect of D2 :-

(i)   D2 be entitled to her pre-legal aid costs of this trial and the legal aid contribution which she had paid, except the costs arising from and occasioned by the 5 Applications; amount to be taxed, if not agreed; and

(ii)   For the avoidance of doubt, D2 shall not be entitled to any of her costs incurred before the information related to this case was laid in the magistracy.