HKSAR v. Woo Yuet Sim and Another

DCCC 1088/2015

[2019] HKDC 261

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1088 OF 2015

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J U D G M E N T

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Introduction

1.There were two defendants (D1 and D2) and both of them were convicted after trial[1].  The present matter concerns only D2 and it is an application by the prosecution against him for a confiscation order, pursuant to s 8(1)(a)(i) of the Organized and Serious Crimes Ordinance, Cap 455 (“OSCO”).  The application was made on 11 November 2016 immediately after his conviction but before sentence of 10 charges of “lending money at an effective rate of interest which exceeds 60% per annum” (“the loan sharking charges”)[2] and one charge of “conspiracy to deal with property known or believed to represent proceeds of an indictable offence” (“the money laundering charge”)[3]. The hearing of the application was adjourned[4] pending the prosecution preparing and tendering a statement pursuant to s10 of OSCO (“s 10 statement”).  On 25 November 2016, D2 was sentenced to a total imprisonment term of 30 months’ imprisonment.

2.The hearing of the application for confiscation, however, was put off as a result of D2 filing on 14 December 2016 a Notice of Application for Leave to Appeal against both conviction and sentence.  Upon D2 abandoning his sentence and conviction appeals respectively on 17 October 2017 and 11 May 2018 and upon the application by the prosecution, the confiscation application was restored. Nevertheless, owing to D2’s then medical conditions the hearing of the application was adjourned several times before it was eventually heard on 18 February 2019.  After the hearing, I reserved my judgment and said that it would be handed down on a day to be notified.  I now give my judgment as follows.

The Charges

3.The facts of the case are summarized in my Reasons for Verdict[5] which I am not going to repeat.  In brief, the loan sharking charges spanned a period between 17 November 2006 and a day unknown in August 2009 and the interest rates charged by D2 ranged from 120% per annum to 368.72% per annum.  Schedule 1 annexed to this judgement shows the amounts of the loans made by the defendant to various prosecution witnesses.  The total amount of the loans so advanced (which formed the subject matters of the loan sharking charges) was $74,300.  The total amount of interests which D2 received was about $15,130[6].

4.As regards Charge 12, the offence occurred between 4 May 2009 and 14 May 2011.  The property concerned was a total sum of HK$4,336,000.01 deposited to D1’s bank account held with the HSBC bank.  It is the prosecution case, and I so found, that the said bank account was at the material period of time under the sole control of D2[7] and that he had made use of that bank account “for the purpose of receiving, concealing or disguising the proceeds of his own loan sharking activities”[8].  Whilst among the loan sharking charges D2 stands convicted only Charge 10 (concerning PW7) fell within the conspiracy period of Charge 12, it was found that “besides the payments from PW7 there were other payments into D1’s bank account which were also proceeds of D2’s loan sharking activities”[9]. Schedule 2 is a summary of the various deposits to and withdrawals from the said bank account during the conspiracy period.  This court found that it is “beyond reasonable doubt that a significant proportion of the deposits paid into D1’s bank account during the currency of the conspiracy were D2’s proceeds of loan sharking”[10].

Pre-conditions for confiscation

5.In view of the similarities between the confiscation regimes respectively under OSCO and Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 (“DTROP”), both sides agree that, based on HKSAR v Shing Siu Ming & Ors (No.2)[11], in proceedings for the making of a confiscation order under OSCO, the court must determine if the following pre-conditions are met:

(i)   Had the accused benefitted from the specified offences[12]?

(ii)   If so, whether his/her proceeds of the specified offences were  at least $100,000[13]?

(iii)   If so, what should be the amount, if any, to be recovered under the confiscation order[14]?

6.It is further agreed by the parties, pursuant to s 65C of the Criminal Procedure Ordinance, Cap 221, that as at February 2019 the total value of D2’s property that might be realized is $30,102,144.90.  That amount is more than the amount ($4,328,000[15]) which the prosecution seeks to recover under the confiscation order sought.

Material for consideration

7.D2 has not adduced any new evidence for the purpose of the present proceedings.  He simply points to the evidence already adduced at the trial and the findings made by this court in the Reasons for Verdict and the Reasons for Sentence.  He also relies on the submission of his counsel on the law.  In the circumstances, based on Shing Siu Ming (No.2)[16],in determining whether an accused had benefited from any specified offences he stands convicted and the amount of the total proceeds thereof, this court can and does have regard to:

(a)   the evidence adduced at the trial; and

(b)   the s 10 statements tendered by the prosecution[17] and the defence[18] respectively.

8.I bear in mind that the standard of proof applicable here is the civil one of the balance of probabilities[19]. I note that the presumptions provided for in s 9 of OSCO are not applicable, as the prosecution is not asserting that the offences D2 stands convicted are “organized crimes”.  I also take into consideration the submissions of counsel, both written and oral.

Contention of the parties

Prosecution submissions

9.There can be no dispute that both “lending money at an effective rate of interest which exceeds 60% per annum” (“loan sharking”) and “conspiracy to deal with property known or believed to represent proceeds of an indictable offence” (“money laundering”) are specified offences listed in Schedule 1 of OSCO.

10.Mr Chau for the prosecution, having conceded that the confiscation regime under OSCO is conviction-based[20] and that the total amount of D2’s proceeds of the loan sharking charges were below the monetary threshold of $100,000, relies also on D2’s conviction of the money laundering charge as the basis of his application.  Mr Chau contends that the cash deposits[21] and transfer deposits[22] made to the bank account in question, totalled $4,328,000, were D2’s proceeds of loan sharking as well as money laundering.  Furthermore, the whole of the $4,328,000 was pecuniary advantages which D2 obtained in connection with the commission of the two offences and therefore he had benefited from both of them: HKSAR v Lin Kei Tat[23].  As such, the monetary threshold of $100,000 has been met.  Mr Chau further contends that since the total value of D2’s realizable property is more than the total value of D2’s proceeds from the loan sharking charges and the money laundering charge, the amount to be recovered under the confiscation order shall be the full amount of $4,328,000[24]. 

Defence submissions

11.On the other hand, Mr Tang, counsel for D2, contends that any benefit which D2 may have obtained (if any) pertained only to the predicate offence of loan sharking but not money laundering.  As such, the monetary threshold for confiscation has not been met and it follows that the prosecution’s application must fail.  Mr Tang’s contention can be summarized as follows:

(a)   the prosecution’s position at the trial was just that the deposits were D2’s proceeds of loan sharking.  The prosecution present stance, as contained in the two s 10 statements, to the effect that the said $4,328,000 was (also) D2’s proceeds of money laundering departs from their original stance at the trial;

(b)   whilst Mr Tang accepts during the course of his oral submission that, based on the evidence available, this court would be entitled to find on balance of probabilities that the deposits in question were D2’s proceeds of loan sharking, it is submitted that account may not be taken of those loan sharking offences that are neither the subject of convictions nor formally taken into consideration: R v Crutchley and Tonks[25], cited in Archbold Hong Kong 2019, at §41-52; and Anderson v DPP[26]; and

(c)   in any event, the prosecution has failed to show that D2 had derived any “benefit from the commission of” the offence of money laundering in the statutory sense of the phrase as explained in HKSAR v Li Kwok Cheung George[27].

Consideration

12.Having considered counsel submissions, with respect, I am unable to accept Mr Tang’s contentions. 

As to pre-condition (i)

13.As to Mr Tang’s contention (a), I find that there is no inconsistency between the stance taken by the prosecution at the trial then and its stance now, although their focus at different stages might be different.  At the trial, the prosecution focused on proving the charges. It is therefore understandable and proper that, for the purpose of proving the money laundering charge, the prosecution should specify, as best they could, that the deposits in questions were proceeds of loan sharking.  In the present proceedings, the prosecution focus on, among other things, showing that D2 had benefited from the specified offences he stands conviction.  Nevertheless, that the prosecution has all along been alleging that the deposits were D2’s proceeds and they have not at any stage, for the purpose of seeking confiscation, restricted themselves to just one of the two specified offences, be it loan sharking or money laundering.  In my judgment, as long as there is material before me to show that in law the deposits could also be regarded as D2’s proceeds of money laundering, then I can see no reason why the prosecution should not be entitled to reply on that as a basis of their application for confiscation.  Furthermore, the s 10 statements tendered by the parties are not pleadings which define the respective case of the parties, although the defendant may in his s 10 statement make acceptance of the prosecution’s allegations against him[28]. The s 10 statements tendered by the parties only serve to provide the court with the relevant information on deciding whether the various pre-conditions for confiscation have been met.  Apart from s 10 statements, the court is also entitled to have regard to other source of information including the evidence which had been adduced at the trial.

14.Secondly, I can see no reason why a sum of money cannot be proceeds of more than one offence at the same time for the purpose of confiscation proceedings under OSCO.  I note that s 2(9) of OSCO provides that:

“Reference made in this Ordinance to property received in connection with the commission of an offence include a reference to property received both in that connection and in some other connection”.

Therefore, it is clear that the legislature envisages a situation where a property can be proceeds of more than one specified offence.

15.Thirdly, for the present propose, the issue as to whether the deposits in question were D2’s proceeds of money laundering is mainly a matter of statutory interpretation. That is to say, whether the deposits were “payments or other rewards received by him in connection with the commission of”[29] the money laundering offence for which he was convicted.  If the answer to that is in the affirmative, then by virtue of the statutory definition D2 had “benefited” from that offence[30]. 

16.As to Mr Tang’s contention (b) above, Mr Chau has already accepted that if the deposits in question were not also D2’s proceeds of money laundering, then the monetary threshold of $100,000 would not be met.  This is because D2 was only convicted of 10 loan sharking charges and their proceeds in total falls below the threshold: Anderson v DPP.  On the other hand, if the deposits in question were also D2’s proceeds of money laundering so that his proceeds of specified offences in total were at least $100,000, then the argument based on R v Crutchley and Tonks and Anderson v DPP would, as discussed below, simply be irrelevant.

17.As to Mr Tang’s contention (c), I take heed of what the Court of Final Appeal says in HKSAR v Li Kwok Cheung George that:

“30.   If section 2(6)(a) is to apply, the payment must be envisaged to be received “in connection with the commission of” the predicate offence.  But, contrary to the prosecution’s submission, the section requires more than just some general, unspecified connection between the payment and the offence.  Due weight must be given to the words “or other rewards” in the phrase “payments or other rewards”.  As a matter of language, those words make it clear that the contemplated payment must be in the nature of a reward. It must in particular be a payment having the quality of a reward received in connection with commission of the relevant offence.

31.    In R v Allpress, Toulson LJ, giving the judgment of the English Court of Appeal sitting as a panel of five judges, stressed the need to have regard to the whole phrase and its effect as a matter of language:

“The phrase ‘payment or other reward’ implies that the payment must be in the nature of a reward in order to fall within the relevant section, and that is consistent with the rationale of the confiscation scheme as explained by the House of Lords. The final sentence of [17][31] in May would make no sense if physical receipt of a sum of cash by D constitutes ipso facto the receipt of a payment or other reward, whether payment is for himself or not.” (Emphasis in original)

32.    A relationship of “reward” linking the payment and the commission of the offence must therefore exist before the payment qualifies as “proceeds of an indictable offence” under section 2(6)(a).  For a payment to have this character, it has, for instance, to be a recompense or return or remuneration or incentive for or in connection with doing or having done something.  In the context of section 2(6)(a), that “something” is the commission of the predicate offence.  It follows that the payment must derive from or be generated by, or be received on account of, commission of the offence.  Money so received is tainted by its criminal origins and unsurprisingly treated as the proceeds of an indictable offence.

33.   Section 2(6)(a) therefore only applies to tainted payments.  “Clean money” which is not paid or received in the nature of a reward in connection with commission of the predicate offence does not qualify as the proceeds of such an offence for the purposes of section 25(1).  …

…

40.   The provisions governing confiscation orders are aimed at depriving a defendant of his proceeds of the relevant offence to the extent that he has benefited from such offence.  Such an order can be made against a defendant who has been convicted of and is to be sentenced for a specified offence.   But before the power can be exercised, section 8(4) requires the court first to determine that he “has benefited from the specified offence” and that “his proceeds of that specified offence or offences are in total at least $100,000.”  Benefit is therefore fundamental to the confiscation jurisdiction.  If satisfied as to such benefit, the court proceeds to determine the amount to be recovered from that defendant. Section 11(1) prescribes as the recoverable amount “the amount [the court] ... assesses to be the value of the defendant’s proceeds of the specified offence to which section 8(4) applies.”  The court may order the defendant to pay that assessed amount or, if it is satisfied that the amount which can be realised is less than the assessed value of the defendant’s proceeds, a lesser sum.  The power is therefore aimed at stripping the defendant of his proceeds of the offence to the extent to which he has benefited from it, within his realisable means.

…

67.    In our view, given that the United Kingdom’s confiscation regime employs closely comparable concepts, the abovementioned decisions of the House of Lords and Supreme Court provide persuasive and helpful guidance in the purposive construction of the relevant concepts in OSCO and in particular, the interpretation of the phrase “proceeds of an indictable offence” both for the purposes of section 25(1) and the confiscation regime.

68.    The central proposition of the purposive interpretation is that, in line with the pervasive object of stripping away the economic benefits obtained by defendant in connection with the commission of the predicate offence, property ought not to be held to be a particular defendant’s “proceeds” unless that defendant has gained an economic benefit from such property.” (Emphasis supplied)

18.In my humble view, it is important to read the judgment of the Court of Final Appeal in context, as it has often been said that, “In law, context is everything”[32].  In Li Kwok Cheung’s case, the Court of Final Appeal was dealing with the case where the appellants were not the intended and ultimate beneficiaries of the property in question.  The appellants’ role was just to provide funds (“clean money”) so that they could be used as an instrument for committing an indictable offence.  As the Court of Appeal observes in HKSAR v Lin Kei Tat, ante:

“35.   In Li Kwok Cheung George, which Mr Pang has so earnestly prayed in aid, the focus was not on payments or rewards derived from a predicate offence, but money used in furtherance of such an offence, i.e. the so-called “clean money”.  What the Court of Final Appeal confirmed was only that section 2(6) of the Ordinance targeted “tainted money” i.e. money which was derived from or resulted from a predicate offence, but not “clean money”.  The judgment of the Court of Final Appeal must be understood and interpreted on this factual basis.”

19.In my humble view, there is a valid and important distinction in the present case, which was also present in Lin Kei Tat’s case, that the money launderer (D2 here) also happened to be the predicate offender so that he was the intended ultimate beneficiary of the proceeds which were the subject matter of the money laundering.  To test the validity of this proposition, if one were to use the language of the Court of Final Appeal in Li Kwok Cheung’s case and ask, rhetorically:

(i)   what would be “the recompense or return or remuneration or incentive for or in connection with” D2 committing the money laundering (Charge 12), if any?  The answer can only be his use and enjoyment of the deposits.  The offence of loan sharking was completed immediately after D2 had advanced the loan to a borrower at an excessive rate.  The very incentive for D2 to commit the further offence of money laundering was so that he could receive repayments from borrowers.  In this sense, the deposits were just as much his “rewards” in connection with his commission of the money laundering as the loan sharking;

(ii)   were the deposits “tainted money”?  In the absence of any credible evidence to the contrary, the answer is plainly in the affirmative, bearing in mind the standard of proof applicable here;

(iii)   had D2 gained an economic benefit from his dealing with the deposits in question?  But for his dealing with the deposits, he would not have obtained and enjoyed the repayments from his borrowers.  Therefore, the answer must be in the affirmative; and

(iv)   would the “confiscation”[33] of those deposits be in line with “the pervasive object” of stripping away the economic benefits obtained by D2 in connection with the commission of the money laundering?  Again, the answer must be “yes”. 

20.Thus, I am unable to see how there could be any conflict with the judgment of the Court of Final Appeal in Li Kwok Cheung’s case by treating the deposits in question as D2’s proceeds of money laundering.  To the contrary, in my humble view such treatment would be in harmony with that judgment. 

21.I draw some comfort from the fact that my view is to some extent reinforced by the following paragraph in Li Kwok Cheung’s case:

“69.   As we have been at pains to point out, the section 25(1) offence is committed where a person deals with property knowing or having reasonable grounds to believe that the same represents the proceeds of the predicate offence.  The predicate offender is benefited by obtaining those proceeds.  The property he obtains are his payment or other reward received in connection with his commission of the predicate offence. But, as we have seen, a further aspect of “benefit” arises in the context of the confiscation regime as applied to persons who subsequently deal with the proceeds of the predicate offence.  Before a confiscation order can be made against such persons, they must also be shown to have benefited from those proceeds as required by section 8(4).  Such benefit need not be shown to prove liability under section 25(1) but is a condition of making a confiscation order.  The following example illustrates this:

(a)   X is a drug trafficker who has just sold a consignment of drugs to a buyer and received a suitcase containing $3 million in banknotes in payment. 

(b)   X asks his friend Y (who knows where the money comes from) to deliver the suitcase to Z, a professional money launderer.  Y receives nothing for doing this, merely acting because of his friendship with X.

(c)   Z receives the money and is allowed to keep $100,000 as his fee after having dealt with the balance of the $3 million on X’s behalf in ways designed to conceal its criminal origins.

(d)   X commits the predicate offence of drug trafficking and the $3 million constitutes its proceeds with X obviously benefiting to the extent of $3 million.  A confiscation order in the amount of $3 million can in principle be made against X.

(e)   Y commits a section 25(1) offence since he deals with the $3 million which he knows or has reasonable grounds to believe represent X’s proceeds of the predicate drug trafficking offence.  However, since Y has not himself benefited, no part of the $3 million constitutes “his proceeds” of the predicate offence and the section 8(4)(a) requirement of a benefit to Y is not satisfied.  No confiscation order can be made against Y although he can be otherwise sentenced for the section 25(1) offence.

(f)   Z commits a section 25(1) offence since he deals with the $3 million which he knows or has reasonable grounds to believe represent X’s proceeds of the predicate drug trafficking offence.  His benefit from those proceeds is his fee of $100,000 and a confiscation order can be made against him to that extent.  He can of course also be otherwise sentenced for the section 25(1) offence.

(g)   We might add that a confiscation order can be made against X in respect of the $3 million proceeds, permitting restraint and receivership orders, etc, to be made to secure his property for eventual confiscation by invoking the ancillary provisions of OSCO where, for instance, the money is intercepted in Y’s or Z’s possession but X has absconded.” (Emphasis supplied)

22.I note that whilst the example used by the Court of Final Appeal is one of trafficking, the legal context is the confiscation regime under OSCO.  A number of observations can be made:

(1)   it is plain from the above passage that the Court of Final Court envisages that the predicate offender himself can be subject to confiscation proceedings on the basis that he had benefited from his commission of the predicate offence;

(2)   since the offence of trafficking does not require payment as an element of offence, theoretically speaking at least the person “X” used in the above example, in addition to trafficking, could have also been separately charged with the offence of money laundering for his receipt of the drug money; and

(3)   assuming that the trafficking was done outside Hong Kong so that a trafficking charge could not be laid but a money laundering charge would be viable because X’s receiving of the proceeds occurred in Hong Kong[34], then I can see no valid reason in law, in principle or in policy[35] as to why the prosecution should not be able to confiscate the drug money by relying on his conviction for money laundering alone, especially in situation when there was no “Y” or “Z” involved in the dealing of the proceeds. 

23.Last but not least, Mr Tang’s contention is also contrary to the interpretation of Li Kwok Cheung’s case as adopted by the Court of Appeal in HKSAR v Lin Kei Tat, ante, which in any event, is binding on me.  I note that it is a major plank of Mr Tang’s submission that X’s conviction for money laundering could not be used as the basis for confiscation, as X had derived no profit or additional advantage from his dealing with the deposits which was over and above what he had derived from loan sharking. 

24.However, as decided by the Court of Appeal in Lin Kei Tat’s case, the “proceeds” of an offence are not confined to “profit” and that the expressions “benefited”, “proceeds” and “rewards” under OSCO all refer to payments or other pecuniary advantages obtained in connection with the commission of the predicate offence[36]. Based on Lin Kei Tat’s case, for purpose of confiscation proceedings it matters not whether D2 could make a “profit” out of his dealing with the deposits.  D2’s dealing with the deposits (repayments) concerned enabled him to have access to, use and enjoy the repayments of which he was the intended ultimate beneficiary.  In that sense, D2 had obtained a “reward” in connection with his commission of the money laundering.  In my judgment, this provides a sufficient basis to find that he had benefited from the money laundering offence he stands convicted. 

25.The aforesaid view is also supported by what happened in Lin Kei Tat’s case.  In that case, the appellant was convicted on his own plea of two counts of money laundering.  It was the prosecution case that the appellant engaged in illegal off-course gambling activities including bookmaking and that he received illegal bets through two bank accounts from which he made withdrawals.  The basis of the appellant’s conviction for money laundering, which is similar to D2’s case here, was that he had dealt with his own proceeds.  On appeal against the confiscation order, the Court of Appeal, having Li Kwok Cheung’s case in the forefront of its mind, had no difficulties in upholding the confiscation order[37], even though there was nothing to show that the appellant by dealing with his own proceeds of illegal bookmaking had derived any additional advantages. This is consistent with the holding of the Court of Appeal that[38]:

“Any profit made in connection with the commission of an offence is certainly “proceeds of an offence”, but “proceeds of an offence” does not consist solely of “profit”; it also encompasses “any payments or other rewards received”. When it comes to consider “benefited”, “proceeds” and “other rewards” mentioned in the Ordinance, the court must go by the basic definition of “proceeds of an offence”. In the light of the foregoing analysis, “benefited”, “proceeds” and “rewards” all refer to the payments or other pecuniary advantage obtained in connection with the commission of the relevant offence and are not confined to “profit”.” (Emphasis supplied)

It is plain that the reference to the “relevant offence” in the last sentence quoted above can only be a reference to the offence of money laundering.  This is because the appellant had not been convicted of illegal bookmaking, so that the application for confiscation could only be based on his conviction for money laundering.

26.Based on the above, I am satisfied that the prosecution is entitled to use D2’s conviction for money laundering (Charge 12) as the basis of the present application.  I am also satisfied and I find that D2 had benefited from both of the offences of loan sharking and money laundering he stands convicted. 

As to (b): whether the threshold of $100,000 is met

27.Section 2(6) of OSCO provides that:

“For the purposes of this Ordinance—

(a) a person’s proceeds of an offence are—

(i) any payments or other rewards received by him at any time … in connection with the commission of that offence;

(ii) any property derived or realised, directly or indirectly, by him from any of the payments or other rewards; and

(iii)   any pecuniary advantage obtained in connection with the commission of that offence;”

28.In the present case, D2 stands convicted of more than one specified offence in the same proceedings. In determining whether D2’s proceeds meet the monetary threshold of $100,000, it is provided in s 8(4) that:

“The court shall then determine—

(a) … whether the person has benefited from the specified offence or from that offence taken together with any specified offence of which he is convicted in the same proceedings, or which the court proposes to take or has taken into consideration in determining his sentence;

(b) …

and, if he has, whether his proceeds of that specified offence or offences are in total at least $100,000.”

29.In the Reasons for Verdict, I made the following findings:

“107. There is, as against D2, little dispute that he had agreed with D1 for her to lend him the use of her HSBC bank account and that agreement would entail D2 causing monies to be deposited and withdrawn from her bank account. There is also little dispute that the monies subsequently deposited into her bank account in fact belonged to him.

…

109. In addition to the above, there is also the following agreed bank evidence:

(a) during the charge period, there was a total of $4,336,000.01 paid into D1’s HSBC bank account of which, I find, D2 had the sole control. Of this sum, three quarters (1,257 times) came from cash deposits and the remaining quarter from transfer deposits. The majority of the cash deposits were under $4,000 each. During the same period there were withdrawals totaling $4,336,060.01, almost all of which were made via ATM or in cash. The number, size and pattern of the aforesaid transactions are consistent with the prosecution case that D2 was using D1’s bank account to receive proceeds of his loan sharking activities.

(b) On the other hand, the fact that there were substantial amount of transfer deposits (totaling $1,019,900) into D1’s bank account is inconsistent with D2’s assertion that he had used that bank account solely for his parallel goods business which he said was conducted on cash basis. He had not mentioned anything in his evidence about those transfer deposits.

(c) In view of the total amount of money transacted in D2’s personal Hang Seng Bank account (deposits totaling $37,625,494.46 and withdrawals totaling $37,519,535.40) and also the documents he produced in court which showed that account number, it is obvious that he had been using his personal bank account for his other business and also for other purposes including making transfers to the borrowers as discussed above.

110. Although I am prepared to accept that D2 had conducted parallel goods business using the corporate vehicle of New Oceanic, the use of that company could not have happened before March 2010. It might be that at some stage during the charge period D2 had also engaged in parallel goods business. However, this does not mean that D2 could not have engaged in loan sharking.

111. Based on all the evidence as a whole, I also draw the interference, which I find to be irresistible, that during the period between 4 May 2009 and 14 May 2011, besides the payments from PW7 there were other payments into D1’s bank account which were also proceeds of D2’s loan sharking activities. …”

30.In the Reasons for Sentence, this court made the following findings:

“16. In D2’s case, the money laundered through the bank account actually belonged to him and this, coupled with the fact that the proceeds related to his loan sharking activities, makes him much more culpable than D1. The bank records show that during the charge period there were deposits in the total amount of $4,336,000.01. About 76% of that total amount was made by way of cash deposits and there were 1,257 times of such deposits. Almost all money was withdrawn in cash through ATM. I appreciate that apart from the about $20,000 from PW7, there is no direct evidence as to how much of the other deposits actually came from D2’s loan sharking activities. I engaged Mr Davies on this issue during mitigation. Mr Davies submitted that all the prosecution could prove was the $20,000 from PW7 and the other monies related to D2’s parallel goods business. I bear in mind that the burden of proof is on the prosecution. However, based on the evidence available at the trial including:-

(a) the evidence that D2 had been doing money lending business for at least part of the conspiracy period;

(b) my rejection of D2’s evidence that he had conducted parallel goods business in his own name and what he said about “Ah Shing”;

(c) the huge difference between D2’s income reported to the Inland Revenue Department and the vast amount of wealth that D2 managed to accumulate during the relevant period;

(d) the fact that he had used his own Hang Seng Bank account for the parallel goods business of New Oceanic;

(e) the fact that New Oceanic also had its own bank account; and

(f) the pattern of deposits and withdrawals,

I am satisfied beyond reasonable doubt that a significant proportion of the deposits paid into D1’s bank account during the currency of the conspiracy were D2’s proceeds of loan sharking.  As such, I do not accept Mr Davies’ submission that only a small amount of money in D1’s bank account related to D2’s loan sharking activities.”

31.Based on the evidence adduced at the trial and the other material now before me, bearing in mind the standard of proof applicable in the present proceedings and in the absence of any credible evidence to the contrary, I find that the cash and transfer deposits in question had a “dual character” in that they were also “payments or other rewards” received by D2 in connection with the commission of the money laundering offence (Charge 12).  I am further satisfied and I so find that the total amount of D2’s proceeds of the specific offences, which include the cash and transfer deposits in question, were more than the monetary threshold of $100,000 as required by s 8(4) of OSCO. 

Defence submission on deduction

32.Since it is my finding that the deposits in question were also D2’s proceeds of money laundering, it is unnecessary for me to deal with Mr Tang’s contention that, if the prosecution could not rely on D2’s conviction of the money laundering charge as a basis for the present application and had to fall back just on D2’s conviction of the loan sharking charges, then in determining the amount of D2’s proceeds of loan sharking, deductions should be made for “the principal-component” of the deposits (repayments) and that account should only be taken of “the interest-component” of the repayments to D2.  Nevertheless, for the sake of completeness, I will deal with the point shortly. 

33.With respect, Mr Tang’s above submission is untenable.  As I have noted above, the offence of “lending money at an effective rate of interest which exceeds 60% per annum” is completed once the loan concerned was made. Repayment of the loan is not an element of the offence.  As such, any repayment made by the borrower would be a “payment or other reward” to the lender which the latter received in connection with the offence, whether or not the lender would make any profit out of his offence.  The point has already been decided by the Court of Appeal in Lin Fei Tat’s case:

“31.   We do not overlook the fact that the Ordinance is not just directed against “illicit money” derived from the offence of illegal bookmaking.  “Illicit money” can come from the commission of other offences, including trafficking in dangerous drugs, fraud, kidnapping, blackmail, robbery and living on earnings of prostitution (see Schedule 1 of the Ordinance).  When the court is to make a confiscation order in relation to the “laundering” of “illicit money” which has its source in one or more of these offences, is the court required to first, work out the amount of money which might be realized as against the defendant; second, deduct from it the cost incurred in committing the relevant offence or offences (for example, the cost of buying materials for manufacturing drugs, payments to couriers who delivered the drugs, or even the money spent on buying weapons used in a robbery); and only then can it confiscate the remaining sum of the money which might be realized as against the defendant?  We consider that the answer must be “no”, which is plain and obvious and is a matter of course.

32.   If a confiscation order made under the Ordinance targets only the “profit” gained in committing an offence, then what needs to be written down in the Ordinance would merely be that the “profit” gained by a defendant in connection with the commission of the offence shall be confiscated, and there is no need to specify that what is to be confiscated is the amount that might be realized as against the defendant.

33.   We agree that it might be regarded as unjust where the “profit” a defendant actually gained from the offence in question is rather small but the total amount of money that might be realized as against him is to be confiscated.  However, we take the view that in interpreting the Ordinance, the court should not be overly affected by the special circumstances which might exist in some extreme cases.  In any event, when a defendant, who knew very well what possible consequences the commission of an offence could lead to, nevertheless chose to commit that offence, he has only himself to blame if in the end he has to face a harsh punishment.”

As to (c): the amount of the confiscation order

34.As aforesaid, it is an admitted fact that the total value of D2’s property that might be realized is more than the amount which the prosecution seeks to confiscate. 

35.In the circumstances, pursuant to s 11(1) of OSCO, for the present purpose this court is satisfied that the amount to be recovered in D2’s case under the confiscation order shall be the total amount of the cash and transfer deposits in question.  Therefore, pursuant to s 2(6)(b), the amount to be recovered from D2 is $4,328,000. 

Order

36.Based on the above, I hereby make a confiscation order against D2 in the amount of $4,328,000.  Pursuant to s 13 of OSCO, at the request of Mr Tang, which is fairly not opposed by Mr Chau, D2 shall pay the aforesaid amount within 6 months. 

37.D2 has already served his sentence for the loan sharking charges and the money laundering charge.  Nevertheless, pursuant to s 13 of OSCO I shall fix a term of imprisonment in default of payment which is in addition to the imprisonment term in respect of the offences convicted.  The amount that D2 is now ordered to pay exceeds $2.5 million but does not exceed $10 million and according to the schedule in s 13 the length of imprisonment in default shall be between 3 years and 5 years.  Having regard to the judgment of the Court of Appeal in Lin Fei Tat’s case, I can see no reason not to adopt the arithmetical approach and Mr Tang does not suggest the otherwise.  Having adopted the arithmetical approach, I order that D2 is to serve an additional imprisonment term of 3½ years in default of payment.

38.In view of the outcome of this application, I do not foresee that there would be any application for costs.  However, in case there is one, then it can be dealt with on papers. 

Schedule 1

Charge	Borrower	Date	Loan amount (HKD)	Interest rate (p.a.)
1	PW4	17.11.2006	$1,000	240%
2	PW4	13.10.2007	$300	240%
3	PW1	8.8.2005	$5,000	240%
4	PW1	16.8.2006	$5,000	240%
5	PW1	16.2.2007	$10,000	240%
6	PW1	7.9.2007	$8,000	120%
7	PW2	13.12.2007	$10,000	240%
8	PW8	22.5.2009	$10,000	240%
9	PW6	20.7.2007	$5,000	368.72%
10	PW7	A day unknown in August 2009	$20,000	120%

Schedule 2

A/C 1 HSBC account no. 127-505493-292 in the name of female WOO Yuet-sim for the period between 2009-05-04 and 2011-05-17
	Amount (HKD)	(%)	Frequency of Transaction	(%)
Deposit
Cash Deposit	$3,308,100.00	76.29%	1257	76.41%
Transfer Deposit	$1,019,900.00	23.52%	386	23.47%
Cheque Deposit	$8,000.00	00.18%	1	0.06%
Interest Deposit	$0.01	--	1	0.06%
Total Deposit	$4,336,001.01	100%	1645	100%
Withdrawal
ATM Withdrawal	$4,139,400.00	95.46%	400	97.09%
Cash Withdrawal	$55,130.01	1.27%	6	1.46%
Transfer Withdrawal	$141,530	3.26%	6	1.46%
Total Withdrawal	$4,336,060.01	100%	412	100%

Breakdown of Cash Deposit of A/C 1 as follows:

Cash Deposit Amount  (HKD)	Frequency of Cash Deposit
Below $1,000	494 times
Between $1,001 and $2,000	299 times
Between $2,001 and $3,000	169 times
Between $3,001 and $4,000	136 times
Between $4,001 and $5,000	50 times
Between $5,001 and $10,000	77 times
Between 10,001 and $74,000	32 times
Total no. of times	1257 times