HKSAR v. Lung Hon Lam

CACC 260/2024

[2025] HKCA 362

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 260 OF 2024

(ON APPEAL FROM DCCC NO 452 OF 2023)

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D E C I S I O N

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1.The applicant (D1 at trial)  and Hui Chak Yi (D2 at trial)  were jointly charged with conspiracy to deal with property known or reasonably believed to represent proceeds of an indictable offence (Charge 1). D2 was also charged with the substantive offence as an alternative to Charge 1 (Charge 2), and an additional substantive offence of dealing with property known or believed to represent proceeds of an indictable offence (Charge 3).

2.On 1 November 2024, following a trial before Deputy District Judge David Cheung (the judge), the applicant was convicted of Charge 1 and D2 was convicted of Charges 1 and 3.

3.On 12 December 2024, the applicant filed a notice of application for leave to appeal against conviction and sentence.  As for both his conviction and sentence, he complained that the judge failed to consider the evidence comprehensively and that the conviction was unsafe and the sentence was excessive.

4.By summons dated 17 March 2025, the applicant applies for bail pending appeal.  In an affirmation in support of the application dated 14 March 2025, the applicant stated that he is now legally represented and, upon legal advice, will only proceed with his application for leave to appeal against conviction.  The applicant has attached to his affirmation draft perfected grounds of appeal, prepared by counsel representing the applicant, Mr Joe Chan, Mr Schweitzer Wong and Mr Oscar Tam.  On 7 April 2025, the applicant filed perfected grounds of appeal signed by counsel. 

5.The prosecution case in respect of Charge 1 was that between 1 November 2016 and 13 January 2017, the applicant and D2 conspired together with Leung Ka Hei (referred to as Tai B)  and Lam Yin Kai (referred to as Michael Lam)  to deal with the sum of HK$6,376,964.78 in the bank account numbered 012-887-0-018809-2 held in the name of United Gold Trading Limited (UGTL)  at the Bank of China (Hong Kong)  Limited (BOC). 

6.The prosecution case in respect of Charge 3 was that between 29 December 2016 and 22 June 2017, D2 dealt with the sum of HK$12,097,771.87 in the account of UG with the Bank of East Asia (BEA).

7.The respondent objects to the application for bail by the applicant. 

8.The applicant together with Tai B, held a half share in UGTL, and the other half share was held by Michael Lam with his girlfriend, D2.  When UGTL was set up, one share was held by a secretarial company, 4,999 shares by the applicant and 5,000 shares by D2.  The applicant and D2 were made directors of the company and signatories of the BOC account, which was opened on 6 June 2016.  However, it appears that the BOC account did not become operational until 1 November 2016.  During the period from 1 November 2016 until the account was closed on 13 January 2017, there were 101 deposits totalling HK$6,376,964.78, of which 99 deposits totalling HK$6,146,964.78 were in cash.  All cheque withdrawals were made by D2, who also made 4 cash withdrawals totalling HK$560,000.  Withdrawals were made on the same day as the deposits or shortly afterwards to multiple unknown parties.[1]  The Inland Revenue records of the company during the relevant period did not disclose any business or receipt of any income or profit.

9.On 15 October 2016, D2 registered the business name of UG and set up a bank account with BEA.  She was the sole signatory of the bank account. 

10.In a video recorded interview under caution, the applicant stated that he invested in a gold trading business through a friend, Tai B, who introduced him to Michael Lam.  The business was divided into two halves, and each side contributed HK$600,000.  Michael Lam and D2 held one half and Tai B and the applicant held the other half.  He contributed HK$120,000 and Tai B contributed HK$480,000.  He was a salesperson but did not take part in the job.  He was to receive a basic salary of HK$5,000 each month, but it was never paid.  He attended the company offices, but had no idea what the cold calls were about and no knowledge of the actual operation of the company, including how price differences in commissions in gold trading were calculated. There were 10 odd staff and he only saw them making telephone calls.  He opened the bank account, which could only be used by D2 and himself.  The company cheques were signed by both of them but D2 kept the cheque books and ATM cards.  He believed all payments received were for legitimate business purposes.  He explained that as the company was losing money, he withdrew his shares in UGTL and terminated the BOC account in November 2016.  He said he lost about 300,000 odd dollars.  He claimed that he did not know about the company’s financial transactions and did not read the bank statements. 

11.As confirmed by the applicant, the main issue at trial was whether there was any agreement to commit money laundering as alleged by the prosecution and whether he was a party to such an agreement.

12.The judge, in his reasons for verdict, found on the evidence that the alleged gold trading business of the company was a sham.[2]  He held that the funds transacted in the bank account were proceeds of an indictable offence and that the applicant conspired with D2 and others, having reasonable grounds to believe, that the bank account would be used for the purpose of receiving, concealing or disguising the proceeds of an indictable offence.  He found the applicant’s exculpatory account in his interview was not credible.  He ruled that the applicant was not an investor in the company but rather a sham director and shareholder.  He rejected the applicant’s claim that he was a director in a non-executive capacity and was unaware of the financial transactions of the company.

13.The original grounds of appeal were as follows. Ground 1 averred that the judge erred in rejecting the applicant’s exculpatory explanations in his video recorded interview.  Ground 2 complained that the judge erred in holding that there were irresistible inferences against the applicant in respect of his knowledge and intention.  Ground 3 averred that the judge erred in applying HKSAR v Wong Chor Wo (a person lending the use of their account)  [3]. Ground 4 complained that the judge failed to give adequate reasons.  Ground 5 alleged that there was no evidence to find the applicant had been a party to the alleged money laundering scheme, and in the circumstances, the conviction was unsafe and unsatisfactory.

14.In oral submissions, the applicant submitted draft amended perfected grounds of appeal against his conviction, and the grounds were reformulated as follows.[4] Ground 1 averred that it was not open on the evidence for the judge to find that the applicant was not a legitimate investor in UGTL, nor a sham shareholder or director of UGTL.  Ground 2 complained that the judge failed to adequately take into account, inter alia, some or all of the following matters: (i)  the applicant was involved in UGTL for a short period of about 2½ months; (ii)  the applicant was not involved in any financial banking transactions of the BOC account, other than as a signatory to the account; (iii)  the applicant terminated his directorship on 19 December 2016 and closed the BOC account of UGTL on or before 13 January 2017; (iv)  the applicant did not receive any of the funds transacted in the BOC account; (v)  after the applicant terminated his involvement in UGTL, the company continued its operation and a new bank account was opened with the BEA; and (vi)  the exculpatory evidence in the applicant’s VRI, including his lack of knowledge regarding the transactions in the BOC account.  Ground 3 referred to the particulars of Ground 2, alleging the evidence did not support the finding that the applicant agreed with the requisite mental element to launder the proceeds of an indictable offence with the other named conspirators.

15.The applicant’s case was that he was an investor in UGTL through Tai B but had little, if any involvement, in its operation, other than it traded in London Gold, even though he was a shareholder and director of the company and a signatory to the BOC bank account.  He terminated his involvement in UGTL because it was not making any profit and was losing money.  He claimed he was not aware of the details of the financial transactions taking place through the BOC account.  The cheques and the ATM cards of the account were held by D2.  He further claimed he was not involved in any of the financial transactions of the BOC account, nor did he receive any funds from the account.  He was only involved in UGTL for a short period of time and after he left the company, it continued to operate through another bank account.

16.D2 elected to give evidence at the trial.  She said that after some months of operation, the BOC informed her that UGTL’s bank account might be closed.  Michael Lam and Tai B had a meeting and decided to open a second bank account, but they could not do it with the same company name.  They decided to use a sole proprietorship to open another bank account in the business name of U.G. (UG)  with the BEA.  It does not appear that the applicant was involved in the arrangement.[5] When the BOC made enquiries about the UGTL bank account, she attended the bank to explain the accounts.  She mainly dealt with Michael Lam and Tai B about the business and had little involvement with D1.[6]  She confirmed that the company’s trading operations were handled by Michael Lam and Tai B.[7] 

17.The judge in his reasons for verdict gave a comprehensive overview of the relevant legal principles and set out a detailed analysis of the issues in addressing the case against the applicant and D2.

18.The essence of the applicant’s challenge to his conviction is the judge’s findings that he was not a genuine investor in a legitimate gold trading business but a sham director and shareholder in UGTL. Mr Chan argues that at the trial, the prosecution never alleged that the underlying gold trading business of UGTL was a fraud in which the applicant was involved.  The judge rejected the applicant’s account in his VRI, stating that he played a passive role in the company and did not know how profits were generated through price differences and commissions in the gold trading business.  He reasoned that as an investor and salesperson, he would have known how the business operated.[8] Mr Chan argues that this finding was not available on the evidence and was contrary to the prominent role played by Michael Lam and Tai B and the limited role played by the applicant.  The judge also rejected the applicant’s account in respect of the timing and manner of his withdrawal from UGTL.  There was an issue as to whether the applicant withdrew his shares during the period between October and November 2016.  The judge did not accept that the applicant was a non-executive director of UGTL and that he did not attend BOC in November 2016 to terminate the BOC account.[9]  Mr Chan argues that this finding is primarily based on a mistaken answer given by the applicant in his VRI and ignores that the applicant withdrew his shares, while the operation of the business continued without him.  There was also the evidence of D2, whose evidence showed that the applicant played a minimal role in the operation of the bank account and withdrew after a relatively short period.  Mr Chan submits that even though the judge rejected D2’s evidence, the evidence overall showed a limited involvement by the applicant in the operations of UGTL.

19.Mr Chan submits that the prosecution did not allege an explicit predicate offence but simply that there were reasonable grounds to believe that the funds transacted in the BOC account represented the proceeds of an indictable offence.  However, the judge found that the operation of UGTL was a sham business and the money transacted in the BOC account qualified as the proceeds of an indictable offence.[10]  There would be an argument in respect of the judge’s reasoning if it were the case that the prosecution were not alleging or seeking to prove that the gold trading business was fraudulent.

20.Whilst the judge rejected the applicant’s explanation that he extricated himself from the business of UGTL because it was losing money, he mainly relied on the evidence against D2 which was far more extensive, basically due to her role and duration in the operations of UGTL and UG.  It appears the prosecution presented its case against the applicant and D2 without adducing any evidence that proved that UGTL’s business was illegitimate.[11] However, the judge found that the gold trading business was a sham, which appears to have been based mainly on the findings against D2.[12] 

21.In finding the applicant guilty of the conspiracy charge for money laundering, the judge reasoned that the business of UGTL was a sham and that the applicant and D2, together with others, agreed to use the BOC account to receive and transfer money for UGTL.  He explained that he drew the inference that the applicant had conspired with the others having reasonable grounds to believe that the BOC account would be used for the purpose of “receiving, concealing or disguising the proceeds of an indictable offence” and that those grounds were reasonable.  He further explained that he based his findings on Wong Chor Wo, which concerns a case where a person has allowed their bank account to be used to launder illicit monies.[13] 

22.I consider there is a reasonable argument as to whether Wong Chor Wo was correctly applied, and whether the evidence against the applicant supported the Judge’s findings that the applicant entered into the conspiracy alleged against him and that UGTL was a sham business in circumstances where the prosecution did not seek to prove a predicate offence. However, at this stage, I am not prepared to grant bail pending appeal as this issue requires more detailed consideration.  I will therefore direct that the applicant’s leave application be expedited and brought on as soon as possible.

Ms Elisa Cheng, SPP, of Department of Justice, for the respondent

Mr Joe Chan, Mr Schweitzer Wong and Mr Oscar Tam, instructed by O Tse & Co, for the applicant

[1]   Reasons for Verdict, at [12] and [13]. 

[2]   Reasons for Verdict, at [96], [97], [299] and [304]. 

[3]   HKSAR v Wong Chor Wo, unrep., CACC 314/2006, 16 June 2008.

[4]   The Amended Perfected Grounds of Appeal filed on 17 April 2025.

[5]   Reasons for Verdict, at [173]-[178].

[6] .  Reasons for Verdict, at [63]-[66].

[7]   Reasons for Verdict, at [67].

[8]   Reasons for Verdict, at [226]-[236].

[9]   Reasons for Verdict, at [237]-[247].

[10]   Reasons for Verdict, at [297], [299] and [304]. 

[11]   Reasons for Verdict, at [210]. 

[12]   Reasons for Verdict, at [248]-[301] and at [297], regarding the finding of a sham business.

[13]   Reasons for Verdict, at [302]-[307].