HKSAR v. Ma Zhujiang and Another

CACC491/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 491 OF 2005

(ON APPEAL FROM DCCC 388 OF 2005)

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BETWEEN

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Before : Hon Ma CJHC, Stock JA and McMahon J in Court

Dates of Hearing : 26 and 27 June 2007

Date of Judgment : 20 August 2007

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J U D G M E N T

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McMahon J (giving judgment of the Court) :

1.The applicants (“D1” and “D2”) were convicted by Deputy Judge Yiu in the District Court of two joint offences of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1) of the Organized and Serious Crimes Ordinance, Cap. 455 (“the Ordinance”), being Charges 1 and 2.  D1 was separately convicted of a further offence, contrary to the same section, being Charge 3 and D2 was convicted of a separate offence of attempting to deal with such property being Charge 4.

2.D1 was sentenced to five years’ imprisonment in respect of each of the offences the subject of Charges 1, 2 and 3; those sentences to be served wholly concurrently.  D2 was sentenced to four years’ imprisonment in respect of each of the offences the subject of Charges 1 and 2 and to three years’ imprisonment in respect of the 4^th charged offence; all of those sentences being ordered to be served wholly concurrently.  That resulted in a total sentence of five years’ imprisonment for D1 and of four years’ imprisonment for D2.  

3.Each applicant seeks leave to appeal both his convictions and sentence.

4.Before we proceed it is convenient to set out something of the history of the legislation we are concerned with in this appeal.

5.Section 25 of the present Ordinance was substantially amended by the Organized and Serious Crimes (Amendment) Ordinance No. 90 of 1995 which came into effect on 3 August of that year.  

6.Prior to that amendment section 25(1) had been in the following terms :

“	25.	Assisting a person to retain the proceeds of an indictable offence
		(1)	Subject to subsection (3), a person who enters into or is otherwise concerned in an arrangement whereby―
			(a)	the retention or control by or on behalf of another (‘the relevant person’ (有關的人)) of the relevant person’s proceeds of an indictable offence is facilitated (whether by concealment, removal from the jurisdiction, transfer to nominees or otherwise); or
			(b)	the relevant person’s proceeds of an indictable offence―
				(i)	are used to secure funds that are placed at the relevant person’s disposal; or
				(ii)	are used for the relevant person’s benefit to acquire property by way of investment,
		knowing or having reasonable grounds to believe that the relevant person is a person who has committed or has benefited from an indictable offence, commits an offence.”

Following the 1995 amendments the provision read :

“	25.	Dealing with property known or believed to represent the proceeds of an indictable offence
		(1)	Subject to section 25A, a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.”

7.Identical amendments had been made to section 25(1) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405 (“DTROP”) by the Drug Trafficking (Recovery of Proceeds) (Amendment) Ordinance 1995.  Section 25(1) of DTROP had been, prior to those amendments, and was, after those amendments, in the same terms as section 25(1) of the Ordinance.

The prosecution case

8.The prosecution case was that both D1 and D2 were members of a syndicate in Hong Kong which, in some way, was able to obtain genuine cheques drawn by reputable companies in the United States in favour of payees with which those companies had business.

9.Bank accounts were then opened by members of the syndicate at Citic Ka Wah Bank (“Citic”) in Hong Kong using company names virtually identical to those of the American companies who were the stated payees on the cheques.  The cheques were then presented to Citic for collection and payment of the proceeds into the account which had been opened. 

10.In respect of the 1^st charged offence the drawer of the cheque was Huntsman Petrochemical Corporation (“Huntsman”), the payee was Unit Gas Transmission Company (“Unit Gas”), the cheque was dated 30 August 1999 and was made out in an amount of US$1,257,623.  It was drawn on Huntsman’s account with Mellon Bank in the United States and was presented to Citic in Hong Kong on 5 October 1999.  It was banked into a current account opened with Citic on 29 September 1999 in the full name of Unit Gas.  That company had been registered as a business in Hong Kong some two weeks earlier on 14 September 1999 but had no connection with the United States company of the same name.  On 19 October 1999, the cheque was cleared through the international banking system and its Hong Kong dollar equivalent of $9,762,650 was credited to the Unit Gas account with Citic in Hong Kong.  Over the next month virtually all of those funds were withdrawn from that account.

11.The 2^nd charged offence involved a cheque in the sum of US$963,473 drawn by the Ford Motor Company USA (“Ford”) in favour of Coral Energy Resources LP, USA (“Coral Energy”) and dated 20 August 1999.  It was drawn on the Ford account with the Texas Commerce Bank in the United States.

12.This cheque was also presented to Citic in Hong Kong on 5 October 1999.  It was banked into a current account which had been opened with Citic on 28 September 1999 in the full name of Coral Energy.  That company had been registered as a business in Hong Kong on 2 September 1999 but had no connection with the United States company of the same name.

13.On 28 October 1999 Citic was informed by its agent bank in the United States that the drawer of the cheque, that is Ford, had stopped payment.  That step had been taken once Ford had been informed by the genuine payee that it had failed to receive the cheque.

14.The 3^rd charged offence concerned a cheque drawn by a company Publicis and Hal Riney (“Publicis”) on its account with Mellon Bank in an amount of US$704,837 and dated 15 October 1999.  The payee was USA Networkadv (“USA Network”).  The cheque was presented to Citic in Hong Kong on 30 November 1999.  It was banked into a current account which had been opened with Citic on 26 November 1999 in the full name of USA Network.  A company by that name had been registered in Hong Kong on 3 November 1999.  That company had no connection to the payee.

15.On 22 December 1999 the cheque was cleared through the international banking system and its Hong Kong dollar equivalent of $5,472,709 was credited to the current account opened with Citic in the name of USA Network.  Over the next ten days nearly all of that sum was withdrawn.

16.The 4^th charged offence concerned members of the syndicate on 17 May 2000 in Hong Kong taking steps to register the names of three companies at the Business Registration Office.  However by that time, acting on information provided by a member of the syndicate to the Hong Kong police, undercover police officers had infiltrated the syndicate and posed as persons prepared to provide their personal details for the purpose of registering the companies with the Business Registration Office.  They there arrested D2 and brought the scheme to an end.  Other arrests, including that of D1, then followed. 

17.The prosecution case as to the role of D1 in the 1^st and 2^nd charged offences was that he had taken the two cheques, the subject of those offences, to the offices of Citic in Hong Kong and there provided a bogus explanation to the staff of Citic as to the provenance of those cheques to the effect that he worked for a company, China Ocean Helicopters Company (“China Ocean”), which was involved in a joint venture with the payees named on the cheques.  The Citic staff were aware that China Ocean was a subsidiary of their own holding company, Citic Holdings Group Ltd.

18.So far as the 3^rd charged offence was concerned, D1’s role was similar.  On 30 November 1999, D1 went to Citic together with one other individual and handed over the cheque the subject of this offence for collection.  

19.The staff he dealt with had by this time accepted that D1 worked with China Ocean and he again orally confirmed that.  He provided the Citic staff with the account number into which the funds paid in respect of the cheque were to be deposited.  He confirmed that the payee was a business partner of China Ocean.  The cheque was accepted for collection by Citic on that basis.

20.On 23 December 1999 D1 and another person returned to Citic.  By this date the cheque had been cleared and funds of HK$5.4 million had been deposited into the account of USA Network.  D1 had with him a cheque made out to cash purportedly signed and chopped on behalf of the drawer USA Network.  D1 filled in the amount of HK$3.1 million and insisted on being paid in cash.  D1 and the person with him were taken to a VIP lounge in the bank where $3.1 million in cash was paid to them.  They then left without counting the money.

21.It is obvious that on 30 November 1999 and 23 December 1999, D1 and the persons with him had been given special treatment by the staff of Citic.  That was because on 5 October 1999 the Citic staff who dealt with D1 had been introduced to him by Mr Cai, the Chief Executive officer of Citic, as an executive of China Ocean.  

22.As a result it appears that the staff of Citic were not as cautious as they perhaps should have been before allowing D1 to walk out of their bank with $3.1 million in cash.  They had not properly checked the identity of D1 or his companion.  Nor had they attempted to contact the account holder USA Network and verify the withdrawal.

23.The role of D2 in the 1^st charged offence was said to be that he had gone with another person called Siu to the Business Registration Office on 14 September 1999 for the purpose of registering the company Unit Gas.  He had accompanied Siu also to Citic for the purpose of opening an account in the name of that company.  He had provided the Citic staff with the Business Registration Certificate of Unit Gas.

24.D2’s role in the 2^nd charged offence had been on 2 September 1999 to accompany another person Wong to Eric’s Secretaries Ltd, a company which provided commercial services in the way of desk hiring, telephone and receptionist hire and mail and fax services.  D2 and Wong hired a desk in the name of Coral Energy, the name of the payee on the cheque the subject of this offence.  D2 made the subsequent rental payments for that serviced desk until February 2000 and frequently attended the hired desk in the interim to receive and make telephone calls.

25.D2’s role in the 4^th charged offence was to meet the two police undercover agents, who were PW5 and PW6 at trial, at the Business Registration Office on 17 May 2000.  PW5 and PW6 had been introduced to D2 by Siu as persons who were prepared to lend their names and personal particulars on documents to be filed with that office for the purpose of registering companies.  Unbeknownst to D2 Siu was by this time co-operating with the police.

26.D2 explained to PW5 and PW6 what they had to do, saying that their main purpose was to set up a company and subsequently to open a bank account for it, so that in a week or so overseas cheques could be deposited into that account.  After that they would simply have to draw down money from the account.  D2 gave three business registration forms to PW5 and PW6 which had each already been partly filled in with a company name and address.  The company names on the three forms were : the Minute Maid Company, Keebler company and General Electric Company.  When D2 was asked by PW5 whether a false address could be used on the form when he provided his personal particulars, D2 replied that it could.  PW5 and PW6 then went off purporting to register the companies.  When they left D2 was arrested.  Neither D1 nor D2 gave or called evidence at trial.

27.We will firstly deal with the applications concerning conviction.

28.Mr Clive Grossman, SC on behalf of D1 originally advanced five grounds of appeal but prior to and at the hearing abandoned three of them.  The remaining two can be summarized as follows :

(1)	The judge was in error in his understanding that the phrase “reasonable grounds to believe” contained in section 25(1) of the Ordinance did not require proof of an actual belief.
(2)	The judge erred in any event in finding D1 had such “reasonable grounds to believe” the cheques represented the proceeds of an indictable offence.

29.D2’s grounds of appeal advanced by Mr Raymond Chan against conviction can be stated as follows :

(1)	The judge erred in finding D2 had reasonable grounds to believe each of the cheques the subject of the charges represented proceeds of an indictable offence.
(2)	The judge was in error in rejecting and placing no weight upon D2’s exculpatory statements to the police.
(3)	In respect of the 4th charged offence, the judge erred in finding D2’s acts amounted to an attempt to deal with the proceeds of an indictable offence.

Mr Chan adopted also Mr Grossman’s arguments in support of D1’s 1^st ground of appeal so far as his own client was concerned.

D1

Ground 1

30.Mr Grossman’s argument under this ground is that the phrase “having reasonable grounds to believe” contained in section 25(1) of the Ordinance requires proof that a defendant in fact so believed.  That is, he submits that as against D1 the prosecution were required to prove both that there were reasonable grounds for D1 to believe that the cheques the subject of the charges represented the proceeds of an indictable offence, and that D1 did in fact believe that to be so.

31.In his reasons for verdict, the judge said in respect of the mental element of a section 25(1) offence that :

“

… The mens rea is ‘knowing’ or ‘having reasonable grounds to believe’.  For the latter, objective test requires proof that there were grounds that a common sense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in whole or in part represented any person’s proceeds of an indictable offence, while the subjective test requires proof that those grounds were known to the defendant.”

Mr Grossman says that is wrong because in addition a defendant must be proven to have actually believed the relevant property represented the proceeds of an indictable offence.

32.As we have said both the terms and the amendment histories of section 25(1) of the Ordinance and section 25(1) of DTROP were virtually identical, with the obvious exception that the latter Ordinance dealt exclusively with the proceeds of drug trafficking rather than of indictable offences generally.  It was accepted for the purposes of argument before us that the history and terms of the provisions of section 25(1) in each Ordinance, and the Ordinances generally, are so similar that the phrase “reasonable grounds to believe” contained in each must have the same meaning.  We agree that must be so.

33.Prior to the amendment of DTROP in 1995, the Privy Council in AG of Hong Kong v. Lee Kwong Kut [1993] AC 951 per Lord Woolf at 964, in referring to the phrase “knowing or having reasonable grounds to believe” contained in section 25(1) of that Ordinance at that time, said :

“

… the only ‘mens rea’ which the prosecution is required to establish, if mens rea is an appropriate description of the necessary mental element, is that the defendant should know or have reasonable grounds to believe that the relevant person is connected with drug trafficking.  This mental element can exist, even if the defendant does not have the required belief, if there are reasonable grounds for his holding the belief.  The offence is therefore a Draconian one.”

34.In HKSAR v. Shing Siu Ming [1999] 2 HKC 818, this court interpreted the phrase “having reasonable grounds to believe” contained in section 25(1) of DTROP to mean that a defendant was required to be proven to have known of those reasonable grounds but was not required to be proven to have possessed the actual belief.

35.Mayo JA in delivering the judgment of the court said :

“

… This phrase, we are satisfied, contains subjective and objective elements.  In our view it requires proof that there were grounds that a common sense, right-thinking member of the community would consider were sufficient to lead a person to believe that the person being assisted was a drug trafficker or had benefited therefrom.  That is the objective element.  It must also be proved that those grounds were known to the defendant.  That is the subjective element.”

and in referring to the direction given at trial :

“	No objection can be taken to the summing-up to this point.  The judge then went on to tell the jury that when considering the words ‘knowing or having reasonable grounds to believe’ they :
	‘	must distinguish keep these two things apart — believing, belief and knowledge — these are two different things.  Belief is mental element which is lesser than knowledge.  Knowledge is when you know something yourself … Belief is something less than knowledge.  So this belief, in the minds of these two ladies, in counts two and three, they must have had reasonable grounds to believe that D1 was involved in and carrying on in drug business and drug trafficking or had carried on drug trafficking, or had benefited from drug trafficking.  That is number one.’
	Here the judge was wrong as he was directing that it was incumbent upon the prosecution to prove either knowledge or belief, which he characterized as ‘something less than knowledge’, in the minds of the defendants.  The test is, in fact, not so high.  The prosecution has to prove knowledge of trafficking or that a defendant had reasonable grounds to believe that there was trafficking.  The prosecution is not called upon to prove actual belief.  It would be sufficient to prove reasonable grounds for such a belief and that the defendant knew of those grounds.”  [Emphasis added]

36.In Seng Yuet Fong v. HKSAR [1999] 2 HKC 833 this point was taken by way of application to the appeal committee of the Court of Final Appeal by one of the applicants in Shing Siu Ming but was dismissed.  In delivering the determination of the committee Litton PJ adopted the reasoning in Lee Kwong Kut and commented that section 25(1) was intentionally wide in its scope.  

37.Subsequently in the case of HKSAR v. Yam Ho Keung (unreported) CACC555/2001, this court plainly proceeded on the same basis as the principle enunciated in Shing Siu Ming in respect of section 25(1) of the Ordinance.

38.Mr Grossman argued that the previous decisions of this court in Shing Siu Ming and Yam Ho Keung and of the Appeal Committee of the Court of Final Appeal in Seng Yuet Fong were not binding upon us and that we were at liberty to re-address the matter.

39.We accept for present purposes, though as will be seen we do not have to decide the point, that while the determination of the Appeal Committee of the Court of Final Appeal in Seng Yuet Fong is highly persuasive, it is not a judgment of that court and is not binding upon us.  We are of course not bound by the decisions of this court in Shing Siu Ming and Yam Ho Keung if satisfied they are per incuriam or that they are inapplicable to the present legislation.

40.But in our view for the reasons which follow, those decisions are not wrong and are applicable to the present legislation and the meaning of the phrase “having reasonable grounds to believe” as contained in the present provisions of section 25(1) of the Ordinance is as enunciated by Mayo JA in Shing Siu Ming.

41.In attempting to convince us otherwise Mr Grossman advanced a number of arguments.

42.He firstly urged upon us that as the terms of section 25(1) had been substantially amended in 1995 the reasoning contained in Lee Kwong Kut, Shing Siu Ming and Seng Yuet Fong no longer applied so far as the present section 25(1) of the Ordinance is concerned.

43.We disagree.  Firstly, the phrase “reasonable grounds to believe” itself remains unchanged.  It is difficult to imagine that would be so if the legislature intended it to have a different meaning within the amended section.  We bear in mind in this regard that the judgment in Lee Kwong Kut was reported in 1993 and had attributed the meaning to that phrase which we have excerpted above.  That must have been known to the legislature at the time the amendments were made in 1995 and in our view by using the same phrase considered in Lee Kwong Kut it must have been the intention of the legislature to incorporate that same meaning into the phrase as it is presently contained within the amended section 25(1) of the Ordinance.

44.Secondly, the decision in Shing Siu Ming was concerned with both the pre-amended and post-amended versions of section 25(1) of DTROP, as the offences had run over the date of the change in legislation.  The judgment of the court did not distinguish any different meaning in the phrase “having reasonable grounds to believe” in the pre-amendment and post-amendment versions of the offence.  As Mr Robert Lee for the respondent pointed out, Yam Ho Keung followed the principles enunciated by Mayo JA in Shing Siu Ming and the court in Yam Ho Keung was dealing with offences committed after the amendment to section 25(1) of the Ordinance.

45.However Mr Grossman also relied upon a number of English authorities where phrases of similar wording have been interpreted as requiring, as part of the mens rea, actual belief in the subject matter of the offence.  In R. v. Samuel [1988] 1 QB 615 the Court of Appeal was concerned with section 58(1) of the Police and Criminal Evidence Act 1984 which allowed a police officer to delay an arrested person’s access to a solicitor “where he has reasonable grounds for believing” that the exercise of that right of access may interfere with the investigation of an offence.  Hodgson J in delivering the judgment of the court said in respect of that section :

“

The words of the section clearly imply that the officer does so believe.  Therefore a court which has to decide whether denial of access to a solicitor was lawful has to ask itself two questions : ‘did the officer believe?’ a subjective test; ‘were there reasonable grounds for that belief?’. an objective test.”

46.Mr Grossman understandably relies upon this statement of the law as support for his argument.  We note however that section 58(1) refers to “reasonable grounds for believing” and in that it differs from the terms of section 25(1) of the Ordinance which refer to a defendant “having reasonable grounds to believe”. 

47.We do not think that the difference is merely one of semantics.  Section 58(1) by its terms assumes that a belief is held, and requires additionally that it be based on reasonable grounds.  Section 25(1) of the Ordinance however makes no such assumption.  It merely requires that reasonable grounds to form a belief exist regardless of whether any such belief is in fact held.  In our view the different terminology used in section 25(1) was deliberate and was designed to arrive at the meaning for the phrase “having reasonable grounds to believe” stated by this court in Shing Siu Ming.

48.The House of Lords in O’Hara v. Chief Constable of the Royal Ulster Constabulary [1997] AC 286 was concerned with powers of arrest pursuant to section 12(1) of the Prevention of Terrorism (Temporary Provisions) Act 1984 which again referred to “reasonable grounds for suspecting” and in our view, for the same reasons, that case does not assist the 1^st applicant.

49.Mr Grossman relies also on the judgments in Castorina v. Chief Constable of Surrey [1996] LGR 241.  But in that case the Court of Appeal was dealing with the powers of arrest given to a police constable by section 2(4) of the Criminal Law Act 1967.  That provision is in wholly different terms to that part of section 25(1) of the Ordinance we are concerned with and was of no assistance.

50.More directly in point perhaps is R. v. Saik [2007] 1 AC 18 where the House of Lords was concerned with section 93C(2) of the Criminal Justice Act 1988 (as amended in 1993) which made it an offence to deal, in specified ways, with property which the defendant “knows or has reasonable grounds to suspect represents another’s proceeds of criminal conduct”. 

51.The defendant in that case was charged with a conspiracy contrary to section 93C(2) and was convicted on the basis that he in fact suspected the funds he dealt with were the proceeds of crime.

52.Section 93C(2) is in the following terms :

“

A person is guilty of an offence if, knowing or having reasonable grounds to suspect that any property is, or in whole or in part directly or indirectly represents, another person’s proceeds of criminal conduct, he — (a) conceals or disguises that property; or (b) converts or transfers that property or removes it from the jurisdiction, for the purpose of assisting any person to avoid prosecution for an offence to which this Part of this Act applies or the making or enforcement in his case of a confiscation order.”

53.It is apparent the section is in quite different terms to those of section 25(1) of the Ordinance and has two separate aspects of mens rea.  Firstly, it requires proof that a defendant knew or had reasonable grounds to suspect the property he dealt with was the proceeds of crime.  Secondly, it requires proof that the defendant’s purpose in dealing with that property was to assist some person to avoid prosecution for an offence.

54.The House of Lords had before it two questions certified by the Court of Appeal.  They were :

“	(1)	Can a defendant be convicted of a statutory conspiracy to contravene section 93C(2) of the Criminal Justice Act 1988 if he enters into an agreement to convert property … which he had reasonable grounds to suspect was the proceeds of crime and did in fact suspect but did not actually know was the proceeds of crime?
“	(2)	Is the objective requirement that a defendant can be convicted of an offence under section 93C(2) of the Criminal Law Act 1988 if he had reasonable grounds to suspect that the property converted etc was the proceeds of crime (without having actual knowledge or suspicion) incompatible with the subjective requirement that the activity of the defendant must be for the specified purpose of assisting another to avoid prosecution for a criminal offence or avoiding the making or enforcement of a confiscation order?”

55.The court was ad idem in its view that the substantive offence created by section 93C(2) required proof that a defendant actually suspected that the property dealt with was the proceeds of crime.  But that view was based on the particular characteristic of the section imposing the two separate aspects of mens rea.  As Baroness Hale of Richmond said at 57E–F (paragraph 102) :

“

In common with all your Lordships I agree that the substantive offence requires that the accused actually suspects that the money is the proceeds of crime.  Without that actual suspicion he cannot act with the purpose required.  I would therefore have answered the second certified question accordingly.”  [Emphasis added]

56.Lord Brown said at 58F–H :

“

108.

If indeed the section contemplated that the defendant (D) might be guilty of the offence merely because ‘he had reasonable grounds to suspect’ that the property was hot (ie, merely because objectively grounds existed which would make a reasonable person suspect that the property was hot), then certainly I would regard that as incompatible with the requirement that D also be proved to have laundered the hot property for an illicit purpose.  Plainly he could not have that illicit purpose unless subjectively he also either actually knew or at the very least suspected the property to be hot.  It is, therefore, I readily accept, necessarily implicit in the section that not only must D have reasonable grounds to suspect that the property is hot but also that he does suspect it.  That requirement, of course, presents no problem whatever in the present case : the appellant did suspect that the money he had laundered was the proceeds of crime and, indeed, he pleaded guilty (to the conspiracy count) on that explicit basis.”  [Emphasis added]

57.It can be seen from these judgments which we regard as illustrative of the reasoning of the court as a whole on this point that the interpretation of the phrase “knowing or having reasonable grounds to suspect” contained in section 93C(2) of the Criminal Law Act 1988 was based on a construction of the terms of the particular provision and is not of general application.  Saik, though at first blush of some assistance to Mr Grossman, does not in fact advance his argument.

58.One further authority should be mentioned.  In R. v. Banks [1916] 2 KB 621, the appellant had been convicted pursuant to section 5(1) of the Criminal Law Amendment Act 1885 of carnal knowledge of a girl under the age of 16.  By section 5(2) a statutory defence existed in circumstances where a defendant “had reasonable cause to believe the girl was of or above the age of sixteen years”.  The appellant argued that regardless of whether or not he believed the complainant to have been 16 or above, if reasonable grounds existed for that belief he was entitled to an acquittal.  The Court of Criminal Appeal disposed of that ground with considerable brevity contenting itself with saying :

“	In our judgment the phrase ‘had reasonable cause to believe’ means ‘had reasonable cause to believe and did in fact believe’, i.e., that the person charged believed on reasonable grounds that the girl was at least sixteen years of age.”

59.No other analysis is contained in that judgment as to how the court arrived at that conclusion, but it is true to say that any other conclusion would result in absurdity in the circumstances of that legislation.  That is because, unlike the identical phrase as it operates in section 25(1) of the Ordinance, the phrase as it was contained in section 5(2) operated purely as a defence.  To give the phrase its literal meaning would have allowed a defendant who was perfectly aware that his victim was aged less than 16 to rely on other objective circumstances so as to establish, in the face of his own knowledge of the victim’s age, the statutory defence.  Again, this case is restricted to a construction of the terms of the particular provision in the context in which it appeared and is not of general application. 

60.In our view then, the authorities relied upon by Mr Grossman did not assist his argument and did not prevent us from allowing the phrase “having reasonable grounds to believe” contained in section 25(1) of the Ordinance its plain and literal meaning.

61.Secondly, Mr Grossman relied to a significant extent on the Legislative Council’s debate during the second reading of the DTROP Bill on 12 July 1989 to support his argument that the legislature’s intention was that an actual belief by a defendant that the property dealt with by him was the proceeds of drug trafficking had to be proved in a prosecution under what was to become section 25(1) of DTROP.  Having read the excerpts from Hansard helpfully provided by Mr Grossman we are of the view that if anything, they support the contrary position that the legislature intended the phrase “having reasonable cause to believe” (as it was expressed at that time) to be interpreted in the way it was in Shing Siu Ming.

62.Mr Grossman’s final point of substance was that it has been the trend of the criminal law in recent years to do away with objective mens rea and to restore the requirement of proof of a defendant’s subjective state of mind.  He cites R. v. G [2004] 1 AC 1034.  Whether or not that is so as a general proposition it is still a matter within the remit of the legislature to determine the nature of the mens rea to be established as against an offender under a particular provision.  That is so even for serious offences.  In So Wai Lun v. HKSAR (2006) 9 HKCFAR 530 the Court of Appeal concluded, in respect of a charge under section 124 of the Crimes Ordinance of unlawful sexual intercourse with a girl under the age of 16 years, that any belief of a defendant that the girl was over that age did not provide a defence.  The offence is one of absolute liability.  Where the nature of the mens rea contained in a particular provision is clearly intended by the legislature to be of a certain sort, then subject to any overriding principle of law to the contrary, that is the construction which must be given it by the courts.

63.In the present case we are satisfied the correct construction of the terms of section 25(1) of the Ordinance is as stated in Shing Siu Ming in respect of section 25(1) of DTROP, and there is no reason to infer into the phrase “having reasonable grounds to believe” the additional element of actual belief for which Mr Grossman argued.

64.This ground fails.

Ground 2

65.Mr Grossman argues that in any event there was insufficient evidence to establish a factual background from which it could be inferred that D1 had reasonable grounds to believe the cheques represented the proceeds of an indictable offence.

66.The evidence at trial accepted by the judge clearly established in respect of the three cheques handled by D1 that, in respect of each of them, the payee :

(1)	did not operate a bank account in Hong Kong;
(2)	did not authorize anyone, including D1, to deposit the cheques in Hong Kong;
(3)	had no dealings with D1;
(4)	had not registered a business in Hong Kong; and
(5)	had no joint venture with any Chinese company or any Chinese male at the relevant times.

67.The judge after summarizing in some detail the evidence relevant to D1’s role in the presentation of the three cheques said this :

“	85.	… one could readily see the scheme was that when a foreign cheque was in hand, someone would register a company in the same name of payee and open a bank account in that name.  The 1st defendant was responsible to get ways to present these foreign cheques to the bank, while the 2nd defendant played the role of actively assisting in passing BR documents as well as company cheque and chop transfer.  The 2nd defendant also played the role of doing secretarial service for such company and, finally, when the cheque was honoured, substantial sums of money would be withdrawn. …
		…
	89.	… For the 1st defendant, the circumstances of presenting the cheque to bank staff was not normal; the amount was substantial; it was a foreign cheque.  Instead of going direct to the bank counter for a simple, straightforward deposit, the 1st defendant chose to contact very senior staff at the bank.  The 1st defendant was not the payee, yet he knew that payee had bank account in Ka Wah Bank.  He even said the payee had joint venture with his company.  On another occasion, the cheque was suddenly passed by the 1st defendant to another senior staff for deposit at the end of a meeting, and the 1st defendant simply departed and said he had to meet CEO of the bank.  The 1st defendant this time said the endorser was his business partner, and the sum was for a joint venture of China upon inquiry.  No doubt, the circumstances were sufficient to lead a person to believe that the cheque did, in whole or in part, represent any person’s proceeds of an indictable offence.  Further, judging from the 1st defendant’s conduct and acts, from what he said and did to the bank staff in different occasions, I am sure those grounds as aforesaid were known to him.  Particularly, there is no evidence to contradict, undermine or explain the evidence led by the prosecution.”

68.That was a broad statement of the evidence against D1.  The judge was aware of other details which added considerable flavour to that evidence.  For example, on 30 November when D1 had arranged a first meeting with PW10, a senior manager of Citic’s Enterprise Services Department, he had provided her with the cheque issued by Publicis in favour of USA Network in the amount of US$704,837.00, endorsed with a forged endorsement, and told her the endorser was a business partner of his and the amount shown was to go to the joint venture in China. 

69.Given the earlier evidence accepted by the judge that was for all practical intents and purposes, a direct lie.

70.On another occasion D1 and another person came to PW10’s office at the bank and presented a cash cheque in the amount of HK$3.1 million drawn on the Citic account opened in the name of USA Network signed by the authorized signatory of that account, a person “Gozi” who was one of the syndicate members.  D1 wished to withdraw physical cash rather than have the funds transferred.  D1 and the other person were taken to the VIP room in the bank where, after a teller asked for the cheque to be endorsed, the cash was delivered to D1 and he and the other person then left without counting it.

71.D1 had commenced his relationship with Citic by, in some way unexplained on the evidence, convincing its chief executive officer, Mr Cai, that he was an executive with China Ocean which was, like the bank, a subsidiary of the same holding company, Citic Holdings Group Ltd.

72.He presented himself as a high profile businessman, with the cheques he presented to the bank being incidental to his business.  He had presented a proposal involving the building of a large scale light railway infrastructure on the mainland when he first met PW10.  That project never reached fruition.  The documents he presented to the bank, later seized by police, set out one of the parties to the project as having an address in Hong Kong.  The judge had earlier dealt with that aspect of the evidence in his reasons for verdict.  He said :

“

71.

… In P28, Party B to the agreement was Hong Kong On-Hope Investment Limited at 22nd Floor, Bank of China Tower, 1 Garden Road, Hong Kong, and the representative was Lam Chiu-shun.  However, in fact, the whole 22nd Floor was occupied by Messrs Koo & Partners since 1993, and they had never sub-let nor allowed the said On-Hope Investment Limited and/or Hong Kong On-Hope Investment Limited to use the said address.  Lam Chiu-shun was also not known to Messrs Koo & Partners.”

73.On the basis of all of this the judge was entitled to find that D1 must have known that there was something fundamentally wrong with the background of the cheques he was dealing with.  The judge concluded for good reason that D1 was a member of the syndicate formed to deal with these cheques.  On the basis of all of the facts found by the judge, we are of the view that there was sufficient to found an irresistible inference that D1 was aware of reasonable grounds to believe the cheques represented the proceeds of an indictable offence.

74.Mr Grossman raised at some stage the argument that it had not been established that D1 was not a director of China Ocean as he said he was, and that if he were it would have been impossible for him to have become involved in this fraud as he would inevitably have been discovered.  It is sufficient to say that there was no evidence before the court as to whether D1 was or was not connected with China Ocean, a Chinese company.  Nor was there any evidence from Mr Cai the head of Citic in Hong Kong.  Whatever the reasons for that, Mr Grossman’s submission in this regard amounts to little more than speculation.

75.Finally, Mr Grossman criticized that part of the judge’s findings set out above where he referred to there being “no evidence to contradict, undermine or explain the evidence led by the prosecution”.  He argued that to be an application of the principle in Li Defan v. HKSAR [2002] 5 HKCFAR 320 in circumstances where it was not appropriate to do so.

76.Firstly, the judge’s comment was not an application of the principle in Li Defan for which that case is often cited.  That principle as articulated by Lord Hoffman NPJ is to the effect that in exceptional circumstances it is permissible for the tribunal of fact to go beyond what is in the standard Judicial Studies Board direction and consider that the prosecution case on a particular issue relevant to guilt is strengthened by the absence of the accused from the witness box.

77.But the trial judge’s comments do not go that far and in fact repeat the Judicial Studies Board standard direction.  As Bokhary PJ said in Li Defan in respect of the same phrase criticized by Mr Grossman in the present case, those words are “unexceptionable on any view of the applicable principles”.

78.This ground must fail also and D1’s application for leave to appeal against conviction is dismissed.

D2

Ground 1

79.Mr Chan also argues that there was insufficient evidence to establish facts sufficient to ground the judge’s finding that D2 had reasonable grounds to believe the cheques represented the proceeds of an indictable offence.

80.The judge summarized the evidence he accepted against D2 which, broadly, firstly consisted of admissions made by him in the course of a video recorded interview in which he said that he instructed the person Siu to open a bank account (Siu was the authorized signatory of the Unit Gas account), helped him collect money from that account and thought that the money coming into the accounts “may have been appropriated”, thought it a “bit unhealthy”, but nevertheless received $40,000 for his reward; secondly, his role in setting up a secretarial service for Coral Energy, one of the companies registered in Hong Kong in the names of the payee of the cheques, and thirdly the evidence of the undercover police officers PW5 and PW6 who had received instructions from him as to registering a company in Hong Kong for the purpose of the reception of overseas cheques.  He had told PW5 and PW6 that it was alright to use false particulars in doing so.

81.The judge said this of D2 in his reasons for verdict :

“	90.	… For the 2nd defendant, he admitted his involvement, especially regarding the setting up of Unit Gas and the opening of bank account, where he also actively assisted in passing BR documents, cheque book and company chop.  He knew that it was improper and chose not to be the licence holder, and he also found the money of improper nature.  The 2nd defendant said he still helped in because, as he had been unemployed for over a year, his mentality would neglect to take precautions against external temptation, and he did obtain reward for money by playing his role.  The 2nd defendant said he dared not to do illegal act nor knowing money involved was ‘black money’, but this is not worth believing.  His exculpatory explanation in the statement was not made nor repeated under oath, and it had not been tested under cross-examination.
	91.	The 2nd defendant then further actively assisted in Coral Energy, as said by PW3 and 4, of his attendance.  He was seen to be with Wong to hire desk, and he further requested not to mention anything about him.  Moreover, the 2nd defendant also told undercover agents the whole scheme and asked them to register three other companies.  With his knowledge and acts, the 2nd defendant was surely doing more than the preparatory act in relation to the said three other companies.  Likewise, I am sure that the 2nd defendant did take part in the whole plot, and the circumstances were sufficient to lead a person to believe the cheque deposited did, in whole or in part, represent any person’s proceeds of an indictable offence.  Further, judging from the 2nd defendant’s conduct and acts, from what he did and took part in the different occasions, I am sure those grounds, as aforesaid, were known to him.  There is also no evidence to contract, undermine or explain the evidence led by the prosecution.”

82.It is quite plain in our view that the judge carefully assessed the evidence he accepted against D2 and that evidence clearly established facts which were more than sufficient to ground the inferences drawn by him regarding D2’s role in the offences the subject of Charges 1 and 2.  Mr Chan’s complaint in this regard cannot succeed.  

83.Mr Chan also complains that the judge in finding that D2 was a part of the whole “plot” was in error.  We do not think so.  It must have been obvious to D2 that he was merely one of a number of people who were involved in an overall scheme of obtaining cheques from overseas, opening bank accounts in the names of the payees of those cheques, setting up a secretarial service to give those companies some apparent substance so as to ultimately obtain the funds represented by those cheques.  His role in the plot may have been limited but the overall nature of the scheme was plainly before him.

Ground 2

84.Complaint is made of the judge rejecting some parts of D2’s video recorded interview which were exculpatory.

85.It is trite law that a tribunal of fact may attach what weight it thinks fit to the exculpatory parts of a “mixed” statement.  See R. v. Sharp [1988] 1 WLR 7.

86.Mr Chan however says that it was wrong for the judge to reject the exculpatory parts of D2’s mixed statement “for the reason that the exculpatory explanation was not made under oath nor had been tested under cross-examination”.  

87.But that is not in its context, what the judge said.  The failure of D2 to give evidence was simply a matter which went to the weight of the exculpatory parts of D2’s statements to the police.  The fact that exculpatory statements, which amount to a defendant’s case, cannot be tested by cross-examination is one matter which a tribunal of fact is entitled to take into account.  In Sharp the House of Lords specifically approved of the following passage in the judgment of Lord Lane CJ in R. v. Duncan 73 Cr.App.R. 359 at 365 :

“

Where a ‘mixed’ statement is under consideration by the jury in a case where the defendant has not given evidence, it seems to us that the simplest, and, therefore, the method most likely to produce a just result, is for the jury to be told that the whole statement, both the incriminating parts and the excuses or explanations, must be considered by them in deciding where the truth lies.  It is, to say the least, not helpful to try to explain to the jury that the exculpatory parts of the statement are something less than evidence of the facts they state.  Equally, where appropriate, as it usually will be, the judge may, and should, point out that the incriminating parts are likely to be true (otherwise why say them?), whereas the excuses do not have the same weight.  Nor is there any reason why, again where appropriate, the judge should not comment in relation to the exculpatory remarks upon the election of the accused not to give evidence.”  [Emphasis added]

88.There was nothing inappropriate in the judge making the comment which he did.  It was a matter of common sense.  The judge was not inferring from D2’s failure to give evidence that the exculpatory parts of his statements to the police were untrue as Mr Chan’s arguments suggested.  He was simply taking into account that the exculpatory statements were untested in cross-examination. 

89.This ground must fail.

Ground 3

90.In respect of the 4^th charged offence, the judge said in his reasons for verdict :

“

95.

For Charge 4 against the 2nd defendant, a charge for attempt, by preparing the BR forms for three other companies stated in the charge, asking the undercover to register, knowing the whole plot where foreign cheques would be deposited and money be withdrawn for reward, the 2nd defendant had clearly been doing more than a preparatory act to attempt to commit the offence.  The prosecution has also proved this charge beyond all reasonable doubt. …”

91.Mr Chan suggests that the acts of D2 in having PW5 and PW6 register companies in the names of payees of cheques were acts merely preparatory, and no more, to the commission of a section 25(1) offence in respect of those cheques once they were obtained.  

92.We agree.  There was no evidence concerning those cheques before the judge.  There was no evidence they had yet been stolen or otherwise obtained.  There was no evidence who the drawer was, or indeed any direct evidence whether at that time they had come into existence at all.

93.In our view there was insufficient evidence before the court to establish beyond doubt that the acts of D2 in setting up companies in the names of foreign companies D2 may have thought to be payees of cheques went beyond mere preparation for an eventual dealing with those cheques.  It is sometimes a difficult task to draw a line of demarcation between acts which are merely preparatory to the commission of an offence and acts which go further and amount to an attempt : see R. v. Geddes (1996) Crim.L.R. 894 (and the commentary thereto).  But in the present case, where there was no evidence the cheques had yet been stolen or obtained, we cannot see how D2’s act could be categorised as other but preparatory.  This ground succeeds.

94.Accordingly D2’s applications for leave are dismissed except that we treat his application for leave to appeal against his conviction on the 4^th charge as the appeal, allow the appeal and quash his conviction in respect of that charge and set aside his sentence in relation to that offence.

SENTENCE

95.D1 was sentenced to five years’ imprisonment on each of Charges 1, 2 and 3.  Those sentences were ordered to be served wholly concurrently.  The totality of sentence was therefore five years’ imprisonment.

96.Mr Grossman makes a number of complaints against the individual sentences and their totality.  He argues firstly that the sentences were disproportionate to the role played by D1, and suggests that role was relatively minor.

97.The judge after summarizing the scheme of fraud as a whole said this about D1’s role :

“

14.

I found that the 1st defendant did play a significant role in this plot.  Very senior staff of the bank were contacted where the 1st defendant also disguised by putting forward another substantial project.  But, at the same time, passing the cheques to these senior staff to deposit into the bank.  No doubt, the counter staff or teller would then only make inquiry to these senior staff and eventually leading that these cheques be accepted by the bank.  It was clearly different from a simple straightforward counter deposit.  This was a premeditated and well-planned scheme.  At the very least, HK$3.1 million had been withdrawn by D1 and other persons. …”

We agree with those comments and given the sums of money represented by the cheques D1 dealt with we do not think any criticism can be made of the individual sentences imposed by the judge.  Indeed, though we do not propose to interfere, we think the judge to have been somewhat lenient in ordering that the sentences run wholly concurrently.  There were three discrete offences and sentences which ran partly consecutively would have been entirely justified.

98.Mr Grossman argues that the judge wrongly assumed D1 benefited in the whole amount of $3.1 million withdrawn by him and another from the Citic account in the name of USA Network on 23 December 1999.  But the judge said in that regard simply that D1 and another person had withdrawn that sum of money.  That was no more than a statement of the role played by D1.  It did not carry the import attributed to it by Mr Grossman.

99.Complaint is made of the judge not allowing sufficient weight to the delay in bringing D1 to trial.  These offences were committed in the second half of 1999 and into May of 2000 when D1 was arrested.  D1 and D2 went to trial in August 2005.  We have had placed before us the affidavit of Catherine Shuk Yiu Fung, Senior Government Counsel setting out the chronology of events following on from the arrest of D1.

100.The primary cause of the delay in prosecuting D1 (and D2) comprised the original unavailability of six American witnesses and the eventual obtaining of their evidence in various states of the United States by way of letters of request.

101.We accept that the delay in the prosecution of D1 and D2 can be accurately characterized as systemic in nature and primarily due to the international dimension of the fraud itself.  In our view, the judge correctly so characterized it when he said :

“

15.

For the factors of the lapse of time, it is quite clear that it was because the American witnesses were involved; American depositions had to be obtained; and that the scheme was no simple one.”

Although the judge did not then go on to clearly state what discount he allowed for delay as a mitigating factor, we are satisfied that the sentences eventually imposed after trial were of a level to properly reflect the factor of delay.

102.The application of D1 in respect of sentence is dismissed.

D2

103.D2 was unrepresented in his application in respect of sentence.  His home-made grounds of appeal plead his need for money, the small role he played and that he had been led into the offences by others.  But even having quashed his conviction regarding the 4^th charged offence we are nevertheless of the view given his role in the scheme of fraud, which we accept to be a degree less in culpability than that of D1 but which was still important to the success of the scheme, that the sentences imposed upon him in respect of the remaining 1^st and 2^nd charged offences should be maintained.  We do not propose to interfere with the judge’s order that those sentences be served concurrently, if only to maintain a proper proportionality of sentence between him and D1 which reflects their different roles in these offences.  Accordingly, his application regarding sentence in respect of the two remaining offences for which he stands convicted is dismissed.

Mr Robert S.K. Lee, SADPP of Department of Justice, for the Respondent

Mr Clive Grossman, SC and Ms Kelly Chan, instructed by Messrs Tsang, Chan & Woo, for the 1^st Applicant

Mr Raymond W.S. Chan, instructed by Messrs Eddie P.L. Law & Co., as assigned by DLA, for the 2^nd Applicant (On Conviction)

The 2^nd Applicant, in person (On Sentence)