HKSAR v. Hui Yat Sing and Another

CACC 29/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 29 OF 2007

(ON APPEAL FROM DCCC NO. 660 of 2005)

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Before:   Hon Stuart-Moore Ag CJHC, Yeung JA and McMahon J

Dates of Hearing: 3 June 2008

Date of Judgment: 3 June 2008

Date of Reasons for Judgment: 13 June 2008

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REASONS  FOR  JUDGMENT

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Stuart-Moore, Ag CJHC (giving the reasons for judgment of the Court):

Background

1.The applicants, Hui Yat-sing (D1) and Wong Suet-mui (D2) are husband and wife.  On 18 January 2007, they were convicted following their trial in the District Court before Judge Geiser on a charge of conspiracy to deal with property known or reasonably believed to represent the proceeds of an indictable offence, contrary to section 159A of the Crimes Ordinance, Cap. 200, and section 25 of the Organized and Serious Crimes Ordinance, Cap. 455.  They were each sentenced on 19 January 2007 to 6½ years’ imprisonment.

2.D1 and D2 sought leave to appeal against conviction and D2, in addition, sought leave to appeal against her sentence.   At the conclusion of the proceedings on 3 June 2008, we dismissed all of these applications and we now give our reasons for so doing.

3.Mr Paul K N Wu, on behalf of the applicants, has provided us with a synopsis of the case which Ms Charlotte Draycott SC, for the respondent, has assured us correctly sets out the general background and facts of the case.  We propose, therefore, to adopt some of Mr Wu’s very helpful overview.

4.The conspiracy alleged against the applicants, as set out in the particulars of the offence, was that:

“… between 1 September 1995 and October 2001, in Hong Kong, they conspired together and with Hui Yat-fai also known as Xu Chao-fan, Yu Wing-chung, also known as Yu Zhen-dong, Hui Kit-shun also known as Xu Guo-jun, Liang Shu-xiang, Kwong Wa-po, Cheong Kin-wah and other persons unknown, knowing or having reasonable grounds to believe that property, namely sums of money or their equivalent, in whole or in part, directly or indirectly represented the proceeds of an indictable offence, to deal with the said sums by inter alia:

(a)  remitting them directly or indirectly to casinos or their accounts maintained in those casinos;

(b) buying and selling real property;

(c)  applying them as salaries or expenses for the company named Land Galaxy Limited;

(d) transferring them to Va Mei Mao Iek Gong Si and remitting the said sums back to Hong Kong;

or otherwise handling them in bank accounts maintained in the name of Ever Joint Properties Limited, Yau Hip Trading Company Limited or in the names of other companies under the control of the said Hui Yat-sing and Wong Suet-mui or bank accounts maintained in their own names or the names of other conspirators.” (Appeal bundle p. 2)

5.The aliases used by three of the co-conspirators, Hui Yat-fai, Yu Wing-chung and Hui Kit-shun, respectively, were false.  They were referred to at trial as Xu Chaofan, Yu Zhendong and Xu Guojun.  They were employed by the Bank of China (BOC) in Kaiping.  Xu Chaofan (a first cousin of D1) became the general manager of the Kaiping branch in 1992 and remained there until August 1998 when he was succeeded by Yu Zhendong who remained in the position until June 2000 when Xu Guojun took over the position until October 2001.  However, in 2001, all of these past general managers fled to Canada via Hong Kong when an audit threatened to expose them as having taken billions (in Hong Kong dollars worth) from the bank.  The money had been channelled through the accounts of companies which D1 and D2 controlled as well as through their personal accounts and through the accounts of Xu Chaofan’s brother-in-law, Kwong Wa-po.

6.There was no challenge at trial that there had been theft on a grand scale from BOC.  The flow of the stolen money into various company and private accounts was also not challenged.  This was set out in charts prepared by a forensic accountant, Mr Grimsdick.  The judge summarised the central issue in the case as having been “the state of mind of the defendants at the material time and the conclusions that Mr Grimsdick [came] to as a result of his detailed analysis”.

7.The companies in Hong Kong which were alleged by the prosecution to have been the vehicles used to launder a large proportion of the stolen proceeds were Ever Joint Properties Limited (EJP) and Yau Hip Trading Limited (Yau Hip Trading).  EJP was set up in 1992.  Throughout the time covered by the conspiracy charge, D1 and D2 were directors of EJP as well as signatories of the company’s bank account.  D1 was effectively the managing director and D2 was the deputy general manager although she was primarily responsible for the day-to-day running of Yau Hip Trading.  Both of these companies participated in investment and fund movements of money coming from the Kaiping branch of BOC.

8.The remaining co-conspirators had readily identifiable roles.  Liang Shuxiang was in charge of two Mainland companies which received loans from BOC Kaiping and later transferred the funds to EJP in Hong Kong.  Kwong Wa-po deposited large sums from BOC Kaiping into Macau casinos.  Cheong Kin-wah gave evidence under immunity.  He operated the company, referred to in the particulars of the charge, Va Mei Mao Iek Gong Si, and was asked by D1 during February 1999 to receive $48 million from Hong Kong.  Subsequently, he obtained three bank drafts each for $16 million issued in favour of Hui Yat-fai, Hui Kit-shun and Yu Wing-chung (the false names used by those conspirators).  The other name identified in the particulars of the charge, Land Galaxy Limited, was set up by the three past general managers at the Kaiping branch of BOC to enable them to receive substantial salaries from EJP.

9.In short, the case for the prosecution was that Xu Chaofan, Yu Zhendong and Xu Guojun (“the three managers”) had embezzled an enormous sum of money from BOC Kaiping.  The total value of all receipts by EJP was HK$6.4 billion over a period of 74 months between September 1995 and October 2001 when the three managers were variously in charge of BOC Kaiping.  The money stolen from BOC Kaiping was channelled through the accounts of companies controlled by D1 and D2, primarily EJP and, to a lesser extent, Yau Hip Trading, as well as through the personal accounts of D1, D2 and accounts of Kwong Wa-po.  This money was remitted to Hong Kong by means of false information purporting to show, for example, loans made to intermediary companies when no genuine business existed between these intermediaries and EJP.

10.The three managers, D1 and D2 applied the money stolen from BOC Kaiping to deal in properties, shares, index futures and foreign exchange.  The three managers also gambled in casinos in Australia and the United States by using the stolen money.

11.The main prosecution witness apart from Mr Grimsdick, a forensic accountant, was Yu Zhendong who gave evidence for the prosecution pursuant to a Letter of Request issued by the High Court in Hong Kong.  He stated that the purpose of setting up EJP was that the three managers as well as D1, D2 and others involved in the scheme, would be able to share in any profits.  He was the only prosecution witness who stated that D1 and D2 had actual knowledge of the tainted nature of the money with which they were dealing.

12.In October 2001, following a change in the structure providing for the transfer and remittance of funds and BOC’s centralization of information management, discrepancies were found in the accounting books of BOC Kaiping.  On 13 October 2001, BOC’s auditors examined the accounting records for that branch and found that a huge sum of money had been stolen.  On the same day, the three managers failed to attend work.  Instead, they fled to Hong Kong using Hong Kong identity cards to gain entry.  On 15 October 2001 they left Hong Kong for Canada.

13.In the investigation which followed, Mr Grimsdick provided expert evidence that, on examination of the documents retrieved from EJP and Yau Hip Trading, the bank accounts and trading accounts of D1, D2 and Kwong Wa-po were used as conduits for fund movements and he concluded that over the 74-month period covered by the alleged conspiracy, there were extremely large fund flows through EJP’s bank accounts (HK$6.4 billion) which were unrelated to its business operations.  Thus, EJP was being used as a conduit for fund movements that had no valid commercial basis.  Whilst D1 and D2 did not challenge the factual basis of Mr Grimsdick’s analysis, his conclusions were disputed by them.

Defence case

14.None of the banking documents produced by the prosecution was challenged by the defence and much of the formal evidence was introduced at trial by way of admitted facts.  D1 attended four video-recorded interviews held, respectively, on 17 October 2001 (1^st interview), 18 October 2001 (2^nd interview) and 20 October 2001 (3^rd and 4^th interviews).  D1 made no admissions as to knowledge of the tainted nature of the funds from BOC Kaiping.

15.The central issue raised by D1 and D2 at trial was their state of mind at the material time.  Both gave evidence.  In essence they claimed that they believed that EJP was a “window company” of BOC Kaiping in Hong Kong, that they acted upon instructions of the three managers whom they trusted and that they did not know and had no reason to believe that the three managers had been acting fraudulently during the period covered by the charge.  They did not know, they said, that the three managers had embezzled BOC Kaiping’s money and they denied the allegations made against them by Yu Zhendong.

Judge’s assessment

16.The judge accepted and relied upon the evidence of both Yu Zhendong and Mr Grimsdick.  He found that:

“112.   If the evidence of Mr Grimsdick is to [be] accepted, and I have accepted it, it must be the case that bearing in mind the backgrounds of both defendants and the positions that they held in EJP, that they must, at a minimum, have reasonably suspected or believed that the huge amounts of money they were undoubtedly dealing with, and which was flowing in and out of their accounts and the accounts of EJP, had not been legitimately obtained.” (Emphasis added)

The italicised words were heavily criticised by Mr Wu in his 2^nd and 3^rd grounds of appeal.

17.However, as the judge went on to say, the evidence did not stop there.  D1 and D2 were “fully aware” of the large-scale embezzlement of funds from BOC Kaiping by the three managers.  This finding was made in the light of the evidence of Yu Zhendong who had given evidence about a dinner in Tsim Sha Tsui attended by D1 and D2 when the whole scheme to set up EJP was proposed by Xu Chaofan.  The admissibility of Yu Zhendong’s deposition, made pursuant to a Letter of Request, was the subject of the 1^st ground of appeal.

Grounds of appeal

18.Mr Wu, as we have indicated, raised a total of three grounds of appeal.  The first, which attacked the admissibility of Yu Zhendong’s deposition, amounted to a submission that, because of defects in the procedure adopted by the Mainland court, the proceedings in which Yu Zhendong’s deposition was taken amounted to a nullity.  The second ground criticised the basis of the judge’s conclusions which led him to convict because, it was submitted, the judge applied, or may have applied, an incorrect test.  The third ground was that, having applied the wrong test, insufficient consideration was given to the evidence of the applicants about various important aspects of their defence.

19.We shall deal with each ground in turn.

(1) Admissibility of Yu Zhendong’s deposition

20.In an attractively presented submission which went straight to the points he wished to make, Mr Wu made it clear to us that he was not suggesting that any suggested procedural irregularity under the 1^st ground had created any unfairness to D1 and D2.  To the contrary, he accepted that no unfairness whatsoever had been caused by the manner in which Yu Zhendong’s deposition was taken.

21.The 1^st ground of appeal was that the taking of Yu Zhendong’s deposition in Jiangmen pursuant to a Letter of Request dated 17 February 2006 issued to the Intermediate People’s Court in Jiangmen (the ‘Jiangmen Court’) was “irregularly and/or invalidly instituted and conducted for reasons set out below and thus the judge wrongly admitted the deposition”.  Detailed particulars of this ground were set out in paragraphs (a) to (e) as follows:

“(a)    The letter of request specified that Yu Zhendong to attend for examination and to produce documents before such person appointed by the Intermediate People’s Court in  Jiangmen according to its procedure who is competent to take the testimony of Yu Zhendong.  By this stipulation the examiner should be properly appointed by the Jiangmen Intermediate People’s Court according to its procedure.  However the Vice-President of Jiangmen Court (Judge Sham) declined to appoint any competent person from the Jiangmen Court to take a presiding role.  Instead the Jiangmen Court would simply provide a court official to witness the proceedings and asked the Hong Kong Court to provide a judge of its own to attend as the examiner.  Consequently on the application of the Secretary of Justice, Mr Justice Lunn on 10/5/2006 appointed HH Judge Geiser (who had already be[en] designated to be trial judge in the Hong Kong proceedings) as the examiner.  There is a dearth of evidence or proper evidence in respect of : (i) the formal / proper appointment procedure of an examiner by the Jiangmen People’s Intermediate Court and (ii) whether such appointment by the Jiangmen Court can be delegated to the Hong Kong Court according to any of the regulatory rules / provisions of the Jiangmen Court.  In the premises there is no evidence or proper evidence to show / prove that HH Judge Geiser’s appointment to preside as examiner in Jiangmen Court was proper / valid and thereby there is no evidence or proper evidence to show / prove that the examination of Yu Zhendong was properly / validly conducted.

(b) The letter of request requested that the examination of Yu Zhendong be made under oath and adjudicated by the Intermediate People’s Court in Jiangmen.  Proceedings adjudicated by the Intermediate People’s Court in Jiangmen must mean that the proceedings be adjudicated / regulated by a properly / validly appointed examiner in accordance with the procedural rules and the law of evidence of the Court of the People’s Republic of China.  However the proceedings in Jiangmen were conducted / regulated by HH Judge Geiser by adopting the procedural rules and the law of evidence of the Hong Kong Court.

(c) The letter of request required that Yu Zhendong be examined under oath.  The Jiangmen Court does not have any provision for a witness either to swear or affirm.  The Jiangmen Court, however, did not object that Yu Zhendong would confirm before giving evidence that he would say the whole truth.  At the commencement of the Jiangmen proceedings Yu Zhendong was directed by HH Judge Geiser (as the examiner) to affirm according to the Hong Kong Court affirmation formality.  However there is no evidence / no proper evidence that the Jiangmen Court can lawfully and properly regulate its rules and procedure to suit the requirement set by the requesting court (ie Hong Kong Court) in the letter of request.

(d) Section 77E(2) of the Evidence Ordinance, Cap 8 stipulates that an order made under Section 77E in respect of a letter of request shall specify the evidence to be obtained.  This is a mandatory provision.  However neither the order of Deputy Judge Toh dated 10/2/2006 ordering the issue of the letter of request nor the subsequent letter of request dated 17/2/2006 specified the evidence to be obtained.  Thus letter of request was invalidly issued.

(e) Further it cannot be implied from the provision of Section 77E that Hong Kong criminal proceedings and examination of a witness conducted in a jurisdiction outside Hong Kong pursuant to a letter of request can and/or should be presided by the same Hong Kong judicial officer.” (Emphasis added)

22.The defence took a preliminary issue at trial that Yu Zhendong’s deposition was inadmissible.  The points raised were the same as those taken in these proceedings.  In addition, the defence arguments at trial had been foreshadowed in a letter to the Department of Justice, dated 17 May 2006, from the solicitors acting for D1 and D2 which, in so far as it is relevant to this ground of appeal, stated:

“Under the terms of the aforesaid Letter of Request the witness should be examined ‘under oath’.  We take note that paragraph 3(4)(b) of the Summary of Meetings recorded that ‘there will be no swearing/affirmation’ when Mr Yu Zhendong (Mr Yu) testifies.  In this regard your attention is drawn to the judgment of Liu Sung Wai v HKSAR (FACC No.2 of 1998).

Under the present arrangements the Jiangmen Court is only providing the venue and procuring the attendance of Mr Yu in the Letter of Request Proceedings.  The examiner is HH Judge Geiser.  Prosecuting counsel and defence counsel will respectively lead evidence and cross-examine Mr Yu.  We are of the view the present arrangements are no longer truly Letter of Request Proceedings under Section 77E of the Evidence Ordinance.  We hence put on record that by agreeing to participate in the proceedings held in Jiangmen Court does not preclude our clients from taking issue with any irregularity of the captioned Letter of Request Proceedings and the admissibility of the deposition of Mr Yu at the trial.

We should also be grateful if you would take note that our clients wish to be informed of any further Letter of Request Proceedings application to the High Court by you so as to enable them to participate in the hearing(s).”

23.The person with responsibility in Hong Kong for making the arrangements for the Letter of Request proceedings to be held in the Intermediate People’s Court in Jiangmen, Guangdong Province, was Catherine S Y Fung whose affidavit, dated 10 October 2006, was also before the trial court.  She is a Senior Government Counsel attached to the Department of Justice.  The procedure she adopted was pursuant to the procedure set out in section 77E of the Evidence Ordinance, Cap. 8, the relevant parts of which provide:

“(1) Where it appears to the Court of First Instance that any criminal proceedings-

(a)   have been instituted in Hong Kong; or

(b)  ……

the Court of First Instance may order that a letter of request shall be issued and transmitted in such manner as the Court of First Instance may direct to a court or tribunal specified in the order and exercising jurisdiction in a place outside Hong Kong, requesting such court or tribunal to assist in obtaining evidence for the purposes of those criminal proceedings.

(2)   An order under this section shall specify the evidence to be obtained and, in the case of evidence to be obtained-

(a)   by the examination of any person as a witness, the name and particulars of such person or such other particulars by reference to his office or employment as may be sufficient to ascertain his identity; or

(b)   by the production of any document or thing, the nature of such document or thing or a description thereof.

(3)   An application to the Court of First Instance for an order under this section may be made ex parte supported by affidavit-

(a)   in respect of criminal proceedings referred to in subsection (1)(a), by the Secretary for Justice or any person charged with an offence to which such criminal proceedings relate; or

(b)   ……

(4)   A letter of request ordered to be issued by the Court of First Instance under this section shall be issued by the Registrar of the High Court (in this Part referred to as ‘the Registrar’) under the seal of the High Court in such form as may be prescribed by rules of court, or if no such form is prescribed in such form as the Court of First Instance may direct.

(5)   The power to make rules of court under section 54 of the High Court Ordinance (Cap. 4) shall include power to make rules of court with respect to this section (including the procedure to be followed) and for supplementing its provisions.

(6)   ……”

24.Mr Wu made the point, which the respondent has accepted, that up to the present time no rules have been made under section 77E(5).

25.The Registrar of the High Court issued the Letter of Request to the Jiangmen Court in respect of Yu Zhendong’s deposition on 17 February 2006.  This followed an order made on 10 February 2006 by Deputy High Court Judge E. Toh.  The Letter of Request stated, amongst other things:

“And whereas a Judge of the High Court of the Hong Kong Special Administrative Region has ordered that a Letter of Request shall be issued to the Intermediate People’s Court in Jiangmen, Guangdong Province of the People’s Republic of China requesting the Court to assist in obtaining the following:

To examine a Chinese male whose alias and the particulars pertaining under it are those appearing on his Hong Kong Identity Card which is believed to have been fraudulently obtained,

Yu Zhendong (Chinese Commercial Code: 0151-2182-2639)

Date of Birth : 3 November 1963 in the People’s Republic of China and holder of the PRC Passport No. 141262003.

Alias: Yu Wing-chung (Chinese Commercial Code : 0151-2837-1813)

Date of Birth : 29 March 1963 in the People’s Republic of China and holder of Hong Kong Identity Card No. P736629(2)

under oath in proceedings adjudicated by the Intermediate People’s Court in Jiangmen, Guangdong Province of the People’s Republic of China.

Now I, the Registrar of the High Court of the Hong Kong Special Administrative Region, hereby request for the reasons aforesaid and for the assistance of the said Court that you will be pleased to summon the said witness and such other witnesses as agents of the Secretary for Justice of Hong Kong request in writing to summons, to attend for examination and to produce the documents as aforesaid, at such time and place as you shall appoint, before such person appointed by you as according to your procedure, is competent to take the testimony of witnesses and require the production of documents.

And I further request that you shall require such witness or witnesses to be examined on oath touching the said matters in question in the presence of agents of the Secretary for Justice of Hong Kong or such of them as shall, on due notice given, attend the examination and in the presence of any agents instructed by such other persons as may be affected by this Request or such of them as shall, on due notice being given, attend the examination.

And I further request that you will permit the agents of the Secretary for Justice of Hong Kong or such of them be present to examine such witnesses as may, after due notice in writing, be produced and that you will also permit such other agents who shall be present and instructed by such other persons as may be affected by this Request to cross examine those witnesses examined on oath as may be appropriate.” (Emphasis added)

26.The italicised words included in the extract from the Letter of Request reflect the emphasis placed on those words by Mr Wu under the 1^st ground of appeal.  He pointed out that Ms Fung’s affidavit stated that it was noted at a meeting held in Jiangmen on 8 May 2006 with Judge Sham, Vice-President of the Jiangmen Court, that:

“(a)    the Jiangmen Court would not play a presiding role. They could provide a court official to witness the whole proceedings and invited us to arrange a Judge from Hong Kong to attend as the presiding judge/examiner, and

(b) there would be no swearing/affirmation, but the Jiangmen Court would have no objection if the witness was asked by counsel to confirm that what he was going to say was the whole truth.”

27.Naturally, as Ms Fung deposed in her affidavit, these two issues caused some concern and they were further explored with the Jiangmen Court.  We shall return to what was eventually arranged in due course.

28.Ms Fung also applied to Lunn J for a judge to be appointed as an ‘examiner’ in the Letter of Request proceedings.  This led to the appointment of the trial judge, Judge Geiser becoming, for these purposes, the examiner.  In fact, as we were informed by Mr Wu and by Ms Draycott, both of whom attended the proceedings in Jiangmen, the term ‘examiner’ is something of a misnomer.  Counsel for the prosecution and for the defence questioned the witness in the normal way with the assent of the Jiangmen Court.  It was not a case, as the term might imply, of the judge carrying out the examination of the witness.

29.The criticisms made by Mr Wu, effectively repeating the arguments in the court below, were, firstly, that the Jiangmen Court did not “adjudicate” in the proceedings because rulings, and the like, were made by Judge Geiser according to Hong Kong law.  Secondly, it was submitted that there was no competent examiner from the Jiangmen Court to regulate the proceedings according to its own procedure and law.  The Mainland judge who sat throughout the proceedings in Jiangmen was, Mr Wu submitted, merely a “witness” to them.  In such circumstances, it was contended that the terms of the Letter of Request had been materially breached and such irregularities rendered the deposition of Yu Zhendong inadmissible as the proceedings were effectively a nullity.  Added to this, Mr Wu submitted, thirdly, that the Letter of Request was in breach of the mandatory provision that the order (under section 77E(2) of the Evidence Ordinance) for the Letter of Request, “shall specify the evidence to be obtained”.  All that the order specified was the identity of the prosecution witness to be called without any reference to the evidence he was expected to give.  Fourthly, the Letter of Request had requested the examination of Yu Zhendong to be under oath but this was not adhered to.  Finally, under this ground, Mr Wu argued that as the proceedings in Jiangmen were separate and distinct from the trial in Hong Kong, it could not have been the legislative intent that the trial judge should also undertake the role he adopted in Jiangmen. 

30.In support of his argument, Mr Wu relied on Liu Sung-wai v HKSAR [1999] 1 HKLRD 89 to which we shall turn in due course.

31.We have read the judge’s ruling on the admissibility of Yu Zhendong’s deposition in which he commented that the meeting with Judge Sham in Jiangmen had led to a modification of the procedure originally set out.  Plainly, the taking of an ‘oath’ was inappropriate but, as Judge Geiser was right to point out, the Jiangmen Court had no objection to the witness being asked “to confirm that what he [Yu Zhendong] was going to say was the whole truth”.  In effect, therefore, the Jiangmen Court had responded positively to the Letter of Request on this issue but they required the ‘examiner’ to be appointed by Hong Kong.  For its part, the Vice-President of the Jiangmen Court, Judge Sham, appointed Madam Judge Wu who, in the words of the trial judge was to:

“… participate in the proceedings not just as a witness but also to bestow the authority of the Jiangmen Court upon the proceedings, because it was through the authority vested in her as a judge of the Intermediate People’s Court in Jiangmen that permitted these proceedings.

14. It is not without significance that Madam Judge Wu signed, together with myself, on the confirmation certificate at the completion of the deposition. … without her presence I had no power to regulate the proceedings.  She, in effect, had ultimate control over the entire proceedings.  The order of Lunn J simply gave effect to [Judge Sham] the Vice-President’s request that the authorities in Hong Kong provide an examiner to sit in Jiangmen under the authority of the Jiangmen Court.” (Emphasis added)

32.It is quite clear to us that Judge Geiser had no power to regulate the proceedings without Madam Judge Wu’s appointment to, and attendance at, the proceedings in the Jiangmen Court.  In this sense, the proceedings took place before a competent and duly appointed judge of the Jiangmen Court, the adjudicator, and Judge Geiser was there to assist as the examiner.

33.In Liu Sung-wai’s case (above) at page 94J, it was stated that:

“… Letters of request are aptly named, for such a letter is one by which a court communicates to another court its request for that other court’s assistance.  The requesting court seeks, for use within its own jurisdiction, evidence to be taken within the requested court’s jurisdiction.  And if the appropriate request is made and met, then such evidence will be obtained: (i) under the auspices of the requested court; (ii) without any violation of or affront to the requested state’s sovereignty; and (iii) by means of the requested court’s facilitates including, if necessary, its coercive powers.”

In that case, as Ms Draycott submitted, the Letter of Request was fatally flawed in that the High Court of Hong Kong had issued a second Letter of Request but the prosecution had failed to transmit this to the foreign court and, under Hong Kong law, such transmission was necessary before a deposition could legitimately be obtained.  However, evidence was then collected under the second Letter of Request.  The prosecution argued that this was a legitimate Letter of Request because, under American Law, such transmission was not necessary as the order of the American Court given under the original Letter of Request bestowed a continuing authority to take the evidence.  No evidence was forthcoming to support this assertion and the deposition, for this reason, was inadmissible.

34.Ms Draycott submitted that what was decided in Liu Sung-wai’s case was confined to its own facts and provided no authority for the proposition that every step taken by a foreign court needed to be supported by evidence that it had acted in accordance with its procedures.  Mr Wu, on the other hand, who had submitted that the Mainland procedures had not been followed, produced no evidence to that effect.

35.Ms Draycott’s contention was quite simply that the questioned examination of Yu Zhendong was part of a process of utilising the powers of the requested court which were brought to the proceedings by Madam Judge Wu.  It was not, Ms Draycott argued, necessary that the proceedings should be conducted in accordance with its own procedures relating to the rules of evidence or conduct provided there was no violation of that court’s sovereignty.  Having regard to Ms Fung’s affidavit, from which it was apparent that the proceedings were carried out in the way prescribed by the Jiangmen Court which Madam Judge Wu was there to ensure, there could not be said to have been any affront to the host court’s sovereignty.  In any event, we consider, without having heard argument on the topic, that in the absence of any evidence to the contrary we are entitled to proceed on the basis that the Mainland court acted properly and in full accordance with its jurisdiction.

36.As to the remaining points under this ground, it was contended by Ms Draycott that the precise nature of the evidence to be called was well known to the defence as the witness was clearly identified in the Letter of Request and the defence had, as Mr Wu conceded, been supplied with the witness statements of Yu Zhendong.  As to the suggestion that there cannot have been any legislative intent for the trial judge to assume the role of the examiner, it was submitted by Ms Draycott that there was nothing to suggest the contrary and, in any event, it was both sensible and preferable that the judge who was to try the case on the facts should have had the opportunity to assess the evidence first-hand.

37.The only argument put forward by Mr Wu which slightly troubled us was that, contrary to the mandatory requirement in section 77E(2) of the Evidence Ordinance, nowhere in the order made in the High Court for a Letter of Request was “the evidence to be obtained” specified.  It did not seem to us that Ms Draycott’s answer to this omission, in effect that by providing all the known details of Yu Zhendong to identify the witness who would testify, quite met the statutory requirement.  However, plainly, as Mr Wu accepted, no injustice was created by the omission and as this was a matter which was purely procedural, of form rather than any substance, the irregularity was not, in our opinion, a material one.  We pause only to comment that a reference in the High Court order to testimony on the subject matter covered by the statements already served on the parties would most adequately have remedied the situation.  This only has to be stated for the omission to be seen as a minor blemish of no consequence.

38.We consider that in regard to all the remaining arguments advanced on the respondent’s behalf, these had the advantage of reflecting common sense as well as the law in that nothing propounded by Ms Draycott appeared to conflict with section 77E of the Evidence Ordinance.  The High Court of Hong Kong had requested assistance in obtaining evidence in District Court criminal proceedings and had, with the utmost courtesy, been given total cooperation by the Jiangmen Court which permitted the hearing to proceed in the manner which had been agreed.

39.This ground failed.

Grounds 2 and 3

40.Mr Wu, in entirely separate arguments under the 2^nd and 3^rd grounds which, realistically, he accepted could only arise if the 1^st ground succeeded, submitted that:

“2. The learned Judge relied upon the conclusions of Mr Grimsdick (called by the prosecution as a forensic accountant) in finding that the Applicants reasonably suspected or believed the funds obtained from BOC Kaiping were illegitimately obtained (paragraph 112 of Reasons for Verdict) and thereby to proceed to convict the Applicants of the offence.  In reaching the aforesaid finding the learned Judge erred in law in applying the test that the Applicants had reasonably suspected or believed the funds were illegitimately obtained instead of applying the test that whether objectively there were reasonable grounds to lead a person to believe that the funds were tainted money and whether subjectively the Applicants were aware of the existence of such reasonable grounds.

3.   As the learned judge erred in: (i) applying the wrong test stated in Ground 2 above and (ii) the learned Judge failed to give any or any sufficient consideration to the evidence of the Applicants, in particular the following matters which showed / might have shown that they were not parties to the alleged conspiracy :

(a)   the Applicants’ belief that EJP was a window company of BOC Kaiping was not unsubstantiated

(b)   the Applicants kept detailed records and acted openly through normal banking channels which enable others to trace their every transaction at any point of time

(c)   the Applicants did not seek to avoid the police or take steps to leave Hong Kong when the conspirators told them that they would flee

(d)   the Applicants rendered their full assistance to the police and Bank of China when they were called upon to do so

The conviction is therefore unsafe and unsatisfactory.” (Emphasis added)

41.Although we have found that the 1^st ground of appeal had no real substance to it, we propose, nevertheless, to deal shortly with the remaining grounds.  As we set out earlier, the judge in his Reasons for Verdict had stated that having accepted the evidence of Mr Grimsdick, it had to be the case “at a minimum” that the applicants “reasonably suspected or believed that the huge amounts of money they were undoubtedly dealing with … had not been legitimately obtained”.

42.The substantive offence under consideration, contrary to section 25 of the Organized and Serious Crimes Ordinance provides that “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”.

43.Mr Wu submitted that the judge made findings about the state of mind of D1 and D2 which were adverse to them both because he had rejected their testimony that they had no knowledge and no reasonable grounds to believe that they had laundered the proceeds of crime.  Mr Wu argued that, despite this finding, the burden remained on the prosecution to prove mens rea in the context of the charge and this required a proper evaluation of the evidence.  He pointed out that McMahon J, giving the judgment of the Court of Appeal, stated in HKSAR v Ma Zhujiang [2007] 4 HKLRD 285, applying what was said in HKSAR v Shing Siu-ming [1999] 2 HKC 818, that the plain and literal meaning of the phrase “having reasonable grounds to believe” contained in section 25 of the Organized and Serious Crimes Ordinance required proof only that a defendant knew of reasonable grounds for holding the requisite belief (that the property being dealt with represented the proceeds of crime) rather than actual belief.

44.Mr Wu’s argument, in short, was that by saying that the applicants must have “reasonably suspected or believed” that the sums of money with which they had dealt were not legitimately obtained, the judge demonstrated that he had, or might have, equated belief with suspicion when a “reasonable ground to suspect” would not be enough to establish the charge.

45.In support of his argument, Mr Wu pointed to various parts of the evidence given by the applicants which revealed them to have acted openly and with integrity in the past.  Unlike others involved in this case, the applicants had not fled overseas and had provided assistance to the police when enquiries were made of them.  They had, it was suggested, kept detailed records at the EJP office and had dealt not only with BOC but many other banks and reputable financial institutions.  Possibly, it was argued, the applicants had acted recklessly but a mere suspicion about the source of the funds would not have been a sufficient basis on which to convict.

46.In reply, Ms Draycott submitted that it was plain, from the words used by the judge to describe his conclusions arising from the evidence given by Mr Grimsdick, that the only inference to be drawn was that the applicants knew full well that the funds with which they had dealt were illegitimate.  Ms Draycott submitted that the use of the word ‘reasonably’ in the phrase adopted by the judge when saying that the applicants “must at a minimum have reasonably suspected or believed” that the funds had not been legitimately obtained was a compression of the two-stage test referred to in Shing Siu-ming’s case rather than an erroneous approach to the law.

47.Shing Siu-ming’s case was cited in HKSAR v Ma Zhujiang (above at page 294) in these terms:

“34.   In HKSAR v Shing Siu Ming [1999] 2 HKC 818, this Court interpreted the phrase ‘having reasonable grounds to believe’ contained in s.25(1) of [Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405] 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)”

48.It was with this authority in mind that Ms Draycott contended that the judge in the present case had compressed the two-part test to be applied in such cases and that the judge had applied the objective test when finding that the suspicion or belief the applicants had was ‘reasonably’ based.  It was further submitted that the judge’s finding that the applicants reasonably “suspected or believed” that the money had not been legitimately obtained, incorporated their knowledge of the reasonable grounds that led to that belief or suspicion.

49.We consider that the so-called compression of the two-fold test in a case of this kind was unfortunate.  It has created an argument where none should have existed.  The evidence, as the judge recognised, was overwhelming and the applicants’ evidence, to the effect that they were unaware that the money in which they were dealing was stolen from BOC, was rejected as completely untrue, as was their account that they had been operating a legitimate “window company” investing BOC’s money on its behalf.  The judge, in his Reasons for Verdict, said at one stage:

“102. As far as the evidence of both defendants is concerned, I say straightaway that I do not believe them.  Both defendants were, I found, extremely evasive when giving their testimony in the witness-box, Miss Draycott having on many many occasions to repeat the same question three, sometimes four times before any sensible answer was given.  This applies to both defendants.

103.   I have given a long and hard deliberation to the accounts that both defendants gave in the witness-box and have also spent a considerable amount of time reviewing the documentary exhibits produced on their behalf. …  In the event, I dismiss their evidence as being untrue.”

There was, it is clear, ample evidence, although the prosecution did not need to go thus far, to support a finding that the applicants had actual knowledge of the source of the funds which found their way into EJP and it is equally clear that this is what the judge found.  The judge’s Reasons for Verdict continued as follows:

“104. The 1st defendant was managing director of EJP, and the 2nd defendant a director.  Their signatures appear on all of the banking documents and cheques which were responsible for moving the money.  The 1st defendant had 17 years’ experience of working in a bank prior to moving to EJP in 1993, and the 2nd defendant had some experience of working in a bank and import and export companies as an accounts clerk prior to her position as a director of Yau Hip.

105.   Bearing all this in mind, it is quite impossible to believe that the defendants did not know what they were doing when they signed these cheques.  The explanation that they blindly followed the instructions of Xu Chaofan or either of the other two managers without question, when they were effectively responsible for the running of a private company, is fatuous in the extreme, and I dismiss it.

106.   Similarly, if the defendants were duped by the managers into believing that EJP was simply an investment arm of the Bank of China Kaiping, as is being suggested by the defence, why did the defendants think it to be legitimate for them to be responsible for moving millions of dollars into casino accounts?  And why did they think it to be legitimate for EJP to effectively fund the purchase of three expensive flats for each of the managers at Le Sommet?  This is completely inconsistent with either of the defendants believing that EJP was a legitimate window company of the Bank of China Kaiping.

107.   With regard to the evidence and report of Mr Grimsdick, I say that I accept these in their entirety, and I accept the conclusions that he has come to.  He has concluded that over the 74-month charge period there were significant fund flows through EJP’s bank accounts which were unrelated to its operations.  Therefore, EJP was being used as a conduit for fund movements that had no valid commercial basis.

108.   Due to the sheer size of these unexplained receipts, he concludes that D1 and D2, and directors of EJP, must have been aware of them and must have been aware that they were not connected to EJP’s operations.  I also accept from him that the personal and trading accounts of both defendants were also being used as a conduit for the flow of funds, as were the accounts of Kwong Wa-po.

109.   I accept the evidence of the important witness, Mr Li Qi Zang.  I accept from him that EJP had no account with the Bank of China Kaiping and that it was not an organisation of the Bank of China.  I also accept that throughout the whole period of the investigation that the audit team carried out, he never saw any evidence of permission being granted by a senior branch – such as Bank of China Jiangmen, or Bank of China Guangzhou – for the money from the Bank of China Kaiping to be remitted abroad.

110.   Dealing with the evidence and the report of Mr Alan Tang, I do not accept any suggestion from him that the activities of EJP, over the relevant charge period, were consistent and typical of a legitimate window company.

111.   I am satisfied, however, that EJP falls perfectly into the category of pseudo window companies that he described, some of which being simply scams run by a few individuals with a view to making a quick profit, or simply involved in fraudulent activities.  This, I am satisfied, is the case with EJP.  And I am further satisfied that both defendants were aware of it.”

50.We rejected the contention that the judge may not have found that the prosecution had proved that the applicants knew or had reasonable grounds to believe that these funds were the proceeds of theft.

51.These grounds failed.

Conclusion on conviction

52.The applications made by D1 and D2 were, for the reasons given, dismissed in regard to conviction.

D2’s sentence

53.It was submitted that having regard to D2’s clear record and her relatively minor role, when compared to the part played by D1 in the conspiracy, a sentence of 6½ years’ imprisonment was manifestly excessive.

54.There was no merit in this argument.  Laundering of proceeds worth $6.4 billion in just over six years can only be described as having been carried out on a massive scale.  We are told that much of the money was lost by the three managers in gambling and trading in a foolhardy way.  For their part, D1 as well as D2 provided a smart front for a business that had all the appearances of one which was legitimate.  D2 was involved in the day-to-day running of EJP and personally managed Yau Hip Trading which was also utilised to handle the funds.  It is apparent that D2 played a full role in the offence.

55.Our only comment in regard to the sentence is that it is surprising it did not reflect the maximum which can be imposed in the District Court.  It is plain that this offence fell inside the worst category of its type, added to which there has been no restitution and not a sign of remorse.

56.The application was dismissed.

Ms Charlotte Draycott SC, on fiat, for the Respondent.

Mr Paul Wu, instructed by Messrs Angus Tse, Yuen & To, for the 1^st and 2^nd Applicants (D1 and D2).