HKSAR v. Lung Yun Ngan and Another

CAC C 482/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 482 OF 2010

(ON APPEAL FROM DCCC NO. 1300 OF 2009)

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BETWEEN

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Before: Hon Hartmann JA，Kwan JA and A Cheung J in Court

Date of Hearing: 12 May 2011

Date of Judgment: 12 May 2011

Date of Handing Down Reasons for Judgment: 24 May 2011

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REASONS FOR JUDGMENT

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Hon Hartmann JA (giving the judgment of the Court):

Introduction

1.On 23 November 2010, following a trial in the District Court before His Honour Judge Browne, the two applicants, a married couple, were convicted of the offence of dealing with property known or believed to represent proceeds of an indictable offence, contrary to s.25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap. 455.  Both were sentenced to a term of 12 months’ imprisonment.

2.Both applicants sought leave to appeal their convictions and their sentences.  Having heard submissions, we dismissed the applications in respect of both conviction and sentence.  We said we would give our reasons later and do so now.

General background

3.In 1989, a company called Wah Hing Stationery Manufactory Limited (“Wah Hing Stationery”) was set up to manufacture and sell the metal parts of lever arch files.  Once fully established, it maintained two factories in the Mainland and an administrative centre in Hong Kong.

4.There were three shareholders in Wah Hing.  For the purposes of this judgment, it need only be mentioned that one of the shareholders, and a director, was a man named Lung Kam Chiu (“Lung”).

5.It appears that Lung’s principal responsibilities in the management of the company were administrative and in this regard he was assisted by a female accounts clerk named Lee Chun who joined the company in 1996.  Lee Chun was described as Lung’s “Girl Friday”.

6.It is not disputed that between about January 2004 and September 2007, when Wah Hing Stationery found itself in financial difficulties, Lung and his co-directors conspired together to raise funds by defrauding various banks.  In each instance the frauds took the form of bogus applications for the issue of letters of credit.  There were no genuine underlying transactions and accordingly no genuine documentation to support the applications.

7.In each case the letters of credit were made payable to a dormant company called Soon Sales Enterprise Limited (“Soon Sales”), the controlling director of that company being a relative of one of the directors of Wah Hing Stationery.  Soon Sales would then remit the monies received from the banks to Wah Hing Stationery, doing so either directly or via various intermediatory companies.  The intermediatory companies were it seems for all essential purposes ‘shell companies’ used specifically for the purpose.

8.Lee Chun, Lung’s ‘Girl Friday’ was given the task of managing the necessary paperwork – arranging the issue of cheques and the like – to ensure the smooth running of each fraudulent application for letters of credit.

9.One of the companies used as an intermediatory for the receipt of payments from Soon Sales and their onward transmission to Wah Hing Stationery was Perfect Keen Limited (“Perfect Keen”), a company incorporated in 1994.  There were four shareholders and directors of this company.  They were Lung and his wife and both the first and second applicants.

10.It is to be noted that there is a blood relationship between Lung and the first applicant, the first applicant being Lung’s younger sister.

Looking to the charge

11.The charge of which the two applicants were convicted alleged that between 1 July 2004 and 30 June 2006, in Hong Kong, they dealt with property, namely a sum HK$3,074,931, knowing or having reasonable grounds to believe that, in whole or in part, directly or indirectly, it represented the proceeds of an indictable offence.

12.It was not the prosecution case that the applicants dealt with the monies knowing that they represented the proceeds of serious crime.  It was instead the prosecution case that the applicants dealt with the monies having reasonable grounds to believe that they represented the proceeds of serious crime.

13.It was not disputed at trial that between the dates given Soon Sales made out four cheques in favour of Perfect Keen totalling HK$3,074,931.  Each of the four cheques was made out in order to remit monies received pursuant to bogus letters of credit applications to Wah Hing Stationery via Perfect Keen.  Once the monies were received by Perfect Keen they were passed on to Wah Hing Stationery by way of six cheques.

14.Each of the six cheques issued by Perfect Keen were signed by the first and second applicants.

15.The original indictment under which the first and second applicants were brought to trial also charged six other persons with various offences.

16.Lung and his two shareholders and co-directors in Wah Hing Stationery – who were named as the first three defendants on the indictment – pleaded guilty to 30 charges of conspiring to defraud banks, the various conspiracies involving a sum in excess of HK$22,000,000.

17.Lee Chun – who was named as the fourth defendant on the indictment – pleaded guilty to 41 charges of conspiracy, the various conspiracies to which she pleaded guilty involving a sum in excess of HK$32,500,000.

18.Lee Chun agreed to give evidence for the prosecution, her testimony being central to the prosecution case against the first and second applicants.

Evidence concerning the two applicants

19.At the time of trial, the first applicant was 61 years of age.  She had come to Hong Kong from the Mainland as a young woman, working for a time sewing garments.  After she met and married the second applicant, she became a housewife.

20.At the time of trial, the second applicant was 72 years of age.  He too had come to Hong Kong from the Mainland.  He had been trained in the Mainland as a practitioner in traditional Chinese medicine and had followed that calling for many years in Hong Kong.  He had ceased to run his own practice in or about 2002 when he took up employment with a Taoist charitable organization.

21.While both the first and second applicants read and write Chinese characters, they have no proficiency in the English language.

22.At trial, both applicants chose to testify in their defence.  Their evidence as to how it was that they became shareholders in Perfect Keen and were appointed directors of the company was to the following effect.

23.In 1994, they were approached by Lung, the first applicant’s elder brother.  Lung was understood to be a successful businessman. Lung proposed that a company be set up to supply Wah Hing Stationery with the necessary metals for its manufacturing process.  He proposed that the two applicants, together with himself and his wife, would be the shareholders and directors of the company.

24.Lung said that working capital for the business was needed and prevailed upon the two applicants to raise money by mortgaging one of two apartments which they owned and which at that time were both mortgage free.

25.Lung proposed that the first applicant would receive a monthly salary of $5,000 while his own wife would receive a salary of $2,500.

26.Even though they would invest in the business and would both be shareholders and directors of Perfect Keen, the two applicants, however, were not required to participate in any way in the day-to-day management of Perfect Keen.  Lung agreed to take care of that.

27.They were, however, given a limited role.  That role was related solely to being the custodians of the company cheque-book and also of a company chop, both to be kept at their private residence.  In addition, they were to receive and hold all bank statements of Perfect Keen.

28.As to the chopping and signing of cheques, this they were to do when requested.

29.It appears that initially the first applicant and Lung’s wife were the ones who signed all Perfect Keen cheques.  There is no evidence that Lung himself ever signed any of the cheques.  However, in about 2002, with Lung’s wife being increasingly absent from Hong Kong, the second applicant took over her role as signatory.

30.According to the two applicants, they knew nothing of the business fortunes of Perfect Keen nor did they make any enquiry, not even when, in 2002, Lung prevailed upon them to mortgage their second apartment for additional capital.

31.Even though the company bank statements were sent to their private address and remained under their custody, the applicants said that they never read them.

32.As to how it was that the first and second applicants came to sign cheques when they had no active role in the management of Perfect Keen and, according to them, knew nothing of the financial state of the business, the evidence – certainly concerning the signing of the six cheques, the subject of the single count of ‘money laundering’ – was to the following effect.

33.Lee Chun, Lung’s ‘Girl Friday’, testified that she did not know about the business of Perfect Keen, if any.  She said that the only cheques of the company in respect of which she was involved were related to what she knew to be the fraudulent movement of monies.

34.Lee Chun testified that between 20 July 2004 and 16 June 2006, at her request, the two applicants signed six cheques on behalf of Perfect Keen.  The first cheque was dated 20 July 2004, the second was dated 19 October 2005, the third, fourth and fifth cheques were all dated 14 February 2006 while the last of the six cheques was dated 16 June 2006.  The total value of the cheques was HK$3,074,931.

35.Lee Chun testified that, when a cheque drawn on the account of Perfect Keen was needed to be signed, she would contact the first applicant and ask her to do so.  The request was not accompanied with any information as to the payee, the amount to be paid or the purpose of the payment.  In short, the two applicants were required in each instance to sign a blank check, having no idea of its intended purpose or value.

36.Once chopped and signed, the cheque would be collected by a messenger and returned to Lee Chun at her office where – with the exception of one cheque to which reference is made below – she would fill in the necessary details.

37.As to the manner of signing each cheque, the judge noted (para. 46 of his Reasons for verdict):

“[Lee Chun] said that the chop of Perfect Keen was put on the front and back of the Perfect Keen cheques and [the first and second applicants] signed within both chops as the cheques were cash cheques.”

38.It was the evidence of the two applicants that, when a request to sign a cheque was received from Lee Chun, the first applicant would sign herself and would obtain the signature of her husband.  The six cheques that formed the subject matter of the single count of ‘money laundering’ were all signed in this manner with the exception of one cheque in respect of which the second applicant wrote in the name of the payee (Wah Hing Stationery) in English letters, having apparently received a faxed instruction to do so.

39.When they testified, both the first and second applicants said that they did not believe they were doing anything illegal by signing the six blank cheques.  They said they did not know why the six cheques had to be chopped and signed on both sides: this was simply an instruction from Lee Chun.

40.As to the mortgaging of the two properties owned by herself and her husband, the first applicant testified that she did not know how much was being borrowed or how the funds were being employed.  She said she had no idea of how the debt was being repaid.  She said that she trusted her brother and these were matters for him.

41.The first applicant testified that she was never aware of any business problems with Perfect Keen despite the fact that in 2002 her brother had prevailed upon her to raise money by way of mortgaging the second apartment.

42.When interviewed under caution, the husband, the second applicant, made mention of being told by his wife that Lung’s company had a cash squeeze: hence the need for the second mortgage.  However, when he testified, he said that his wife had never told him anything to that effect.

43.When he testified, it was essentially the second applicant’s evidence that he took little interest in matters concerning Perfect Keen, that he trusted Lung and was prepared to trust what his wife told him. 

44.Having considered all of the evidence, the judge rejected the exculpatory evidence of both the first and second applicants.  He was satisfied that the evidence proved by the prosecution was sufficient to enable him to draw the single, compelling inference that the first and second applicants-

“… knew of sufficient grounds that would lead a common sense, right-thinking member of the community to believe that the property in whole or in part represented any person’s proceeds of an indictable offence.”

45.On this basis, he convicted both applicants.

The first and second grounds of appeal

46.In the first two grounds of appeal, Mr Egan, representing both applicants, submitted that the judge had misdirected himself as to matters of law, those matters going to proof of the essential elements of the offence of dealing with property while having reasonable grounds to believe that it represented the proceeds of some form of serious crime.  

47.First, it was Mr Egan’s submission that the judge, in convicting the applicants, had focused entirely on what would lead a common sense, right-thinking member of the community to believe that the property being dealt with by the applicants when they signed the six cheques represented the proceeds of an indictable offence, ignoring entirely the requirement to prove that the applicants themselves “had grounds for believing” that to be the case.

48.In pursuing this submission, Mr Egan relied on the following words of Litton PJ who, in giving the determination of the Appeal Committee of the Court of Final Appeal in Seng Yuet Fong v HKSAR [1999] 2 HKC 833, at 836, said the following in respect of s.25(1):

“To convict, the jury had to find that the accused had grounds for believing; and there was the additional requirement that the grounds must be reasonable: that is, that anyone looking at those grounds objectively would so believe.” [my emphasis]

49.In our judgment, however, for reasons to which we shall now turn, the judge did not misunderstand nor misapply the appropriate test.  He duly instructed himself as to the requirements of law and came to his determinations within the constraints of those instructions.  

50.As this Court held in HKSAR v Shing Siu Ming& Ors [1999] 2 HKC 818, at 825, the phrase “having reasonable grounds to believe” incorporates both subjective and objective elements.  Objectively, it requires proof that there are grounds that a common sense, right-thinking member of the community would consider sufficient to lead a person to hold a particular belief.  Thereafter, subjectively, it has to be proved that those grounds were known to a defendant.

51.This Court, in its later judgment in HKSAR v Ma Zhujiang [2007] 4 HKLRD 285, confirmed that the test remained the one enunciated in HKSAR v Shing Siu Ming.  It came to this finding after a consideration of the true meaning and intent of intervening judgments including that of the Appeal Committee of the Court of Final Appeal in Seng Yuet Fong, the judgment relied upon by Mr Egan.  Giving the judgment of the Court in Ma Zhujiang, McMahon J said (para. 47):

“Section 25(1) of the Ordinance … merely requires that reasonable grounds to form a belief exist regardless of whether any such belief is in fact held.”

52.In the result, it is now well-settled that, to prove the actus reus of the offence, what must be proved is no more than the act of ‘dealing’ in the property that is the subject of the offence.  To prove the mens rea of the offence, however, two things must be proved.  First, that on the facts found to be proved, there are grounds that a common sense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in question constitutes the proceeds of an indictable offence and, second, that the defendant knew of those grounds.

53.On that basis, therefore, the necessary mental element of the offence can exist even if a defendant does not himself believe that the property in question constitutes the proceeds of an indictable offence provided that he knows of the grounds upon which objectively such belief is reasonably based.

54.The offence is a wide one, purposefully so.  It means that a person who is asked to deal in property, invariably money, in circumstances which, on any objective analysis, would give rise to a reasonable belief that it represents the proceeds of serious crime, is obliged to take those circumstances into account and to act accordingly.  He cannot seek refuge in some alternative belief, even a plausible one, which happens to suit his purposes better.

55.The second submission made by Mr Egan was to the effect that the judge had misdirected himself as to law was based on the assertion that the judge had failed to take into account that the hypothetical common sense, right-thinking member of the community must be a person of the same age and sex as each applicant and a person sharing their circumstances; in short, that such a person must be placed “into the shoes” of each applicant.

56.With respect, we could find no grounds to support this submission.  Professional judges sitting in the criminal courts are today well used to applying the ‘reasonable man’ test in its various forms. There is no need for them to spell out its constituent parts.  It is fundamental that the test, hypothetical in nature, requires that the ‘reasonable man’ knows what the defendant knows subject of course to the fact that the ‘reasonable man’ fashions his actions in the light of that knowledge in a manner that, in the present case, a ‘common sense, right-thinking member of the community’ would do.  A study of the judge’s evaluation of the evidence, a matter to which we shall turn shortly, makes it plain that he reached his determinations in respect of both the first and second applicants in accordance with their circumstances at the time and what he was satisfied was known to them.

The third, fourth and fifth grounds of appeal

57.These three grounds, all concerning the nature and extent of the evidence and the manner in which the judge evaluated that evidence, were Mr Egan’s principal grounds.

58.The third ground was to the effect that, in respect of both the first and second applicants, there was insufficient primary evidence to enable the judge to draw the single, irresistible inference that was fundamental to the conviction of each applicant, namely, that a common sense, right-thinking member of the community, knowing what was known to the applicants at the time, would consider that knowledge sufficient to lead to the belief that the money being dealt with by way of the signed cheques was in some way the proceeds of serious crime.

59.The fourth was to the effect that the judge had compounded matters by failing adequately, or at all, to evaluate the little evidence there was.

60.The fifth was that, in his failure to adequately evaluate the evidence, the judge failed also to separate out and clearly state the grounds upon which, on an objective assessment, the court was able to be sure that those grounds were sufficient to lead a common sense, right-thinking member of the community to believe that the money being dealt with by way of the signed cheques was in some way the proceeds of serious crime.

61.These grounds are best considered in the light of the judge’s evaluation of the evidence.

62.The judge noted, first, that the first and second applicants operated a joint bank account and that, in addition, the first applicant operated a bank account of her own.  Implicit in this finding was the fact that neither of them was therefore ignorant of the basics of banking matters and that both must have understood the potential dangers of signing blank cheques. 

63.Central to the factual matrix taken into account by the judge were the following matters:

i.   Although neither the first applicant nor her husband had any involvement in the day-to-day running of Perfect Keen and indeed, on their evidence, neither knew nor had any interest in the nature of the business or its varying fortunes, the first applicant nevertheless received a salary of $5,000 per month for some 14 years.

ii.   In return for that monthly salary she and her husband had only two duties.  First, to keep possession of the company cheque-book, a company chop and all the company bank statements - items which invariably would be kept at the business premises but in this case, for some reason which, according to the applicants, neither of them queried, were kept at their private residence well away from the company premises.  Second, when called upon to do so, to sign and chop those company cheques in blank on both sides without any knowledge whatsoever of their intended purpose, their intended value or to whom they were to be paid.

64.Absent some convincing explanation – and there was none – it was implicit in the findings of the judge that those circumstances alone would have raised the concerns of any common sense, right-thinking member of the community, even if there was a family connection.  The questions arising from those circumstances were self-evident.

65.Why, if the business of the company was entirely legitimate, were the cheque-books to be kept separately in a private residence? During the course of submissions, Mr Egan said that investors in a company may often keep custody of the company cheque-book as a means of ensuring that the funds of the company are dealt with responsibly.  That may be so but in the present case the first and second applicants, on their own admission, signed all cheques in blank and therefore had no idea whatsoever of the degree to which the cheques would impact on the welfare of the business and their investment in it.

66.Why, if the business of the company was entirely legitimate, were bank statements not kept with other financial documents necessary for the proper management of the company but kept instead in the private residence of the applicants?

67.Why, if the business of the company was entirely legitimate, were the two applicants on each and every occasion kept ignorant of the nature of the cheques that they were asked to sign?

68.If the first applicant’s only duties were to possess the items mentioned above and to sign blank cheques, why did she receive a monthly salary of $5,000? 

69.The facts that so obviously gave rise to these questions were never in dispute.  Taken singularly or together, they constituted evidence that was central to the prosecution case.  As the judge noted (para. 167):

“[The applicants] made no enquiries as to why they were invited to become directors of Perfect Keen and bank signatories for a company they knew nothing about. They never asked why they were being asked to sign blank cheques, [they never asked] the amount of the cheques or the payees. They never asked why they had to sign both the front and back of the cheques.”

70.When directing himself as to law, the judge made reference to HKSAR v Wong Chor Wo and Another (unreported) CACC 314/2006 in which this court said:

“In the normal course of events, if a man allows another person to use his bank account to deposit and withdraw funds, in the absence of evidence to the contrary, the inevitable inference will arise that the holder of the bank account has reasonable grounds to believe that the funds passing through the account represent the proceeds of an indictable offence”. (para. 108)

71.The Court continued by saying:

“That the account is used to conceal the transactions is an inference which inevitably arises from the fact that a person uses another’s bank account to undertake transactions without any explanation to the holder of the bank account.” (para. `110)

72.It was Mr Egan’s submission that, in the factual context of the present case, these references were entirely irrelevant and constituted a misdirection by the judge.

73.We found no force in that submission.  While in the present case the factual circumstances were very different, the underlying principle remained of direct relevance.  The first and second applicants agreed to keep the company cheque-books and a company chop at their private residence. That itself, absent some reasonable explanation, indicated at the very least a real concern – a belief – that some form of subterfuge was in play.  More importantly in the present context, by possession of the relevant physical materials but at the same time by agreeing to sign blank cheques without ever knowing their intended purpose, their intended value or to whom they were intended to be paid, the inference had to be drawn that the applicants were participating in an arrangement that was aimed at concealing transactions.

74.During the course of oral argument, Mr Egan said that the circumstances of the present case were unique in that neither the first nor second applicants were primary dealers; they were, he said, secondary dealers only.  But, whether primary or secondary dealers, as is implicit in the findings of the judge, the applicants by their actions over the two-year period had played an integral part in the arrangement to move funds and had done so in circumstances which, on any objective assessment, raised disturbing questions.

75.In his evaluation of the evidence, the judge took into account the admitted evidence that the first and second applicants were prevailed upon in the initial instance to mortgage one of their apartments to provide business finance for Perfect Keen and later, in 2002, were prevailed upon to mortgage their second apartment to raise business finance either for Perfect Keen or Wah Hing Stationery or both.  The evidence did not indicate that the two applicants were affluent: it was to the contrary.  They were therefore putting at risk a substantial portion of their wealth.

76.In light of this, it is unsurprising that the judge was not prepared to accept that both the first and second applicants were as disinterested in the business as they asserted.  In respect of the first applicant, the judge observed (para. 161):

“… said she did not look at the bank statements, she was not curious. This was notwithstanding that both properties she owned had been mortgaged to the bank and it was her understanding that the second property was mortgaged because there was not enough money from the first mortgage for business. She said that she did not know how much the repayments on the mortgage would be, how much was borrowed or how much she was going to get out of it. She said she never asked [her brother, Lung].”

77.Intimate family bonds may perhaps explain why, with their personal wealth at risk, the first and second applicants should have been so disinterested in the affairs of the business in respect of which they were the custodians of the cheque-book, chop and bank statements.  Indeed, as the judge noted, the first applicant protested that she would “do anything” to help her brother in whom she had total belief.  However, it was the evidence of the second applicant that his wife and her older brother rarely met and were in fact not close.  In light of such evidence it was implicit in the judge’s assessment of the evidence that he was not prepared to accept, as the first applicant asserted, that there existed a bond of unquestioning trust between her and her brother.

78.Nor was the judge, on his assessment of the evidence, prepared to accept the contention made by both the first and second applicants, more especially the second applicant, that their actions were selfless, motivated only by a desire to help a family member.  In this regard, the judge took into account the fact that, by agreeing to take on the minimal and highly questionable responsibilities that she did in respect of Perfect Keen, the first applicant had been paid a sum of $5,000 a month for a period of almost 14 years.  The judge further took into account the fact that the second applicant for much of that period of time had been earning no more than $14,000 per month, the extra income being earned by his wife thereby providing close to 25% of their total monthly income.

79.Before trial, when interviewed under caution by the police, the second applicant had said that he had agreed to mortgage a second property because his wife had told him that her brother, Lung, was having a ‘cash squeeze’; in short, that he and his wife, when they mortgaged the second apartment, were aware that it was done to try to alleviate financial difficulties.  However, during the course of his testimony, when cross-examined, both the first and second applicants denied ever knowing of any financial difficulties.  The judge rejected these assertions by the first and second applicants.  He concluded (para. 170):

“I was sure that both were aware [Lung] had financial problems and yet they claimed that they never asked how much was the debt and how the debts were to be met, even when they agreed to mortgage their second property.”

80.The judge went on to conclude in respect of the various matters to which he had made reference: “I did not believe that the defendants were being truthful about these matters.”

81.Implicit in the judge’s evaluation, was his rejection also of the claim made by both the first and second applicants that they had never looked at the bank statements of Perfect Keen sent to and kept at their private residence “notwithstanding that they were signing blank cheques and their properties were mortgaged to the bank for company purposes.”

82.By way of summary, in his evaluation of the evidence, the judge was satisfied that both the first applicant and the second applicant had good reason to know – and did know – a good deal more about the affairs of Perfect Keen than they had been prepared to admit.

83.Returning to the third ground of appeal, namely, that there was insufficient primary evidence to enable the judge to draw the inference that he did, while clearly the evidence was limited, it remained cogent.  We did not accept that it was insufficient.

84.It was the fourth ground of appeal that the judge had failed adequately, or at all, to evaluate the evidence.  As Mr Egan put it, he had simply recited the evidence and then come to a conclusion of guilt in respect of the two applicants; there had been no weighing of the evidence and no assessment of its value.

85.It is accepted that the judge, in the course of his evaluation, adopted a fairly ‘broad brush’ approach but, depending on the nature of the evidence to be evaluated, that may be the only, indeed the best, method of approach.  In the present case, nearly all of the background evidence was undisputed.  It fell into a number of limited areas.  The judge was meticulous in considering each of those areas of evidence.  It was implicit in the manner in which he described those areas of evidence, constructing a logical framework, that he was at the same time assessing their relevance and their probative value.  In our view, while it may have been better if the judge had stated clearly certain aspects of his implicit analysis, it would be wrong to say that there was no analysis.

86.Equally, in respect of the fifth ground of appeal, namely that the judge failed to clearly state the grounds upon which, on an objective assessment, he was satisfied that that the guilt of the two applicants was proved, while it is correct that the judge did not separately itemise those grounds, they were not overly complex nor numerous and arose clearly out of his general evaluation.

Sentence

87.The applications for leave to appeal against sentence were founded on the assertion that, in all the circumstances of the case, the sentences of 12 months’ imprisonment imposed on both applicants after trial were manifestly excessive.

88.The principal perpetrators of the conspiracies to defraud were the first and second defendants and Lung, the third defendant.  They pleaded guilty to 30 conspiracies, the total sum involved in those conspiracies being in excess of $22 million.  Having regard to various matters of mitigation, and to the fact that each had pleaded guilty thereby earning a one-third discount, the first defendant was sentenced to 22 months’ imprisonment, the second to 18 months’ imprisonment and Lung, the third defendant, the one who had liaised directly with the first and second applicants, was sentenced to 24 months’ imprisonment.

89.The fourth defendant, Lee Chun, pleaded guilty to 41 charges of conspiracy to defraud, the total sum involved in those conspiracies being in excess of $32 million.  It was accepted that she had at all times acted under the instructions of the first three defendants and that she had acted out of loyalty to them.  In addition to pleading guilty, she gave full cooperation to the police and gave evidence as a prosecution witness.  She was sentenced to 11 months’ imprisonment.

90.The first and second applicants were not charged with any count of conspiracy to defraud.  There was no evidence that they had any knowledge of the true nature of the funds which they helped to circulate.  They were convicted of one count of what is commonly called ‘money laundering’.  But, as the judge noted, money-laundering itself is considered to be a crime of utmost seriousness.

91.Money laundering is the processing of criminal proceeds in order to disguise their illegal origins.  As such, it is just one step along from the original offence itself, be it drug trafficking, prostitution, bribery or fraud.  Money laundering is therefore inextricably linked to the underlying criminal activity that has generated it.  It enables such criminal activity to continue.  Money laundering flourishes when persons are prepared to turn a blind eye to the true nature of the funds with which they are dealing.  It not only corrupts individuals, it threatens the integrity of our banking and financial services.  It is unsurprising that our legislature has viewed it to be criminal activity of the most serious kind.  In terms of s.25(3) of the Organized and Serious Crimes Ordinance, a person who is found guilty of money laundering is liable on conviction upon indictment to a fine of $5 million and to imprisonment for 14 years.

92.This Court, in HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, confirmed that there are no sentencing guidelines for the offence of money laundering, that is, for the offence of dealing with the proceeds of an indictable offence, because the facts vary so much from case to case.  In looking to relevant factors, the Court said that the amount of money involved in the ‘laundering’ exercise itself was a major consideration as was the length of time over which the exercise took place.

93.In respect of the two applicants, over a period of two years they participated in a laundering exercise involving some $3 million.  As to the level of their participation in the laundering exercise, they kept custody of the chop and cheque-book of the company used to help launder funds and signed six blank cheques when called upon to do so.

94.While of course each case must depend very much on its own facts, the imposition of a substantial period of imprisonment for a money laundering offence involving $1 million or more is not remarkable.  By way of example, in HKSAR v Chow Ying Ki (unreported) CACC 378/2004, [2005] HKEC 983, this Court was of the view that a sentence of four years’ imprisonment for the commission of a money laundering offence involving $3 million and lasting some nine months was not manifestly excessive.  Similarly, in HKSAR v Abayomi Bamidele Fayomi (unreported) CACC 159/2009, [2005] HKEC 2167, this Court upheld a sentence of three years and six months’ imprisonment in respect of three counts of money laundering involving $1,243,000, being the proceeds of a deception case.

95.In the present case – even taking into account the ages of the first and second applicants, the fact that they had no previous convictions, their relationship to Lung who recruited their participation and the relatively limited level of their participation – we are of the view that an immediate custodial sentence was inevitable.  As we have said, their participation in the scheme extended over a period of two years and involved a sum in excess of $3 million.  In those circumstances, the imposition of a sentence of 12 months’ imprisonment cannot be said to be manifestly excessive.  Indeed, the observation may be made that it contained an element of mercy.

Mr Kevin Egan, instructed by Messrs Roberstons, for D5 and D6/Applicants

Ms Maggie Yang, SPP of the Department of Justice, for the Respondent/HKSAR