HKSAR v. Ononuju Livinus and Another

CACC 190/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 190 OF 2011

(ON APPEAL FROM DCCC1159/2010)

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BETWEEN

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Before: Hon Stock VP, Wright and Saw JJ

Date of hearing: 19 January 2012

Date of handing down reasons for judgment: 15 February 2012

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REASONS FOR JUDGMENT

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Hon Wright J (giving the reasons for judgment of the Court):

1.On 19 January 2012 we granted the applicants’ applications for leave to appeal, treated the hearing as the appeal proper and quashed the conviction of the first applicant on Charge 1 and the second applicant on Charges 1, 2 and 3. We declined an application for a retrial of the second applicant. We indicated that we would hear any application there may be for costs once our reasons for allowing the applications are made known. We indicated that we would furnish those reasons in due course: these are they.

2.On 28 April 2011 the applicants were convicted, after trial, by His Honour Deputy Judge A Yuen of a joint charge of conspiracy to deal with property reasonably believed to represent the proceeds of an indictable offence contrary to ss 25 (1) and (3) of the Organised and Serious Crimes Ordinance, Cap 455 (the Ordinance) as read with ss 159A and 159C of the Crimes Ordinance, Cap 200. The second applicant was convicted of two further charges of dealing with such property.

3.As the judge observed, most of the facts were not in dispute. The respondent’s written submissions contain a summary of facts which we paraphrase:

Golden Sunny industrial Co Ltd was incorporated in Hong Kong on 17 May 2007. The second applicant was its sole director and shareholder.

Prestige Consolidation International Ltd was incorporated on 5 June 2009 in Samoa. The first applicant was its sole director. On 5 August 2009, the first and second applicants came, together, to Hong Kong from the mainland. On that day, the first applicant opened an account for Prestige at the Hong Kong and Shanghai Banking Corporation (HSBC). On 7 August 2009 the applicants departed, together, for the mainland.

On 23 June 2009, the applicants came, together, to Hong Kong from the mainland. On that day the second applicant opened an account for Golden Sunny also at HSBC. On 24 June 2009 the applicants departed, together, for the mainland.

The first applicant was also the sole director of Ononuju Ventures Japan Ltd in Tokyo, Japan, which operated an account with Shinkin Central Bank in Japan.

Prestige and Golden Sunny had the same business address and contact telephone number in the mainland.

On 12 November 2009 the applicants came, together, to Hong Kong from the mainland. They departed, together, to the mainland later the same day.

In respect of the first charge, on 3 December 2009 USD $145,444.57 was transferred from the United States from a George Iolta Trust Account of the Bank of America into the HSBC account of Prestige. That day USD 60,000 and the following day USD 62,000 were transferred from the HSBC account of Prestige into that of Golden Sunny. On 7 and 8 December 2009 respectively USD 62,000 and USD 50,000 were transferred from the HSBC account of Golden Sunny to the Shinkin account of Ononuju.

On 7 December 2009 a staff member of HSBC telephoned the first applicant to inform him that the sum transferred from the United States into the account of Prestige may relate to a possible fraud and requested return of the money. The first applicant responded that Prestige was a company trading in batteries and that the funds had been received from a buyer whom he had known for years who had remitted money from the trust account concerned.

The same day that same staff member telephoned the second applicant to enquire of the relationship between Prestige and Golden Sunny. The second applicant responded that they were business partners. In response to a request for proof of that fact, the following day she sent a fax, accompanied by two invoices purportedly issued by Golden Sunny to Prestige, to HSBC explaining the relationship.

In respect of the second charge, on 11 December 2009 - eight days after the first transfer -  USD $184,944.57 was transferred from an account in Georgia, United States of America, into the HSBC account of Golden Sunny. Three transfers were effected from that account into the Shinkin account of Ononuju: on 11 December, USD 63,000; on 12 December, USD 63,500; on 14 December 2009, USD 57,475.

In respect of the third charge, on 15 December 2009 - four days after the second transfer - USD $294,984.57 was transferred from an account in California, United States of America, into the HSBC account of Golden Sunny. Three transfers were effected from that account into the Shinkin account of Ononuju; on 15 December, USD 63,500; on 16 December, USD 63,600; on 17 December 2009, USD 136,690.79. In addition on 16 December 2009 USD 68,440 was transferred to an account with China Construction Bank held by Zhongshan Guangyu IMP EXP Co Ltd, the second applicant's agent company in the mainland.

On 17 December 2009 the same employee of HSBC contacted the second applicant and requested the return of the two amounts most recently transferred into the HSBC account of Golden Sunny. On this occasion the second applicant explained that Prestige had secured a purchaser for her products and the moneys represented part payment from that purchaser but that Prestige thereafter had cancelled the order and requested a refund of the moneys directing that they be paid to the Shinkin account of Ononuju. The second applicant refused the request to refund the moneys to HSBC on the basis that she had already manufactured the goods and to refund HSBC would result in a loss to her.

On 24 August 2010 the applicants came, together, to Hong Kong from the mainland. They were arrested.

4.The first applicant elected to testify in his defence. He called no witnesses. The second applicant elected neither to testify nor call witnesses but relied, as she was entitled to do, upon both the contents of a record of interview of her by the police and the testimony of the first applicant together with documents introduced in evidence through him.

Grounds of Appeal

5.The first applicant advanced two grounds of appeal: first, that the judge erred in relying on a lie by the first applicant in order to draw the inference that the first applicant had reasonable grounds to believe that the moneys represented the proceeds of an indictable offence because the judge was wrong to find that what the first applicant had said to the HSBC employee in fact was a lie, alternatively, the judge failed to give himself a full lies direction; second, the judge failed to consider whether, objectively, reasonable grounds existed that would lead a reasonable man to believe that the moneys represented the proceeds of an indictable offence and, further, that no such grounds existed.

6.The second applicant advanced three grounds of which the second makes a similar complaint to the first ground raised by the first applicant to the effect that the judge erred in finding that the second applicant had lied to the HSBC employee: the other two grounds are, first, that the judge wrongly found that certain exhibits introduced in evidence through the first applicant were not genuine and that he relied on that finding to convict the second applicant; second, that the judge failed to consider the possibility that the second applicant may have been deceived by the first applicant.

Lies

7.The issue of lies affects both applicants. On the issue of the judge’s finding that the first applicant had lied to the HSBC employee, the evidence of the employee, which the judge accepted, was that the first applicant had told her that he had known the purported customer - one Maxwell - for many years. Conversely, when testifying, the applicant said that he had only met Maxwell in April 2009 who, subsequently, in August 2009 had placed his first order for batteries.

8.It was not axiomatic that the first applicant had lied to the HSBC employee: he may have been lying in court or, indeed, on both occasions.

9.What had been established before the judge was not the fact that the first applicant had necessarily lied when speaking to the HSBC employee or, conversely, when testifying in court but that the first applicant had contradicted himself on an important issue. That was a matter which the judge was entitled to take into account in assessing the first applicant's credibility.

10.When reviewing the evidence of the first applicant  - which he described as "inherently incredible" and "wholly incredible and untrue" - the judge passed a number of observations, in respect of each of which he posed himself a rhetorical question: in some instances he responded to those questions. On the question of the first applicant’s lies he said:

26.7     I have no doubt [the HSBC employee] is a credible and reliable witness. I found D1 lied to [her] when he was asked about the buyer. Why should D1 lie to [her]?

By itself that passage is unexceptionable: it is consistent with an enquiry into the first applicant’s credibility.

11.However, when making known his finding in regard to the state of the knowledge or belief of the first applicant as to the nature of the moneys he said:

50. It is also clear from the evidence that on 7 December 2009 when [the HSBC employee] made inquiries with D1 and D2,…, each told [her] a lie and obviously the purpose of which was to cover up the source of the money.

51. …

52. Both D1 and D2 are fully aware of the movement of the money and both could not explain the source of the money. In fact each of them told a lie to try to cover up the source of the money. The only irresistible inference is that both D1 and D2 knew or reasonably believed that the money represents proceeds of an indictable offence and they conspired together to deal with that.

[Emphasis supplied]

12.The prosecution had not sought to rely upon the fact of that lie to support its case against the first applicant: its stance, both at trial and before us, was that the two directly conflicting versions given by the first applicant about the same issue was a matter which the judge was entitled to take into account in assessing the credibility and reliability of the first applicant's evidence.

13.Mr Edmond Lee for the respondent sought to persuade us that even if we were to conclude that the judge had gone further than to use the conflict in the first applicant’s evidence only for the purpose of assessing his credibility, there was nothing to indicate, either in these passages or the reasons for verdict generally, that the judge had used the lie to infer guilt. It was his submission that there is ample authority to the effect that this court will not find that a single judge has misapplied or ignored the law where he has not given himself a specific direction unless there are indicators to the contrary.

14.We accepted that to be correct as a general proposition. However, in this matter the judge’s Reasons for Verdict were superficial and inadequate, failing to address a number of important issues which ought to have been addressed in the context of this case. The issue of whether the applicants had lied to the HSBC employee and how the judge was to deal with those lies, if there were any, was one instance.

15.Whilst it may be that the passages quoted from the Reasons for Verdict above were capable of the construction contended for by Mr. Lee, given the overall inadequacy of the Reasons for Verdict we were unable to be confident that the judge only used the lie in support of the prosecution case: there seemed to us, not least from the manner in which he expressed himself in §52 of the Reasons for Verdict, to be a distinct possibility that he relied upon it to infer guilt.

16.Insofar as the second applicant was concerned, it was unclear from the Reasons for Verdict to which of the two conversations which the second applicant held with the HSBC employee - on 7 and 17 December 2009 - it was that the judge referred when he found that she too had lied to the employee, although it seemed probable that he had both in mind.

17.In the first conversation it appeared that the second applicant explained the nature of the relationship between Prestige and Golden Sunny and followed that up with a fax transmission to HSBC, it comprising a letter - which dealt with that relationship - and copies of two invoices from Golden Sunny said to relate to the alleged transaction involving the customer Maxwell. For the judge to have found that the second applicant lied during that first conversation it must be that he was relying upon his finding that the invoices were not genuine invoices: this was a finding which we did not accept he was entitled to make and to which we return.

18.As to the second conversation, there does not appear to be any evidence which established that whatever the second applicant was alleged by the HSBC employee to have said to her was, as a fact, untruthful. Once again, it was unclear from the Reasons for Verdict but seems probable that what the judge had in mind was an ongoing course of dishonesty by the second applicant based upon his finding in regard to the falsity of the second applicant's invoices.

19.In the case of the first applicant the judge demonstrably had two separate versions of what the first applicant had told the HSBC employee: no such evidence existed in the case of the second applicant which the judge would have been entitled to take into account to assess her credibility.

20.There did not seem to us to be any articulated justification for the judge's finding that the second applicant had lied but, even if there were, we would not be able to be confident that the judge did not mis-use that finding.

The existence of reasonable grounds to believe (first applicant)

21.It is incontrovertible that the test to be applied in respect of the offence of money laundering when the prosecution relies upon reasonable belief rather than actual knowledge is twofold:

It is well settled that the concept of having “reasonable grounds to believe” involves both objective and subjective elements: the objective element necessitates proof of the existence of grounds which a commonsense, right-thinking member of the community would regard as sufficient to lead a person to believe that property in whole or in part represented proceeds of an indictable offence; the subjective elements requires proof that those grounds were known to the particular accused.

See Secretary for Justice v CHOI Sui Hey [2008] 6 HKC 166 §18.

22.The judge did not set out the test anywhere in his Reasons for Verdict. Whilst it is not essential that a judge repeats the precise passage quoted above, in the present matter the judge did not indicate in any form in the Reasons for Verdict that he had turned his mind, specifically, to each of the two tests.

23.This court, differently constituted, has indicated on a number of occasions that it "is preferable " when a judge is assessing evidence that he start by setting out the elements of the offence which are specifically in issue, usually relating to the mental element.

Where the judge is a professional judge sitting alone, however, it can be assumed, unless there are indications the contrary, that the judge is well aware of the elements of the offence charged and that the reasons, pointing to where the evidence is accepted or rejected, are directed to those elements.

See, for example, HKSAR v KWOK Chi Wah [1999] 1 HKLRD 481 at 485G-486C

24.Whilst, once again, there was nothing in the Reasons for Verdict which indicated that he had failed to apply both limbs of the test, the central issue before the judge was the existence or otherwise of reasonable grounds to believe as it affected the state of knowledge of the two applicants. This is not a case in which the facts inexorably established reasonable grounds for such belief: it was therefore incumbent on the judge to show that he had addressed the issue and to explain the reason for his conclusion.

25.The central feature of the defence of each of the applicants was the state of his/her knowledge. The facts upon which the judge was entitled to assess the state of their knowledge differed, of course, between them. Had he applied his mind directly to the issue of whether reasonable grounds to believe existed, and demonstrated that he had done so, it may be that he would have come to different conclusions in respect of the two applicants. Instead, a reading of the Reasons for Verdict revealed that he simply took a broad brush approach to this issue.

26.This was a matter which, in our view, required careful analysis of the evidence identifying the particular aspects of it which could form the basis upon which a commonsense, right-thinking member of the community would be led to believe that property was the proceeds of an indictable offence. Mr. Lee suggested that there were only three grounds which could form the basis for that belief although, for our part, there seemed to be other aspects that might have been available to the judge for consideration. Be that as it may, no such exercise was conducted by the judge.

27.We noted, with concern, that as appears in §11 above, the judge made no direct finding whether the respective applicant knew or whether he/she had reasonable grounds to believe that the property represented proceeds of an indictable offence: on the evidence it was certainly open to him to have concluded that the actual state of knowledge of the two applicants differed. That was a finding which ought to have been made.

28.The reasons for verdict did not point to or identify, as was indicated to be the saving grace in KWOK Chi Wah, which evidence the judge accepted and which he rejected for the purpose of ascertaining whether the elements of the offence had been proven.

29.We were consequently unable to say with any certainty that the judge had addressed his mind to the specific elements of the three offences.

The second applicant's application

30.The position of the second applicant both in respect of Charge 1 and Charges 2 and 3 which she faced alone is different from that of the first applicant. The judge erred in several respects. We have already dealt with the second applicant’s second ground of appeal relating to the judge’s finding that she had lied to the HSBC employee.

31.The judge found that "... it is clear that D2 was telling the police a packet of lies.". It was not immediately clear from the Reasons for Verdict how he arrived at this conclusion but it seemed to have been based upon two factors, being his findings that, first, the sales confirmation, Exhibit D7, was "a complete fiction" and, second, that the second applicant "... told [the HSBC employee] a lie and obviously the purpose of which was to cover up the source of the money."

32.We fully understood his scepticism regarding the sales confirmation which purported to form the basis of the contract between the first applicant and the customer Maxwell. A significant feature of it - and one that obviously impressed the judge - was that the document was dated 1 August 2009 yet it contains the correct account number of the account opened at HSBC by the first applicant on behalf of Prestige. That demonstrates considerable prescience given that the account was only opened four days later, on 5 August 2009.

33.The fundamental difficulty in respect of this first part of this approach was that there was no evidence that the second applicant had any knowledge of the existence of the sales confirmation or, indeed, the events leading up to it. It is true that the sales confirmation bore details of the second applicant's company and bank account but the only evidence before the judge was that this document had been prepared by the first applicant: as difficult as it may be to comprehend the first applicant's evidence as to why he included information concerning the second applicant on that document, that cannot attribute knowledge of either the existence of the document or the prima facie falsity of it to the second applicant.

34.We recognised that the judge criticised the contents of the record of interview with the second accused in a number of other respects. None of those criticisms, individually or collectively, was such, in our opinion, as to undermine the second applicant's case.

35.The second finding which appeared to have underpinned the judge’s rejection of the second applicant's defence was that the second applicant lied to the HSBC employee. We have dealt with that above. The only basis upon which he could have arrived at that conclusion was by rejecting the genuineness of the substantial volume of records which the second applicant introduced and were before the judge. As foreshadowed, we return to this issue.

36.It was necessary to appreciate to which documents the judge was referring. During the prosecution case the facsimile to the bank and the two supporting invoices (see §17 above) had been produced, presumably during the testimony of the HSBC employee, as Exhibits P9. Remarkably, they had been omitted from the appeal bundle.

37.During cross-examination of the first applicant on behalf of the second applicant those same documents had again been produced but this time with a series of additional supporting documents relating, it was suggested to the first applicant with which he agreed, to the same transaction: those additional documents included items such as production orders and a bill of lading. Those documents were produced as Exhibit D9. In addition, a further batch of documents was produced on behalf of the second applicant which became Exhibit D10: they were accepted by the first applicant to relate to previous dealings between him and the second applicant.

38.The judge discussed the documents which formed Exhibit D9 in §§42 to 45 of the Reasons for Verdict. Thereafter, he expressed himself in these terms:

46. D2 also produced other documents with the attempt to prove that D2 had a genuine business with D1.

47. After careful consideration of all the evidence the only inference I can draw is that all these documents produced by D2 were fake.

39.It seemed to us that the only interpretation which we were able to place on the use of the phrase "other documents" in §46 was that this was a reference by the judge to the documents comprising Exhibit D10.

40.It was the judge’s finding regarding the documents contained in Exhibit P9, D9 and D10 that form the basis of the second applicant's first ground of appeal.

41.It should have been plain to the judge from both the record of interview as well as the tenor of cross-examination on her behalf of, particularly, the first applicant that the second applicant's position was that she had had substantial ongoing business transactions with the first applicant over a number of years; from her point of view, the current transactions were yet more in the ongoing business relationship; the first applicant had provided her with an explanation, not unreasonable on the face of it, as to why he required the deposits which Prestige or the purported customer had transferred to her account to be transferred to a company which she knew to be controlled by him.

42.Apart from introducing those documents during the course of cross-examination of the first applicant, the second applicant had made copies of them available to the prosecution at a pre-trial review. The second applicant had also put up a series of photographs depicting the premises of her factory as well as piles of batteries in those premises bearing the trade name of the batteries apparently purchased by the first applicant: the first applicant confirmed that he had visited those premises on a number of occasions and seen the manufacturing process.

43.The second applicant's case revolved around the existence of that business relationship. Whilst it was true, as the respondent submits, that the judge was not bound by the prosecution's view on aspects of the evidence, it was a matter of fundamental fairness that if the judge intends to take a different view from that of the prosecution, being a view which strikes at the core of a defence advanced on behalf of an accused person, he should give an indication to that accused to enable the issue to be addressed.

44.Of particular significance was this exchange in court:

Mr. Davies:  I'm certainly not going to object to documents I'm producing. The reason it is done is there are just so many documents and I think there is no real dispute about these. These are...

Q.:  So can you see that document in front of you? It's this one here.

Court: You are still on that document?

Mr. Davies:  Yes, still on, just to demonstrate quite clearly there were large numbers of batteries exported. This is not something made up in court. These documents were served on the prosecution at the pre-trial review I should say.

[Emphasis supplied]

45.Mr. Lee's position was that, based on the evidence before him, the judge was entitled to make a finding of falsity in respect of the limited documents forming Exhibit P9 and, further, that even if the judge had erred in making a finding of falsity in respect of the rest of the documents forming Exhibit D9 as well as those forming Exhibit D10 that finding did not in any way vitiate the finding in respect of Exhibit P9 - it became an unnecessary and irrelevant finding which simply could be ignored.

46.He further submitted, with force, that whilst the judge may have erred in respect of the documents other than those forming Exhibit P9, there was no necessity for the prosecutor to directly have put to the first applicant the suggestion that those documents, Exhibit P9, were false because the prosecution’s stance in respect of those specific documents was clear from the very fact of the institution of the prosecution of these offences: the prosecution's case was clear, he said - that these were moneys which the two accused were engaged in laundering and the suggestion of the second applicant that the documents in Exhibit P9 represented a genuine transaction was false.

47.There was no suggestion at all from the prosecution that the genuineness of the remaining material in Exhibit D9 or the material in Exhibit D10 was in any way in dispute. Although the prosecutor cross-examined the first applicant about his business dealings with the second applicant and was well aware of the earlier cross-examination on behalf of the second applicant, it was not suggested at any stage that that documentation was not genuine.

48.The authorities to which we were referred in support of the second applicant's first ground of appeal relate to the duty of counsel to put the case of a party during cross-examination. They are of no particular assistance in this matter.

49.We did not agree that the effect of wrapping up all the documentation in Exhibits D9 and D10 and simply dismissing them all as a false had no consequences for the finding in regard to the documents comprising Exhibit P9. It was, as Mr. Lee realistically recognised, open for there to have been genuine business dealings between the applicants and, in addition, illicit dealings. That was a matter which the judge, in the particular circumstances of this case, was duty bound to address. Had he done so he may well have arrived at the conclusion that some of the documents may have evidenced genuine transactions between the parties which in turn may, or may not, have influenced his decision making process. The broad-brush approach adopted by the judge in respect of taking all the documentation together was oversimplistic.

50.We could not divine from the statement of findings whether the judge found that all the documents were false because of his attitude to those comprising Exhibit P9 or whether he found that those comprising Exhibit P9 were false because he believed the remaining documents to be false.

51.The failure of the judge to address his mind to whether there was a difference between the different groups of documents and to make a finding, without warning, that all of the documents were false deprived the second applicant of a fair trial by depriving her of the opportunity to lead evidence supporting those documents. That unfairness extended to all three charges.

52.There was no necessity for us to address the remaining ground of appeal.

Mr Edmond Lee, SADPP (Ag.), of the Department of Justice, for respondent

Ms Fiona Nam, instructed by Tangs, for the 1^st applicant.

Mr Oliver Davies, instructed by Wong & Co, for the 2^nd applicant.