HKSAR v. Wong Wai Kwong David

Press Summary (English)

Press Summary (Chinese)

FACC No. 9 of 2014

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 9 OF 2014 (CRIMINAL)

(ON APPEAL FROM CACC NO. 96 OF 2010)

____________________

____________________

____________________

J U D G M E N T

____________________

Mr Justice Fok PJ (giving the Judgment of the Court) :

Background

1.This uncontested appeal arises as a result of the Court’s decision, handed down on 5 June 2014, in HKSAR v Li Kwok Cheung George & Ors[1].

2.That case involved four of six defendants tried for various offences. The four defendants in question were: Wayland Tsang Wai Lun (Tsang); his wife Nancy Kwok Wai Man (Kwok); Charles Cheng Kai Ming (Cheng); and George Li Kwok Cheung (Li).

3.Tsang and Kwok were directors and shareholders of a public company who were convicted of having conspired with an immunised prosecution witness, named Au Yeung, to defraud the Stock Exchange of Hong Kong and the public company’s shareholders by means of what was referred to as “the Charge 3 conspiracy”.

4.The facts giving rise to the Charge 3 conspiracy were summarised in the Court’s judgment in HKSAR v Li Kwok Cheung George & Ors as follows:

“6. In mid-March 2002, the price of Grand Field’s shares had fallen from $0.68 to $0.12. In an effort to bolster that price, Tsang and Kwok hatched a scheme to give a false impression of profitable activity involving a Mainland joint venture to construct a natural gas pipeline near Chongqing. A company called Sino Richest Limited (‘Sino Richest’) was formed with shareholders, including a company called Logistic China Enterprises Limited (‘Logistic China’), who were ostensibly unconnected with Grand Field. On 25 May 2002, Sino Richest purported to sign a joint venture agreement with the Mainland party and shortly thereafter, Grand Field purported to acquire 75% of Sino Richest in consideration of Grand Field issuing to the shareholders of Sino Richest 315 million new Grand Field shares. On 4 June 2002, a bullish public announcement was made about this joint venture which was said to be subject to government licences and approvals.

7. The public announcement was false, it never having been the intention of Tsang and Kwok to proceed with the joint venture. However, Grand Field came under increasing pressure from the Stock Exchange to provide further details relating to the joint venture and the needed government approvals. As Tsang and Kwok were unable to comply, hoping to put an end to such pressure, they sought to pretend with Au Yeung’s help that Grand Field had sold its interest in the joint venture (held via Sino Richest) back to Logistic China. The purported sale was announced on 12 August 2003. This pretence led to their conviction of the Charge 3 conspiracy. Charge 3 alleged that Tsang, Kwok and Au Yeung had conspired to defraud the Stock Exchange and the shareholders of Grand Field by dishonestly

‘... concealing that there had been no genuine acquisition of a business to develop and construct a gas pipeline in Chongqing, the Mainland; and falsely representing that there was a genuine disposal of the aforesaid business in Chongqing’.”

5.Cheng and Li were directors of another listed company which was the holding company of a group providing financial and securities broking services.  They, together with Tsang, Kwok, the appellant in this appeal[2] and one other, were alleged to have conspired to implement a scheme involving circular payments designed to conceal the Charge 3 conspiracy and charged with having conspired to commit a money laundering offence contrary to sections 25(1) and (3) of the Organized and Serious Crimes Ordinance[3].  This offence was the subject of Charge 4 of the indictment at trial.

6.The facts giving rise to Charge 4, as summarised in HKSAR v Li Kwok Cheung George & Ors, were as follows:

“8. To give credence to the re-acquisition by Logistic China, the four appellants (and others) set up a scheme with a view to providing evidence that Logistic China had duly paid Grand Field (through its subsidiary called Ka Fong Industrial Limited (‘Ka Fong’)) $32 million to re-acquire the Sino Richest shares. This was where Cheng and Li came into the picture. On 31 July 2003, advancing funds which originated from Upbest, they caused a series of payments to be made (with Cheng signing a series of Upbest cheques) which resulted in a circular flow of funds bringing the money back to Upbest on the same day, after having passed through a web of local and offshore companies. Payments to and by Logistic China, Ka Fong and Tsang formed part of these circular payments. Logistic China received $32 million from a company upstream in the circular flow and then, purporting to pay for the re-acquired Sino Richest shares, made a payment of $32 million to Ka Fong (Grand Field’s subsidiary). Ka Fong (by a cheque signed by Kwok) then paid the $32 million to Tsang who then passed the money onwards so that it was eventually returned, after certain disguising complications, to Upbest. On the following day, 1 August 2003, Grand Field faxed to the Stock Exchange a copy of the payment-in slip showing that Logistic China had paid $32 million to Ka Fong on the previous day.

9. These circular payments were the subject of Charge 4 which alleged a ‘conspiracy to deal with property known or believed to represent the proceeds of an indictable offence contrary to ... sections 25(1) and (3) of [OSCO]’, particularised as follows:

‘[Tsang, Kwok, Cheng, Li (and others) [viz. the appellant and Au Yeung]] ... knowing or having reasonable grounds to believe that property, namely $32 million ... in whole or in part directly or indirectly represented proceeds of an indictable offence, conspired together with [Au Yeung] to deal with the said property.’”

The appellant’s conviction and appeal to the Court of Appeal

7.The sole charge against the appellant was Charge 4.  After trial before HH Judge A. Wong[4], the appellant, together with Tsang, Kwok, Cheng and Li were convicted of this charge on 5 March 2010.  The appellant was sentenced to 6 months’ imprisonment for the offence and has since served that sentence.

8.On appeal to the Court of Appeal, the appeals of the appellant and his co-defendants in respect of Charge 4 were dismissed on 28 November 2012.[5]

HKSAR v Li Kwok Cheung George & Ors

9.Following the dismissal of their appeals by the Court of Appeal, Tsang, Kwok, Cheng and Li applied for leave to appeal to this Court against their convictions under Charge 4.  On 15 August 2013, the Appeal Committee granted them leave to appeal against their Charge 4 convictions and certified the following question of law, namely:

“Whether the expression ‘proceeds of an indictable offence’ in s 25(1) of the Organized and Serious Crimes Ordinance, Cap 455, is confined to money gained from the commission of an indictable offence or, instead, extends to money used in the furtherance of such an offence.”

10.The Court heard the appeals of Tsang, Kwok, Cheng and Li[6] on 19 and 20 May 2014.  The appeal raised the question of whether, by virtue of the statutory definition of “a person’s proceeds of an offence” in section 2(6)(a) of OSCO, the offence of money laundering in section 25(1) of OSCO could be committed where a person deals with funds that are known not to derive from any offence but which are intended to be used as part of a fraudulent conspiracy.

11.In its judgment dated 5 June 2014, the Court concluded[7] that:

“… the Courts below were wrong to construe the expression ‘proceeds of an indictable offence’ in s 25(1) of OSCO as extending to cover money used as an instrument furthering the Charge 3 conspiracy where there was no evidence that the appellants knew or had reasonable grounds to believe that such money represented the proceeds of an indictable offence. It was on the contrary clear that all concerned knew that the payments and receipts of the sum of $32 million relied upon by the prosecution involved dealing with funds provided by Upbest, there being no evidence that such funds were other than legitimate. It was erroneous to construe section 2(6)(a) as widening the concept of ‘proceeds of an indictable offence’ to cover such payments.”

12.The Court accordingly held[8] that the Charge 4 conspiracy was not established and the appeals of Tsang, Kwok, Li and Cheng in respect of that charge were allowed and their convictions thereunder quashed.

The appellant’s application for leave to appeal out of time

13.By notice dated 24 June 2014, the appellant applied to the Appeal Committee for leave to appeal against his conviction in respect of the Charge 4 conspiracy and, due to its lateness, for an extension of time in which to make such application.  In respect of the latter application, the appellant explained that he did not apply for leave to appeal within the prescribed time after the dismissal of his appeal against conviction by the Court of Appeal due to his financial difficulties and personal circumstances.  In short, he had exhausted his savings in defending himself at trial; he had borrowed funds from his wife to pursue his appeal to the Court of Appeal but had since separated from her; he therefore could not rely on her for further funds and had to repay what she had already lent him.

14.The appellant’s application was not opposed by the respondent and, by a consent order dated 11 September 2014, the Appeal Committee granted him leave to appeal and an extension of time in which to do so.

15.Although now water under the bridge, it is right to point out that the grant of such an extension was, of course, a rare and exceptional course since there is a well-recognised practical necessity for finality in the criminal process and an extension of time to appeal against a conviction out of time is not normally granted only on the ground that an authoritative judgment subsequent to the conviction has held the previous understanding of the law to be incorrect.[9]

16.In the present instance, the extension was justified on the basis of the very exceptional circumstances of the appellant’s case.  The conviction sought to be appealed was not, as is more usually the case in this situation, unrelated to the subsequent authoritative judgment holding the previous understanding of the law as incorrect.  On the contrary, the appellant’s conviction was in the same case, was for the same offence as Tsang, Kwok, Li and Cheng and was based on the same facts and evidence.  The question of law determined by the Court in HKSAR v Li Kwok Cheung George was directly applicable to the appellant’s proposed appeal and, if applied, would fully determine that appeal.  He had provided a reasonable explanation for his failure to apply for leave to appeal within the prescribed time limit.  For the appellant otherwise to remain convicted of the Charge 4 offence, alone amongst the various parties charged with that offence and on an erroneous view of the law, would plainly subject him to substantial and grave injustice.

The appeal

17.The Appeal Committee having granted the requisite extension of time to appeal together with leave to appeal, it now falls to consider the merits of the appeal itself.

18.The respondent having indicated that it would consent to the appeal being allowed, the Registrar directed the filing of a Joint Printed Case by the parties in accordance with the practice and procedure for uncontested appeals.[10]

19.On 11 November 2014, the parties duly filed such a case jointly submitting that the appeal should be allowed and proposing an agreed order as to costs.  In support of the appeal, it was jointly submitted that, given the decision of the Court in HKSAR v Li Kwok Cheung George, substantial and grave injustice has been done to the appellant such that his appeal should be allowed.

20.In the light of the Court’s judgment in HKSAR v Li Kwok Cheung George, the appellant’s conviction in respect of Charge 4 is unsustainable as a matter of law for precisely the same reasons that led to the appeals of Tsang, Kwok, Li and Cheng being allowed in that case.  There was no evidence that the appellant knew or had reasonable grounds to believe that the money used to further the Charge 3 conspiracy represented the proceeds of an indictable offence.  The $32 million constituting the subject of the money laundering offence charged were funds provided by Upbest and there was no evidence that these were other than legitimate.  They were therefore not “proceeds of an indictable offence” within section 25(1) of OSCO and it follows that Charge 4 could not be established against any of the parties to the alleged conspiracy.

21.In the circumstances, the appellant’s conviction of the Charge 4 offence, alone amongst the various parties charged with that offence and on an erroneous view of the law, involves a substantial and grave injustice.

Disposition

22.For the reasons set out above, the appellant’s appeal is allowed and his conviction under Charge 4 quashed.

23.In accordance with the parties’ agreement, we make the following costs orders by consent:

(1) The appellant be entitled to payment of his costs of trial in DCCC 24/2008, to be taxed if not agreed.

(2) The appellant be entitled to payment of one-half of his costs in CACC 96/2010, with a certificate for two counsel, to be taxed if not agreed.

(3) The appellant be entitled to payment of his costs of applying to the Appeal Committee for leave to appeal in FAMC 46/2014, to be taxed if not agreed.

(4) The appellant be entitled to payment of his costs of the substantive appeal in FACC 9/2014, to be taxed if not agreed.

Joint Written Submissions by:

Mr Joseph Lee and Ms Emily Yu, instructed by Wat & Co., for the Appellant

Mr Anthony Chau SPP, of the Department of Justice, for the Respondent