Dealing with property known or believed to represent proceeds of indictable offence – criminal liability for acts of another – prosecution case not presented in clear manner – failure to allege defendant was party to joint enterprise – consequent failure by trial judge to address and properly analyse primary issue of basis of defendant's criminal liability – mens rea – error in approach to “reasonable grounds to believe”
D was convicted of a joint charge with X and an uncharged person, K, of dealing with property known or believed to represent the proceeds of an indictable offence, namely a forged cashier’s order for US$1.9 million payable to C, a company (the "Forged Order") (Charge 2). X pleaded guilty to both Charge 2 and a charge against him alone of using a false instrument (ie, the Forged Order) to deceive B, a bank, into accepting it as genuine so it could be negotiated and the proceeds credited into an account of C (the "Account") (the "Fraud"). The prosecution case was that D was liable for X’s criminal acts of dealing with the proceeds of the Fraud on the basis that he set up the Account. Specifically, D, having come with X to Hong Kong, set up C (with D as the CEO), then opened bank accounts at B in C’s name as a co-signatory with X and later departed. X returned to Hong Kong alone, encashed the Forged Order at B and, of the US$1.9 million credited into the Account, remitted US$1.779 million to an overseas bank account in C’s name and also withdrew cash, leaving a balance of US$10,681.46. D’s submission of no case to answer on the ground that he was no longer in Hong Kong when the dealing in the property occurred and his earlier preparatory acts could prove only a prima facie case of conspiracy was rejected. D gave evidence that he had known his friend K for 15 years and, because he was unemployed, K asked him to be a director of a music entertainment company; he was promised a commission of 2.5 percent of deposits into the Account; he only knew X through K; he knew nothing about the Fraud or X’s involvement in it; he did not think there was anything improper about C’s accounts; and he returned to Hong Kong to collect the ATM card on K’s instructions but was arrested. The Judge found that there was no direct evidence that D knew of the Forged Order or Fraud, but did not address how D could be liable if he was not a party to the dealing with the property. However, in his reasons for sentence, the Judge stated that D was a party with X to a joint “criminal enterprise” for the purpose of laundering money from the proceeds of crime; and while X had done a little more than D (by presenting the Forged Order), there was no significant difference between their culpability as they simply played different roles in executing their agreement. D applied for leave to appeal against conviction out of time, further arguing that in evaluating D’s beliefs, the Judge applied the two-stage test propounded by the Court of Appeal in HKSAR v Pang Hung Fai  4 HKC 366 which was held by the Court of Final Appeal to be erroneous after D was convicted.
Held, granting leave, treating the hearing as the appeal and allowing the appeal, that:
- The Judge correctly concluded that the charge alleged that D was a party to a joint criminal enterprise and that this doctrine would make D liable for X’s acts in carrying out the crime to which he and K were a party. However, he did not state what the joint enterprise was, although given his sentencing remarks, at least in respect of X, he regarded it as the fraudulent use of the Forged Order. The money laundering here was the final act by the fraudsters of removing the money from the Account and Hong Kong to obtain the benefit of their illicit dealing, ie it was a consequence or incident of the underlying fraud.
- It was incumbent on the prosecutor to make clear in his opening speech that D was criminally liable for X’s actions because, on the evidence, they and K were participants in a joint criminal enterprise, having reached an understanding or arrangement amounting to an agreement that they would commit a crime.
- The criminal joint enterprise to which X and K were a party was the commission of the Fraud whereby the proceeds would be deposited into the Account and then transferred overseas. However, the prosecution did not allege that D was a party to this joint enterprise. Because the prosecution case was not presented in a clear manner, the Judge failed to address the primary issue of the basis of D’s criminal liability, and to analyse it applying the relevant legal principles to the evidence. On this ground alone, the conviction could not stand.
- Further, the Judge erred in finding that D had “reasonable grounds to believe”. D’s evidence concerning his personal beliefs about K and why he favoured him needed to be considered in analysing whether D had the requisite mens rea. The Judge never said explicitly which parts of D’s evidence he accepted or rejected. It was not clear that the Judge did disbelieve D, at least in respect of his denial of knowledge of the Fraud. D was entitled to have his evidence properly evaluated and a reasoned determination made as to his credibility. This was not done.