HKSAR v. MA WING KEUNG

CACC119/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 119 OF 1998

(ON APPEAL FROM DCCC 1074 OF 1997)

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J U D G M E N T

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Chan, CJHC delivering the judgment of the court :

1. The applicant was convicted after trial in the District Court of 3 counts of evasion of liability by deception contrary to section 18B(1)(b) of the Theft Ordinance, Cap.210. He was sentenced to 2 years 4 months on each count. The first two sentences were to run concurrently with each other and 12 months of the sentence on the third count were to run consecutively to the first two sentences, making a total of 3 years and 4 months. The applicant now applies for leave to appeal against both conviction and sentence.

2. The first prosecution witness, PW1, was the shareholder and director of a company called Top Foundation Printing International Limited. It was his evidence that sometime in March 1996 he was approached by the applicant who represented a company called Noble Advertising and Modelling Production Company Limited. The applicant placed orders with PW1 for the printing of certain publication on fashion. The cost was to be paid on credit. By April 1996, a sum of $193,222.75 was outstanding. On 24 June 1996, the applicant issued a cheque, the subject matter of the first count, which was postdated to 20 July 1996. PW1 said that at the time of the issue of the cheque, the applicant told him "Don't worry. It will be honoured." Unfortunately, it was not. PW1 then chased the applicant for payment. Meanwhile other orders were placed by the applicant with PW1 and were accepted. By July 1996, according to the records, up to the end of June, a total of $298,897.75 was still outstanding and that included the $193,222.75 which was still unpaid. Upon the demand of PW1, the applicant issued 4 personal cheques in purported payment of these debts. They were the subject matter of the second count. They were also dishonoured when they were presented for payment in September 1996. PW1 tried to look for the applicant but found that the company had moved. He reported the matter to the police.

3. PW2 was the shareholder and manager of the company called Comlang Graphic Art Studio. In February 1996, that company provided service to the applicant's company having done so previously in January 1996. The services provided consisted of "negative colour separate processing". The work was allegedly completed in April. The cost was $14,452. PW2 received a cheque from the applicant which was postdated to June 1996. It was dishonoured. In December 1996, she went to see the applicant and got another cheque which was postdated to 20 January 1997. It was also dishonoured. That was the subject matter of the third count.

4. The officer of Nanyang Commercial Bank gave evidence and testified that the account of the applicant's company was opened on 28 June 1996 but was closed on 23 August 1996. According to the bank records, most of the time the account was in the debit although there was, at times, some credit up to only $5,000 to $6,000. The account was however closed by the bank on 23 August because, according to the witness, there were too many dishonoured cheques. The officer of the Overseas Trust Bank also gave evidence to the effect that the account of the company was closed on 18 January 1997. The reason was again that there were too many dishonoured cheques. He was able to confirm that the cheques of the company required two signatures.

5. The applicant gave three statements to the police. He said that the events leading to these statements were these. He was beaten up by a number of people who he believed were triad members and sent by PW1. As a result of the assault, he was admitted into hospital. After that, he reported the assault to the police and upon police investigation, he gave these statements to the police.

6. He said in his statements that in January 1995, he set up a company together with a Miss Chiang. He admitted having placed various orders with PW1 for the printing of certain publications since March 1996. He also said that the printing was very poor and he refused to accept them and to pay for the cost. However, in June 1996 he signed the cheque which was the subject matter of the first count. He handed it to his staff for the signature of Miss Chiang since two signatures were required but the staff had wrongly given the cheque to PW1 without Miss Chiang's signature. He rang up PW1 and asked him not to present it. Finally, he issued the 4 cheques which were the subject matter of the second count to cover the previous debt and the other debts which had arisen from the subsequent orders. He admitted that when he issued those cheques, he knew there was no money in the account of the company but alleged that Miss Chiang had told him that money would be forthcoming and would be deposited in that account. And so he told PW1 that money would be deposited after he had received notification from PW1 that the cheque would be put into the bank.

7. A number of matters were raised by the applicant in his statements which could be regarded as his defence because he did not give evidence or called evidence at the trial. Those matters included firstly that he was just an employee of the company and not responsible for the debts. Secondly, he was forced to sign the subsequent cheques under threat by PW1 and thirdly, the goods or articles delivered by PW1 were not of good quality and he had rejected them. In respect of the services provided by PW2, he said the work was not done by PW2's company but by another company.

8. The applicant was unrepresented at the trial and is unrepresented before this Court. He had filed a number of written submissions which we had considered. The Deputy District Judge in her Reasons for Verdict did not set out the evidence given at the trial or any findings based on the evidence. She referred to the brief facts as set out in the Summary of Facts which, of course, was not evidence properly before the court. The judge dealt with the matters raised in the trial including those raised by the applicant in his statements, the bank account balance statements and the fact that the company's bank accounts were closed by the banks. She also dealt with the evidence that one of the cheques were allegedly handed by mistake to PW1. She did not accept the applicant's defence. At the end of her Reasons for Verdict, she accepted that PW1 and PW2 were truthful, honest and reliable witnesses and said she placed no reliance on the cautioned statements save that it was clear from those statements that the applicant had a substantial responsibility for the running of the company. She then made findings to the effect that she considered the applicant had in his statements attempted to avoid liability or lessen his involvement. She was satisfied that the applicant handed over the various cheques to the two witnesses with knowledge that they would not be honoured by the banks. The judge was also satisfied beyond reasonable doubt that there was intent to make default in whole or in part of an existing liability and that the applicant had dishonestly induced the two witnesses to wait for payment by deception. She accordingly convicted the applicant of the three charges.

9. It is not disputed that the applicant had issued the cheques, which were the subject matter of the three charges, to PW1 and PW2. It is also not disputed that these cheques were dishonoured. The crucial distinction between a civil claim on dishonoured cheques and a criminal prosecution for the evasion of liability by deception using such cheques is the presence of intention and dishonesty. With respect to the Deputy District Judge, she did not adequately deal with these ingredients. Mr Wong for the prosecution submitted that from the bank statements produced before the court, the applicant's accounts were most of the time in the debit and that this was strong evidence showing that at the time when he issued the cheques there was no intention to pay on them. Counsel also submitted that the applicant did not give evidence and therefore there was nothing to substantiate his allegation that he was expecting money from another person or some other legitimate sources. Counsel argued that the judge was entitled therefore to reject his statements and find that he was dishonest and had the intention to defraud.

10. While we accept that the matters dealt with by the judge and argued by Mr Wong were relevant factors, they were not all the matters which the court ought to have considered. There are various aspects of the case which required serious consideration. These included the following matters.

11. First, the applicant might want to minimize his role in the business and said that he was only an employee. This might not be the truth but there was an allegation that a Miss Chiang was at least a co-partner. As a matter of fact, one of the bank officers confirmed that two signatures were required for the issue of a cheque. The existence of another person running the company or at least having authority to sign cheques or even financing the company could not be ruled out. Unfortunately, this point was never explored by the applicant because he was unrepresented and it was not adequately considered by the judge. If this allegation was correct, it was consistent with his allegation that although he knew that there was no fund in the company's account when he issued the cheques, Miss Chiang had assured him that money would be forthcoming. This would go to the issue of his intention and dishonestly.

12. The second matter was that the applicant's company was running for a while. PW1 had continued to do business with him despite the first dishonoured cheque. PW2 had done business with him before, had got a dishonoured cheque but was paid in cash later. This was clearly not a case of a fraudulent enterprise from the beginning where the accused had deceived goods with the use of dishonoured cheques and then disappeared. Here we have a on-going concern.

13. Another matter which should receive consideration was that the debts arose from the printing of publications by PW1's company for the applicant's company and from the services provided by PW2's company to the applicant's company. This case was not concerned with providing goods of any resaleable value whereby the rogue could get hold of the goods and sell them at a discount to make quick money and then disappeared. These were services provided to the applicant's company and could not be resold to get money. There was a suggestion that some of the printing matter were still in the office and this is not disputed by Mr Wong for the prosecution. According to the applicant, the work done by PW1 was poor and the services were actually not provided by PW2. This of course was not an excuse if there was dishonesty and intent to defraud. But this allegation and the matter relating to this allegation are consistent with the applicant's defence that he was doing normal business but then ran into financial difficulty and could not repay his debts.

14. The fourth matter which ought to be considered was that the applicant's company accounts were closed by the banks and not by him. The cheque which was the subject matter of the first count was issued when the applicant was still doing business with PW1. He reissued another cheque in exchange for it. During the meantime, PW1 continued to do business with the company. There were 4 postdated cheques issued in exchange. It could be noticed that of the 4 cheques, 3 of them were postdated to the 9th, 16th and 22nd of August, i.e. before the bank account was closed. This went to show the applicant's state of mind when he issued those cheques. This was an important consideration in relation to the issue of dishonesty. Unfortunately, the trial judge did not deal with this.

15. Another matter was that the company of the applicant was closed in July because, according to him, he was assaulted by people sent by PW1. It is interesting to note from the evidence that when PW1 was asked whether he had obtained the services of a debt collecting company, he denied but when he was asked whether he had engaged triad members to assault the applicant, he, after the proper warning from the judge, refused to answer that question. The applicant alleged that he was forced to sign one cheque and this was dealt with by the judge but he said after the closure of the shop, he reported the matter to the police. This fact was not disputed. It would be rare for a person who had dishonestly issued cheques to defraud his creditors to bring the matter to the attention to the police and this in our view is also a matter which should receive serious consideration by the judge when dealing with the issue of dishonesty and intent.

16. Finally, PW1 said that he had been paid some money, a total of $20,000. Unfortunately, it was not clear when he received this money. This was not followed up in the evidence. If PW1 was paid before the applicant was assaulted or before the matter was reported to the police, this might go to the question of dishonesty. That is to say, the applicant intended to reduce liability from time to time albeit he was under pressure to do so. This would also suggest that the issue of cheques was part and parcel of a running business.

17. Having considered all these matters, we take the view that while there were clearly suspicions suggesting that the applicant might have the requisite dishonesty and intention to defraud, there was evidence which in our view cast doubt on the issue of intention and dishonesty. Regrettably, this issue had not been adequately dealt with by the Deputy Judge. There were matters which required serious consideration and which the judge did not consider or consider adequately. There were matters which although the judge had dealt with had not been sufficiently considered in the light of the important ingredients of intention and dishonesty.

18. Looking at all the evidence in the round, we cannot help feeling that at the end of the day we are left with a lurking doubt whether the applicant had the requisite intent and dishonesty when he issued those cheques. For these reasons, we do not think that the convictions are safe or satisfactory. In the circumstances, we would grant leave to appeal. We treat the hearing of the application as the hearing of the appeal and allow the appeal and quash the convictions. We also set aside the sentences.