THE QUEEN v. NG WING KEUNG, PAUL

1996, No. 349
(Criminal)

HEADNOTE

          The second thing deemed by section 51(5) of the Inland Revenue Ordinance, Cap. 112, is no more than that a person is aware of the contents of his tax return or like document. If those contents happen to be false, he is not deemed to know that they are false. Nor is he deemed to know what would be true.

          Further, that deeming provision, just like the first one in the subsection, is rebuttable.

          Accordingly, the subsection is consistent with the Bill of Rights and is extant.

1996, No 349
(Criminal)

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JUDGMENT

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Power Ag CJ:

1. Unanimously, we have refused leave to appeal against conviction. Our reasons for doing that will now be given by Bokhary JA. By a majority, we have also refused leave to appeal against sentence. And the majority's reasons will now be given by Stuart-Moore J.

Bokhary JA:

2. This case comes to us from a 25-day tax evasion trial before His Honour Judge Sweeney in the District Court early this year.

3. Two men were on trial. One of them became the applicant before us, a man of previous good character in his late thirties.

4. He was the 1st accused at the trial. Both he and the 2nd accused worked in the same insurance company. He was its Senior Agency Manager. The 2nd accused was an insurance agent, and served as his personal assistant.

5. Apart from his position in the insurance company, the applicant was the sole proprietor of an insurance agency business, carried on under the style of Paul Ng & Co.

6. The tax with which we are concerned is tax on the profits which he earned in carrying on that business.

7. There were 12 charges in the charge sheet. Eight were against the applicant alone, while four were against the 2nd accused alone.

8. Of the eight charges which the applicant faced, four (being the 1st, 4th, 7th and 10th) were of wilful use of a fraud, art or contrivance with intent to evade tax, contrary to section 82(1)(g) of the Inland Revenue Ordinance, Cap. 112. We will refer to those as "the use charges". The other four charges (being the 3rd, 6th, 9th and 12th) were of wilfully making a false statement with intent to evade tax, contrary to section 82(1)(c) of the same Ordinance. These we will refer to as "the statement charges".

9. In so far as is material, section 82(1) provides that :

"Any person who wilfully with intent to evade or to assist any other person to evade tax...

shall be guilty of an offence..."

10. All the charges against the applicant were laid on the footing that he was the principal offender.

11. Turning to the 2nd accused, the four charges which he faced (being the 2nd, 5th, 8th and 11th) were of wilful use of a fraud, art or contrivance with intent to assist the applicant to evade tax.

12. On May 27 this year, after a lengthy deliberation and with a careful statement of his reasons, the judge convicted the applicant on each of the eight charges which he faced, but acquitted the 2nd accused on each of the four charges which he faced.

13. Passing sentence on June 24 this year, the judge sentenced the applicant to a total of three months' imprisonment by way of concurrent terms of that duration, and fined him a total of $940,000, allowing him six months to pay and fixing six months' imprisonment in default.

14. The reasons which I am now giving are our reasons for refusing the applicant leave to appeal against his conviction.

15. Each use charge was "paired" with a statement charged in the way in which we are about to state.

16. The 1st, 4th, 7th and 10th charges (each being a use charge) were paired with the 3rd, 6th, 9th and 12th charges (each being a statement charge) respectively.

17. As for particulars, those of the 1st charge (a use charge) read:

" Ng Wing-keung Paul, on or about the 15th of November 1990, in Hong Kong, wilfully with intent to evade tax for the year of assessment 1988/89, made use of a fraud, art or contrivance or authorized the use of such fraud, art or contrivance, namely, by making use of the names as appeared in Schedule 3 of the Profit and Loss Account annexed to the Profit Tax Return for the year of assessment 1988/89 in order to claim higher tax deductible expense in the sum of HK$243,000 in that particular tax assessment year."

18. And the particulars of the 3rd charge (the statement charge with which the 1st charge is paired) read:

" Ng Wing-keung Paul, on or about the 15th of November 1990, in Hong Kong, wilfully with intent to evade tax for the year of assessment 1988/89, made a false statement, namely, by falsely represented that a sum of $243,000 had been paid as commission to those persons as appeared in Schedule 3 of the Profit and Loss Account annexed or enclosed to the Profit Tax Return for the year of assessment 1988/89."

19. So the year of assessment for that pair is 1988/89; and the deduction in question there is $243,000.

20. Apart from the charge date, the particulars of each of the other three pairs of charges are the same as those of the first pair except for the year of assessment and the deduction in question.

21. Thus for the pair made up of the 4th and 6th charges: the year of assessment is 1989/90; and the deduction in question is $484,800. For the pair made up of the 7th and 9th charges: the year of assessment is 1990/91; and the deduction in question is $598,440. And for the pair made up of the 10th and 12th charges: the year of assessment is 1991/92; and the deduction in question is $561,600.

22. Looking the applicant's profit and loss account annexed to each of his profits tax returns mentioned in the charges against him, one sees this.

23. In each instance, there is in the "Expenses" column an item of expense designated "Sub-agents" commission (Sch III)". In each instance, the deduction in question is given as the total amount of such commission paid in that year of assessment. And in each instance, Schedule III sets out the names of the sub-agents to whom such commission is supposed to have gone and the sum which each of them is supposed to have received.

24. Thus it was represented to - and believed by the Revenue - that the appellant had in the four years of assessment 1988/89, 1989/90, 1990/91 and 1991/92 incurred a total of ($243,000 + $484,800 +$598,400 +$561,600) $1,887,840 deductible expenses by way of commission paid to sub-agents.

25. The total tax-saving(to use a neutral term) therefrom came to $269,439.

26. Eventually, it became clear that no sub-agents' commission had been paid by the applicant in any of those four years of assessment.

27. So the prosecution said this. The applicant had used the names of persons who were scheduled as (but were not in truth) sub-agents who had been paid deductible expenses in the form of commission. And such use was the wilful use by him of a fraud, art or contrivance with intent to evade tax. Further, the representation that those persons had been paid such commission was a false statement wilfully made by the applicant to evade tax.

28. The judge felt sure that all of that was indeed so. And he convicted the appellant on all the charges which he faced accordingly.

29. As far as the 2nd accused was concerned, the judge noted that the case levelled against him was that he had assisted the applicant "in his tax evasion by gathering up some of the list of names that were allegedly used and forwarding them to the accountants, knowing that those lists were false." And then he said that he said that he felt unsure as to: whether the names gathered by the 2nd accused were the precise names used by the applicant; which documents the 2nd accused delivered to the accountants; and whether he knew what the documents were to be used for. So he acquitted the 2nd accused on all the charges which he faced.

30. In challenging the applicant's convictions, Mr Griffiths who leads for him has taken a number of points.

31. Essentially, the questions which those points raise are these. First, was there a case to answer? Secondly, assuming that there was a case answer, are the convictions unsafe or unsatisfactory?

32. As part of his argument that there was no case to answer, Mr Griffiths submitted that section 51(5) of the Inland Revenue Ordinance, Cap. 112, has been repealed by section 3(2) of the Hong Kong Bill of Rights Ordinance, Cap. 383, by reason of its inconsistency with article 11(1) of the Bill of Rights which secures the presumption of innocence.

33. We reject that submission and will say why towards the end of this judgment.

34. There is no other sufficient basis for saying that there was no case to answer. So there is no sufficient basis for saying that at all.

35. On the question of whether the convictions are unsafe or unsatisfactory, there is one point which we would dispose of straightaway.

36. In each instance, the names scheduled in Schedule III merely give the details of an item in the Expenses column stating that such-and-such a total amount had been incurred as an expense in the form of commission paid to subagents whose names were, or were to be, scheduled.

37. The applicant signed each profit and loss account with that item in it at the time when he signed it.

38. It is nothing to the point that the schedule of names were annexed only afterwards. That is because it is not a question of mere inaccuracy as to: which sub-agents were paid commission; or how much commission each of them was paid; or the total amount of commission paid to sub-agents. It is clear that no commission at all was paid to any sub-agent.

39. Accordingly, the only reasonable inferences are these. In each instance, the annexure of those names was a seamless continuation of the process begun by the creation of that item. The person who so began that process so continued it. And he completed it by submitting the finished product, the return with all its annexures, to the Revenue.

40. There was, on the whole of the evidence, an overwhelming case that the applicant was that person. His denials and explanations do not look convincing in print. And the judge who received them at first-hand was sure that they were false.

41. The judge's conclusion that the applicant did the things, knew the things and had the intent alleged against him is, in our view, not in any way flawed. We have no lurking doubt over these convictions. And we do not find them unsafe or unsatisfactory.

42. It remains only to deal with the Bill of Rights challenge.

43. Section 51(5) of the Inland Revenue Ordinance, Cap. 112, provides that:

"A return, statement, or form purporting to be furnished under the Ordinance by or on behalf of any person shall for all purposes be deemed to have been furnished by that person or by his authority, as the case may be, unless the contrary is proved, and any person signing any such return, statement, or form shall be deemed to be cognizant of all matters therein."

44. Mr Griffiths put forward a most draconian reading of that subsection.

45. The second thing deemed thereunder is, he argued, irrebuttable. We reject that construction. The word "and" immediately preceding the second deeming provision ties the same to what goes before. It does that so as to incorporate, albeit not in the most felicitous language, the allowance for proof to the contrary.

46. Mr Griffiths also argued that when someone is deemed to be cognizant of all matters in his return, statement or form, he is deemed to know not only the contents of the document but also, if they are false, that they are false and what the truth happens to be. We reject that construction also. All that is deemed is that he is aware of the contents of his document.

47. The subsection can be of some assistance to the prosecution by relieving it of having to prove certain matters. But those are matters to which circumstances would in any event tend to point: often strongly and sometimes inexorably. And they are not matters which would of themselves conclude a case against an accused. The primary burden would remain on the prosecution. No dishonesty is presumed or deemed.

48. Plainly, the subsection as properly construed is Bill consistent and extant. There was a case to answer at the close of the prosecution's case. And, we would add, there would have been one with or without the subsection.

49. Those are the reasons why we refused leave to appeal against conviction.

50. Speaking now entirely for myself and turning to sentence, no useful purpose would be served by setting out why I would have suspended the applicant's sentences. Suffice it to say that I fully recognize the weight of the considerations which have moved the majority but attach even more weight to other considerations, chiefly the interests of society as well as of the applicant himself in his rebuilding his life as soon as possible : an objective to which the crushing experience of a spell in prison would be inimical.

Stuart-Moore J:

51. Bokhary JA has already fully set out the charges on which the Applicant was convicted and in respect of which he was sentenced to concurrent terms of three months' imprisonment.

52. Mr Griffiths QC does not suggest that the sentence was too long, or that imprisonment was wrong in principle. He submits, however, that this was a case where the sentence of imprisonment ought to have been suspended. His submissions are based both upon the mitigation originally placed by Mr Martin Lee QC before His Honour Judge Sweeney and some additional material that was put before us. At the conclusion of these submissions, we dismissed the application and stated that we would give our reasons for doing so at a later date.

53. We have firstly considered the matters taken into account when sentence was originally passed. The learned judge had the principles to be borne in mind in Attorney-General v. Ma Lai-wu and others (Application for Review, number 23 of 1986). He considered them in turn:-

54. Against all of these positive factors, the learned judge had to balance the undoubted gravity of the offences. As he pointed out, the tax rate is a low one and was generous to the Applicant by allowing him to run a number of household expenses against tax. In the last relevant year, the Applicant had been able to make a return showing $231,000 as the assessable profit on commission income of $4,300,000. The Applicant had legitimately made large claims for deductions which had enabled him to enjoy a luxurious lifestyle. It was in the year following these relatively modest returns of income that he committed himself to mortgage repayments of $2,000,000 on an apartment in Parkview.

55. As the learned judge observed, this Applicant was content to play the role of generous host at large banquets where he would sometimes distribute valuable presents. Yet, while happy to be associated with public displays of charity, the Applicant was determined to pay as little tax as possible. Having been caught evading tax, on evidence that was overwhelming, he showed no remorse whatever. Instead, he sought to put the blame on his own staff and on the staff of his accountants. This was a contradiction in terms of expressions that had been used on his behalf to the effect that he was an honest man with integrity.

56. It was in these circumstances that the learned judge took three consecutive sentences of six months' imprisonment as his starting point for the purposes of sentence. However, he considered that to make such an order would probably have the effect of causing the Applicant's ruin. Accordingly, he decided to make a discount that can only be viewed as generous by imposing concurrent sentences of three months' imprisonment on all the charges (with fines in addition).

57. Against this background, Mr Griffiths QC called Mr Terence Smith, the Chief Executive of National Mutual (Asia). He testified that the Applicant was likely to be de-registered by the Insurance Agents Registration Board, and that the effect would probably cost the Applicant $1,000,000 a year. In simple terms, those who sell insurance require a certificate that they are "fit and proper" persons. Mr Smith was also able to tell the Court that the Applicant led a group of between six to seven hundred people whose success was dependent on him.

58. It was therefore submitted on the Applicant's behalf that this was an appropriate case where it would be right and to suspend the sentence.

59. In the opinion of the Court, the learned judge had properly taken into account everything that there was to be said on the Applicant's behalf. Furthermore, he had balanced this with the undoubted gravity of the offences.

60. A sentence of imprisonment with immediate effect, is to be expected in this type of case. It carries with it an important message to those, some of exemplary character as was the applicant, who contemplate cheating the Revenue.

In the Ma Lai wu case (above), Silke JA giving the judgment of the Court, said (at page 6):

"Lenient sentences, where detection is not certain, may encourage persons to take a risk. Persons who commit offences such as these are favoured by the possibility of non-detection and favoured yet again if upon detection they can look forward to leniency."

61. In our judgment, the Applicant has received the least possible sentence. Not only were the offences serious, they were persistent, they were motivated by greed on the part of a man whose material wealth was considerable, and they were accompanied by a singular lack of remorse.

62. Accordingly, we do not find that it would not have been appropriate to suspend the sentences. On the contrary, this was a case where it would have been wholly inappropriate to do so.

63. For these reasons, as we indicated on the last occasion, the application for leave to appeal against sentence must be refused.