HKSAR v. HO WAI CHING

CACC 42/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 42 OF 2012

(ON APPEAL FROM HCCC NO. 40 OF 2010)

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J U D G M E N T

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Hon Lunn JA (giving the Judgment of the Court):

1.  The applicant sought leave to appeal against her conviction after trial by Deputy High Court Judge Andrew Chan , as he was then and a jury on 17 January 2012 of 14 counts of fraud, contrary to section 16A of the Theft Ordinance, Cap. 210 and the sentences of imprisonment imposed upon her in consequence, to a total of 7 years and 3 months imprisonment.

The Counts

2.  Each of the counts alleged that the applicant, together with Hui Po Keung and Leung Chi Keung, Kenny, committed fraud on the respective banks on stipulated dates in the overall period 2 January to 9 July 2007.   The Particulars of Offence of Count 1 illustrate the nature of the alleged frauds, namely that those persons:

“ …by deceit, namely by falsely representing that the purported or intended sales and purchases of goods mentioned in 21 Ming Fai Production Company Limited invoices were genuine, and with intent to defraud, induced the Standard Chartered Bank(Hong Kong) Limited to accept the said documents as genuine and to pay Ming Fai Production Company Limited, which resulted in benefit of the total sum of $9,805,355 Hong Kong currency to themselves, or in prejudice or a substantial risk of prejudice to the said Standard Chartered Bank (Hong Kong) Limited.”

Background

3.  The applicant, who is the wife of Mr Kenny Leung and the sister-in-law of Mr Hui Po Keung, stood trial together with them in a trial on the same indictment before the same judge in a trial which concluded in June 2011.   Whilst her two co-accuseds were convicted of all 14 counts on the indictment the jury was unable to reach a verdict in respect of the applicant.   As a result, the applicant was re-tried.

Overview

4.  The 14 counts on the indictment concerned a total of 301 applications that were made on behalf of Cyberspeed Technology Company Limited (“Cyberspeed”) to 14 different banks for invoice financing payments in respect of alleged purchases of computers by Cyberspeed, to a total value of over $153 million, to be made to the vendor, Ming Fai Production Company Limited (“Ming Fai”) in the period in and between January and July 2007.   There was no dispute that the banks granted those applications and made payments to that value to the stipulated bank accounts of Ming Fai.  When Cyberspeed ceased business in July 2007, a total of over $21.47 million was owed to the various banks under the invoice financing arrangements.

The prosecution case

The fraud

5.  It was the prosecution case that none of the 301 transactions described in the documentation provided in support of the application for invoice financing was concerned with a genuine transaction.  That documentation asserted on its face that Cyberspeed had bought computers from Ming Fai, payment in respect of which was to be made through that bank financing.  There were no such transactions.  The purpose of the arrangement was to provide for funds for Cyberspeed.   Hui Po Keung, the applicant’s brother-in-law, was a shareholder and director of Ming Fai and in control of that company.

6.  Shortly after payments were made to Ming Fai by the banks as requested on behalf of Cyberspace, the monies, less a deduction of 0.2% commission of the monetary value received by Ming Fai, were transferred, first to one of three companies controlled by the applicant and her husband Kenny Leung and then to Cyberspeed. Those companies were Sofmap Company Limited (“Sofmap”), Global Gain Properties Limited (“Global Gain”) and Cyberspeed Services Limited (“Cyberspeed Services”).  The movement of those monies, reflected in fund flows, was the subject of admitted facts.

The prosecution case against the applicant

7.  The prosecution case against the applicant was that she was not only in name but also in fact the Financial Controller of Cyberspeed.  She stated in her tax returns that she occupied that position for the financial years 2004-2005, 2005-2006 and 2006-2007 in which she described receiving salary of $360,000, $450,000 and $720,000 respectively.  As the Financial Controller of Cyberspeed, she knew that Ming Fai, her brother-in-law’s decoration company, did not sell computers to Cyberspeed to a value of $153 million in the period of just over six months in the first half of 2007.  She knew that there were no goods involved in the transactions in respect of which applications were made to the banks for invoice financing payments to be made to Ming Fai.

8.  It was the prosecution case that the applicant was knowledgeable about invoice financing, having not only signed on applications for the grant of such facilities but also having received explanations about the operations of the facility from bank officers employed by a number of the banks with whom Cyberspeed had such facilities.

The defence case

9.  Although the applicant did not avail herself of her right to give evidence she called her husband, Mr Kenny Leung as a witness in the defence case.  He testified they met while the applicant was working at American Express and they married in 1994.  In 2002, the applicant had left her employment with American Express and become a housewife.  He said that 60 to 70% of the 301 transactions that were the subject of the charges were not genuine transactions.  However, he said that the remaining balance concerned genuine sales of computers from Ming Fai to Cyberspeed.  He prepared all the invoices and purchase orders on the letterhead of Ming Fai.  It was an admitted fact that Mr Kenny Leung signed on all 301 application forms made to the banks for invoice financing.  He testified that the applicant played no part in making those applications.  Mr Kenny Leung testified that, having been given the security key to the bank accounts of Ming Fai, he transferred the payments made by the banks to Ming Fai in respect of invoice financing, less the 0.2% commission, to one or other of the three companies used as a first step in receiving those monies, which he then transferred to Cyberspeed itself.

10.  Although the applicant held the title of Financial Controller of Cyberspeed, Mr Kenny Leung testified that in reality she did not perform any such duties. She was accorded that title for purposes of window dressing only.  He said that although the applicant did attend the offices of Cyberspeed several mornings a week she merely followed arrangements approved by him.  Her time was primarily absorbed looking after their young daughter.

GROUNDS OF APPEAL AGAINST CONVICTION

11.  In the grounds of appeal against conviction advanced on behalf of the applicant by Mr Eric Kwok SC it was submitted, in effect, that the applicant had not received a fair trial.  Firstly, evidence had been adduced improperly from witnesses called by the prosecution. Counsel for the prosecution had asked leading questions and even cross-examined some of those witnesses.  Four former employees of Cyberspeed were stipulated to be the witnesses concerned. Further, that evidence had been accompanied by improper comments made by counsel for the prosecution.  Secondly, it was submitted that the judge had interrupted and intervened in the evidence of prosecution witnesses to the extent that he had assumed the role of an advocate in the proceedings.   Further, the judge had conducted himself in that manner in the defence case as well, in the evidence adduced from Mr Kenny Leung.

12.  Finally, it was contended that the judge had failed to give the jury proper/adequate directions that they consider each of the 14 counts separately from one another.

A CONSIDERATION OF THE SUBMISSIONS

13.  The four witnesses called in the prosecution case in respect of whom criticisms were made of prosecution counsel for the manner in which their evidence was adduced, namely by leading questions and cross-examination accompanied by improper comments, were identified as Mr Joe Lai Yiu Cho, Mr Danny Ho Kwai Yuen, Ms Ann Ng Mee Lin and Mr Marco Chan Yik Lung.  All four of them had been former employees of Cyberspeed and, save for Mr Marco Chan, were colleagues at Super Dragon Technology at the time of their testimony.  Mr Joe Lai is the sole proprietor of the latter company.  Mr Danny Ho is the brother of the applicant.  The court has been provided with a transcript of the testimony of all four witnesses.

14.  Unsurprisingly, a considerable amount of evidence was adduced in evidence-in-chief of those witnesses by answers given to leading questions.  Broadly speaking, that was done without issue being taken by counsel for the applicant.  No doubt, that was because the evidence was not controversial.  Where the evidence was controversial, counsel for the applicant objected readily.

15.  An issue in the trial canvassed with some of the four witnesses was the nature of the business conducted at or the use made of premises of Cyberspeed at Kwai Chung, in particular whether or not any wholesale, rather than retail, business in computers was conducted at the premises.

16.  In his evidence in chief, Mr Danny Ho, the warehouse supervisor of Cyberspeed said that nobody manned the Kwai Chung warehouse.  He said that it was used, “to keep some laptop computer bags, laptop computer display shelves and miscellaneous items”.  He agreed with the leading question that it was, “not a warehouse for computers”.  However, he also said that Cyberspeed conducted a wholesale business, albeit that he was not involved himself.  In cross-examination, it was asserted to him by counsel on behalf of the applicant that in his witness statement dated 12 November 2007 he had said of the Kwai Chung premises, “its main function was to put company’s goods, to store company’s goods, mostly hand-carry computers”.  There followed an interchange with counsel[1]:

“ A. I believe what I said in my witness statement was hand-carry computer bags.

Q. No…do you want to read paragraph 2 of that statement of yours dated 12 November?”

17.  It appears that thereafter the witness was provided with a copy of the statement and he was given an opportunity to read paragraph 2.  However, counsel did not return to the issue of whether or not the statement asserted that hand-carry computers were stored at that warehouse, contenting himself with the witness’s agreement that he only visited the Kwai Chung warehouse rarely and that the items stored there were not his responsibility.  He agreed that the wholesale side of the business was carried on by Mr Kenny Leung and that he was not involved.  Also, Mr Danny Ho agreed with a series of leading questions asked at the end of cross-examination to the effect that his sister, the applicant, was not responsible for the day-to-day management of either the retail or wholesale business of Cyberspeed, its sales or purchases or negotiations with suppliers, customers or bankers.

18.  Re-examination by counsel for the prosecution began with a wholly unacceptable sarcastic comment[2]:

“ Now, since you were so observant of the management of Cyberspeed Technology…

Mr Chang: I object to that question.

Q. That is the sum total of your answer ..

Mr Chang: That is comment.

COURT: You can skip the first sentence, yes.

Mr Iu:  All right.”

19.  Next, Mr Danny Ho said that Mr Kenny Leung was responsible for looking after the stock of the wholesale business.  That evidence produced a barrage of hostile questions from counsel for the prosecution[3]:

“ Why? What was the reason as you saw it? Why was it that you were required to look after the stocks for retail and he did not employ anybody to look after the stocks for wholesale but he would look after it personally?”

In the absence of the jury, the judge overruled counsel for the applicant’s objection that counsel for the prosecution was cross-examining his own witness.  Counsel for the prosecution continued his line of questioning before the jury[4]:

“ Q. …I was dealing with the stocks for the wholesale. You said there was wholesale. Now, you said Kenny Leung looked after the stocks himself.

A. Yes

Q. Now, you said he was a very busy man, right?

A. Yes.

Q. Right. Now, in the warehouse, that was yourself and three other staff.

A. Yes.

Q. Can you think of any reason why Kenny Leung would not appoint one of the four of you to help him or engage another person…

Mr Chang: I object to that question. It amounts to cross-examination of his own witness.

COURT: Allow. Thank you

Q. Can you think of any reason why he wouldn’t employ another one or delegate it to you or one of the four of you to do that?

A. I don’t know.”

20.  Counsel for the prosecution questioned the witness in a similar vein in respect of the role of the applicant in the company[5]:

“ Q. Did you know that your sister signed cheques for Cyberspeed Technology?

A. No, I don’t know.

Q. I see. You don’t know. Did you know that your sister is one of the signatories to the Cyberspeed cheque accounts?

A. No, I don’t know.

Q. Do you know that your sister employed people, employed staff working for Cyberspeed Technology? Did you know that?

A. I don’t know either.

Q. You don’t know. I see. Did you know that the office staff would turn to her when there was an accounting problem? Did you know that?

Mr Chang: That’s a leading question, putting words into the witnesses mouth, and I apologise.

Mr Iu:  I’ll rephrase it.  Alright.  There’s no argument.”

21.  That pattern of posing leading questions to the witness had been employed by counsel for the prosecution, without objection, in eliciting evidence-in-chief from the witness in respect of the applicant[6]:

“ Q. Did you know that she was officially the Financial Controller of Cyberspeed Technology at Hua Chiao?

A. I don’t know.

Q. Did you know that she looked after the accounts or the accounting matters of Cyberspeed Technology at Hua Chiao?

A.   I don’t know.”

22.  Although counsel for the prosecution was deflected in pursuing that pattern of impermissible questioning on that occasion, it was soon resumed[7]:

“ Q. ...Did you know that bankers sometimes came to the offices of Cyberspeed Technology and would speak to Kenny Leung? Did you know that?

A. Yes, I know.

Q. Did you know that sometimes Wendy, sister Wendy also took part in those discussions?

Mr Chang: I object to that question, and that is not in accordance with the material on hand, and that is also a leading question, putting words into the witness’ mouth.

COURT: Thank you. Allow.

Q. Did you know that?

A. I don’t know.

Q. Or vice versa, put it this way, sometimes your sister and your brother-in-law would go to the banks and talk to the bankers, vice versa.

Mr Chang: I object to that again, putting words into the witness’ mouth.

COURT: “Do you know?” That is the question.

Mr Iu: Yes.

Q. Do you know that sometimes your..

COURT: Yes or no?

A.    I don’t know.”

23.  Counsel for the prosecution then embarked on traversing the assertion made by counsel for the applicant to Mr Danny Ho that he had said in an out-of-court statement that the main function of the Kwai Chung warehouse was, “to store company’s goods, mostly hand-carry computers.”  He did so by the extraordinary device of simply reading out to Mr Danny Ho passages in another statement made shortly after the statement in respect of which he had been questioned in cross-examination and inviting the witness to confirm that the questions and answers were as read out and that the answers were correct to the best of his recollection at the time the statement was made.  No objection was taken and the court did not intervene, notwithstanding the fact that the witness had in effect denied making the statement asserted by counsel for the applicant, who had not persisted in his attempt to have the witness confirm that the statement was inconsistent with his oral testimony.  In the result, the assertion by counsel for the applicant to the witness was just that, a bare assertion, not supported by evidence.  Nevertheless, counsel for the prosecution embarked in questioning his own witness in re-examination in the following fashion[8]:

“ Q.  Could you now look at Question 2 and Answer No. 2 in that statement?  Does the question read like this: “Did the company have any other stores for goods in the time it was in business at Hua Chiao Commercial Building, Nathan Road, Mongkok?”  That was the question the police asked of you.

A.  Yes.

Q.  And you answered the police like this: “As far as I know, besides the store at Hua Chiao, the company also leased a store once in an industrial building unit in Lam Tin Street, Kwai Chung, especially for holding parts and notebook computer covers.”

A.  Yes.

Q.  And then you go on to say this: “However, no notebook computers were kept at the store because it was not manned.”  “It was not manned.”

A.  Yes.

Q.  Lastly, you said, “My workmates and I went to the store to draw stocks only when required.”

A.  Yes.

Q.  That was your answer.

A.  Yes.

Q.  Was that a correct answer to the best of your recollection at the time?

A.  Yes.

Q.  Finally, in the next question, Question No. 3, you were asked this question: “Did the suppliers deliver notebook computers to the store in Kwai Chung?”  That was the question put to you.

A.  Yes.

Q.  And your answer was no.

A.  That’s right.

Q.  That was a correct answer at the time to the best of your recollection.

A.  Yes.”

24.  It is apparent from an interchange between counsel during cross-examination on behalf of the applicant of Mr Joe Lai, the manager of Cyberspeed, which required the intervention of the court, that counsel for the prosecution failed to conduct himself in the manner appropriate to that role:[9]

“ Q. Did you understand Mr Tsoi to be the company’s employee?

A. I am not sure.

Q. He helped Kenny Leung in wholesale business, as you said.

A. Yes, but I don’t know in what way Kenny employed him, the form of recruitment, I don’t know.

Q. His work was delivery, transportation of goods, he’s a driver.

MR IU: No, I think the proper question or the fair question is, “Do you know how he worked?”

MR CHANG: That’s my way of asking.

MR IU: No, it’s not your way of asking.

COURT: Stop.

MR IU: Sorry.”

25.  The context in which the interchange occurred concerned the evidence of Mr Joe Lai as to the business conducted at or the use made of premises of Cyberspeed at Kwai Chung, in particular whether or not any wholesale, rather than retail, business was conducted at the premises.  In cross-examination, Mr Joe Lai testified that he had encountered a Mr Tsoi at the Kwai Chung premises and understood that he had something to do with a wholesale business in notebook computers of Mr Kenny Leung.

26.  The question posed by counsel for the applicant was unobjectionable.  In any event, it was no business of counsel for the prosecution to formulate the question he wished the witness to be asked.  His intervention was uncalled for and rude to boot.  It ought never to have happened.  Fortunately, decisive judicial intervention brought the matter to a close eliciting a thoroughly merited appropriate apology from counsel for the prosecution.

27.  In re-examination of that witness, counsel for the prosecution re-visited the issue of the operation of a wholesale business at the Kwai Chung warehouse.  Again, he did so in a manner inappropriate to questioning a prosecution witness:

“ Q. Now, if the wholesale, as you understood it, that was taking place at Kwai Chung, you know why there was only one staff, Mr Tsoi, doing a.. one-man job?

A. I don’t know why, neither do I know how it was operated.

Q. You told this court in the beginning of your examination that the thrust of the business of Cyberspeed was retail throughout the years. Remember that?

A. Yes.

Q. You stand by that answer?

A. I only dealt with the retail business.

Q. Come on, you’re on the senior management, you work there six, seven years, you know what the business was about, what was the thrust of the business.

Mr Chang: my Lord, I hate to rise again and to object, but I do appreciate if my learned friend will refrain from cross-examining his own witness.

COURT: Thank you. Noted. Allow.

Q. Please.

A.   Mainly carry out retail business.”

28.  As counsel for the applicant pointed out in their written submissions there were many other instances in which leading questions were put to prosecution witnesses by counsel for the prosecution in areas in which it was clear there was a dispute between the parties.  However, in almost all of those instances no objection was taken on behalf of the applicant.  The style of questioning of counsel for the prosecution created a strong impression that he suspected that the sentiments of those witnesses lay in the defence camp.  Whilst that approach in a prosecutor is to be deprecated strongly, we are satisfied that in instances, cited earlier, in which impermissible questions were posed of witnesses to which objection was taken those witnesses held firm to their testimony and no damage was done to the defence case.  Accordingly, we are satisfied that there is no merit in this ground of appeal.

Judicial interruptions of testimony

29.  Needless to say, there were interventions from time to time from the judge in the course of the testimony of the four prosecution witnesses highlighted on behalf of the applicant.  Counsel has not been able to point to any interruption which was in any way inappropriate. By contrast, the judge’s interruption at the end of the examination-in-chief of Mr Kenny Leung was uncalled for and inappropriate.

30.  There was no issue that the documentary and computer records of Cyberspace were not available to the police when they made their investigation.  Mr Danny Ho testified that in September 2007, at the request of Mr Kenny Leung, he had arranged for 80 to 100 boxes of documentation to be removed from the offices of Cyberspeed and taken to a 20 tonne lorry in a scrapyard in the New Territories where they were stored. Ms Ann Ng testified that on 18 September 2007 she had accompanied Mr Kenny Leung to that scrapyard in order to retrieve some of that documentation.  However, they found no lorry in the scrapyard and were unable to retrieve any documentation.  At Mr Kenny Leung’s behest she reported the loss to the police that day.  Similarly, there was no dispute that the hard disks on the computers of Cyberspeed were damaged or missing.

31.  In the context of Mr Kenny Leung’s evidence of the movement for storage of the documentary records of Cyberspeed from the company’s offices to the lorry in the scrapyard in the New Territories and the subsequent attempts to retrieve them, the following interchange ensued[10]:

“ COURT: Well, straight to the question, please.

MR CHANG: Yes.

COURT: What happened?

Q. Did you ‑‑ did you type out a list of things to be retrieved?

A. Yes.

Q. What documents did you need at that time? Why did you need those documents?

COURT: Why did you need first?

MR CHANG: Yes.

COURT: The restructuring company wished to have those documents. Yes.

A. Yes.

Q. Now, look at page 25 which is the police report dated 18 September, which contained a list of 19 company names in respect of which a documents of lost report was filed.

A. Yes.

COURT: Were those documents really lost? Really?

A. The documents are put away for storage by Danny Ho were lost.

COURT: They were not caused to be lost.

INTERPRETER: Sorry, I don’t understand.

COURT: They [were] not made to disappear. They were genuinely lost.

A. Genuinely lost.

COURT: Thank you. So as the hard disk within the company’s computers. Hard disks.

MR CHANG: Server.

COURT: Hard disk.

MR CHANG: Hard disk.

COURT: Hard disk, within office computer, desktop. You see, we have heard evidence that they were either removed or damaged. Office, Mr Leung. Office. Office computers. Office computers.

A. Now I’m telling you why...

COURT: No. Office computers.

Q. Used in the office.

COURT: The computers used in your office.

Q. Used by Karen Lee, used by Ann Ng, used by you, those computers.

A. Yes.

COURT: Why were those hard disks either damaged or removed?

A. I don’t know. I was not the last person to deal with them. It was engineering staff who dealt with it.

COURT: Can you think of any reason why they would do such things?

A. Maybe apart from contacting me the liquidator, Alvan Liu, also contacted my secretary or the repair staff. Maybe he said if the data will not be used after liquidation the hard disk should be removed because those hardware would be sold later. The data would be lost. So I remember that he talked to me about that then I told him to talk to my secretary who arranged somebody to deal with it. That’s what I remember about this matter.

COURT: Without consulting you? Without asking you to look into what’s inside the hard disk?

A. He did not ask me further.

COURT: You see, at that stage you were still hoping for restructuring or second creditors’ meetings. You know, information inside computer would still be of some assistance to you.

A.   It was not at that time.  I saw that before the first creditors’ meetings they’d dealt with the computers. Computers were returned from the shops to the of course.  They were put together with other computers in the office.  I saw them do it before the first creditors’ meeting.  Many equipments had already been put in the meeting room.” [Italics added.]

32.  Clearly, the judge evinced an obvious suspicion that the documentary and computer records of Cyberspeed had been deliberately destroyed, the clear inference being that Mr Kenny Leung was directly or indirectly responsible for that happening.  In due course, that was the suggestion put to Mr Kenny Leung in cross-examination by counsel for the prosecution.  At that time, the judge returned to the issue asking the witness[11]:

“So the destruction of hard disc, the disappearance of the server as well as the documents they were simply coincidence?”

33.  In asking Mr Kenny Leung whether the documents had really been lost and in asking him if, in fact, they had been “caused” to be lost, the judge was trespassing onto the remit of counsel for the prosecution.  He ought not to have asked those questions.  They were questions for counsel for the prosecution.

34.  Clearly, the line of questioning by the judge went primarily to the ambit of Mr Kenny Leung’s admitted criminality.  He accepted that he was responsible for practising fraud on each of the 14 banks by presenting them with applications for the grant of invoices financing in respect of sham transactions to the extent of 60 to 70% of the purported transactions with Ming Fai.  The questions asked by the judge, put directly in due course by counsel for the prosecution, went to the issue of whether or not Mr Kenny Leung was involved in covering up his crimes by having the relevant company records destroyed.  Whilst it was the prosecution case that the applicant was a party to the frauds, it was never suggested that she was in any way a party to the destruction of the relevant company records.  There was no evidence of that at all, as is apparent from the judge’s recitation of the evidence relevant to that issue in his summing up[12].

35.  Insofar as the judge’s questioning might have impacted on the general credibility of Mr Kenny Leung, it is to be noted that not only did he admit in testimony that he had practiced fraud on the 14 banks but also be accepted that in his own trial he had lied in his testimony to the jury in testifying that the transactions were genuine.

36.  In the result, whilst we are satisfied that the judge ought not to have posed the impugned questions, that did not viewed in context of his conduct of the proceedings as a wholeconstitute a material irregularity.

Separate consideration of each count

37.  In order better to understand the context of the judge’s directions to the jury in respect of the need to consider each count separately, the hearing of 18 June 2013 was adjourned, so that the court could have the benefit of a transcript of the Opening and Closing speeches of counsel for the prosecution at trial and of the Closing speech of counsel for the applicant.  It is clear from the speeches that counsel for the prosecution, notwithstanding the fact that there were 14 counts of fraud on the indictment, put its case on the basis that there was one underlying “fraudulent scheme”[13] in which the applicant was a party.  It was the prosecution case that the applicant was a party to the arrangement of the banking facilities, in which Ming Fai was named as a supplier of computers to Cyberspeed[14], pursuant to which the banks provided funding in the applications reflected in the 14 counts, in which Ming Fai was named as a supplier of computers to Cyberspeed.  Further, it was contended that the applicant knew that Ming Fai was not a supplier of computers to Cyberspeed.  It did not deal in computers at all[15].  On the prosecution case, that obtained throughout in respect of Ming Fai, notwithstanding the fact that none of that behaviour was the subject of charges in the period mid-2004 to December 2006[16].

38.  There is no dispute that the judge gave the jury the standard direction that they should consider each count on the indictment separately.  He said[17]:

“ You must consider the case against and for the defendant on each count separately.”

39.  Then, the judge went on to give the direction envisaged by footnote 5 of Specimen Direction 3 of the Judicial Studies Board’s Specimen Directions, namely:

“ Of course, that does not mean that you must consider each count in isolation from the other counts. There is quite a lot of common ground between the different counts on this indictment, because they cover a course of business dealings in the business over a significant period and there are common features between all these different counts. You are entitled to use your decision in relation to the facts of one count to assist you in reaching a conclusion on the facts of another count.”

40.  At an early stage in his directions to the jury the judge identified[18] as one of the issues between the prosecution and defence:

“ whether the defendant had the necessary knowledge, intention and participation in defrauding the banks.”

41.  Subsequently, the judge gave the jury directions in respect of the issue of joint responsibility[19]:

“ The prosecution case is that the defendant jointly committed the offence with Kenny and Hui Po Keung in all counts. … Where a criminal offence is committed by two or more persons, each of them may play a different part, but if they are in it together as part of a joint plan or agreement to commit it, they are each guilty. The words “plan” and “agreement” do not mean there has to be any formality about it. An agreement to commit an offence may arise out of the course of conduct of two or more people….From their conduct you may be able to infer there is a plan or agreement. An agreement can be inferred from acting together.

The essence of joint responsibility for a criminal offence is that each person shared the intention to commit the offence and took some part in it, however great or small, so as to achieve that aim.

Your approach to this case should therefore be as follows: if you are satisfied that the offence of fraud was committed, and if, looking at the case of the defendant, you are sure that with the intention to commit the offence, she took some part in it, then she is guilty of the offence in question.”

42.  Then, the judge went on to describe to the jury how the prosecution put its case against the applicant[20]:

“ …the defendant, being the financial controller, director and person in charge of the accounting department of Cyberspeed Technology:

(i) knowing that there existed no genuine goods in these 301 transactions;

(ii) knowing that false invoices would be used by her husband to obtain invoice financing; and

(iii) knowing that false invoices would be relied on by the bank;

took part in applying and signing banking facilities, executing personal guarantees and transferring moneys.” [Italics added.]

43.  Later in the summing up, the judge revisited the twin issues of the applicant’s knowledge of the perpetration of the fraud on the various banks and her acts of participation in the frauds[21]:

“ At the beginning of my summing-up, I have told you the essence of joint responsibility for a criminal offence is that each person shared the intention to commit the offence and took some part in it, however great or small, so as to achieve that aim.

Putting that into the context of this case, it means the prosecution have to make you sure that the defendant, knowing that there existed no genuine goods in these 301 transactions or some of these 301 transactions, knowing that invoices produced to the banks were false and would be relied upon, she took some part in it.”

44.  Of the evidence relevant to those issues, having reminded the jury that the applicant and her husband Mr Kenny Leung were shareholders and directors of all the relevant companies, except Sofmap, the judge said:

“ She could also operate all the corporate bank accounts singly. In addition to that, Wendy also had internet access to Cyberspeed Technology’s bank accounts in DBS and BEA since 2004. She could see all invoice finance transactions, including those of Ming Fai, on the computer screen in respect of the DBS account.

The prosecution say the defendant had knowledge about invoice financing. Between 2004 and 2007, the defendant signed on many, many banking facilities letters, corporate resolutions, authorising the granting of such facilities. The prosecution say after the granting of this invoice finance facilities, Kenny and Wendy started to purchase a large number of properties. The prosecution say by 2007, when Cyberspeed Technology had difficulty in paying their staffs, when Wendy had to move to a smaller house, the fact that the influx of 153 million could not have escaped her attention. Furthermore, the defendant continued to participate in the signing of letters of guarantee and banking facilities letters in 2007, and as late as April 2007. The last banking facilities letter that the defendant put her signature on was the Citic Ka Wah Bank facilities letter. That was done on 24 April 2007.

The prosecution say she was a real financial controller of Cyberspeed Technology. Between 2004 and 2007 the defendant claimed herself to be financial controller on tax returns. It was admitted in paragraph 62 of the Admitted Facts that at different places and times, she held herself out as financial controller.

The prosecution say she was responsible for the accounting department. I mentioned this morning about the bankers’ evidence. I do not want to repeat myself here, but PW19, Mr Man, of Bank of Communication; PW20, Miss Tam, of ICBC; PW29, Mr Lui Man-fai of Fubon; PW22, Mr Leung Ping-shun of DBS; PW31, Mr Li Wai-nin, Edwin, of PT Bank told you all about that, that they all thought that the defendant was responsible for financial matters or accounting matters.

The prosecution say looking from the monetary aspects, Wendy could not be involved only superficially in the company’s financial affairs. These monetary aspects include her interest in properties either personal or corporate, her interest in fixed deposits, her liability in mortgage repayment, her liability in executing unlimited personal guarantees.

The prosecution say the defendant had personal knowledge about Ming Fai’s business nature. Ming Fai was no more than just a decorator for Cyberspeed Technology’s retail shop and office. Ming Fai could not be a supplier of any computer or computer-related accessories to Cyberspeed Technology. She certainly should know the business of her sister’s husband.

The prosecution also say the defendant’s silence when contents of the banking facilities letters were read to her indicate her knowledge throughout.  She did not raise any questions to the bankers about Ming Fai.”

45.  There is no dispute that the judge did not condescend to identifying the specific evidence available on each of the counts, contrasting and comparing the evidence on different counts.   In respect of the evidence of the applicant’s role in securing and renewing invoice financing facilities with the various banks, as noted above, the judge dealt with matters generally, reminding the jury that[22]:

“ Between 2004 and 2007 the defendant signed on many, many banking facilities letters, corporate resolutions, authorising the granting of such facilities.”

46.  Earlier in the summing up[23], the judge had reminded the jury of the Admitted Facts, including Exhibit 46, which put into evidence banking documentation in respect of each of the banks alleged to have been defrauded in each of the 14 counts.  Those documents included the applications for the grant/renewal of invoice financing bank facilities, together with lists stipulating Cyberspeed’s suppliers.  The applicant was a signatory of those documents.  Of significance, was the fact that the banks restricted invoice financing to stipulated suppliers.  Ming Fai was named as one of their suppliers in the facilities arranged by the applicant with the banks.

47.  The judge summarised the evidence of the banker witnesses who testified in respect of the invoice financing facilities granted by the 14 respective banks[24]:

“ All the bank officers stated generally in their evidence that prior to the granting of the facilities, their banks required Cyberspeed Technology:

(1) to submit a pre-approved list of suppliers;

(2) not in any way related or connected to any of those suppliers;

(3) if such relationship exists, to declare the relationship to the bank and to provide further evidence to substantiate the purchase;

(4) to use the money advanced to finance genuine purchase of goods.”

48.  As noted earlier, the judge reminded the jury[25] that Ming Fai was a business run by her sister’s husband, which provided decoration services, including for Cyberspeed.  As such, the issue was how it could be named as a supplier of computers and computer related accessories to Cyberspeed?

49.  The judge made specific reference to the fact that the invoice financing facility with the Citic Ka Wah Bank, stipulating Ming Fai as a supplier, had been renewed by the applicant in April 2007.  Of course, that was in the middle of the period stipulated in the counts on the indictment in which the offences were alleged to have been committed.  However, the invoice financing facilities arranged with other banks had been granted prior to January 2007.

50.  It follows that in identifying the three issues of knowledge said to be relevant to the applicant’s acts in applying for and signing bank facilities, namely knowing that “there existed no genuine goods in the 301 transactions” the judge was putting the cart before the horse.  The bank facilities, save for Citic Ka Wah Bank, had been obtained before the impugned 301 transactions the subject of the counts.  Clearly, the gravamen of the prosecution case was that the applicant secured the banking facilities naming Ming Fai as a supplier of computers knowing that not to be the case.  Rather, she knew and intended that, as when required by their mutual cash-flow needs, her husband, Kenny Leung, would avail himself of that facility to obtain financing in respect of Ming Fai invoices.

51.  Of the evidence of the limits of the applicant’s participation in the execution of the frauds, the judge reminded the jury[26] of the defence case:

“ The defence say between January 2007 and July 2007, she only signed 70 cheques out of 283 cheques issued by Cyberspeed Technology through five of the 14 lending banks. She did not sign on any of the 301 invoice finance applications. Her only involvement in these 301 transactions was signing on five cheques transferring 2.85 million out of a total of 153 million. You can do your calculation yourself. I did mine briefly: 2.85 out of 153. She drew salary because she needed to, otherwise the creditworthiness as a guarantor would be called into question. The salary given to her was no more than using for mortgage repayment.

The defence say that the defendant may have knowledge about banking facilities, may have knowledge about invoice financing, or may have knowledge about Ming Fai, that, however, did not mean the defendant had the necessary knowledge of and involvement in, Kenny’s fraudulent scheme.”

52.  Notwithstanding the judge’s inaccuracy, save in respect of the Citic Ka Wah Bank’s invoice financing facility, in stating that the applicant had signed bank invoice financing facilities knowing that there were no genuine goods in the 301 transactions, we are satisfied that it was readily apparent from the banking documentation before the jury that all the other banking facilities were granted before any of the 301 transactions.   More accurately stated, the issue was whether she had done that knowing that any application for invoice financing in respect of Ming Fai, rather than the 301 transactions it turned out to be, would not involve genuine goods and would be false.  We are satisfied that was obvious to the jury.

53.  As was made clear to the jury, the primary issue was the applicant’s knowledge of the falsity of the stipulation in the information supplied by her to the banks in respect of invoice finance facilities that Ming Fai was a supplier of computers to Cyberspeed.  If the applicant knew that to be false, what was the purpose of Ming Fai being so stipulated?  As the judge had directed the jury, the issue was whether the applicant was a party in a joint enterprise with her husband and her brother-in-law where that had been her role, whereas it was her husband’s role to apply for the invoice financing funds in each purported transaction in which Ming Fai was the named beneficiary, as particularised in the counts in the indictment.  At issue, was whether when she applied for the bank invoice financing facilities from the 14 banks she knew and intended that, as and when required by their mutual cash-flow needs, her husband, Kenny Leung, would avail himself of that facility to obtain funds in respect of Ming Fai invoices.

54.  We are satisfied that that the summing up overall identified those issues and posed the appropriate questions for the jury.

Conclusion

55.  Having regard to the matters addressed in paragraphs 26 to 31 of this judgment.  We grant the application for leave to appeal against conviction but, treating the hearing of the application as the hearing of the appeal, we dismiss the appeal against conviction.

SENTENCE

Reasons for sentence

56.  In imposing sentence on the applicant, the judge acknowledged[27] that her husband, Mr Kenny Leung was the “mastermind” behind the fraudulent scheme, in which he had made false invoices and purchase orders which he produced to banks in order to obtain invoice finance loans.  He found that he had done so, “to save you and your husband’s ailing computer business and to ease the financial difficulty”.   Of the applicant’s role, the judge to determine that she had assisted her husband[28]:

“ in applying for banking facilities, signing on banking facility letters, company resolutions, exercising deeds of guarantee and transferring moneys.”

57.  The judge said that the seriousness in the commission of these offences lay, first of all, in the fact that invoice financing requires a relationship of trust between the applicants for finance and the banks.  He noted that that relationship of trust is vulnerable to the use of false documents.  He said that the factors identified by the courts in cases involving letters of credit fraud of banks as relevant to sentence were relevant to sentence in this case.  He identified the relevant factors stipulated in the judgment of this court in HKSAR v Dai Chi Wai[29] as being, “the amount of the loans, the number of banks, the period, the role of each defendant and the actual loss to the bank”.

58.  The judge noted that in HKSAR v Law Chi-man, Kenneth[30] this court had determined that a total sentence of 6 years’ imprisonment imposed on the appellant after trial in respect of three charges, two of conspiracy to fraud and one of fraud of three separate banks, involving total loans of $15.6 million and the loss of $9.8 million was not excessive.

59.  As Stock JA, as he was then, noted[31] in the judgment of the court the applicant was not the prime mover behind the offences.  The three charges involved loans of $4.5 million, $3.6 million and $7.5 million of which the respective losses were $2.5 million, $1.8 million and $5.5 million.  The court quashed sentences of 6 years’ imprisonment imposed in respect of each of the charges and substituted sentences of 4 years’ imprisonment.  However, it ordered that two years of sentence of imprisonment imposed in respect of Charge 3 be served consecutively to the sentences of imprisonment imposed in respect of the other charges.  Accordingly, the total sentence of imprisonment imposed on the appellant remained 6 years’ imprisonment.

60.  Finally, the judge referred to the judgment of this court in the HKSAR v Lee Kwok Yun & Others[32].  He noted that this court determined appropriate a total sentence of 6 years’ imprisonment imposed upon the applicant after he had pleaded guilty.  There, the applicant pleaded guilty to 18 counts of false accounting, concerning letters of credit related to goods which did not exist in which the banks sustained a total loss of US$11.4 million.

61.  Of the circumstances of the commission of this case, the judge noted that the loans obtained from the banks in total amounted to $153 million, with an outstanding loss of $21.4 million.  Further, that those monies have been obtained by way of 301 applications in a period of just over six months.  He noted that Citic Ka Wah Bank suffered a loss of $6.8 million having advanced a total of $17.5 million (Count 3), whereas Industrial and Commercial Bank of China sustained a loss of $6.4 million having advanced a total of $25.7 million (Count 9).

Sentence

62.  In sentencing the applicant, the judge acknowledged that the applicant had played a “slightly lesser role” and imposed sentences of 4 years’ imprisonment in respect of each of Counts 3 and 9 and three years’ imprisonment in respect of each of the other 12 counts.  Then, the judge ordered that 3 months’ imprisonment imposed in respect of counts 1 to 8 and counts 10 to 14 be served consecutively to the sentence of imprisonment imposed in respect of Count 9.  Accordingly, the total sentence of imprisonment imposed upon the applicant was 7 years and 3 months.

GROUNDS OF APPEAL AGAINST SENTENCE

63.  Mr Kwok submitted that the overall sentence of 7 years and 3 months’ imprisonment imposed upon the applicant was manifestly excessive.  He suggested that the judge had placed inadequate weight on mitigating factors, including:

(i) the applicant had committed the offences because her husband’s business had encountered financial difficulties and her role culpability was less than that of her husband; and

(ii) the loss suffered by the banks of around $21 million was far less than the aggregate amount of loans obtained.

64.  Next, it was submitted that the judge erred in sentencing the applicant to 4 years’ imprisonment in respect of counts 3 and 9, given that the respective losses were $6.4 million and $6.8 million.  Further, given that 6 out of the 12 banks involved in the other counts sustained no loss at all and the largest loss was only $3.2 million, the sentences of 3 years’ imprisonment imposed in respect of the other counts was excessive.

A CONSIDERATION OF THE SUBMISSIONS

65.  In HKSAR v Hui Po Keung and Leung Chi Keung, Kenny[33] this court, differently constituted, was concerned, inter-alia, with the sentences of imprisonment imposed by the judge upon the applicant’s husband and her brother-in-law after their convictions in the first trial, of the offences of which the applicant was convicted in the re-trial.   Determining Kenny Leung to have been the “mastermind” of the fraudulent scheme and Hui Po Keung to have played a lesser role the judge had imposed a total sentence of 8 years and 3 months’ imprisonment on the former and 7 years and 3 months’ imprisonment on the latter.   Having regard to the aggravating features of the commission of the offences the subject of Counts 3 and 9, the judge sentenced Kenny Leung and Hui Po Keung to 5 years and 4 years’ imprisonment respectively for each count.  For the other 12 counts, the judge sentenced Kenny Leung to 3 years’ imprisonment on each count and Hui Po Keung to 2 years’ imprisonment on each count.

66.  Mr Kwok, who appeared in that appeal for Hui Po Keung, advanced arguments, some of which are similar to those advanced on behalf of the applicant in this case.  The court rejected the submission that the sentences imposed in respect of Counts 3 and 9 were excessive, noting[34]:

“ In Count 3, no fewer than 46 false applications were made to the Industrial and Commercial Bank of China over the period 2 January to 6 July 2007 resulting in total loans of $25,721,989, of which $6,443,718 was lost to the bank. In Count 9, no fewer than 33 false applications were made to Citic Ka Wah Bank over the period 11 January to 5 July 2007 resulting in total loans of $17,518,242, of which $6,804,251 was lost to the bank.”

67.  However, the court did accept that there was merit in the submission that in imposing the same sentences for each of the counts, other than Count 3 and Count 9, the judge failed to reflect appropriately the different aggravating factors obtaining in the commission of the offences. Of Count 4, the court noted[35] that it concerned only three applications in the period 3 to 12 January 2007, as a result of which only $1,572,020 was lent, but nothing lost to the bank.  In the result, the court quashed the sentences imposed on that count and substituted sentences of 3 years’ imprisonment for Kenny Leung and 2 years imprisonment for Hui Po Keung.

68.  Having regard to the fact that, “not only was the 2^nd applicant the mastermind of the fraudulent scheme but also its primary beneficiary” and noting the extent and duration of the fraudulent scheme and the loss to the banks, the court determined that the sentence imposed on Kenny Leung was “entirely appropriate”.  By contrast, the court concluded that, having regard to the different roles and the benefits received, the sentence imposed on Hui Po Keung was excessive.  The court quashed the order that 3 months of each of the sentences imposed in respect of Counts 4, 6 to 9 be served consecutively to the sentence of 4 years’ imprisonment imposed in respect of count 9.  In the result, the total sentence of imprisonment imposed upon Hui Po Keung was 6 years.

69.  We are satisfied that the applicant’s culpability fell between the culpability of her husband, Kenny Leung, and that of her brother-in-law, Hui Po Keung.  The latter’s benefit from his participation in the fraudulent scheme was only 0.2% of the $153 million obtained from the banks.  By contrast, the applicant and Kenny Leung shared the benefits flowing from the frauds.  Further, we are satisfied that the total sentence of 7 years and 3 months’ imprisonment imposed upon the applicant was entirely appropriate.

Conclusion

70.  For the reasons set out earlier, we allow the application for leave to appeal against sentence and, treating the hearing of the application as the hearing of the appeal, allow the appeal in respect of Count 4, which sentence we quash imposing in its place a sentence of 2 years’ imprisonment.  We do not disturb any of the other orders.  Accordingly, the total sentence of imprisonment imposed on the applicant is 7 years and 3 months.

[1] Appeal Bundle, page 179 O - Q.

[2] Appeal Bundle, page 186 O.

[3] Appeal Bundle, page 186 U.

[4] Appeal Bundle, pages 188 Q - 189 D.

[5] Appeal Bundle, page 190 L - R.

[6] Appeal Bundle, page 177 B - D.

[7] Appeal Bundle, page 191 J - U.

[8] Appeal Bundle, pages 189 P - 190 D.

[9] Appeal Bundle, page 227 K - R.

[10] Appeal Bundle, page 355 G - 356 U.

[11] Appeal Bundle, page 422 J.

[12] Appeal Bundle: the evidence of Mr Danny Ho, page 100 G - L; Ms Ann Ng, page 102 P - S; and Kenny Leung, page 119 J - P.

[13] Appeal Bundle, page 454 O - P (Opening); page 503 E (Closing).

[14] Appeal Bundle, page 497 P - R (Closing).

[15] Appeal Bundle, page 440 J - M; page 455 M - O (Opening).

[16] Appeal Bundle, page 503 E - H (Closing).

[17] Appeal Bundle, page 84 Q.

[18] Appeal Bundle, page 83 N - P.

[19] Appeal Bundle, page 88 Q - 89 G.

[20] Appeal Bundle, page 92 Q - 93 B.

[21] Appeal Bundle, page 123 S - 124 E.

[22] Appeal Bundle, page 124 M.

[23] Appeal Bundle, page 94 F and following.

[24] Appeal Bundle, page 107 L - Q.

[25] Appeal Bundle, page 125 L.

[26] Appeal Bundle, page 127 C - K.

[27] Appeal Bundle, page 141.

[28] Appeal Bundle, page 141 S - T.

[29] HKSAR v Dai Chi Wai [2011] 4 HKLRD 534 at page 537, paragraph 4.

[30] HKSAR v Law Chi-man, Kenneth (CACC 356/2006; unreported, 7 September 2007).

[31] HKSAR v Law Chi -man, Kenneth, paragraph 2.

[32] HKSAR v Lee Kwok Yun & Others (CACC 117/2004; unreported, 18 July 2005).

[33] HKSAR v Hui Po Keung and Leung Chi Keung, Kenny (CACC 240/2011; unreported, 29 November 2012).

[34] HKSAR v Hui Po Keung and Leung Chi Keung, Kenny, paragraph 91.

[35] HKSAR v Hui Po Keung and Leung Chi Keung, Kenny, paragraph 93.