HKSAR v. CHEUNG KWUN YIN

CACC 164/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 164 OF 2007

(On Appeal From District Court Criminal Case No. 1143 of 2006)

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J U D G M E N T

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Hon Cheung JA (giving judgment of the court) :

1. The applicant was charged with two offences.  The first was procuring the making of an entry in a record of a bank by deception, contrary to section 18D(1) of the Theft Ordinance (Cap. 210).  The second was blackmail, contrary to section 23(1) and (3) of Theft Ordinance. 

2. He was convicted after trial by H H Judge Yau in the District Court.  He was sentenced to three years’ imprisonment respectively for the first and second offences.  The Judge ordered one year of the second sentence to be served consecutively to the first sentence of three years’ imprisonment, making a total sentence of four years’ imprisonment.

3. The applicant now appeals against both conviction and sentence. 

The first offence

4. The particulars of the first offence are as follows :

‘CHEUNG Kwun-yin, on or about the 24th day of October, 2005, in Hong Kong, dishonestly with a view to gain for himself or another or with intent to cause loss to another, procured the making of an entry in a record of the Hong Kong and Shanghai Banking Corporation (‘HSBC’), namely, a credit entry of $800,000 Hong Kong currency in a bank account numbered 622-072965-888 by deception, namely, by falsely representing to X that it was required by the HSBC to have $1 million in his bank account for applying for a Platinum credit card and that the said CHEUNG Kwun-yin was to apply for a Platinum credit card from the HSBC.’

The second offence

5. The particulars of the second offence are as follows :

‘CHEUNG Kwun-yin, on the 13th day of November, 2005, at New San Diego Hotel, Nos. 1-5, Chi Wo Street, Yaumatei, Kowloon, in Hong Kong, with a view to gain for himself or another, made an unwarranted demand of $1 million Hong Kong currency from X, with menaces.’

Facts

6. The person ‘X’ referred to in the particulars of the offences was PW1.  She was a married businesswoman.  In March 2004 she met the applicant in a bar where he worked.  His job was to entertain the customers of the bar.  Shortly thereafter the applicant and PW1 developed a sexual relationship. 

7. In December 2004 the applicant on two separate occasions borrowed a total sum of $200,000 from PW1 on the pretext that he needed the money to be engaged in business. 

8. In January 2005 the applicant informed PW1 that he would like to open an account in HSBC in order to enable him to apply for a platinum credit card (‘the card’).  He told PW1 that $1 million would be required to open the account and as she had already lent him $200,000 she would only need to lend him another $800,000.  PW1 in order to please the applicant and to maintain their relationship agreed to his request. 

9. On 24 October 2005 the applicant and PW1 opened a joint account in HSBC and PW1 deposited a cheque of $800,000 into the account.  This was the subject matter of the first charge.  At that time PW1 learnt from the applicant that he had used the $200,000 that she previously lent him to buy shares and that he could not put the $200,000 into the account immediately.  She, however, trusted the applicant that he would eventually sell the shares and put the money into the account.  The applicant promised PW1 that after he obtained the card in a month’s time he would repay the $800,000 to PW1. 

10. On 13 November 2005 the applicant asked PW1 to meet him at a hotel where he told her that he had used up the money in the account and that he would not return the money to her.  He further threatened her that unless she gave him another $1 million he would disclose their relationship to her husband.  This was the subject matter of the second charge.

11. PW1 became very emotional and wanted to kill herself.  In order to placate PW1 the applicant then told her that he would repay the money to her.  The parties then left the hotel.  Thereafter PW1 was unable to locate the applicant.  PW1 discovered that only $1,000 was left in their joint account and on 15 November 2005 she reported the matter to the police. 

12. The police found an ‘IOU’ at the home of the applicant where PW1 acknowledged that she owed a gambling debt of $1.7 million to the applicant and promised to repay the debt within 60 days.

13. PW1 said that the signature on the paper was her signature and the company seal appearing thereon was that of her company’s, but she denied that she owed the applicant any gambling debt or that she had written the ‘IOU’. 

14. PW1 explained that whenever she travelled on business overseas, she would bring along some signed blank company stationery with her company’s seal imposed on it.  She claimed that sometimes when she met the applicant she would carry her briefcase with her and the applicant might have the chance of obtaining the paper without her knowledge.  She did not know the circumstances in which the applicant obtained the blank sheet of paper which became the ‘IOU’.

The defence

15. The applicant, as he was entitled to do, did not give evidence or call any witness at the trial. 

16. The defence that was put to PW1 was that on 5 October 2005 while they were in Macau they gambled with each other and she lost $1.7 million to the applicant.  At that time the applicant already wanted to break up their relationship but PW1 wanted to continue their relationship and promised the applicant that she would give $1.7 million to him.  This was denied by PW1.  Thereafter PW1 opened the joint account and gave $1 million to the applicant. 

17. The applicant further denied that he had asked for another $1 million from PW1 or that he had threatened to disclose their relationship to PW1’s husband. 

The finding

18. The Judge rejected the defence put forward by the applicant and accepted the evidence of PW1.  The Judge accepted the PW1’s evidence on the ‘IOU’.  He found the applicant guilty as charged. 

Section 18D

19. In relation to the first charge, Mr. Paul Leung who appeared together with Mr. Edwin Choy,counsel for the applicant, argued that section 18D is not intended to cover an offence such as the present one and is intended to deal with cases where a bank is the target of deception.

20. Section 18D is as follows :

‘(1)      Any person who dishonestly, with a view to gain for himself or another or with intent to cause loss to another, by any deception (whether or not such deception was the sole or main inducement) procures the making, omission, altering, abstracting, concealing or destruction of an entry in a record of a bank or deposit-taking company, or any subsidiary thereof the principal business of which is the provision of credit, shall be guilty of an offence and shall be liable on conviction upon indictment to imprisonment for 10 years.’

Legislative history

21. Section 18D was introduced by the Theft (Amendment) Bill 1986.  During the second reading of this bill in the Hong Kong Legislative Council on 12 March 1986 the Attorney General stated that :

‘In the course of prosecuting commercial crimes, my chambers have encountered difficulties under the existing law in dealing with certain fraudulent transactions carried out for the purpose of obtaining credit from banks or from deposit-taking companies.  Let me give a typical example.  A person dishonestly and by deception induces a bank to lend him some money.  The proceeds of the loan are transferred to an account in his name in that bank or in the deposit-taking company.  The person then disburses the amount of the loan from his account.  In its present form, our view is that the Theft Ordinance does not clearly make such fraudulent activity il1egal.

It is, of course, an offence under section 17 of the Theft Ordinance to obtain dishonestly property belonging to another by deception.  But in my example, the sum which forms the loan obtained fraudulently is created at the moment when the bank or deposit-taking company and the fraudulent borrower come to an agreement.  So it is not thought appropriate under the law to charge an offence under section 17.  Although it is also an offence under section 18 of the Theft Ordinance to obtain dishonestly an overdraft by deception, the better view is that the new loan, in my example, would not fall to be dealt with as an overdraft.

Nor are any of the provisions in the Theft Ordinance, such as the offence of obtaining services by deception, procuring the execution of a valuable security by deception or furnishing false information, thought to fit the kind of transaction in my example.  The best course therefore is to enact new provisions to make these and similar activities criminal, as they should be, and the Theft (Amendment) Bill 1986 is designed to achieve this object.

Clause 2 of this Bill makes it an offence to obtain by deception credit from banks or deposit-taking companies. Clause 3 of the Bill creates a new offence for a person dishonestly to procure by deception the making of an entry in the record of a bank or deposit-taking company.  [i.e. section 18D]  The two new provisions will bring the fraudulent activity of obtaining credit by deception clearly within the ambit of the criminal law.’  (emphasis added)

22. On 16 July 1986 during the second reading of the bill the Attorney General further stated that :

‘ The new clauses 2 and 3 of the Theft (Amendment) Bill proposed by Miss Maria TAM do not alter the purpose of the proposals contained in the original Bill which, as stated in my speech on 12 March 1986 to this Council, are to bring the fraudulent activity of obtaining credit by deception clearly within the ambit of the criminal law.

The amendment to section 18 (clause 2) and the new section 18D (clause 3) will now clearly identify those bodies on which [t]his kind of fraud will ordinarily be perpetrated, that is to say, banks and deposit-taking companies, and subsidiaries of banks or deposit-taking companies whose principal business is the provision of credit.

….....

With these amendments, I remain sure that this Bill will provide valuable additional sanctions against forms of fraudulent activity that are a recurring threat to the integrity of ordinary business life in Hong Kong.’ (emphasis added)

23. An example of a section 18D charge can be found in The Queen v. Sze Sing Ming & Others (CACC 580/1989) where the defendants were charged with a number of offences, including “procuring the making of an entry in a record of a bank by deception, contrary to section 18D.”  It was alleged that the parties composed “an entirely fictitious bill of lading which gave details of a non-existent ship and cargo” in order to negotiate a draft drawn under a letter of credit.  The amount of the bank entry in that case was nearly HK$3 million.

24. A sample of the relevant charge in that case reads :

‘On or about 10th November 1986, the three applicants dishonestly with a view to gain for themselves or another, or with intent to cause loss to another, procured the making of an entry in a record of the Bank of Communications Ltd. (BCL), namely a credit entry of $2,733,739.98 Hong Kong currency to the account of Lordship Co. Ltd. (Lordship) No.027-532-0-009344-3 with BCL, by deception by falsely representing to BCL that the documents submitted to BCL in order to obtain payment on a draft drawn under Letter of Credit number 450861089 issued by the Bank of China were true and genuine documents, that the goods referred to therein, being the subject of the said Letter of Credit had been shipped in accordance with the terms thereof and that Lordship was thereby entitled to have its said account credited in the said sum.’

Purpose and intention

25. Bennion in Statutory Interpretation, 4^th Edition, section 170 drew a distinction between the purpose or object of legislation on the one hand and the legislative intention governing it on the other hand.  The former relates to the mischief to which the legislation is directed and its remedy, while the latter relates to the legal meaning of the legislation.  In the commentary to section 170 it further stated that :

‘The distinction between purpose or object and intention in relation to statutory interpretation is that, while the former has an overall reference to the mischief which the enactment is designed to remedy, intention is taken for practical purposes to relate to the imputed meaning and effect of the enactment in its application to particular factual situations.  A construction which furthers the purpose or object of an enactment is described as a purposive construction.’

Rules of statutory interpretation

26. As Li CJ pointed out in Medical Council of Hong Kong v. Chow Siu Shek David (200-01) 9 HKPLR 449 that historically the most significant rules of statutory interpretation appear to have been :

‘ (i)      the ‘literal rule’ which accorded primacy to the literal meaning of the language used in the legislation unless and until some other factor or factors demonstrated that some other meaning represented the true intention of the legislature;

(ii)       the ‘golden rule’ which was that, whatever the literal meaning of the language which the legislature used, there was a presumption that it did not truly intend to bring about an absurd result; and

(iii)      the ‘mischief rule’ which presumed that the legislature has targeted a particular mischief and provided a remedy for it.’

27. The modern approach to statutory interpretation is to give a statute a purposive construction.  Li CJ was of the view that the ‘purposive construction’ approach may be viewed as being to an appreciable extent a development from the ‘mischief rule’ in particular.

The language in section 18D(1)

28. It is clear from the history of the enactment of section 18D(1) that its purpose is to address deception practised on banks and deposit taking companies for the purpose of obtaining credit.  If one is to adopt the ‘purposive construction approach’, then one should give effect to such a purpose.

29. The difficulty here is whether the language used in section 18D(1) shows that its only purpose is to deal with obtaining credit from the banks by deception or whether it is also capable of covering other types of deception where the person deceived is not the bank and its only correlation to the offence is that an entry happened to appear in the bank’s records as a result of the deception.

30. Mr. Leung argued for the former approach while Ms Sin, Senior Assistant Director of Public Prosecution, counsel for the respondent, argued for the latter approach.  

31. Ms Sin relied on the fact that the meaning of deception in section 18D(1) of the Theft Ordinance has the same meaning given to it by section 17 (the offence of obtaining property by deception) which is

‘“deception”（欺騙手段）means any deception (whether deliberate or reckless) by words or conduct (whether by any act or omission) as to fact or as to law, including a deception relating to the past, the present or the future and a deception as to the intentions of the person using the deception or any other person.’ 

32. We accept that the wording of section 18D(1) is capable of covering a case such as the present.  In fact the wording is capable of covering any deception where a bank is involved even if the bank itself is not the target of the deception.  An example that was raised in argument was a deception practised on a victim who parted with his money to a fraudster.  If the victim happened to keep his money in a bank account then the withdrawal from the account would create a debit entry in that account. 

33. On this interpretation an offence would be created under section 18D(1), even if the bank itself was not defrauded and even if there are other provisions under the Theft Ordinance covering the deception on the victim, such as obtaining property by deception (section 17).  

34. After the enactment of section 18D, the Theft Ordinance was further amended to include the offence of fraud (section 16A).

Restrictive interpretation

35. It is precisely because of the wide ambit that we consider it necessary to restrict the interpretation of section 18D(1) and confine its application to the legislative purpose envisaged at the time of its enactment, namely, to target deception on banks.  As Bennion observed at section 169 where facts arise that were unforeseen by parliament, but which the words of the enactment accidentally fit, it may be necessary to depart from the literal meaning in order to give effect to the imputed intention.  This is another way of describing one of the ‘legislative factors’ or ‘guidelines’ referred to in Chow Siu Shek David namely, the reluctance of the courts to attribute to the legislation an intention to make a radical change by way of a side wind.

Other interpretative factors

36. This approach is also in line with the other ‘interpretative factors’ or ‘guidelines’ referred to by Li CJ.

37. First, it is necessary to strike a balance between the conflicting interpretative factors such as the ‘literal rule’ which accorded primacy to the literal meaning of the language and ‘mischief rule’ which presumed that the legislature has targeted a particular mischief (in fact the mischief here is expressly targeted).

38. Second, there are other comparable provisions dealing with deception when the bank is not the target of deception.

39. Third, there is the law’s tendency to construe each and every provision of a statute in such a way as to accord the same a due measure of real meaning and substance. 

40. The relevant words in the section are :

‘ ... by deception ... procures ... an entry in a record of a bank.’

Although the target of the deception is not stated in the section, it does not mean, having regard to the object of this section, that it intends to target someone other than the bank as well. 

41. Likewise although the word ‘procures’ means ‘to cause or to bring about’ (R v. Beck [1985] 1 WLR 22) and in a way the applicant caused a number of transactions to take place resulting in an entry being recorded in the joint account, our view is that having regard to the legislature’s object, section 18D(1) should not be given such a wide meaning.

Alternative verdict argument

42. Section18D(1) is also unique in that there is no provision for an alternative verdict to a section 18D(1) charge.  However, we do not consider that this would necessarily support the argument of Mr. Leung that section 18D(1) is not intended to cover other situations of deception.

Attorney General v. Chow Wai-ming

43. In Attorney General v. Chow Wai-ming [1992] 1 HKCLR 214, a section 18D(1) offence was laid against the accused who dishonestly used a credit card in excess of the relevant credit limit with no real intention of ever making repayment.  The transactions entered into by means of the credit cards were within the ‘floor limit’ of the retailers who accepted payments by means of the cards.  ‘Floor limit’ means the maximum amount the credit card accepting retailer may process without reference back to the bank which issued the card for its approval.

44. This Court (Yang CJ, Silke VP and Powers JA) upheld the conviction and stated that,

‘ The accused knew they had exceeded their credit limit.  Given that the cardholder is required to use his card within the credit limit each accused knew that this use was dishonest and involved a deception, i.e. that he was entitled so to use the card.  This dishonest and deceptive use was clearly with a view to gain the provision of goods or services.  Each accused must have realized that this use would set in motion a chain of events which would involve the making of an entry of the use in the books of the bank.

We had no doubt that they had procured the making of an entry in each case and by deception within the terms of s. 18D, and that they were properly charged and properly convicted.’

45. The judgment was a short one and the legislative history of section 18D(1) was not addressed.  That case does not necessarily support Ms Sin’s argument that it shows section 18D(1) covers situations such as the present one as well.  This is because in that case the bank was in a way deceived into allowing the accused to carry out transactions which exceeded the credit limit.  That would fit into the legislative purpose of section 18D(1).  In any event because of the brevity of details in that case, particularly those concerning the relationship between the retailer and the card issuing bank, we do not regard Chow Wai-ming as authoritatively stating that section 18D(1) covers situations other than those envisaged in its legislative purpose or object. 

46. We wish to emphasis that in terms of the binding effect of a previous decision of this Court we are not departing from Chow Wai-ming on the basis that it was ‘plainly wrong’ within the meaning accorded to it by the Court of Final Appeal in the recent case of Solicitor (24/07) v. Law Society of Hong Kong [2008] 2 HKLRD 576.  It is not necessary for us to proceed in such a manner.

Social welfare fraud

47. There were also cases of social welfare fraud prosecuted under section 18D(1).  An example is HKSAR v. Ma Kim Hung (CACC 33/2002).  However the issue which we have addressed here was not discussed in those cases and hence they would not be of assistance in our construction of section 18D(1).

Decision on section 18D

48. We are of the view that section 18D(1) does not cover the present offence. 

Merits of leave application

First charge

49. However, if we were wrong on the interpretation of section 18D(1) and the first charge was properly laid, we will now deal with the merits of the leave application against conviction of the first charge.

50. In our view the applicant was properly convicted of the first charge. 

51. The Judge was correct to hold that from the very beginning the applicant did not have the intention to apply for the platinum credit card.

52. Although there was no evidence either way that the applicant had or had not applied for the card, the Judge could still draw the inference about the intention of the applicant from the following facts :

(1) HSBC had never issued the card to the applicant.

(2) If the purpose of depositing the money in the account was to secure the card, this would be wholly defeated if the money was to be withdrawn within a short period of its deposit.  But this was precisely what the applicant had done and this would frustrate the purpose of the deposit.

(3) If the applicant had indeed applied for the card, he would have known that HSBC would not have issued the card to him if there was no more money in the account.

53. From these the inference that the applicant did not have the intention was properly drawn and in accordance with established principles on drawing inference as set out in cases as Kwan Ping-bong v. R. [1979] 1 HKLR 1 and Chamberlain v. R (No. 2) (1984) 153 CLR 521.

54. The Judge was correct to hold that although the prosecution did not show whether HSBC had told the applicant to have $1 million in order to apply for the card, this would not affect the verdict.

55. This is because the deception by the applicant on PW1 was that he would apply for the card.  This was the pretext on which he obtained the money from PW1.  He told PW1 that the money required was $1 million.  Whether it was in fact the amount actually required by HSBC was irrelevant.

56. The Judge was also correct to hold that the content of the ‘IOU’ was false.

57. This was clearly a finding of fact which the Judge was entitled to make.  The Judge had heard and seen PW1 giving evidence.  She denied that she had gambled with the applicant and denied writing out the ‘IOU’.  She had given an explanation on how that the applicant might have got hold of the paper with her signature and company’s seal on it.  In the absence of contrary evidence when the applicant chose not to give evidence, the Judge was clearly entitled to come to the view that the content of the ‘IOU’ was false.

Second charge

58. The Judge found that the second charge of blackmail was also established.  Whether the applicant had uttered the threats and demanded from PW1 another $1 million was clearly a matter of finding of fact by the Judge.  The fact that after the blackmail PW1 had tried to contact the applicant would not necessarily point to a different conclusion on this issue.  After all the parties had an intimate relationship before.  PW1’s subsequent behaviour was not totally inconsistent with her being blackmailed by her former lover.

Sentence

First charge

59. The Judge took into account the tariff of sentence set out in HKSAR v. Cheung Mee Kiu [2006] 4 HKLRD 776 where a sentence of two to three years is considered appropriate for theft involving breach of trust of $250,000 to $1 million.  The Judge was clearly aware that different offences were involved in this case and Cheung Mee Kiu.

60. In our view the Judge was not wrong to consider Cheung Mee Kiu.  However as the amount involved in this case was $800,000 it was not necessary to impose the maximum sentence that was suggested for this particular band of sentence.

61. We are of the view that, if the first charge is sustained, an appropriate sentence is 2½ years’ imprisonment.

Second charge

62. We are of the view that considering the overall circumstances of the offence, a more appropriate sentence for the offence of blackmail is also 2½ years’ imprisonment.

Totality

63. If the first charge is sustained, we would order one year of the second sentence to be served consecutively to the first.  The total sentence would be 3½ years’ imprisonment.

Order

64. We accordingly make the following orders :

(1) On the basis that the first charge was improperly laid, we would allow the application for leave to appeal against conviction on the first charge, treat it as the appeal proper and quash the conviction.

(2) We would dismiss the application for leave to appeal against conviction on the second charge.

(3) We would allow the application for leave to appeal against sentence on the second charge, treat it as the appeal proper and substitute the sentence of 3 years’ imprisonment by a sentence of 2½ years’ imprisonment.