HKSAR v. CHONG KA HAI, KEEFE AND OTHERS

CACC 411/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 411 OF 2012

(ON APPEAL FROM DCCC 1148 of 2011)

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REASONS FOR JUDGMENT

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Hon Macrae JA (giving the reasons for judgment of the Court):

1. The three applicants, D1, D2 and D3 at trial, together with a fourth defendant, D4, were tried on a number of charges before HH Judge Tallentire in the District Court.  On 24 September 2012, D1 and D2 were convicted of two charges of fraud (Charges 1 and 2), contrary to section 16A of the Theft Ordinance, Cap 210, with D1 being convicted of two further offences of evasion of liability by deception (Charges 3 and 4), contrary to section 18B(1)(b) of the Theft Ordinance.  D3 was convicted of a separate charge of dealing with property known or believed to represent the proceeds of an indictable offence (Charge 5), contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap 455.  D4 was acquitted of a similar charge.

2. D1 and D2 were each sentenced to concurrent terms of 5 years’ imprisonment in respect of Charges 1 and 2, while D1 was further sentenced to two months’ imprisonment on each of Charges 3 and 4, which sentences were ordered to run concurrently with each other but consecutive to the sentence on Charges 1 and 2; thus making an overall sentence of 5 years and two months’ imprisonment for D1, and 5 years for D2.  D3 received a sentence of 3½ years’ imprisonment.  All three applicants appealed against their convictions only.

3. On 14 November 2013, we dismissed the appeals against conviction of all three applicants and said we would hand down our reasons in due course.  This we now do.  Throughout this judgment, we shall refer to the applicants by their trial designations.

The prosecution case

4. It is important to note at the outset that Charges 1 and 2 each particularised, within the same time frame from March 2007 to December 2008 inclusive, different amounts which were alleged to have been defrauded from two respective prosecution witnesses by means of the same false representation by the applicants, namely “that the money provided by (the respective witness) would be invested to (sic) (D2’s) company”.

5. The prosecution alleged that, between the dates averred, the two witnesses, Ms Li Yuet-wah (Lee) and her mother, Madam Au Yuet-oi (Au), were induced by D1 and D2 to invest funds in a company said to belong to D2.  The purpose of so doing was, or so they were told, to buy out D1’s existing interest in that company.  They were both promised a return of HK$20,000 a month on their investment, while the capital would be protected.

6. In order to reinforce the impression that D2 was running a substantial and successful business, both Lee and Au were also told that D1’s cousin (a member of a well-known and wealthy family in Hong Kong) would be injecting HK$20 million into the company.  The company was said to invest in real estate, as well as securities and futures, and was linked with a prominent chain of estate agencies called Century 21.  Believing the representations to be true, Lee provided HK$5,068,420 (the sum specified in Charge 1) and Au, HK$5,691,860 and RMB260,000 (the sums specified in Charge 2), to D1 and D2 to be invested in this company.

7. Neither D1 nor D2 ran any business or company at the time, nor did either have any connection with Century 21.  Nor indeed was there any evidence that D2 ever invested any of this money on behalf of Lee or Au.

8. In support of Charges 1 and 2, as against D1 only, the prosecution relied on a series of recorded written and oral admissions by D1 in which, amongst other things, he acknowledged his indebtedness and the reasons why he and D2 had resorted to make false claims to Lee and Au about investing in D2’s company.  At one point, D1 admitted in writing that “they (Lee and Au) fell into the trap for they trusted me.  Now I pledge to bear partial responsibility for the loss of their money”.  Save for the fact that these admissions were not given under caution, on which basis they were objected to, there does not seem to have been any wider issue as to voluntariness.  In any event, the admissions were ultimately admitted into evidence.

9. In relation to Charges 3 and 4, D1 told Au that he wished to buy some gold ornaments for his wife but did not have enough money. Au was then prevailed upon to buy the ornaments on D1’s behalf on the promise that he would repay her later.  To that end, D1 issued two post-dated cheques in favour of Au drawn on a Hang Seng Bank account; one cheque for HK$28,000 in respect of the gold ornaments, the other for HK$30,000 in respect of a pre-existing debt.  However, when presented, both cheques dated 7 June 2008 bounced, not surprisingly since the account on which they had been drawn had been closed in February 2001.

10. So far as Charge 5 was concerned, D3 was the account holder of another account with Hang Seng Bank.  Between 18 October 2007 and 17 July 2008, D1 instructed Au, ostensibly for the purposes of the investment, to deposit a total of HK$2,830,000 into D3’s Hang Seng Bank account.  Banking evidence established that the amounts were either withdrawn in cash or transferred from the account very quickly on almost all of the occasions that deposits were made.  The prosecution relied on a voluntary record of interview given by D3 in which he maintained that he had allowed D2 to use his bank account so that D2 could access the funds more quickly.  D3 claimed to work for D2, yet accepted it was an informal, verbal arrangement in which D2 would sometimes pay him, sometimes not.  The amount of salary was never specified.  D3 said he had no idea whether D2 had set up a company.

11. None of the applicants gave evidence.

The judge’s findings

12. The judge accepted Lee and Au as “honest and sincere witnesses who did their very best to faithfully and accurately recall events and conversations as they occurred in the years 2007 and 2008.  They presented honest and fair, even allowing for an element of bitterness… they were in fact mutually corroborative on important issues to a very high degree.” In reliance on their evidence, he concluded, in relation to D1 on Charges 1 and 2, as follows:

“D1, it was you who constantly sought to reassure and persuade first that D2 was a successful and resourceful businessmen who had nurtured your fictitious investment of 5 million so that your family could live well on the proceeds. It was you who sought to reassure (Lee) and (Au) that your rich cousin, a Mr Fu whom you claimed to be the owner of the Furama Hotel was riding to their rescue.”

13. In relation to D2, he found that:

“…the only possible inference is that you, D2, had no office, you had no company, you had little if any investments, you needed money, at least partially to gamble and pursue your high lifestyle. Trickery and misrepresentation as set out in the charge was used with D1 as your accomplice to dupe and con (Lee) and (Au).”

14. So far as Charges 3 and 4 against D1 were concerned, the judge held that:

“…the signing and presenting of these albeit post-dated cheques drawn on an account closed for over seven years clearly amounts to an evasion of a liability by deception. The only inference I can draw is that you, D1, knew these cheques were not valid instruments as the account was closed and you intended to evade the debt by deception, and (Au) was indeed deceived.”

15. In relation to Charge 5 against D3, the judge rejected the explanation put forward in his record of interview.  D2 had had nine months in which to open his own Hang Seng Bank account, yet D3 allowed substantial amounts to pass quickly through his account during this time.  He found that at the very least D3 had reasonable grounds to believe that the money in whole or in part directly represented the proceeds of an indictable offence.

The grounds of appeal

16. A number of grounds of appeal have been advanced by Mr Francis Cheng, acting on behalf of D2 and D3. No proper written grounds of appeal or written argument have been presented by D1, although we allowed him to address us as to his grounds of complaint and, if necessary, adopt the arguments of Mr Cheng insofar as they assisted him. 

17. Mr Cheng’s grounds of appeal on behalf of D2 and D3 may be summarised thus: the judge failed to consider the risky nature of the investment into which Lee and Au had agreed to invest (Ground 1); the judge failed to consider that the circumstances in which money was borrowed from Lee and Au was due to financial difficulties rather than fraud (Ground 2); the judge failed to bear in mind, on the issue of whether D2 had the requisite intent for fraud, that D2 had in fact made certain repayments to Au (Ground 4); the judge did not properly assess the inconsistencies between Lee and Au (Ground 3); there was insufficient evidence to convict D3, even if the judge rejected his explanations in the records of interview, which he should not have done (Grounds 5 and 6).

Consideration of D1 and D2’s applications

18. We mean no disrespect to the sensibly presented arguments of Mr Cheng, both in written form and orally before us, if we do not condescend into a minute analysis of the evidence upon which they rely.  For the essential foundation of the fraud charges, of the prosecution case and of the judge’s reasons for verdict, was that the company into which Lee and Au were asked to invest, which was said to be D2’s company from which they would be able to derive a healthy monthly return, never in fact existed.  There never was any company with investments in real estate or securities and futures, or with links to Century 21.  D1 never had any investment of HK$5 million in such a company, which he would have been able to withdraw if Lee and Au took his place.  There was no HK$5 million and there was no company.  The whole representation by which Lee and Au were induced to part with a considerable amount of money was a complete sham.

19. Accordingly, we think Ms Yang for the respondent is correct when she says that the crux of the case was the existence of the company in which Lee and Au were persuaded to invest, not the nature of such investment.  It matters not how the witnesses expected the funds to be used, or whether they believed it was a high risk or low risk investment, or whether there was an unfortunate downturn in the share market.  Nor does it matter that some small fraction of the money given to D1 and D2 by Lee and Au was on occasions repaid.  The fact is that neither witness would ever have parted with their money, had they known that the company, of which they were given such glowing reports, had never in fact existed; and that the money was actually being used by D2 for his own purposes.

20. We can therefore dispose of the grounds of appeal very quickly.  Whether the investment was understood by the witnesses to be risky or not (Ground 1) was beside the point.  The money was taken on a wholly false pretext.  Moreover, the evidence was entirely clear that both witnesses were keen to ensure that their capital was protected.  As Lee put it in evidence-in-chief:

“My mother and I emphasised that we did not want to lose the money because my mother was retiring and I was retiring and my mother emphasised that it’s important to keep the capital.”

21. Au’s evidence-in-chief was to similar effect:

“A. …(D2) told me to rest assured, it was very safe and that I would not lose money. I emphasised that I must keep the capital and both D1and D2 said it’s safe.

Q. Did you believe him?

A.   Of course I believed, otherwise I would not put in the money.  I did not want to earn much.  It’s like when you invest in a big investment in the bank, some earns more, some earns less.  I just want something safe.  The most important thing was to keep the capital.”

22. Neither witness ever resiled from that position. The notion that they would have given over these large amounts for D2 to play with as he wished on either the stock market or the gambling tables of Las Vegas did not sit at all well with their stated intention (and D1 and D2’s assurances) that their capital would be protected, while they enjoyed a steady return from their investment in D2’s company.

23. As for Ground 2, the judge was alive to the issue promoted at trial (such as it was), namely that the losses were, or may have been, due to adverse market forces rather than a concerted fraud upon Lee and Au.  He said in terms:

“It is more important from the prosecution perspective to establish whether or not these losses to (Lee) and (Au) were because of a fraudulent scheme or poor commercial management. In other words, the court has to look to see if Lee and/or Au paid over the money to the parties based on a concerted scheme of misrepresentation by D1 and/or D2 or were possibly the victims of adverse market forces.”

24. In our view, the finding that both Lee and Au paid over the money on the basis of a false misrepresentation that they would be investing in a company which did not in fact exist is unassailable.  Whether market forces were also at play did not affect that essential fact.

25. Ground 4 (which can conveniently be dealt with before Ground 3) suggests that the judge failed to bear in mind the repayments of some of the money on the issue of whether D2 had the intention to defraud.  In fact, the judge was well aware of these repayments.  D2 did not give evidence. We agree with Ms Yang that the obvious inference is that relatively small repayments had to be made to perpetuate the impression that Lee and Au’s “investment” was generating returns, and to prolong the deceit.

26. Ground 3 attacks the judge’s finding of credibility.  Both Lee and Au were in the witness box for several days.  The judge was thereby in the best position to assess the credibility of each witness and any inconsistencies in their testimony.  He set out in great detail their evidence and, ultimately, he believed them.  There was no oral evidence from the defence.  We are not prepared to disturb his findings of fact, nor do we accept that there were any material inconsistencies which bore on the essential issue before the court.

27. It is convenient at this stage to deal with the unrepresented appeal of D1.  In essence, he has urged upon us that he was merely a middleman in this whole exercise and was never proved to have touched any of the money.  The difficulty with this contention is the explicit terms of his written and oral confessions, which clearly corroborate the essentials of Lee and Au’s evidence. Exh P1(1), dated 8 October 2008, reads as follows:

“As in the recent months, I, Chong Ka-hai repeatedly deceived my sworn mother Madam Au Yuet-oi and (her) daughter Ms Lee Yuet-wah by stating that (my) elder cousin Foo Hau-fai would help me to pay off the debts that I owed Madam Au Yuet-oi and Lee Yuet-wah amounting to about HK$ 8,500,000, I hereby write this note stating that I will repay the debt in one go on 15 October, 2008 next week and I will not break my promise. Should I fail to do so, you can take action or call the police to arrest me for deception.”

28. Exh P1(2), written on 17 October 2008, is even more explicit and goes directly to proof of both fraud charges:

“I, Chong Ka-hai, introduced Benson Ho Kar-Lun to my sworn mother Madam Au Yuet-oi and former girlfriend Ms Lee Yuet-wah in February 2007. As Ho Kar-lun and I knew that Au Yuet-oi had sold a flat, at the request of Ho Kar-lun, I, Chong Ka-hai joined him to persuade Au Yuet-oi and Lee Yuet-wah into paying HK$5 million for capital protected investment. Furthermore, Ho Kar-lun requested me to falsely claim that I had sold my shares amounting to HK$5,500,000 (with interest over the years) so that Madam Au Yuet-oi could buy the shares. Actually there was no selling of shares.”

29. We have already referred to a third letter, Exh P1(3) written on 25 October 2008, where the applicant acknowledged that both women “fell into the trap”. 

30. These statements were admitted into evidence and were properly relied on for their full effect by the judge.  Their meaning is as unmistakable as their probative value is cogent.

31. In relation to D1’s conviction on Charges 3 and 4, no argument has been advanced on appeal.  Nor sensibly could it be.  The issuance of two post-dated cheques on an account which had been closed seven years earlier speaks volumes as to D1’s dishonest intention to evade liability.

Conclusion as to D1 and D2’s applications

32. There were no merits in the applications for leave to appeal against conviction by either D1 or D2.  The evidence against them both was overwhelming.  Accordingly, we refused their applications.

Consideration of D3’s application

33. In relation to D3’s appeal (Grounds 5 and 6), it was not disputed that large sums of money were deposited into D3’s Hang Seng Bank account over several months and very quickly moved out of the account.  The exculpatory explanation in D3’s records of interview was rejected by the judge as incredible.  D3 did not give evidence.

34. In our judgment, the judge was right to reject that explanation.  Quite what the relationship was between D3 and D2 was not clear but evidently there was no formal employment relationship.  There was no written contract, there were no specific working times or duties, and there was no regular salary.  D3 had no real idea what D2 did for a living, who his associates were, or where he worked.  Furthermore, there was no explanation given as to why during the entire time that these substantial deposits were being made into his account, he never questioned why D2 did not have his own Hang Seng Bank account.

35. As the Court observed in HKSAR v Wong Chor Wo & another (unrep) CACC 314/2006 at para 108:

“In the normal course of events, if a man allows another person to use his bank accounts to deposit and withdraw funds, in the absence of evidence to the contrary, the inevitable inference will arise that the holder of the bank account has reasonable grounds to believe that the funds passing through the account represent the proceeds of an indictable offence.”

36. The inferences arising from the transactions passing through D3’s accounts were obvious and compelling and there was no credible evidence to the contrary. 

Conclusion as to D3’s application

37. For these reasons, D3’s application for leave to appeal against his conviction was also refused.