HKSAR v. CHAN SIU TAI EDWARD

CAC C 78/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 78 OF 2011

(ON APPEAL FROM DCCC NO. 900 OF 2010)

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BETWEEN

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J U D G M E N T

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Hon Hartmann JA (giving the judgment of the Court):

Introduction

1.  On 25 January 2011, after a trial in the District Court before Judge Yau, the applicant was convicted of three counts of evasion of liability by deception, contrary to s. 18B(1)(b) of the Theft Ordinance, Cap. 210. The applicant was sentenced to a total of three years’ imprisonment.

2.  The applicant originally sought leave to appeal both conviction and sentence but before us abandoned his application in respect of sentence.

Background

3.  It was the prosecution case that the three charges of which the applicant was convicted arose out of a scheme of fraud which in one form or another has a long history.  It works to the following effect.  A business is set up with the appearance of legitimacy.  Purchases are made from various suppliers, the initial payments being made in cash or by some secured means.  When the trust of the suppliers has been secured, further purchases are made, payment this time being made by cheque.  The goods are delivered before the cheques are presented.  The cheques are dishonoured and the goods are sold.  By that means those behind the fraud hope to profit.

4.  In the present case, it was the prosecution case that the scheme of fraud was managed through a limited liability company called Central Mak which set up offices at or about the beginning of August 2007.  Orders to purchase plastic resin were then secured with three suppliers.  In each instance the suppliers were approached by a man who introduced himself either as Danny Ko or Ko Kin Keung.  Payment for the first orders were made either in cash or by some secured means.

5.  Shortly after the successful conclusion of these first contracts, the man known to the suppliers as Ko made further orders for the purchase of plastic resin.  Each of the three suppliers delivered the plastic resin, the subject of the second orders, to the offices of Central Mak on 27 August 2007.  Each was given a cheque of that date drawn on Central Mak’s bank account.

6.  Each of the three cheques made out on that date was dishonoured.  These three cheques were in the sums of $275,134, $274,252 and $270,724, a total of $820,110.

7.  When representatives of the suppliers visited the offices of Central Mak they found it was no longer operating.  

8.  Investigations by the police revealed that the plastic resin supplied by the three suppliers had been sold on to a third party for cash.  Investigations further revealed that the persons who purported to represent Central Mak in dealing with the suppliers used prepaid SIM cards, their telephone numbers thereby being that much more difficult to trace; in addition, they gave out name cards bearing false information.

9.  It is to be emphasised that the applicant was not himself charged with conspiracy to defraud.  The three charges of which he was convicted were charges of evasion of liability by deception, each relating to one of the cheques made out on 27 August 2007, the allegation being that he had dishonestly induced the suppliers to wait for payment of the goods they had delivered by representing that the cheques would be duly honoured when he knew they would be dishonoured.

10.  In his Reasons for Verdict, the judge accepted that the evidence against the applicant was circumstantial.  He was satisfied, however, that on the primary facts proved the only reasonable inference to be drawn was that the applicant was guilty of each of the offences.  

The grounds of appeal

11.  The sole ground of appeal, other than a claim that on the evidence there had to be a lurking doubt as to the applicant’s guilt, was that the judge was not entitled to infer guilt from the primary facts.

The nature and extent of the circumstantial evidence

12.  The company, Central Mak, had been incorporated in August 2006.  However, there was no evidence of any activity until nearly a year later when on 10 July 2007 the evidence revealed the following.

13.  First, in company returns of that date signed by the applicant he was listed as the sole shareholder and sole director of the company.  The returns showed that the company had a paid-up share capital of just $1,000.  

14.  Second, on that date the applicant applied to register the company as a business under the Business Registration Ordinance, Cap. 310.  The nature of the business given was “Toys”.

15.  Third, on that date the applicant went to a firm of property agents with a man named Cheung Chi Man, the person initially identified as the third defendant on the indictment.  The purpose of the visit was to sign a tenancy agreement in terms of which Central Mak would lease office premises for two years at a rental of $10,300 per month.  It was the applicant who signed the tenancy agreement.  A few days earlier, Cheung had visited the property agents to sign a provisional tenancy agreement in respect of the same premises and, when he returned with the applicant, in the presence of the applicant, he introduced him to a member of staff as “his boss, Mr Chan”.  Cheung was identified by the sales executive of one of the victim suppliers as Ko.

16.  Two weeks after these events, on 25 July 2007, the applicant opened a bank account in the name of the company with Citic Ka Wah Bank.  The account was opened with a deposit of just $1,000.  The applicant was the sole authorised signatory.  In the account opening information, the nature of the business was described as “Wholesaler” with ten permanent staff.  In the “Details of Contact Persons”, the applicant and “Mr Cheung” were listed.

17.  There was no evidence that the applicant played any role in negotiating to purchase plastic resins from the three suppliers.

18.  However, it was the applicant who on 27 August 2007 wrote out the three cheques which are the subject of the three charges.  All three cheques were drawn on the Citic Ka Wah Bank account.  By 27 August 2007 that account had been in existence just over one month.  The activity in the account had been minimal.  There had been just two deposits of substance.  On 3 August 2007 a deposit of $274,252 had been paid into the account but was withdrawn in full just three days later.  On 13 August 2007 a further amount of $273,811 had been deposited but was taken up entirely the next day in meeting a financial instrument drawn on the account.

19.  As the judge noted, aside from the time when the two deposits were made in the first half of the month, the balance of the account in August 2007 was never more than $4,000.  There was no payment of any substantial deposit just before or just after 27 August 2007.  Nor was there any evidence that any substantial payment was expected just before or just after that date.  In his Reasons for Verdict, the judge said that a study of the bank account revealed that –

“… Central Mak virtually had no business activities going on between mid-August 2007 and 27 August 2007.”

20.  Yet on 27 August 2007, the applicant drew three cheques on the account to a total value of $820,110, each of them being dishonoured.  On that day the account had a credit balance of about $2,000.

21.  When arrested and cautioned, the applicant said only: “I am one of the shareholders.  It is Ko Kin Keung who takes charge of the monetary affairs.”  Nothing was said of the fact that the applicant was the sole director and sole signatory of the company bank account, nor of the fact that the applicant and “Mr Cheung” were listed as the contact persons in the account opening information given to the Citic Ka Wah Bank.

22.  At trial, the applicant chose not to testify.  Nor did he call witnesses.

23.  The applicant’s self-serving response after caution was rightly regarded by the judge as worthy of no weight.

The basis of the appeal

24.  The issue before us was succinct: on the evidence, was the judge entitled to draw the inferences of guilt that he did, they being the only reasonable inferences open to him?

25.  In support of his submission that other reasonable inferences were open to the judge, Mr Tze, the applicant’s counsel, laid out matters which the prosecution had not proved.  First, no name card of the applicant was found nor was his fingerprint found on any of the papers seized from the offices by the police.  Second, there was no evidence that the applicant had himself taken part in any dealings with the three suppliers.  Mr Tze also emphasised that the first dealings with the suppliers had been uneventful, all payments being duly made.

26.  In the result, it was submitted, it was not possible to draw the single inference that the applicant must have been a participant in the fraudulent scheme and must have signed the three cheques with the necessary dishonest knowledge and intent.  On the evidence, said Mr Tze, there were other reasonable inferences open to the court.  He submitted that the applicant may have acted as a ‘front man’ who did as instructed, being kept ignorant of the movement of funds in the bank account.

Consideration of the submission

27.  The judge was required to reach his determination on the evidence.  It was not for him to speculate as to other possible inferences unless they were reasonable inferences arising out of the evidence. 

28.  The applicant chose neither to testify nor to call witnesses.  There was therefore no explanation put forward as to the part played by him in the setting-up and management of Central Mak.

29.  No accused is under compulsion to give evidence on his own behalf.  But where, as in the present case, the prosecution have established facts from which the court can reasonably infer that the applicant was actively involved in the setting-up of the company and had sole access to the company bank account during the time when the company was in operation, since the applicant chose not to go into the witness box to give an explanation of his involvement, he cannot complain if a proper inference is drawn and if it is drawn more readily in view of his election: see Li Defan and Another v HKSAR (2002) 5 HKCFAR 320.

30.  In the present case, having regard to the pivotal role played by the applicant in setting-up the machinery of the business and the fact that he remained at all times the sole signatory of the bank account, we are satisfied that the single, compelling inference open to the judge was that the applicant must have had a working knowledge of activity in the bank account during the period of just one month when it was in operation.  In this regard, the judge took into account that there had been minimal activity in the account, there being virtually no movement of funds between mid-August and the 27^th of the month.  He further took into account that on the 27^th, when the three cheques were signed by the applicant, those cheques totalling more than $800,000, the account had had a credit balance of only about $2,000.

31.  As it was, even though the evidence relevant to the issue was tenuous at best, the judge chose to consider whether the applicant had in some way or another been induced to act as a ‘front man’ doing what he was instructed to do without any knowledge of the true state of affairs.  He rejected this possibility.  He concluded:

“No fraudsters could afford running the risk of using an outsider who was suspicious about what he was asked to do because the whole fraudulent plot would be exposed and compromised if the outsider made a report to the authorities. The only reasonable and irresistible inference is that [the applicant] was a party to the perpetration of the frauds…”

32.  We are of the view that the circumstantial evidence in this case was more than sufficient to enable the judge to draw the inferences of guilt that he did.  The familiar pattern of a ‘long firm’ fraud was established.  The applicant was proven to have been involved at all the essential stages, save for being identified as dealing himself with the suppliers.  On the evidence he was the one who had control of the bank account.  If the applicant was duped or misled, it called for an explanation to that effect.  There was none.

Conclusion

33.  For the reasons given, we dismiss this application for leave to appeal against conviction.