HKSAR v. LAI KON LIM AND ANOTHER

CACC 194/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 194 OF 2003

(ON APPEAL FROM DCCC 1187 OF 2002)

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J U D G M E N T

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Stuart-Moore, Ag CJHC (giving the judgment of the Court):

1. On 29 April 2003, following a trial in the District Court before Judge Sweeney, the Applicants (D1 and D2 respectively), both aged 30, were convicted of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap. 200. On the same day, they were each sentenced to three years' imprisonment.

2. D1 and D2 now seek leave to appeal against conviction. D2 has also sought leave to appeal against sentence out of time.

3. The charge adequately sets out the general nature of the allegation against the Applicants, namely, that between 18 March 2002 and 31 May 2002, they:

".... conspired together with DENG Faming, LEE Chi-fung Andy and LI Ngan-lung to defraud such companies, firms and persons as might be induced to deliver goods to Grand Union Enterprise Company ('Grand Union'), by dishonestly:-

(a)	falsely representing that 'Grand Union' was genuinely involved in purchasing goods as were delivered to it;
(b)	inducing, causing or allowing such companies, firms and persons to deliver goods to 'Grand Union'; and
(c)	falsely representing that the cheques drawn on the account of 'Grand Union' with the Bank of China (Hong Kong) Limited, in which DENG Faming was the sole signatory, would be good and valid orders for the payment of such goods if presented for payment on or after the dates thereon."

4. The judge found that the set up at Grand Union had all the hallmarks of a long firm fraud designed to defraud creditors.

5. Witnesses from four of the companies who fell victim to the fraudulent activities described in the charge testified at trial.

6. PW1, on behalf of Oriental Lane Enterprises Limited, spoke of receiving a telephone call from someone calling himself "Leung Man-to" ("Leung"). Later he received a fax from the person purporting to be Leung. This initial contact caused PW1 to go to the Grand Union offices where he met the man calling himself Leung. In fact, this was D1 who had adopted a false name and was describing himself as the company's merchandiser. D1 provided a sample polyester shopping bag and a potential order for such bags was then discussed. PW1 also met D2 who was calling himself "Chu Wai-cheung". Eventually, an agreement was reached that 20,000 bags would be manufactured at about $7.70 each. Payment was to be by post-dated cheque.

7. Following D1's inspection of the goods at PW1's factory in Shenzhen, PW1 delivered the bags, on or about 13 May 2002, to a car park from where they were collected. Later, D1 confirmed the safe receipt of the goods. A cheque for $154,000, post-dated to 2 June 2002, was given to PW1 at Grand Union's office in Connaught Road West, allegedly signed by Deng Faming on behalf of Grand Union. This was drawn on the Grand Union account held with Bank of China (HK) Limited.

8. When the cheque was duly presented, it bounced. On 4 June 2002, PW1 tried to contact D1 on numerous occasions without success. When he went to report the matter at Waterfront Police Station, he found a crowd of other handbag suppliers who had got there before him to make complaints of the same kind as his own.

9. A series of events of a similar type was described by PW2 on behalf of Shing Chong Industrial Company who had read an advertisement for Grand Union in a newspaper. She was introduced to D1 as "Leung". D2, using his true surname, was introduced to her as "Mr Chu". D2 was said to be responsible for the accounts. In short, three orders for handbags were placed by Grand Union which PW2's company duly fulfilled. Post-dated cheques for 2, 3, 4 and 6 June 2002 in the sums of $266,000, $16,464, $302,400 and $361,200, respectively, were tendered by Grand Union. All of these were dishonoured and returned marked "Refer to Drawer".

10. The evidence of the third victim-company concerned a total loss of about $663,864 to Winet Trading Limited ("Winet"). This evidence was covered by way of Admitted Facts. This was an order in which D1 was concerned. When D1 was recognised on an identification parade by Mr Lee Chi-kwong, one of Winet's proprietors, he referred to D1 as Vincent or Wilson Lai.

11. The total loss to Chun Yip Handbag Company, the last of the victim-companies to be considered on the evidence produced at trial, was just over $733,000. The representatives of Grand Union were "Mr Leung" (D1) and "Mr Chu" (D2). Again, there was an agreement that payment would be by means of post-dated cheques and, again, these were dishonoured.

12. Other general evidence in the trial revealed that D2 had rented premises at Room 806 in the Kenbo Building in Queen's Road West from 26 March 2001. When these were searched, various items connected to Grand Union were found including boxes of business cards, a Citibank letter to Li Ngan-lung (a named co-conspirator) and various samples and photographs of travel bags. The landlady said that D2 had frequented the premises with D1 and someone calling himself Li Ngan-lung.

13. Two female employees of Grand Union also gave evidence for the prosecution. The first of these, PW4, believed that the boss of the company was Deng Faming. She was given namecards bearing the same false names which D1 and D2 had been using. She worked from 25 March 2002 until she returned after two days' leave on 5 June 2002 to discover that the company had closed without notice.

14. PW5's job was to tour factories in Shenzhen which manufactured handbags seeking to order handbags on behalf of Grand Union. She also discovered, when she returned to work on 5 June 2002, that the company had suddenly closed.

15. PW4 and PW5, apart from a small sum of money paid to them in April, received no salary for their work. They were effectively cheated out of it and never paid.

16. The bank account used by Grand Union at the Bank of China had a balance which had never been more than a few hundred dollars. On 7 June 2002, there was an overdraft of just over $500.

17. Finally, the prosecution produced fingerprint evidence against D2 which showed that he had handled the purchase orders given to PW1 and PW2.

18. Neither D1 nor D2 gave evidence.

19. Mr Lawrence Hui, on D1's behalf, submitted that the verdict was unsafe or unsatisfactory. In his first ground, he contended that "no irresistible inference" of guilt could be drawn from the facts of the case. A number of matters were raised as examples to show that D1 was not instrumental in some of the activities in which other conspirators may have engaged. Mr Hui's principal submission was that it was not possible to draw the inference that D1 was guilty merely because he had operated under a false name. He even went so far as to suggest in his written argument that this fact had "no probative value to indicate .... guilt" and that the judge should have cautioned himself against the use of D1's possible "lie" about himself before using it to D1's detriment.

20. The first ground overlapped with the second ground of appeal which suggested that D1 played a similar role to PW4 and PW5 who, the prosecution had accepted, were innocent employees of Grand Union.

21. In the last of his substantive grounds of appeal, Mr Hui's suggestion was that the judge had relied on a number of "irrelevant matters" when convicting the Applicants. He particularised this allegation in these terms:

"	1.	The association of the Applicant with Mr. Li Ngan Lung in D2's premises could not be used as any evidence or at all to point to the guilt of the Applicant.
	2.	The learned Judge in his reasons for verdict stated: 'Unlike the two ladies, they were not hired by Grand Union in the spring of 2002 but had already been involved with Li Ngan-lung at the Queen's Road West premises during the previous year at which premises some boxes of Grand Union's 'business cards' were subsequently found.'
	3.	It was normal for colleagues such as the Applicant, Mr. Chu Kwok-pang (D2) and Mr. Li Ngan-lung to frequent a place at the same time, as they were all working in Grand Union.
	4.	It was unfair to readily link the guilt of the Applicant with the deeds of Mr. Li Ngan-lung, because Mr. Li was never a party of the trial."

22. Dealing with all these grounds together, it is apparent from the summary of evidence, which is a model of clarity, provided by the judge in his Reasons for Verdict that D1 played a substantial part in the transactions which were covered by the conspiracy. As Mr Vincent Wong, on the Respondent's behalf, in his most helpful written submission pointed out, D1 had solicited, discussed and negotiated purchase orders whilst at the same time using a false name. He would go to Shenzhen to inspect goods and to give instructions about the delivery of goods. He also arranged to go to public relations exercises such as celebrations with a victim-company following the "success" of the "business venture". It appears from the evidence given by the employees, PW4 and PW5, that D1 gave them work to do and also gave specific instructions to tell suppliers not to ask for a deposit.

23. We do not need to consider the suggestion that the equivalent of a "lies" direction was needed in this case. Firstly, this was not a jury case where a specific form of words might, in appropriate circumstances, have been required, and secondly, the false name D1 was using came long before his arrest and was, if anything, all part and parcel of the agreement he was alleged to have made with others to defraud other companies.

24. The suggestion that the role played by D1 was similar to that of PW4 or of PW5 is quite simply, with respect, inaccurate. D1's role was far greater and his association with D2 and Li Ngan-lung was a relevant factor towards showing who the principal conspirators were. The case against D1 was very strong.

25. There is nothing of substance in these grounds of appeal.

26. D2, in a written letter dated 20 October 2003, stated that he had "decided to adopt the grounds" put forward on D1's behalf.

27. D2's role was again summarised by Mr Wong. This showed that D2, sometimes using a false name, was involved in business discussions. He was introduced as the one who was responsible for all payment arrangements when Mr Li was not available. He met with purchasers on many occasions to discuss payment details. This element was important because the timing when cheques would inevitably begin to bounce had to be synchronised with as many transactions as possible. He also telephoned on various occasions concerning the whereabouts of goods. Like D1, he was also involved in the "celebrations" with victim-companies.

28. For the same reasons we have set out in D1's case, the case against D2 was a substantial one. There was no substance in his application.

29. The verdicts against D1 and D2 were neither unsafe nor unsatisfactory. Accordingly, their applications for leave to appeal against conviction are dismissed.

30. D2's application for leave to appeal against sentence was late and he has not provided any good reason why we should entertain it now. More importantly, there was no merit in this application. Although he referred us to two District Court cases where greater sums of money were involved although lower sentences were imposed, the facts were wholly different to this case. We are concerned only in the matter presently before us to ensure that no sentence which could be described as manifestly excessive was imposed on D2.

31. The judge took a starting point of four years' imprisonment which we consider was appropriate. However he went on to say:

".... I reduce that by 25 per cent to reflect the fact that so little of the evidence was challenged, that neither of you have told lies to this court and that you are both of previous clear record. Accordingly, I sentence you each to 3 years' imprisonment." (Appeal bundle p. 26)

32. We do not, with respect, consider that the reasons given by the judge provided proper grounds for giving either D1 or D2 a reduction in their sentence. Accordingly, D2's sentence is in fact considerably shorter than it ought to have been.

33. Finally, we should add that we learnt, in the course of these proceedings, that Li Ngan-lung has subsequently been tried. He was sentenced, following his plea of not guilty, to two and a half years' imprisonment. It appears that this trial came before another judge. Without knowing all the facts it is difficult to say whether Li Ngan-lung was the beneficiary of a sentence which was shorter than it ought to have been. This does not, however, justify this court, in such circumstances, taking a course which would allow a reduction in D2's sentence.

34. This application is dismissed.