HKSAR v. CHEUNG KIN MAN

CACC 199/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 199 OF 2005

(ON APPEAL FROM DCCC NO. 857 OF 2004)

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J U D G M E N T

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

Introduction

1. In this application for leave to appeal against conviction we are asked to find that the trial judge erred in his conclusion that the applicant intended to defraud RTHK, his employer, when processing quotations purportedly from a number of companies vying for contracts.  In the event the successful company was always one of two, either a company called Cést La Pomme de Terre Company Limited (sensibly abbreviated for the purpose of the proceedings to Potato) or a sole proprietorship called Feng Shui (FS).  Those who were in charge of Potato and FS were D2 and D3 at trial and were friends of the applicant who was D1.  On each occasion competing tenders were supposedly made by two other companies, 50M and Ling's Production, but those tenders were made by the hand of D2 or D3, were sham tenders, and were always higher.  So, not surprisingly, they never succeeded, nor were they intended to.  The applicant, it is common ground, knew full well that the supposedly competing tenders came through, if not directly from, D2 and D3 but his case was that Potato and FS performed their jobs soundly and within the prescribed budget, and that the system to which he was party was well known to RTHK, was common practice, and that no-one was deceived and, accordingly, he was not acting dishonestly.

The facts

2. From 1997, the applicant was employed as a project co-ordinator for Radio 2.  One of his functions was to secure productions by outside bodies for which purpose he was required to obtain quotations.  According to the relevant internal regulations, where the cost of a programme's production exceeded $1,000 but was to be less than $50,000, more than one quotation had to be obtained from different service providers whereas if the cost was between $50,000 and $103,000, five written quotations were required.  In cases of urgency where these requirements could not be fulfilled, a special procedure was utilised whereby the supplies officer could, by what was called a covering order, approve a contract in the absence of competing quotations.  In the normal course, forms would have to be filled out, Form A or Form B, depending upon the amount involved and each such form contained space for a summary of the various quotations together with a recommendation as to which tender should be accepted as well as a space in which the reason for the recommendation was to be provided.

3. Potato and FS were connected.  D2 and D3, who lived together as girlfriend and boyfriend respectively, were registered shareholders of Potato and operated the company jointly.  D3 was the registered proprietor of FS and operated from Potato's address although its registered office was given as the home address of D3's sister.  The applicant, D2 and D3, were friends.  They had come to know each other through RTHK and associated with each other on a frequent social basis.

4. Between 15 December 2000 and 1 December 2002, RTHK awarded in excess of 70 production contracts to Potato and in excess of 20 to FS.  It was common ground that approval forms numbering at least 12 covering almost half a million dollars worth of production contracts had been prepared by the applicant and that in each case he had asked either D2 or D3 to secure additional quotations, that is, quotations from other companies, and that those quotations were forthcoming, purportedly from a company called 50M or another called Ling's Production or from FS.  Those responsible for running the businesses known as 50M and Ling's Production were associates of D2 and D3 but it was common ground also that the tender documents were in fact completed by D2 and D3 and were not genuine.  The applicant admitted that he had at no time approached any company for competitive tenders; in other words, he never approached anyone other than Potato and FS.

The Charge

5. The applicant as well as D2 and D3 were arrested on 29 January 2004 and subsequently tried in the District Court before Deputy Judge Browne.  There were in all 38 charges but we are concerned for the purpose of this application only with the first which was a charge of conspiracy to defraud, the particulars of which ran as follows:

“Cheung Kin-man, Ho Yuen-yi, and Yu Siu-kei between the 15^th day of December 2000 and the 31^st day of December 2002 in Hong Kong, conspired together and with other persons unknown, to defraud [RTHK] by dishonestly representing that the quotations submitted by [Potato], [FS], 50M and Ling's Production for prospective RTHK projects were (a) genuinely competitive ones, (b) obtained through a competitive process, and (c) were prepared separately from and independently of each other, thereby deceiving the said RTHK into granting job orders for the said projects to [Potato] or [FS].”

6. The remaining charges, namely Charges 2 to 38 inclusive, were substantive charges of forgery leveled against D2 and D3.  The forgery alleged in each instance was forgery of a quotation purporting to emanate from 50M or Ling's Production.

Evidence

7. The judge in his Reasons for Verdict has rehearsed the evidence adduced in considerable detail and we do not propose to repeat such a rehearsal.  It suffices to say that evidence was given of the system by which quotations were supposed to be solicited, of the system by which covering orders were issued when the normal procedure could not be followed, and of the fact that the quotations submitted by Potato and FS were invariably lower than the suggestedly competing quotations.  It is noteworthy that a number of witnesses from RTHK, such as the superintendent of the development section (PW2), and senior program officers (PW5 and PW6) said that they would not have signed or approved the applications for contracts to be awarded to Potato or FS, which they did sign and approve, had they been aware that the competing quotations had not been issued by the companies represented by the documents to be the applicants.

8. The applicant gave evidence as did the other defendants.  The applicant said that where work was designated to be contracted out, he would be asked to obtain quotations from outside companies whereupon he would telephone D3, ask for a quotation and ask him as well to supply other quotations.  He was aware of the requirement to obtain further quotations depending upon the value of the contract in issue.  His case was that other people at RTHK did the same thing and that he engaged upon this practice without giving it much thought.  He was unaware, he said, of any suppliers' list for outside contracts.  He said that at no time did herealise that quotations supplied to him by D3 were false.

9. He added that everyone used D3 because he was very experienced and his prices were reasonable as well as within the budget.  Most of the jobs given to him were urgent jobs.  He said he was aware that 50M was run by one of D3's friends.  The judge accurately records him as disagreeing with the suggestion that the purpose of obtaining further quotations was so that the lowest quotation could be selected, and when asked if he knew whether or not the supplies officer would approve of the way in which he dealt with these matters he said he did not but was merely following normal practice.  When asked which of his colleagues taught him to do his job in this way he was unable to recall.  It never occurred to him, he asserted, that obtaining quotes from the same person would not result in competitive bids.

10. Amongst the evidence emanating from the other defendants was the suggestion that FS was established to provide a service alternative and cheaper to that provided by Potato; yet the evidence showed that, generally, the prices purportedly quoted by FS were higher than those quoted by Potato.  The judge concluded, not surprisingly, that “the real purpose of establishing [FS] was to have a vehicle for submitting alternative quotations so that it would appear that RTHK were being supplied with independent quotations for work.” (para 264 Reasons for Verdict).

Reasons for Verdict

11. The judge said that the applicant struck him as a bright and articulate person.  He did not believe the applicant's assertion that he did not know why RTHK required additional quotations.  He pointed out that the applicant was a personal friend of the other two defendants and he well knew that the quotations from FS were not independent of those from Potato.  He knew that FS was owned by D3 and that Potato was owned by D2 and D3 and he knew also that the quotations from 50M and from Ling's Productions were always in excess of those from Potato and FS.  There was but one conclusion, according to the judge, to be drawn, which was that the additional quotations were supplied in order to induce staff of RTHK into believing that they were genuine competitive quotations.  He noted that the applicant had in his interview with the ICAC told his interviewers that he did not think that his boss would approve of the practice nor had he told the ICAC, as he now told the court, that the practice in which he had engaged was widespread.  True it was that Potato and FS were held in high regard and that their prices were within budget, but “the dishonesty in this case attaches to the manner in which contracts were awarded to Potato and [FS]”.  (para 284).  He noted that if there were good reason for not approaching other companies and for employing Potato or FS directly, there was a procedure by which such suggested justification could be advanced yet it was not a procedure ever adopted or attempted by the applicant.  The judge was satisfied that the applicant knew that the additional quotations supplied by D2 and D3 were not genuine.  He was satisfied that the quotations were a charade and that the applicant's conduct was dishonest by Ghosh standards.  Accordingly, he convicted the applicant of the conspiracy charged.

This application

12. There is but one ground of appeal and it is that “the finding of guilt is against the weight of the evidence and that the learned judge erred in finding that the applicant acted dishonestly and intended to defraud RTHK”.  This ground is amplified by a written skeleton argument that reminds the court of certain features of the evidence that are said to be exculpatory and that show, so it is contended, that the inference drawn by the judge as to dishonesty was not the only reasonable inference to draw.  The points made are that there was no suggestion that the companies awarded the contracts in fact overcharged or performed substandard work; that the awards of contracts to these two companies, Potato and FS were well-known to those at RTHK and it must have been obvious to all that none other was awarded them, and that it must also have been obvious to all that only D2 and D3 were carrying out all the ‘outsourced projects', so that in reality the tendering system was known to be a meaningless system, and that there was thus no deception.  It is contended that it cannot be said that RTHK was deceived into granting the orders to Potato and FS since those two companies were in any event highly regarded and carried out their work at a reasonable price.  There was in short, so the argument ran, no dishonesty and there was no intention to defraud.

Analysis

13. The fact of the matter is that there was evidence from a number of sources that contracts would not have been awarded had it been known that the supposedly competitive tenders were not true tenders.  In respect of the arguments advanced, it defies common sense to say that there was no purpose in the knowing submission of tenders that on any view were false and consistently for greater sums than those offered by the two outfits run by the applicant's friends.  The suggestion that the system waspractised by others at RTHK and the further suggestion that this was a meaningless matter of form, is a suggestion that does not sit well with what the applicant said to those who interviewed him after his arrest.  In his first interview he said that the reason for obtaining further quotes was ‘to compare prices', an answer that was contradicted by his evidence to the court that he did not know why he was asked to get other quotations (page 1323 appeal bundle).  He was asked at interview (page 179) whether anyone else at RTHK knew of the relationship between Potato and FS and he answered that he did not ask other people, and he said also (page 200) that as to his practice of seeking other quotes to be secured by D2 and D3 themselves, he had never talked to his superior about it.  As a person of some intelligence, and a person who had been an accounts clerk, the practice must surely, had he been innocent, struck him as odd, and it would plainly be remarkable for anyone in such an innocent position not, during the lengthy period of the events in question, to raise it at all with anyone else.  

14. Some of the answers given in cross-examination tell their own tale as to the lack of veracity and the absence of a true defence.  Thus for example:

“Q.  Yes, you understand that the intention about seeking tenders is to get genuinely competitive bids.

A.    Well the reason why I understand the principle behind the tendering process was when I learned from my colleague at the time when I was doing Form A and it just didn't occur to me regarding the competitiveness of tendering.

Q.   That's not true, is it?  In your life you must have bought goods and you must have compared prices.

A.    What's comparing prices?

Q.   Well, have you never bought something and gone along and tried to find the cheapest one?

A.    Very rarely.

Q.   Yes, but you have sometimes – a camera, your spectacles.

A.    I wouldn't do that.

Q.   What, you just buy on impulse, the first thing that's shown you?

A.    Well, once I consider the style fits me, then I will purchase it.

Q.   You're not concerned about prices?

A.    Correct.

Q.   You've never asked what's the price of this good and that good at the same time?

A.    I wouldn't do that.

Q.   I see, but you're aware that other people would?

A.    Well, whether other people would is none of my business.

Q.   But you must have some idea of how the rest of us behave?” (page 1345 of bundle).

He accepted that he knew that in every case in which other quotes were produced, the bids were higher than those submitted for D3's companies, yet he said that that did not even occur to him as odd.  That is not believable, and the judge did not believe him.  Then this, at page 1351:

“Q.  You knew that when a quotation came from [FS] that it also came from D3.

A.    Right.

Q.   And you knew that if it came at the same time as a quotation from Potato that these would not be competitive quotations.

A.    Well whether or not that quotation was a competitive one, it has never come across my mind.”

That too was unbelievable.

15. The suggestion that the constant success of Potato and FS meant that no-one was in fact deceived does not survive the judge's analysis of the matter, although we would in passing point out that a conspiracy to defraud may be constituted even without an intention to deceive: see R v Scott [1975] AC 819.  The judge concluded, not that no-one was in fact deceived, but that the fraud was facilitated “by the cavalier approach to paperwork and administration exhibited by some members of the RTHK staff” and it was clear he said that “some senior personnel at RTHK turned a blind eye to what was going on”.  (page 95-96).  This no doubt accounts for the light sentences imposed on all the defendants, but it is not the same as saying that no-one in authority higher up the scale was misled, and it is not the same as saying that there was not an intention to by-pass a system established for the protection of RTHK's economic interest.  The fact, if it was a fact, that some turned a blind eye, does not of itself absolve the applicant if, as the judge found – and the judge bore in mind that some turned a blind eye – the applicant was acting dishonestly.  In so far as Mr Marray in his oral argument today emphasizes that dishonesty was not proved, one has only to ask what possibly could have been the applicant's state of mind when he knowingly put forward detailed false quotations, if it was not a dishonest state of mind.  That there was falsity in what was put forward by this applicant is clear beyond peradventure, as is the fact that the applicant knew of the falsity.  Furthermore, the judge found that the applicant was well aware of the reason for the procurement procedure, a finding that is not possible to undermine.  That the falsity was the result of an agreement between the three defendants is also clear beyond peradventure as is the fact that the object of this falsity was to ensure that contracts continued to be awarded to Potato and FS.  The fact that Potato and FS performed the services well and at budget prices detracts not at all from these immovable facts, and once it was shown that the applicant together with the others agreed to put forward false information knowing that thereby they were securing a decision that was not theirs to make the fact, if it was a fact, that the applicant thought that RTHK would be well served by Potato and FS is irrelevant.  The effect, as must have been obvious to anyone involved, as was this applicant, in this false tendering exercise was to deprive RTHK of a right belonging to none other than RTHK, namely, the right to choose a more economical or more efficient service should one be offered.  The facts speak for themselves.  The applicant must have known why such a system was in place (as indeed he admitted in his interview) and the trouble to which he went can only have had the purpose of securing benefit for the companies in fact chosen.  He knew that the alternative quotes were bogus, and it seems to us that a finding of dishonesty and a conviction was inevitable.  We see no flaw in the judge's approach or analysis and the application is accordingly dismissed.