HKSAR v. LAI KIN HANG AND OTHERS

DCCC 312/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 312 OF 2016

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REASONS FOR VERDICT

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THE CHARGES

1.  All the defendants, except D2, are facing Charge 1.  D1, D2 and D3 are facing Charge 2.  The particulars of the charges are as follows:

Charge 1(against D1, D3 – D9, D15 & D16)

Statement of Offence: Conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200;

Particulars of Offence: LAI Kin-hang Erwin, CHEUNG Kwok-hung, LO Hoi-chun, YAU Siu-kan, YU Ping-sun, Dominique, LAM Pui-ka (also known as LAM Shuk-ching, Carmen), CHOI Lung-kei, CHAN Kwong-cho, FUNG Tat-yung and YOUNG Chun-kei, between the 27th day of March, 2014 and the 27th day of March, 2015, both dates inclusive, in Hong Kong, conspired together and with other persons unknown, to defraud the clients of Wincades International Accounting Affairs Limited (“Wincades”), by dishonestly: -

(a) falsely representing that: -

(i) Wincades was entrusted by a bank or a financial institution in Hong Kong to handle the loan arrangements of the clients of the said bank or financial institution;

(ii) Wincades could assist the clients to obtain a mortgage loan or personal loan with terms and conditions more attractive to the clients; and

(iii) consultancy fee would not be charged by or payable to Wincades, or those fee would be refunded to the clients unless the particular mortgage loan or personal loan anticipated by the clients was successfully obtained.

(b) thereby causing and inducing those clients to pay consultancy fee to Wincades.

Charge 2 (against D1, D2 and D3)

Statement of Offence: Conspiracy to deal with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 and sections 159A and 159C of the Crimes Ordinance, Cap 200.

Particulars of Offence: LAI Kin-hang Erwin, LI Wing-tat and CHEUNG Kwok-hung, between the 22nd day of April, 2014 and the 27th day of March, 2015, both dates inclusive, in Hong Kong, conspired together and with other person(s) unknown to deal with property, namely sums of money (“the said property”) in accounts numbered 264-567405-883 (“Account 1”) and numbered 264-567405-001 (“Account 2”) held in the name of Wincades International Accounting Affairs Limited with Hang Seng Bank Limited, knowing or having reasonable grounds to believe that the said property, in whole or in part directly or indirectly represented the proceeds of an indictable offence.

THE PROSECUTION CASE

2.  Between 27 March 2014 and 27 March 2015, members of the public (the complainants) received cold calls from unidentified persons, who claimed themselves staff of banks or financial institutions, or being entrusted by them. 

3.  Most of these members of the public owned properties that had been mortgaged to a first mortgagee bank or financial institution, and took out at the same time second mortgage from another bank or financial institution without notice to the first mortgagee. Some of them also borrowed heavy personal loans or credit card loans.  These people were all under various degree of financial difficulty to repay because of the high interest rate of the second mortgage and/or personal loans.

4.  The callers were in possession of some details of the complainants’ property and financial situation which convinced the complainants of the authenticity of the callers as staff of or entrusted by a bank or financial institution.

5.  The evidence of the complainants reveals some common features in their cases, though not in each and every case.

6.  The callers would use tactics which included threatening the complainants that their properties might be re-possessed by the first mortgagee for taking out second mortgage without their consent, or without approval of the Housing Authority in the case of property owned under the Home Ownership Scheme.  When the complainants indicated their inability to repay the first mortgage loan and fear of the consequence thereof, the callers then held out to the complainants hope of assistance to avoid the consequences and offered a re-structuring of their loans at much more favourable interest rate.  In other cases, the complainants were offered very attractive loans to reduce their heavy financial burden. The complainants would then be referred to Wincades International Accounting Affairs Limited (“Wincades”), situated at 12/F, Wing On Plaza, 62 Mody Road, Tsim Sha Tsui East, Kowloon.

7.  When the complainants visited the office of Wincades as arranged by the callers, the complainants would be interviewed by personnel (the “salespersons”) who promised to apply for loans for them at very low interest rate.  The salespersons then persuaded the complainants to sign a “consultancy agreement”, which contained a term that consultancy fee had to be paid to Wincades for their service of applying the loan for the complainants.  The agreement also contained a term to the effect that the consultancy fee would not be charged if the application for loan should be unsuccessful (“the No-Success-No-Fee Clause”).

8.  The complainants were then made to pay up the consultancy fee before the loan they applied for (the “ultimate loan”) was approved. It was done by the arrangement of a “transitional loan” at very high interest rate from a money lender by Wincades for the complainants.

9.  The complainants were told that the high interest for the transitional loan would be off-set by the favourable interest rate of the ultimate loan and hence the complainants would be finally financially better off.  Within a few days the complainants would be escorted by a staff of Wincades to a money lender to collect the transitional loan.  When the complainants obtained the transitional loan, they would be persuaded to use the transitional loan to pay the consultancy fee by cash.

10.  Some complainants were not even aware of the application for the transitional loan at the beginning.  When they were surprised that a transitional loan had been obtained for them, they were told it was the usual practice and the ultimate loan would then be granted.

11.  After the complainants paid the consultancy fee, except the case of PW36, no complainants successfully obtained the ultimate loan.  When they contacted Wincades for the progress of their applications, their telephone calls went unanswered or they were given excuses, such as: the responsible salesperson could not be located or the application was still in progress, so that their efforts of enquiries about their applications were to no avail.  They were kept waiting for the result.

12.  When some of the complainants began to suspect that they had been deceived and demanded for the return of the consultancy fee, Wincades refused to repay.

13.  Some of the complainants reported the matter to the Police, but were given the initial response that it was only a civil matter.

14.  Eventually none of the complainants, but one, obtained the ultimate loan, nor was the consultancy fee refunded.

15.  The Police raided the office of Wincades on 27 March 2015.

16.  The prosecution called 20 complainants in 18 cases to tell their experience in court. In the 18 cases, the following sums were paid to Wincades as consultancy fees, either by cash, by cheque deposit or bank transfer to Wincades’ savings or current accounts:

Case 1 (PW1) - $640,000 (cash)

Case 2 (PW2) - $150,000 (cash)

Case 3 (PW3 & PW4) - $70,000 (cash)

Case 4 (PW5) - $9,900 (cash)

Case 5 (PW6 & PW7) - $60,000 (cash)

Case 6 (PW8) - $220,000 (cash + $10,000 bank transfer)

Case 7 (PW9) - $100,000 (cash)

Case 8 (PW10) - nil (PW10 declined to pay $100,000 fee)

Case 9 (PW11) - $45,000 (cash)

Case 10 (PW12) - $464,000 (bank transfer)

Case 11 (PW13) - $117,310 ($50,000 by bank transfer)

Case 12 (PW36) - $160,000 (cheque deposit)

Case 13 (PW37) - $60,000 (bank transfer)

Case 14 (PW38) - $192,000 (cheque deposit)

Case 15 (PW39) - $50,000 (cheque deposit)

Case 16 (PW40) - $55,000 (cheque deposit)

Case 17 (PW14) - $100,000 (bank transfer)

Case 18 (PW42) - $351,279 (bank transfer)

Some instances of the cases

17.  In one of the cases, a complainant (PW39) was told by a salesperson of Wincades that a loan of $1.1 million could be arranged for him. However PW39 was later told that a loan of $550,000 could be obtained for him. PW39 refused to borrow the loan (as the amount was not what he asked for).  When he refused to pay the consultancy fee of $130,000, he was alleged to have breached the consultancy agreement. Nuisance calls were made to his home and debt collectors also visited his home asking for the payment of the consultancy fee.  PW39 was scared and eventually agreed to pay Windcades $50,000 as settlement fee.

18.  In another case, PW37 refused to pay the consultancy fee when he obtained the transitional loan, as he believed that it should only be paid when the ultimate loan was approved.  He was then threatened that a team of lawyers of Wincades and debt collecting company would pursue the fee against him.  PW37 eventually paid $60,000. He never obtained the ultimate loan or refund of the consultancy fee.

19.  In the case of PW1, he applied for a loan of $2.4 million and paid a consultancy fee of $640,000 after he had obtained a transitional loan.  When he found that his inquiries to Wincades were not answered, he started to have suspicion.  He indicated he did not wish to continue with the application and demanded for repayment of the consultancy fee he had paid.  The salesperson Mr Choi (D8) who dealt with his application said that as the application had started, the consultancy fee could not be refunded.

20.  PW42 paid about $350,000.  She expected that her application could be completed within 2 months as the agreement she signed said the application would take 45-60 days.  After 2 months, her application was not yet granted so she asked for refund.  She repeatedly chased the salesperson for repayment of the fee. She received a “whatsapp” message from the salesperson saying that he would ask the account department to repay the fee.  However she never received the refund.  When she went to Wincades to chase for repayment, the company was already closed down.

21.  Having received the transitional loan, PW13 did not agree to pay the consultancy fee as he believed it should only be paid after he obtained the ultimate loan. However the salesperson Miss Carmen Lam (D7) threatened that if he did not pay it first, she would not proceed with his application. Eventually PW13 paid the consultancy fee of $117,310.  Subsequently he was told to attend an interview with the Housing Department and was charged an extra handling fee of $35,000 for that.  He found it unreasonable and therefore decided not to continue with the application.  He did not ask for repayment of the consultancy fee as he thought it was he who did not continue with the application.

22.  PW6 agreed to pay the consultancy fee of $60,000. The salesperson subsequently asked him to pay $94,000 cash, which PW6 did. $34,000 was said to be the handling charge of the Housing Department. PW74, a Housing Manager of the Housing Department, confirmed in his statement (admitted under s65B of the Criminal Procedure Ordinance) that the latest fee their department would charge for the application was only $4,000.

23.  In the case of PW36, when she eventually obtained the ultimate loan, she found out that the terms of the loan were not in line with what the salesperson had claimed.  Her request for a refund of the consultancy fee of $160,000 was refused.  She filed her claim at the Small Claims Tribunal and the claim was settled at $30,000.

24.  Some other complainants also filed their claims to the Small Claims Tribunal for repayment of the consultancy fee.  Their claims were settled after negotiation. PW 4 could only get back $40,000 of the $70,000 she had paid. PW14 received $50,000 to settle the $100,000 he had paid.

25.  It is the contention of the prosecution that the complainants spelt out the mode of operation of Wincades – they induced members of the public by false representation of their affiliation with banks and financial institutions to engage their “service” so that consultancy fee could be obtained fraudulently.

26.  The defendants can be classified into 3 categories: (a) the director/shareholder/person-in-control of Wincades, D1-D3; (b) the salespersons, D4-D8; (c) the cold-callers, D9, D15 and D16. 

27.  The prosecution contends that all the defendants facing Charge 1 were parties to a global single conspiracy:

28.  The cold-callers induced the complainants to visit the office of Wincades by false representation that Wincades was affiliated with banks or financial institutions.  The salespersons at the office of Wincades then continued the false representations particularized in Charge 1 persuading the complainants to engage their “service”, thereby causing and inducing them to pay consultancy fee to Wincades, regardless of whether the proposed ultimate loan would be obtained. D1 and D3 were the sole director cum shareholder at different stages.  They were in control of Wincades’ management with knowledge of the nature and operation of Wincades’ fraudulent business.

29.  The prosecution says Wincades had no genuine intention or conduct to help the complainants to obtain the ultimate loan they wished to apply for.  They only aimed at obtaining the consultancy fee fraudulently.

30.  D1, D2 and D3 were signatories of Wincades’ bank accounts with Hang Seng Bank (Account 1 and Account 2 in Charge 2) at different stages.  The two accounts were in fact the savings account and current account of one integrated account.  All of them signed up a number of cheques in large amounts.  It was contended that there were sufficient grounds for them to believe that something sinister must be going on.  Alternatively, D1 to D3 were aware of the illegal activities taking place in Wincades.

THE DEFENCE CASE

31.  None of the defendants gave evidence on the general issue.  D7 called 6 witnesses to give evidence.  Generally speaking, all the defendants disputed the existence of a conspiracy to defraud and denied being a party to the conspiracy, if any.

32.  The defence case is that the business of Wincades in obtaining consultancy fee from clients for the arrangement of loans for them was a legitimate and genuine business. It is contended that the false representations particularized in Charge 1 cannot be proved.  The evidence, taken to its highest, can only prove the first false representation.

33.  D1 to D3 disputed that they were in control of the business of Wincades, nor did they know the fraudulent activities.  They disputed, despite the records of the Companies Registry and the bank, that they were the director/shareholder/bank account signatories/signors of cheques of Wincades.

THE ISSUES

34.  There are 3 main issues: (a) whether there was a conspiracy to defraud; (b) whether each of the defendants facing Charge 1 was a party to the conspiracy; (c) whether D1-3 conspired to deal with property known or believed to represent proceeds of an indictable offence.

35.  Credibility of some of the complainants was challenged. Voluntariness of the admissions of D9 and D15 was disputed. Identification of D4 by PW4 and PW7 was disputed.  Identification of D5 by PW2 was challenged.

THE PROSECUTION EVIDENCE

36.  The prosecution called a total of 39 prosecution witnesses, 30 of them were live witnesses and evidence of the rest were admitted under s.65B of the Criminal Procedure Ordinance, Cap 221.  A summary of the evidence of the 20 complainants (in 18 cases) has been prepared by the prosecution and attached as Annex A(2) in their written closing submission.

37.  Six sets of admitted facts were admitted pursuant to s65C of the Criminal Procedure Ordinance.

38.  Various sketches drawn by the police were admitted.  These sketches show the location of the offices of certain defendants, working desks of the “callers” inside Room 2 (the “call centre”), and the location of various exhibits seized.

39.  During the police raid, 10 persons (including D9, D15 and D16) were found in Room 2. The room had 13 partitioned booths with a land line telephone on the desk of each booth. Similar documents were seized from the desks, which included “preamble scripts”, which the prosecution alleged were scripts to be used by the callers as conversation templates when they made cold calls to potential clients.  The prosecution says the preamble scripts prove that the callers pretended themselves to be staff of bank or financial institution.

40.  Statement of the proprietor of a communication company was admitted which confirmed Wincades hired the network telephone service provided by them.

41.  Some complainants attended identification parades in which some defendants were identified (some were not): -

D4 – by PW4, PW7, PW9

D5 – by PW2

D6 – by PW5, PW8 and PW10

D7 – by PW2, PW12 and PW13

D8 – by PW1 and PW2

42.  It is admitted that D5 was the salesperson who met up PW11 inside Wincades’ office on 25 and 27 March 2015.  D1 and D5 got married on 21 July 2014 and remained married at the trial.

43.  Witness statements from representatives of various banks or financial institutions were produced pursuant to s.65B of the Criminal Procedure Ordinance.

44.  PW57 – 61 were respectively staff members of the HSBC, Hang Seng Bank, Bank of Communication, DBS Bank and Prime Credit.  Their evidence confirmed that Wincades was neither entrusted by nor affiliated to their institutions. 

45.  Furthermore, statement of PW73 (Senior Customer Relationship Manager of HSBC) confirmed that HSBC had received enquiries from PW3 as to the identity of certain “bank staff” and that the information of the “bank staff” (staff number, name of department and mobile phone number) were false.

46.  The scene photographs show the layout of Wincades, in particular Room 2 (the “call centre”). 

47.  They also captured the documentary exhibits seized, such as the “preamble scripts”, telephone lists and personal information forms (Desk A of D9 at P51(21), Desk J of D15 at P51(31) and Desk K of D16 at P51(32).  Many desks in Room 2 had similar kinds of documents.

Companies Registry’s documents

48.  It is admitted that Wincades was incorporated in Hong Kong on 27 March 2014.  Company Registry documents show that D1 was the first sole shareholder and sole director of Wincades.  On 15 September 2014, D1 resigned as Director of Wincades and D3 was appointed as the sole Director of Wincades. On 23 September 2014, D1 transferred his shares of Wincades to D3, since then D3 became the sole shareholder of Wincades.

Wincades’ Hang Seng Bank Account

49.  Banker’s affirmation and bank records show that, on 22 April 2014, D1 and D2 jointly opened an integrated bank account at the Hang Seng Bank for Wincades, which contained a current account and a savings account.

50.  D1 and D2 signed on a signature form to provide the specimen of their signatures as the signatories.  The signing arrangement for the accounts was ‘any two of the two’ and ‘without chop shall be valid’.

51.  Since then and until 30 January 2015, D1 and D2 were the authorized signatories of the account while D1 was the authorized multi-channel banking service user of the account.

52.  On 23 January 2015, D3 applied to become the sole signatory of the said Wincades’ bank account.  He also applied to replace the existing “Primary User”. The amendment was effective on 30 January 2015.  On 30 January 2015, D3 became the sole signatory of the said Wincades’ bank account.

The Consultancy Agreement

53.  Except the agreements signed by PW1 and PW42, the consultancy agreements signed by the complainants were basically the same.  Exh P2-1 is an example.  The agreement contained a clause to the effect of “no success, no fee” (see the words above “Client’s declaration”).

54.  There was also another term to the effect that the complainant had to pay the consultancy fee if he/she successfully applied for and accepted the bank’s mortgage or personal loan whether it was referred by Wincades or not within 6 months of the date of the agreement (see Clause 4).

55.  The agreements signed by PW1 and PW42 were much simpler, but they also contained the “no success, no fee” provision.  Both of them provided that the application for mortgage would be completed in 45-90 days.  The consultancy fee would be reimbursed if the mortgage application was unsuccessful.

56.  It is the contention of the prosecution that Wincades had no intention to honour the contract.  The consultancy agreement was just a bait and smokescreen to induce the clients to fall into the sham.

57.  At the end of the prosecution case, a no-case submission was made.  Applying the principles set out in R v Galbraith, I ruled there was a case to answer for all the defendants on the respective charges they are facing.

THE DEFENCE EVIDENCE

58.  While none of the defendants elected to give evidence (which was their right), D7 called 6 defence witnesses.  They were all previous clients of Wincades.  They, except DW4, successfully obtained the ultimate loans. DW4 obtained a consent letter from Housing Authority through Wincades for mortgage loan.  After she obtained the letter, she could not get in touch with Wincades.  Eventually she approached a bank herself and obtained the loan.

59.  It is an admitted fact that defendants 1, 3-6, 9, 15 and 16 each has a clear criminal record in Hong Kong.  I reminded myself of the relevant directions favourable to them.

60.  At the conclusion of all the evidence, counsel of both sides prepared written closing submissions.  I am grateful to all counsel for their assistance.

LEGAL ARGUMENTS

Admissibility of cold calls

61.  It was argued by Mr Li, counsel for D4, that the evidence of cold calls, being hearsay, was not admissible.  I found the objection misconceived. 

62.  For the rule of hearsay, I will quote the simple expression by the Court of Final Appeal – “an oral or written assertion, express or implied, other than one made by a person in giving oral evidence in court proceedings is inadmissible as evidence of any fact or opinion so asserted: Oei Hengky Wirgo v HKSAR[1].

63.  The evidence of the cold calls was adduced by the prosecution not to prove the truth of the assertions in the contents.  It was adduced, just the contrary, to prove the falsity of the assertion that the callers were staff of banks or financial institutions.  The evidence was adduced to prove the fact that it was said and to explain why the complainants would approach Wincades. The evidence is relevant to the alleged false representation being used as the dishonest means to defraud and the existence of a conspiracy.  I found the evidence not infringing the hearsay rule and relevant to the issues in the case.

Admissibility of documents seized

64.  Most of the defence counsel took objection to the admissibility of documents seized in Room 2 of the office of Wincades.  These documents mainly consisted of:

(1) preamble scripts;

(2) telephone lists;

(3) on-line land search records;

(4) miscellaneous standard forms with handwritings.

65.  The grounds of objection can be broadly summarized as: -

(1) Hearsay;

(2) Irrelevant;

(3) Prejudicial effect outweighs probative value.

66.  The “preamble scripts” are in fact computer printouts or papers consisting of Chinese handwritings.  I will just refer to one document as an example and quote a few sentences (Exh P F46-2 at page 1211 of the core bundle): -

“Hello, may (I) speak to mr XXX? I am calling you on behalf of the Property Mortgage Department of XX Bank. I am surnamed…(I) contact you, Mr X, this time is about the condition of the property at XXX…(I) would like to know whether or not (you), …took out a second property mortgage or property owner loan from XX Finance (Company) in the month of X in the year of XXXX…From our bank’s point of view, this move of yours put our bank at risk. You have breached the terms in our contract. The worst scenario is that we can demand from you a full repayment on the mortgage balance...your case is yet to come to the worst scenario…your case is yet to proceed to the call loan procedures…we are going to conduct a stress test with you again… If (you) fail(it), the call loan procedures…will formally take place (and you), Mr X will be requested to fully repay the outstanding amount…” (emphasis added)

67.  On the face of the contents of these documents, they appear to be scripts for a caller to recite to another over the phone.  The prosecution submitted that they are not relying on the truth of the contents.  They are producing the documents to prove the falsity of the assertions in it.  The documents indeed lie as they assert that the callers are staff of banks.

68.  The “telephone lists” are papers consisting of a combination of letters which appear to be names of Chinese, and 8-digit numbers appearing to be telephone numbers.

69.  The “on-line land search records” appear to be computer printouts of land search records containing property addresses and encumbrances.

70.  The other miscellaneous documents are papers consisting of handwriting which recorded on its face information including financial data of a person.

71.  The prosecution submitted that all these documents were not produced to prove the truth of the contents of the documents.  Instead they were produced as circumstantial items of evidence and that they had been brought into existence in the course of and in furtherance of the conspiracy. 

72.  To determine whether the hearsay rule has been breached, it is necessary to determine the purpose for which evidence of an out-of-court statement, made in the absence of a party, was tendered.  As long as its contents were not relied on to prove a fact recited or asserted, it would be admissible if it tended to prove a fact in issue or a fact relevant to a fact in issue.  The forms and contents of a document might be used to draw relevant inferences, including inferences concerning the nature of the document and its contents, without breaching the hearsay rule (para 39-40, 58-63 of Oei above).

73.  I agreed with the prosecution that the documents sought to be produced are relevant circumstantial evidence that Room 2 was used as cold call centre and the existence of these documents together with other evidence are relevant to the issue whether there was a conspiracy to defraud. 

74.  I did not find that the prejudicial effect of these documents outweighed their probative value.

75.  I found accordingly that the documents did not infringe the hearsay rule and are relevant to prove the issues in the case.

The Co-conspirator’s Rule

76.  I also agreed with the prosecution that the “co-conspirators’ rule” is applicable in this case. I find that there is independent sufficient foundation evidence which amounts to “reasonable” evidence of a conspiracy and the participation of each of the defendants for the rule to be applied in this case (Vivien Fan v HKSAR[2]).

77.  I admitted the cold calls and the documents as evidence accordingly.

78.  Mr Chan, counsel for D16, raised the point that the documents shown to D15 in his cautioned interview should only form part of his admission, and is inadmissible against the other defendants.  I agree.  But it does not affect the admissibility of the documents.

Admissibility of Companies Registry’s records

79.  A set of documents certified by the Registrar of Companies relating to Wincades were admitted by D1 and D2 pursuant to s46 of the Companies Ordinance, Cap 622.  Mr Davies, counsel for D3, however challenged the production of these documents.

80.  S 46 of the Companies Ordinance provides: -

“In any proceedings—

(a) a document purporting to be a copy of any information produced under section 45(4), and purporting to be certified by the Registrar as a true copy of the information, is admissible in evidence on its production without further proof; and

(b) on being admitted in evidence under paragraph (a), the document is proof of the information in the absence of evidence to the contrary.”

81.  The documents certified by the Registrar are admissible as prima facie evidence as proof of the information in the absence of evidence to the contrary.  I am satisfied the requisite conditions have been met for the documents to be admitted under the section.

82.  I am also satisfied that the conditions for those documents to be admitted as public document laid down in R v Halpin[3] have been met.

Evaluation of the Evidence

83.  I shall first deal with the credibility and reliability of witnesses.

84.  It was submitted by Mr Sze, counsel for D7, that PW2 and PW12 were untruthful witnesses.  In relation to PW2, the main criticism against him was the omission in his witness statements and evidence in court that he borrowed a loan from Sinolink Finance on 16 January 2015 in order to repay his loan from Ego Finance. 

85.  Mr Sze contended that PW2 had a motive to conceal the Sinolink loan because the obtaining of that loan would be in breach of Clause 4 of the consultancy agreement he signed with Wincades resulting in PW2’s liability to pay Wincades the consultancy fee.  In my judgment, this argument simply cannot stand as PW2 had already paid the consultancy fee to Wincades on 31 October 2014 when he obtained the transitional loan.  There was no good reason for him to conceal the loan.  I accept the explanations of PW2 that he did not mention about this loan as it was not related to the present case.

86.  I do not find his failure to mention about the Sinolink loan cast any doubt on his general credibility. 

87.  Mr Sze further submitted that there were inconsistencies between PW2’s witness statements and his evidence in court.  Given the time lapse between the events of incident, the time he made his statements and the time he gave evidence in court, I find these so-called discrepancies so minor and immaterial that they would not affect the general credibility of PW2.

88.  Insofar as PW12 is concerned, Mr Sze also criticized him for omitting to mention about a loan obtained from Hong Kong Sources Finance on 22 February 2015.  I accept the explanation of PW12 that he did not remember the date he applied for the loan from Hong Kong Sources Finance.  PW12 had already paid the consultancy fee of $464,000 to Wincades.  I do not see any good reasons that he should conceal the loan.

89.  Miss Chow, counsel for D5, submitted that the identification of D5 by PW2 as the female receptionist greeting PW2 was mistaken.  In the cross-examination, PW2 accepted that there was the possibility that he might have mistakenly identified D5. PW2 said the receptionist was wearing long hair without signs of pregnancy.

90.  Given there is unchallenged evidence that D5 gave birth to a baby on 19 January 2015 and pictures of D5 taken around September and October 2014 showing that she was in an advance stage of pregnancy, I am not sure whether D5 was the receptionist meeting PW2 on 24 October 2014.  However this does not affect my finding that PW2 is a credible witness.

91.  Miss Chow also criticized the recollection of PW11 of the events when she met D5 on 25 and 27 March 2015 as inaccurate and unreliable. Given the reasonable lapse in memory over the time, I am of the view that the failure of PW11 to remember the minute details of the two meetings with D5 is entirely reasonable and understandable.  It does not affect the credibility of PW11.

92.  The identification of D4 in identification parades by PW4 and PW7 was disputed.

93.  PW4 accepted during cross examination that D4 (who stood up in court for identification by PW4) was not the “Mr Lai” he met in December 2014.  I find that the prosecution fails to prove that D4 was the “Mr Lai” who met PW4 when the consultancy agreement was signed.  However it does not affect my finding as to the credibility of PW4.

94.  As regards the identification of D4 in the identification parade by PW7 as the “Mr Lee” he met in Wincades, PW7 accepted in cross examination that initially he was not sure about his identification.  However he was sure later when he paid more attention.

95.  Counsel for D4 submitted that PW7 conceded there was a possibility of mistaken identification.  I do not agree.  I think there was an ambiguity in the answer of PW7 during cross examination.  He clarified clearly later in re-examination by saying that he was sure that the person identified by him was the Mr Lee he met when he signed the consultancy agreement in December 2014.

96.  I find the evidence of PW7 simple and reasonable.  Having the opportunity of viewing the person claiming himself as Mr Lee in short distance and over a long period of time, PW7 had sufficient opportunity to see that person clearly.  I accept PW7 is a credible and reliable witness.  I am sure that the identification of D4 as Mr Lee was not mistaken.

97.  I noticed that D4’s surname is Lo, instead of Lee.  I also noticed defence exhibit D4-3, which is a letter issued by Inland Revenue Department to D4 concerning his tax information.  The letter says, according to information available to the Department, D4 received income from Wincades during the period from 1 March 2015 to 31 March 2015.  I do not find the Tax information kept by the Department cast any doubt on the correct identification by PW4.

98.  I have carefully considered all the evidence of the complainants. Save and except the identity issues, I find all of them credible and reliable witnesses.

99.  Insofar as the police witnesses are concerned, I find all of them honest and reliable witnesses.

The Law on Conspiracy

100.  A conspiracy is an agreement between two or more persons to do an unlawful act.  The nub of the offence is the agreement to engage in a common enterprise to do the unlawful act alleged.

101.  To prove the existence of a conspiracy, it must be proved that the alleged conspirators were acting in pursuance of a criminal purpose held in common between them.

102.  The offence of “Conspiracy to defraud” is constituted by becoming a party to an agreement with another or others to use dishonest means: (a) with the purpose of causing economic loss to, or putting at risk the economic interests of, another; or (b) with the realization that the use of those means may cause such loss or put such interests at risk: Mo Yuk Ping v HKSAR [4].

103.  On the meaning of “to defraud”, Sir Anthony Mason NPJ in Mo Yuk Ping cited the definition given by Viscount Dilhorne in R v Scott: “to defraud” ordinarily means. ...to deprive a person dishonestly of something which is his or of something to which he is or would or might but for the perpetration of the fraud be entitled.

104.  The “Ghosh two-stage test” is to be applied for determining whether the means agreed upon by the conspirators are dishonest: Mo Yuk Ping (above, at para 51).

105.  Conspiracy to defraud requires an intention to defraud.

106.  It is commonsense that people do not make agreements to commit crimes in front of others or to put their agreement into writing.  But people may act together to bring about a particular result in such a way to leave no doubt that they are carrying out an earlier unlawful agreement.

107.  One will have to look at all the evidence as to what occurred during the relevant period, including the behavior of each of the defendants, to decide whether there was a criminal conspiracy, and if so whether the defendant was a party to it.

108.  The conspiracy may be proved by inference from conduct, including words spoken in furtherance of a conspiracy.  However an inference can only be drawn if it is the only reasonable inference to draw from proved facts.

The Existence of a Conspiracy

109.  The prosecution contends that this is a case of one single global conspiracy.  The three groups of defendants all shared a common criminal purpose, namely, to defraud Wincades’ clients of the consultancy fees.  As evidenced by their different designated roles, they were not ignorant as to the fact that there were others involved.  They were acting in concert to achieve the said criminal purpose. 

110.  In the present case, I accept the evidence of all the complainants and find inter alia: -

(1) they received cold calls from people who claimed themselves staff members of or entrusted by banks or financial institutions. The callers adopted tactics such as threatening with drastic action to be taken against the complainants or inducing them with attractive borrowing terms;

(2) the callers then referred the complainants to go to Wincades for assistance suggesting or hinting that Wincades was entrusted by or affiliated with their bank or financial institution;

(3) at the office of Wincades, the complainants were told by the salespersons that Wincades could assist them to obtain a loan with attractive terms. They were induced to sign a consultancy agreement whereby the complainants agreed to engage Wincades to apply for loans on their behalf and they would have to pay a consultancy fee;

(4) the complainants were promised that the consultancy fee would not be charged if their applications were unsuccessful;

(5) the complainants were then made to pay up the consultancy fees before the loan they applied for (the ultimate loan) was obtained. If they could not afford to pay the fees immediately, in most of the cases indeed, a “transitional loan” at high interest rate would be obtained swiftly for the complainants. When the complainants obtained the transitional loan, they would be persuaded to use the transitional loan to pay up the consultancy fee by cash;

(6) after the complainants paid the consultancy fees, they then found it difficult to contact the person responsible for their applications, or were just told to wait, and their applications were not followed up in most of the cases;

(7) when the complainants asked for repayment of the consultancy fee for valid reasons, Wincades refused to repay. Only in some cases, when the complainants took legal action against it, Wincades agreed to settle by a sum much less than the fee the complainants had paid.

Room 2 as a Cold Call Centre

111.  In Room 2 of Wincades, “preamble scripts”, “telephone lists”, “land search records” and documents containing personal financial data were found on various desks.  Having considered the set up and lay out of Room 2 and the documents seized, I find that the personnel at various desks in Room 2 were responsible for making cold calls.  The preamble scripts were to be used as conversation templates to be adopted by these callers when they called the potential clients. The callers told the clients they were staff of bank/financial institution or entrusted by them.

112.  There is no evidence that Wincades was in any way entrusted by or related to any banks or financial institutions.  To the contrary, there is evidence from the banks or financial institutions to confirm that Wincades was neither entrusted by nor affiliated in any way to their institutions. The representation of the callers in Room 2 that they were staff of banks or financial institutions was therefore false.

113.  The contents of the preamble scripts were similar and also consistent with the contents of the cold calls received by the complainants.

114.  The cold callers all referred the complainants to Wincades.  The callers must be related to Wincades.

115.  When the complainants went to Wincades, those who interviewed them never asked why the complainants would come to Wincades.  They must know that the complainants approached Wincades as a result of the cold calls they received. 

116.  On the evidence before the court, the only reasonable inferences to be drawn are: Room 2 was operated as a call centre to contact potential clients by cold calls. The callers in this room falsely represented to the potential clients that they were staff of bank or financial institution.  The complainants and the defence witnesses received cold calls from Room 2.  It was through the operation of this call centre that clients were lured to approach Wincades, believing that the calls made to them were from banks or financial institutions and Wincades was entrusted or related to the banks or financial institutions.

117.  I find that by their conduct the salespersons continued the false representation that Wincades had been entrusted by a bank or a financial institution to handle the loan arrangements of the complainants. 

118.  At the office of Wincades, the complainants were all promised that Wincades could assist them to obtain mortgage loan or personal loan with much favourable terms, or the consultancy fee would not be charged.  The prosecution contends that it was a false representation to say that Wincades could assist the clients to obtain loans with terms and conditions more attractive to the clients.  The No-Success-No-Fee promises was also false as Wincades had no intention to repay the consultancy fee.

119.  The defence argues that there were indeed successful cases, PW36 and DW1-6 did obtain the ultimate loans at interest rates more favourable than before.  The complainants did not obtain the ultimate loan or repayment of the consultancy fee either because of their own breach of the agreement or the raid by the police.  Taken the evidence to the highest, the prosecution cannot prove the second and third false representation particularized in Charge 1.

Unusual practices

120.  In my judgment, there are unusual practices adopted by Wincades.

121.  Clients were first lured to approach office of Wincades by fraudulent cold calls.  The false representation of connection between Wincades and reputable banks or financial institutions enhanced credibility of Wincades and reduced the alertness of the complainants.

122.  From the evidence of the complainants, the salespersons in Wincades mainly focused on persuading them the benefit they would get from the ultimate loan and the no-success-no-fee guarantee.  The consultancy agreement was not explained in details. Moreover it was written in a casual and careless manner. In many cases, the loan to be borrowed was not even mentioned.

123.  Wincades also initiated to arrange a transitional loan for the complainants from a money lender in order to pay the consultancy fee.  The interest rate for the transitional loan was very high, for example, 38.4% per annum in the case of PW2.

124.  Wincades staff escorted the complainants to the office of the money lender to obtain the transitional loan.  The complainants were then persuaded to use the loan to pay the consultancy fee by cash.  For examples, PW1 paid $640,000 and PW2 paid $150,000 by cash.  The initiative taken by Wincades on its own to receive these significant sums of money by cash is a very unusual commercial practice.

125.  Many of them after payment of the consultancy fee by cash were only issued an “invoice” instead of a receipt.  The issue of invoice rather than receipt to acknowledge receipt of money is a very strange practice. It is to be noted that an invoice may not be sufficient evidence to prove the payment.  On the other hand, receiving the consultancy fees by cash could leave no trace of the money.

126.  Having paid the consultancy fee, the complainants hardly heard any progress of their applications.  When they made enquiries about it, they were given excuses such as the responsible persons could not be found or the application was still in progress.  They were just kept waiting for the result.

127.  A “red notebook” (Exh P-F54-2) was seized by the police at the reception area of Wincades.  I find that this is admissible as real evidence and circumstantial evidence.  There is a page which has these handwritten Chinese chararters: -

“If there is a call for IC, just say … Leave your name and phone (number). (I) will ask him/her to call you back. [1] Have a meeting [2] Have a meeting at a bank [3] Meet up with customers [4] Have a meal [5] Not yet return [6] Go on a trip] In short, just state whatever excuse that comes to mind.” (emphasis added)

128.  On the face of it, these Chinese characters appear to be instructions to be followed.

129.  On the other hand, the “instruction” is consistent with the evidence of the complainants that once they paid their consultancy fees, their attempts to contact the relevant personnel by phones were always fruitless. The red notebook supports the evidence of the complainants.

130.  It is indeed very unusual in a legitimate business that the staff should be instructed not to put through calls to the right person but to give those “excuses” on the red notebook.

131.  When the complainants asked for refund of the consultancy fee for valid reasons, Wincades refused to repay with excuses that the complainants breached the agreement.

132.  I find the practices in the cases of PW1, PW13, PW37 and PW39 extremely high-handed and unusual. The case of PW6 suggests another false representation of the fee charged by the Housing Department.  There was a lack of commercial justification for the general practices adopted in Wincades, which were not normal activities one would expect in a legitimate business.

133.  On the other hand, I find the consultancy agreement drafted in a very ambiguous and confusing style.

134.  For instances, the amount of loan to be obtained was not specified.  It is also unclear whether the “loan” referred to in Clause 3 of the consultancy agreement means the transitional loan or the ultimate loan. 

135.  At the ultimate paragraph of the consultancy agreement, there is a declaration that the client promises that the consultancy fee shall be paid in full on the day of lending by the financial institution.  It is unclear whether the fee should be paid upon the approval of the transitional loan or the ultimate loan.

136.  Further, Clause 4 does not define what is the “affiliated company” of Wincades.  It is also unclear the loan “I [we] successfully apply for and accept” means the transitional loan or ultimate loan or any loans the client obtained (whether through Wincades or not). 

137.  The terms of the ultimate loan were not specified in the consultancy agreement.  In some cases, not even the loan amount was stated.

138.  As a result of the ambiguities, it could be argued by Wincades that when the client refused to accept the transitional loan, or whatever loans at whatever terms, the client would still be liable to pay the consultancy fee. It was certainly not the intention of the client.

139.  It could also be argued that the consultancy fee was payable when the transitional loan was granted.

140.  The meaning of the “six months” period in Clause 4 is also unclear. It might be argued by Wincades, as defence counsel so interpreted, that Wincades had six months to process the application and therefore any request for repayment of consultancy fee could only be made after 6 months of the signing of the consultancy agreement.

141.  The unclear time limit for processing of the loan application could facilitate Wincades to hold up inquiries for result and requests for repayment of the consultancy fee.

142.  The Note below Clause 4 is so widely drafted that the client must pay the consultancy fee for whatever reasons that he cannot proceed with the application.  Read together with Clause 4a, the client would also be in breach if he is unable to submit within 7 days “all the necessary documents and the information deemed necessary by party B (Wincades)”.  These draconian terms placed clients in an extremely vulnerable position to lose the fees they had paid.

143.  The consultancy agreement drafted in such a confusing and ambiguous fashion facilitated Wincades to find excuses to allege breach on the part of their clients so that they could ask for payment and refuse repayment of the consultancy fee. 

144.  There is no evidence that Wincades endeavoured in processing the applications.  To the contrary, the “transitional loans” could all be approved within a few days.

145.  In my judgment, on the totality of the evidence, it is obvious that the true objective of Wincades was not to provide genuine service to assist their clients in obtaining the loans they wanted.  The true objective was to obtain the consultancy fee from the clients.  There was no genuine intention to help their clients to obtain loans on favourable terms.  They did not care whether there were chances in their applications. In this sense, the representation that they could assist clients to obtain loans with more favourable terms was a false one.

146.  I also do not believe that Wincades had intention to repay the consultancy fee.

147.  Submission was made that unless and until the 6-month “time limit” for Wincades to process the application was expired, it was only a speculation whether Wincades could succeed in obtaining the loan for clients, or whether it had intention to repay the consultancy fee.  It was said that many of the instances relied on by the prosecution had not reached the time limit when Wincades was raided.  It was because of the raid by the Police that Wincades was unable to honour the contract.  I cannot agree with this argument.

148.  I do not think that the consultancy agreement, as the parties suggest, allows Wincades six months to process their client’s applications before they were required to repay the consultancy fee.  In any case, as a matter of fact no complainants (except those who took legal action) after the expiry of the 6-month period have received their consultancy fee up to the trial. 

149.  In my judgment, if Wincades had genuine intention in their business, they could continue to process the applications of their clients or repay the fees after the raid. The raid by the police cannot be used as an explanation for failure of repayment of the consultancy fees. 

150.  On the totality of the evidence, I am sure that Wincades had no intention not to charge or to refund the consultancy fee.  The “No-Success-No-Fee” representation was false.

Whether prosecution must prove all false representations

151.  At the trial there were arguments as to whether the prosecution must prove all the three particulars stated in Charge 1.  Defence counsel contended that the prosecution must prove all the particulars as they chose the conjunctive word “and” to connect all the false representations as the dishonest means.  It was the cumulative effect of all the false representations that caused and induced Wincades’ clients to pay the consultancy fee.

152.  As a result of my finding that the Prosecution has proved all the false representations, I shall only briefly state my view on the argument.

153.  Misrepresentation is not an essential element of the concept of defrauding.  Deception is not an essential element of conspiracy to defraud.

154.  The particulars themselves in the charge do no more than specify (i) the nature of the prosecution case, (ii) the principal overt acts from which they invite the jury to infer that there was a dishonest agreement; and (iii) that a particular defendant was a party to it: R v Hancock [5].

155.  In my judgment, it is the dishonest agreement which must be proved.  It is the agreement to defraud that is the essential ingredient.  It must be proved that the means was dishonest. It is not necessary to prove each of the particulars in the charge.   Moreover, using cold callers to pretend as staff of bank to approach the complainants and further making the false representation that Wincades was entrusted by or affiliated to a bank or financial institution to handle their loan arrangements in order to obtain the consultancy fee, in my view, was itself dishonest means.

156.  The defence relies on the successful cases of PW36 and DW 1-6.

157.  I accept that all the defence witnesses are honest witnesses, though most of them only have vague memory of the events during their applications. In my judgment, the success of their cases provides little assistance to the defence case.  If a conspiracy existed, it does not matter that some clients did eventually obtain the loan or suffered no actual loss.

158.  Their evidence on the contrary can confirm the general modus operandi used by the cold callers in inducing the potential clients to approach Wincades and how they were induced to sign the consultancy agreement and pay the consultancy fee.  Their evidence cannot undermine the prosecution case.

Any economic loss or such risk?

159.  It was argued that Wincades’ clients were not placed in any economic risk as they were protected by the terms of the consultancy agreement.  If the client obtained a loan with better terms, he suffered no prejudice.  When Wincades failed to obtain a better loan for him within 6 months, he was entitled to refund of the consultancy fee.  The clients had a right to civil remedy for the repayment.  In either case, the client suffered no actual economic loss or any risk of economic loss.

160.  I cannot agree with this argument.  While intention to cause detriment is necessary, actual detriment need not be proved in a charge of conspiracy to defraud.  Moreover the argument is faulted as it assumed that the clients would all get back their consultancy fee.  However the evidence proved that it was not the case.  None of the complainants got back their consultancy fees, except those who took legal action against Wincades could get back a small part of the fees they had paid.  In those cases, they still suffered loss.

161.  In my judgment, the complainants suffered economic loss. Indeed when the clients passed the substantial sum of consultancy fee, in particular those who paid by cash, to the hands of Wincades’ staff, the clients were put under the risk that they could not get the money back.  Their economic interests were therefore at risk.

The Conspiracy is proved

162.  Wincades was incorporated in Hong Kong on 27 March 2014.  It opened an account with Hang Seng Bank on 22 April 2014.  The practice of fraudulent calls by cold callers started in the same month (case of PW36).  It continued in May 2014 (case of PW14) and went on until the police raid on 27 March 2015.  The bank account received a total deposit of some $5.7 million (about $2.8 million was identified as payment of the complainants) during the charge period.  In May 2015, the account only kept a balance of about $72,000.

163.  In my judgment, the evidence of each of the complainants should not be viewed in isolation.  Their evidence reflected a pattern of consistent and persistent practice of Wincades.

164.  On the totality of the circumstantial evidence, I am satisfied beyond reasonable doubt that there was a scheme in Wincades to lure members of the public step by step to give them a substantial sum of money in the pretext of “consultancy fee” for their service. 

165.  The scheme was performed firstly by fraudulent cold calls to make the victims believe that Wincades was entrusted by a bank or a financial institution to handle their loan arrangements.  When the victims approached Wincades as arranged, the “salesperons” continued the false representation of the status of Wincades and falsely represented that they could help the victims to obtain loans at much better terms.  I find that Wincades did not care at all whether the victims could succeed.  They did not intend to provide any genuine service to their clients.  They had no intention to refund. 

166.  I find that the scheme was performed as a team work.  I am sure that the means used in the scheme was dishonest. I am satisfied that there was a conspiracy to defraud in the charge period of Charge 1.  It was a global single conspiracy to defraud.

PARTICIPATION OF INDIVIDUAL DEFENDANTS

167.  In order to prove a defendant has participated in the conspiracy, the prosecution must prove that he/she must have known what was proposed as the objective of the agreement and must have intended to carry out that objective into effect. He/she must have the intention to defraud.  He/she is not guilty if he/she was not dishonest.

168.  I shall first discuss the submissions of all defence counsel generally.

169.  The crux of the evidence against D1 to D3 is their position in Wincades and/or their power to control the bank account of the company. 

170.  D1-3 run similar defences.  They had no control or knowledge of the activities in Wincades.  The Companies Registry documents and bank records cannot prove their involvement in the company.

171.  Mr Hemmings, counsel for D1, submitted that there was no evidence that D1 was an “executive” director or in any way employed by Wincades, or he had any control over or knowledge of Wincades’ affairs.  There was no evidence that he had signed any cheques of Wincades or had operated the company’s bank account.  In the absence of expert evidence, a comparison of signatures should not be undertaken by the court.

172.  It was stressed that the prosecution must prove at least one of D1-3 knew each other, there is however no evidence to prove that they knew each other.

173.  It was further submitted that it was highly unlikely the owner of a company whose sole or main purpose was to defraud members of the public would use his own name.  It is a reasonable inference that the true owner of Wincades was Mak Ka Kei, who was the sole director of Tophill International Accounting Affairs Limited.  When the account of Wincades was opened on 22 April 2014, the initial deposit was made by a cheque drawn on account of Tophill.

174.  Mr Hemmings relied on HKSAR v Chan Ka Wai .[6]

175.  Mr Luk, counsel for D2, adopting submissions of counsel for D1, submitted that even if D2 had been assigned with financial management role, that might not have provided him with knowledge of the operational aspect of the business of Wincades.  He pointed out that the “red notebook” does not contain any information concerning D2.  Moreover not a single page of the documents seized from the office of Wincades bears name of D2 or his information.

176.  Mr Davies, counsel for D3, pointed out that D3’s residential address was not the address recorded in Wincades’ company documents or on the bank account.  A search of D3’s residence found nothing that would connect him to this case.

177.  Mr Davies submitted that even if the Companies Registry documents were admissible evidence, they only amount to prima facie evidence, which is insufficient to show that D3 had any financial stake or executive role in the purported fraudulent activities of Wincades. Counsel also said that the record of D3’s ownership of the shares of Wincades was not received by the Companies Registry until 30 March 2015, i.e. 3 days after the police raided the office of Wincades.  It was submitted that no person who knew they were involved in a fraud would submit documents to the Companies Registry after the police had raided Wincades.

178.  It was pointed out that the signature on the document received by the Companies Registry, reporting that D3 was appointed as a director in place of D1, was different from D3’s signature on other documents.

179.  Criticisms were also made that the affirmation of the staff of Hang Seng Bank relating to the procedure for opening of Wincades’ account did not say that the applicant needed to be present during the procedure or that staff would compare the photograph on the identity document with the applicant.  There was also no evidence to show how verification of identity took place and whether the applicant should be present.  It was unclear from the affirmation what was the procedure required in changing the signatories of the account.

180.  Mr Davies pointed out that the bank honoured a cheque which did not bear the signatures of the authorized signatories.  He said cheque no 872872 (Exh P60. CB 1485) had only one signature, and that signature bore no resemblance to the signatures of D1 or D2, who were the authorized signatories at that time. 

181.  Neither of D1, D2 or D3 gave evidence.  That was their right and no adverse inference can be drawn from it against a defendant.

Who gave the specimen signatures kept by bank?

182.  One issue suggested by counsel for D1-3 was that someone else could have used their identity cards to commit the crime.

183.  I am satisfied that the affirmation of Miss Chow of Hang Seng Bank and the bank’s record are admissible under s 20 of the Evidence Ordinance.

184.  Miss Chow stated in para 5 of her affirmation that “A company wishing to open and operate an…account with the Bank has to submit to the bank the following documents: - (a)…specimen signatures of the authorized signatory(ies)…which is signed by the authorized signatory(ies)of the company…(e)the identification of each authorized signatory.  In para 6, she continued to say that “The Bank will require the authorized signatory to produce his original identification document, which will be checked by the Bank’s staff and a copy of it will be retained by the Bank.  The Bank will conduct a company search …to verify…”

185.  In my judgment, it is clear from the affirmation that the bank practice requires that any authorized signatories must produce their original identification document to the bank staff for verification.  The checking will of course include a comparison of the photograph on the identity document with the appearance of the applicant.  The bank staff will have to witness the signing of the authorized signatory, or else the bank staff cannot be satisfied that the specimen signature kept by the bank is that of the authorized signatory.  This standard procedure would apply to any procedures involving the bank’s approval of any authorized signatories, including the addition of any new signatories.  It is entirely unrealistic to suggest that the bank would approve an account to be operated by a person who has not presented himself to the bank to give his signature and his identity document for verification. 

186.  There is no evidence of loss of identity cards or any evidence suggesting the identity cards produced to the bank staff were forged.  There is no evidence to suggest the possibility of impersonation.

187.  Having considered all the submissions of counsel for D1 to D3, I find as irresistible inferences that D1, D2 and D3 were the authorized signatories of Wincades’ account at the relevant material time.  The specimen signatures kept by the bank were theirs.

Whether the prosecution must prove the defendants knew each other?

188.  Counsel for D1-3 submitted that the prosecution must prove D1-3 knew other and there is no such evidence in the case.  Counsel for other defendants also submitted that some defendants left Wincades before others joined. They might not know each other.  It was submitted that people cannot agree with people they did not know.

189.  It was also submitted that evidence of anything happened before a defendant joining Wincades cannot be used against him.

190.  The reply to this line of submission is that a conspiracy is a continuing offence.  It continues as long as there are two or more parties to the agreement intending to carry the agreement out.

191.  The conspirators may join in the conspiracy at various times; any one of them may not know all the other parties, but only that there are other parties; and any one may not know the full extent of the scheme to which he attaches himself; but each alleged conspirator must know that there is in existence or coming into existence a scheme which goes beyond the illegal act which he agrees to do and must attach himself to that scheme:  R v Griffiths[7].

192.  I would however bear in mind that if a defendant joined the conspiracy after it had commenced, then acts done or statement made prior to his or her joining the alleged conspiracy are admissible only to prove the existence of the alleged agreement and the nature of it, but not to prove his or her participation.

Charge 1

193.  I now deal with the evidence against each of the defendants who are facing charge 1.

The shareholder/director/person in control

D1

194.  I do not agree with the submission of Mr Hemmings that there is no evidence to show that D1 had any control over the company’s affairs or financial interest in the company or played any part in the affairs of the company. 

195.  The Companies Register documents proved that D1 was the sole director and shareholder of Wincades from its inception on 27 March 2014 to September 2014.  On 22 April 2014, he opened Wincades’ account with D2 jointly.  He was one of the two authorized signatories of Wincades’ account.  The signatures of both signatories were required for drawing of Wincades’ cheques.

196.  Soon after the inception of Wincades, fraudulent activities commenced and lasted until the police raid in March 2015. 

197.  Bank statements show that numerous cheques had been issued and drawn on Wincades’ current account.  18 cheques in particular were referred to in the banker’s affirmation: -

	(1)      Cheque No. 772415 in the sum of $57,214.32, dated 10 Jun 2014
	(2)      Cheque No. 772429 in the sum of $57,574.75, dated 5 Jul 2014
	(3)      Cheque No. 778810 in the sum of $56,885.80, dated 11 Aug 2014
	(4)      Cheque No. 778824 in the sum of $56,884.30, dated 3 Sep 2014
	(5)      Cheque No. 778840 in the sum of $2,940, dated 29 Sep 2014
	(6)      Cheque No. 778842 in the sum of $56,994.30, dated 6 Oct 2014
	(7)      Cheque No. 778857 in the sum of $3,240, dated 30 Oct 2014
	(8)      Cheque No. 778860 in the sum of $57,032.80 dated 3 Nov 2014
	(9)      Cheque No. 872896 in the sum of $52,395, dated 15 Nov 2014
	(10)     Cheque No. 872893 in the sum of $69,525, dated 15 Nov 2014
	(11)     Cheque No. 872894 in the sum of $75,600, dated 15 Nov 2014
	(12)     Cheque No. 872891 in the sum of $95,348, dated 15 Nov 2014
	(13)     Cheque No. 872903 in the sum of $112,800, dated 15 Nov 2014
	(14)     Cheque No. 872921 in the sum of $3,440, dated 29 November 2014
	(15)     Cheque No. 872920 in the sum of $50,000, dated 29 Nov 2014
	(16)     Cheque No. 872936 in the sum of $59,086.30, dated 9 Dec 2014
	(17)     Cheque No. 872842 in the sum of $3,890, dated 31 Dec 2014
	(18)     Cheque No. 872849 in the sum of $57,008.80, dated 8 Jan 2015

198.  Cheque 15 was issued to settle the claim of PW14.

199.  In the absence of evidence of handwriting expert, I can only say that the signatures on the cheques appear to be similar to the specimen signatures kept by the bank. 

200.  On the other hand, there is no evidence to suggest that the signatures on the cheques were forged.

201.  I draw the inference that the cheques were signed by D1 and D2.

202.  There were frequent movements within Wincades’ savings and current accounts (see Annex B (1)-(3) of the Written Closing Submission of the Prosecution). D1 was the authorized multi-channel banking user of the account.

203.  On the finding that D1 opened the bank account and signed the cheques, and in the absence of evidence contrary to the information as shown on documents of the Companies Registry, I find that D1 was the shareholder and director of Wincades at the relevant time.

204.  In my judgment, D1 as the sole shareholder had financial interests in Wincades. Being the sole director between 27 March and 15 September 2014, he was expected to exercise reasonable care, skill and diligence to manage the company.  It is apparent that Wincades was a very small company.  He signed the cheques of Wincades for amounts from a few thousand up to more than $100,000, suggesting that he was involved in the affairs of the company at various levels. It is hard to believe that D1 had no control and knowledge of the business and affairs of Wincades. 

205.  On all the evidence against him, the only reasonable inferences to be drawn are: from the inception of Wincades up to 15 September 2014 (and probably afterwards), D1 was in control of Wincades’ management.  He was aware of Wincade’s business and the fraudulent scheme to defraud the clients of the consultancy fees.  He agreed and intended that the scam should be carried out.

206.  Even if he did not actively participate in the daily operation of the fraudulent scheme, at the least he knowingly allowed the company and its account to be used as a vehicle for the scam to be perpetuated.

207.  I am satisfied that he was a party to the conspiracy.

208.  The facts of HKSAR v Chan Ka Wai are very different from the present case. In this case, the prosecution case is not only rested on the documents of the Companies Registry. There is other overwhelming circumstantial evidence.

D3

209.  For the same reasons as I have explained in the case of D1, I find that D3 was the authorized signatory of Wincades’ account since 30 January 2015. 

210.  While cheque no 872872 for the sum of $2,840, referred to by Mr Davies, was dated 29 January 2015, the same was only withdrawn from the current account of Wincades on 6 February 2015. (see banker’s affirmation at para 66).  On that day, D3 had already become the sole signatory of Wincades’s accounts.  The signature on the cheque is on the face of it similar to the specimen signature of D3.  I do not see any basis of the criticism by Mr Davies about this cheque.

211.  Mr Davies submitted that the signature in the style of 3 Chinese characters on the Companies Register document purported to be D3’s for his consent to become a director of Wincades (CB 2064) was completely different from his alleged signature on other documents.  The reported residential address was also not connected with D3.  It was also stressed that the record of D3’s ownership of the shares was only received on 30 March 2015 (3 days after the police raid).  Submission was made that no person who knew they were involved in a fraud would submit the document. 

212.  In my judgment these matters are neither here nor there.

213.  A person may use different signatures and report different addresses at different times and/or for different purposes.  The Annual Return disclosing the new directorship and ownership of Wincades was filed and presented by Standard Asia Limited acting as a company secretary.  The Annual Return was dated 27 March 2015, the anniversary of the incorporation of the company. It was the date for filing of the annual return as required by the Companies Ordinance. It might have been filed by the company secretary without knowledge of the raid.  In any case, the filing of the document cannot cast any doubt on the identity of D3 as director and shareholder of Wincades.

214.  The prosecution relies on the cheques, 5 in particular, issued during the time when D3 was the sole signatory: -

(1)      Cheque No. 872872 in the sum of $2,480, dated 29 Jan 2015

(2)      Cheque No. 872881 in the sum of $57,035.80, dated 3 Feb 2015

(3)      Cheque No. 977922 in the sum of $2,840, dated 4 Mar 2015

(4)      Cheque No. 977929 in the sum of $56,351.80, dated 13 Mar 2015

(5)      Cheque No. 977954 in the sum of $2,540, dated 14 Apr 2015

215.  The 5 cheques relied upon by the prosecution bore one single signature which appears to be similar to the specimen signature of D3 on the face of it.

216.  There is no evidence to support a contention that the cheques were forged.

217.  I draw the irresistible inference that all these cheques were signed by D3.

218.  On all these evidence, and in the absence of evidence contrary to the Companies Register records, I find D3 a director and shareholder of Wincades as shown on the records.

219.  Since D3 became the sole signatory and primary user of Wincades’ account, fraudulent activities in Wincades continued and payment of consultancy fees were deposited into this account.

220.  The cheques he signed involved various amounts, suggesting he was involved in the company’s affairs at various levels.

221.  On the totality of all these evidence, I am satisfied beyond reasonable doubt that D3 was aware of Wincades’ business and the fraudulent scheme.  He agreed and intended that the scam should be carried out.  Wincades and its bank account were used as a vehicle to carry out the scam. He was a party to the conspiracy.

The “salespersons”

222.  I now come to the participation of the “salespersons”.  They all knew that their clients had to pay consultancy fee for the “service” of Wincades.  None of them asked the complainants they met why they came to Wincades.  The inference to be drawn must be that they knew the complainants were induced to come by the fraudulent cold calls and the false representation about the relationship with banks or financial institutions.  Some of them continued the false representation expressly.  For those who did not make the false representation expressly, I find that by their silence and their conduct, they knowingly allowed the false representation to continue.

223.  One important aspect of evidence is the operation of the call centre in Room 2.  It is plain that the area of Wincades’ office was relatively small. It is hard to believe that D4-8 did not know the fraudulent operation in the room.  It is not to be neglected that they all appeared to have the authority to deal with substantial sums of cash paid by the complainants.

D4

224.  D4 was identified by PW7 and PW9 as the personnel who induced them to sign the consultancy agreement in Wincades’ office. 

225.  I accept their evidence that on 29 December 2014 when PW7 arrived at office of Wincades; he told D4 (claiming himself as Mr Lee) that he was referred to Wincades by Hang Seng Bank.  D4 replied that Hang Seng Bank often referred cases to them.  That was a false representation.  PW7 gave D4 $94,000 and D4 issued only an “invoice” for $61,000.  The balance of $34,000 was said to be the fee for the Housing Department.  It was proved to be false.

226.  On 7 March 2015, PW9 was referred by the fraudulent cold call to see Mr Law, whom PW9 met in Wincades and identified as D4.  PW9 was induced to sign the consultancy agreement and paid the consultancy fee of $100,000.

227.  It is noted that PW9 said whether Wincades had any relationship with Prime Credit Finance (the financial institution the cold caller claimed to work for) was not his concern.  In my judgment, it does not negate the guilt of D4.

228.  CCTV footages of 27 March 2015 captured that he entered Room 2 and talked to people there.  He must know the operation in the call centre.  Documents related to PW9 and PW11 were also found inside room 3 where he was arrested. 

229.  I attach no weight to his denial of the offence when he was arrested.

230.  On the evidence against him, I am sure that D4 had knowledge of the scam. His dealings with the complainants were acts in furtherance of the conspiracy he had joined. He played the role of “salesperson” to induce the victims to sign the consultancy agreement and pay their consultancy fee by false representations stated in Charge 1.  He had the intention to defraud.

231.  I am satisfied beyond reasonable doubt that D4 was a party to the conspiracy.

D5

232.  D5 was identified by PW11 as Miss Yau who induced her to sign the consultancy agreement.  CCTV footages of 25 and 27 March 2015 showed the meetings between D5 and PW11.  Documents relating to PW11 were seized inside Room 4 where she was arrested.

233.  CCTV footage also showed she entered Room 2.  She must know the operation in that room.

234.  Counsel for D5 submitted that D5 did not make representation to PW11 that Wincades was affiliated with any banks.  I find that by her conduct, she knowingly allowed the false representation made by the caller to continue.

235.  She received $95,000 in cash from PW11.  After a negotiation, she agreed to return a total of $50,000 to PW11.

236.  I am sure that D5 had knowledge of the scam. She played the role of “salesperson” to induce the victims to sign the consultancy agreement and pay their consultancy fee. She had the intention to defraud.

237.  I am satisfied beyond reasonable doubt that D5 was a party to the conspiracy.

D6

238.  D6 was identified by PW5, PW8 and PW10 as the person who dealt with their application for loans and consultancy agreements.  D6 gave them his name card with the name of “Dom Yu” on it.  I accept the evidence of PW10 that D6 did not explain the consultancy agreement in details.  He only stressed that Wincades was recognized by the “4 big banks” and no fee would be charged if the application was unsuccessful.

239.  D6 received a very large amount of cash from PW8 - $210,000.

240.  CCTV footage of 27 March 2015 showed that he entered Room 2. He must know the operation in Room 2.  He did not ask why the PWs came to Wincades.  He must know that they came as a result of the fraudulent cold calls.

241.  Mr Tang, counsel for D6, emphasized in his submission that D6 was different from the other “salespersons”. In particular, in case 8, D6 did not insist on charging PW10 the consultancy fee of $100,000 when PW10 cancelled his application. It was submitted that D6’s state of mind was different from other defendants.  In my judgment, this fact is neither here nor there.

242.  I am sure that D6 had knowledge of the scam.  He played the role of “salesperson” to induce the victims to sign the consultancy agreement and pay their consultancy fee. He had the intention to defraud.

243.  I am satisfied beyond reasonable doubt that D6 was a party to the conspiracy.

D7

244.  I should first mention that D7 was absent on 19 September 2017, the date for closing submissions of all parties.  As a result of her unexplained absence, the case was adjourned to the following day for the prosecution and defence counsel to make inquiries.  On the resumed hearing, defence counsel told the court that D7 still could not be contacted. 

245.  A defendant generally has a right to be present at his trial.  There was however no explanation for D7’s failure to appear.  The prosecution confirmed with the Hospital Authority and the Police that they had no information about D7’s absence.  The only inference was that D7 had chosen to absent herself and had waived her right to be present at the trial.

246.  The general public interest requires that a trial should take place within a reasonable time.  Having considered the principles set out in R v Hayward [8] and balanced the interests of all parties, I ordered the hearing to continue in the absence of D7.  To ensure that she would receive a fair trial, I directed Mr Sze, with his consent, to continue to represent D7 in the proceedings.  Mr Sze made his closing submission on behalf of D7.

247.  I remind myself that her absence is not evidence of guilt and no adverse inference can be drawn from it.

248.  D7 was identified by PW2, PW12 and PW13 as the person having dealings with them. She identified herself as “Carmen Lam” with her name card.  The three witnesses all said D7 falsely told them Wincades was entrusted by a bank. I accept their evidence.  I find D7 made false representations to the clients she met.

249.  She must also have knowledge of Room 2.

250.  She received a large amount of cash from PW2 ($150,000).

251.  I am sure that D7 had knowledge of the scam.  She participated in the scheme by playing the role of “salesperson” to induce the victims to sign the consultancy agreement and pay their consultancy fee.  She had the intention to defraud.

252.  I am satisfied beyond reasonable doubt that D7 was a party to the conspiracy.

D8

253.  D8 was identified by PW1 and PW2 as the personnel dealing with the consultancy agreement.  He introduced himself by his name card as “Leo Choi”.

254.  On 17 October 2014, D8 persuaded PW1 to sign the consultancy agreement to pay the fee of $662,500.  D8 said the application for the loan of $2.4 million would take 45-90 days to process.  He made inducement that when the “pre-approved loan” ($800,000 by way of 3rd mortgage) was approved, the $2.4 million ultimate loan would also be approved.  After PW1 obtained the “pre-approved loan”, he handed over $640,000 in cash to D8 as consultancy fee, but only an “invoice” was issued to PW1 as a receipt.  Two days after he paid the fee, PW1 suspected that D8 was dishonest and did not wish to apply for the mortgage loan.  He asked for repayment of the consultancy fee but D8 refused to repay.

255.  PW2 on 24 October 2014 visited Wincades and met D7 and D8.  D8 said they could try to get a mortgage for PW2 from HSBC or Hang Seng Bank.  As a result, PW2 signed the consultancy agreement.  A few days later, PW2 was shocked to learn that a “pre-approved” loan had been obtained for him.  He was told that this was a transitional loan pending approval of the ultimate loan.  After he received this loan, he was accompanied by Wincades’ staff to go to Wincades’ office where he met D7 and D8 again.  They took $150,000 cash from PW2 as consultancy fee and gave him an “invoice” as a receipt.

256.  D8 stood up in court at the request of his counsel for the identification by PW36, who confirmed that D8 was the Mr Choi who followed up his inquiries about the application.  Mr Lau, counsel for D8, submitted that the successful case of PW36 cast doubt as to whether D8 was dishonest.  The successful case, in my view, is neither here nor there. 

257.  I find that D8 must know the operation of Room 2.

258.  I am sure that D8 had full knowledge of the scam.  He participated in the scam playing the role of “salesperson”. He had the intention to defraud.  I am satisfied beyond reasonable doubt that D8 was a party to the conspiracy.

D9

259.  There is no dispute that D9 worked in Room 2 to make cold calls. When he was arrested in Room 2, he said under caution that he had only worked in Wincades for 2 days, he did not know anything else.  A subsequent video recorded interview was conducted.  D9 challeged the voluntariness of this interview.  I have earlier ruled the interview record voluntarily made by D9 and admitted as evidence in this case.  The reasons for the ruling is attached as Appendix 1 in this judgment.

260.  In the video interview, D9 said he was interviewed at Wincades by “Siu Kan” in mid March 2015.  As instructed, he came to Wincades for training on 25 March 2015 in which “Siu Kan” and “Jackal” were present.  Jackal gave him a set of training material which taught him how to approach customers by pretending to be bank staff.  He was tasked to make phone calls at the call centre according to the telephone list provided by Wincades.  Jackal instructed him to pretend to be bank staff. He would fill in data of clients in a personal information form and pass it to his supervisor for follow up.  He did not know the procedures afterwards.

261.  Mr Choi, counsel for D9 and D15, submitted that claiming to be bank staff on phone to promote low interest loan might just be a “gimmick”.  It did not mean that any illegal or fraudulent activities would be carried out.  It is possible that D9 and D15 did not know or intend that their cold calls and the subsequent handling of the clients would involve the commission of an offence.

262.  In the present case, there is no dispute that D9 was responsible for making cold calls.  The admissions he made were mixed statement.  I find that he knew Wincades was not entrusted by or affiliated to any bank or financial institution. He made false representation to induce people to come to Wincades to apply for loan.

263.  The question is whether he had the requisite conspiratorial intention for the single conspiracy alleged in the charge.

264.  The objective of the single conspiracy was to obtain the consultancy fee, which is the economic loss specified in Charge 1.  The prosecution must prove D9 had the intention to defraud – the intention to cause loss of the consultancy fee, or put such interest at risk, or realization of the loss or such risk.

265.  It appears to be unchallenged that D9 had only worked in Wincades for 2 days.  I accept that D9 was frank to the extent that he told the police of his role in making the fraudulent cold calls.  I find that his exculpatory explanation that he did not know the activities of Wincades after he made the calls might be true.  There is no evidence that D9 knew the clients would then be deceived of the consultancy fee and that it would not be refunded.  It cannot be proved that he realized the clients would suffer loss of the consultancy fee or were at risk of such loss.

266.  I am not satisfied that D9 was a party to the single conspiracy to obtain consultancy fee fraudulently.

D15

267.  There is no dispute that D15 worked in Room 2 to make cold calls.

268.  When he was arrested in Room 2, under caution, he said he knew the company cheated others.  He made further admissions in subsequent video recorded interviews.  D15 challenged the voluntariness of his admissions at the time of arrest and in the subsequent interviews.  I have earlier ruled all the admissions voluntarily made by D9 and admitted as evidence in this case.  The reasons for the ruling are included in Appendix 1.

269.  In essence, D15 admitted that he was employed by Wincades on 2 March 2015 responsible for making cold calls.  He received monthly salary of $4,000 plus a commission.  Wincades provided a preamble script instructing him to pretend to be bank staff when he called the clients.  Jackal, the supervisor, watched them making the calls.  When he made a successful appointment with a client, he would inform his Jackal.  He had however no idea how it would work further when clients came to Wincades to borrow money.

270.  To his credit, D15 admitted his role in making the fraudulent calls.  I accept that he might not have full knowledge of the activities after he made the fraudulent calls. 

271.  There is no direct evidence that D15 knew the clients would then be deceived of the consultancy fee and that it would not be refunded.

272.  For the same reasons as I explained in the case of D9, the evidence is not sufficient to prove that D15 realized the clients would suffer loss of the consultancy fee or were at risk of such loss.

273.  I am not satisfied that D15 was a party to the single conspiracy.

D16

274.  During the police raid, D16 was found in Room 2.  Land search record, a “preamble script” (P-F52-2), a form containing apparently financial date with printed words “Salesman: Jackal” and a box of name cards of “Jackal Young” were found at his desk.

275.  CCTV footage of 27 March 2015 showed that he was talking to other staff members inside Room 2 in front of a white board with figures, appearing to be giving instructions.  The board had D16’s name written on it.

276.  D16 gave a mixed statement to the police in his subsequent interviews.  The voluntariness of these interviews was not challenged.

277.  In a gist, he said in the interview that he was employed by Wincades since 2 March 2015 as a supervisor.  He sat in one of the desks in Room 2.  He worked from 10 am to 7 pm.  He was responsible for supervising the cold call operators, i.e., monitoring their discipline.  He also trained new colleagues.

278.  He further said there were around 11 or 12 colleagues in the room responsible for making cold calls.  His colleagues in Room 2 would record the information of their clients and then pass the same to him.  He would then consider if the assets of the clients were sufficient for making an application for a mortgage.  He was one of the two persons-in-charge of the call centre.  His team was called “Jackal Team”.  Naka Lo and Ms Yau were responsible for interviewing the clients making the applications for loan.

279.  D16 further said Wincades was not a financial company.  He did not know how the salesperson of Wincades promoted the financial plan to their clients. He did not know why land search records and the preamble script were placed on his desk.

280.  He denied his involvement in the fraudulent scheme.

281.  The admissions of D9 and D15 are certainly not evidence admissible against D16.

282.  I find D16 hesitant and evasive in the interviews with the police.  I find Room 2 was used as a call centre where fraudulent cold calls were made. Having worked since 2 March 2015 in Room 2 as a supervisor of the callers in the room, D16 must have known the operation of the callers.  He must have heard the callers pretending to be staff of banks.  He must know the purpose of the preamble script presented to him during the interview.  He did not reveal the true nature of work of the callers in the room to the police.

283.  I find that D16 knew the function of Room 2 being used to make fraudulent calls to induce clients to approach Wincades. 

284.  His position was different from D9 and D15, he was the supervisor and trainer of the callers.  Moreover, his answers to question at counters 234-237 in his first video recorded interview indicate that he knew that the clients who came to apply for loans would have to pay a consultancy fee.

285.  On all these evidence, I draw the irresistible inference that D16 had knowledge of the whole scheme.  He participated in the scheme as a supervisor of the callers to make the fraudulent cold calls.  He knew that the clients would be deceived of their consultancy fees.

286.  I am satisfied beyond reasonable doubt that he was a party to the conspiracy.

Charge 2

287.  Section 25(1) of the Organized and Serious Crimes Ordinance (Cap 455) (OSCO)provides that: -

“Subject to section 25A, a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.”

288.  The law and principles in relation to the money laundering offence have been settled by the Court of Final Appeal in HKSAR v Pang Hung Fai[9] and HKSAR v Yeung Ka Sing Carson[10]. 

289.  In Yeung Ka Sing Carson, the Court of Final Appeal provided clarification as to what constitutes “having reasonable grounds to believe” that property being dealt with represents any person’s proceeds of an indictable offence as prescribed by OSCO section 25(1).  It explained its earlier decision in HKSAR v Pang Hung Fai and endorsed the approach to the “reasonable grounds to believe” mental element adopted by the Appeal Committee in 1999, holding that: “To convict, the jury had to find that the accused had grounds for believing; and there was the additional requirement that the grounds must be reasonable: That is, that anyone looking at those grounds objectively would so believe.”[11]

290.  On the second limb of the offence, the applicable standard to prove the mens rea was whether on the grounds available to him, the accused would have been led to have the requisite belief.  Such grounds must be reasonable, ie, anyone looking at those grounds would so believe.

291.  Reasonable grounds of belief comprised of 2 elements:

(i) an objective elements i.e. there were grounds that a common sense, right thinking member of the community to hold the belief; and

(ii) those grounds were known to be defendant.

292.  The Court of Final Appeal further explained that even if a defendant is entirely disbelieved, it remains necessary for the court to be satisfied that the case against him has been proved beyond reasonable doubt.

293.  If he provides no evidence at all of his beliefs and perceptions, etc, the Court is left to draw whatever inferences may be proper based on the prosecution’s evidence. 

294.  In HKSAR v Lung Ming Chu[12], the Court of Appeal said: If two people agree to deal with property, and if each of them knows or has reasonable grounds to believe that it represents, or will represent, the proceeds of an indictable offence, that is sufficient to make each of them guilty of conspiracy to contravene s 25(1).

295.  In the present case, a call centre was set up in the office of Wincades with a significant number of callers employed to do the fraudulent cold calls.  The fraudulent activities commenced soon after Wincades was incorporated and its account was opened in April 2014.  Coupled with the documents seized in the office and the evidence of the complainants and the defence witnesses, the totality of the evidence has proved that Wincades was established to perpetrate the fraud and the account was open and kept as a vehicle to receive and dispose of the consultancy fees received from the victims.  The consultancy fees were proceeds of an indictable offence.

D1 and D2

296.  I find D1 and D2 opened Wincades’ account and were signatories of the account.  They operated the account and issued cheques until 30 January 2015.  They were dealing with the properties in the account.  There must be agreement between them to operate the account together.

297.  D1 was a party to the conspiracy to defraud.  He had knowledge that the account dealt with proceeds of crime.

298.  There is no evidence showing the relationship of D2 with Wincades.  One would wonder if he had no knowledge of the activities of Wincades, why he would open the account and signed the cheques for the company.  I draw as the irresistible inference that D2 had knowledge of the fraudulent activities in Wincades.  He knew the account was used to deal with proceeds of the scam.

299.  In the alternative scenario that he had no knowledge of the activities of Wincades, he must ask himself why he would be asked to open the account and signed the cheques.

300.  When D2 signed the 18 cheques, he should notice from the amounts on the cheques that he was asked to assist in disposing of significant sums of monies from the account.

301.  If D2 had no control at all of the account and allowed it to be used for receipt and transmission of funds, without inquiries by him or explanation by others, in the absence of evidence to the contrary, inference may arise that he has reasonable grounds to believe that the funds passing through the account represent proceeds of an indictable offence.[13]

302.  There is no evidence of D2’s beliefs and perceptions.  It does not follow that he must be convicted.  It remains for the prosecution to prove the offence beyond reasonable doubt.

303.  In the present case, I do not see any evidence which is inconsistent with him having reasonable grounds to believe.

304.  In the alternative scenario, I would draw the irresistible inference that on the grounds available to D2, he would have been led to believe the account was used to deal with property which represented proceeds of an indictable offence.

305.  I find D2 either knew or had reasonable grounds to believe that the account was used to deal with proceeds of crime.

306.  I infer that D1 and D2 had agreed to deal with property known or believed to represent proceeds of an indictable offence.

D3

307.  D3 was a party to the conspiracy to defraud.  I find that he had knowledge that Wincades’s account was used to deal with proceeds of the crime of fraud.

308.  The documents of the Companies Registry proved that D3 became the sole director of Wincades on 15 September 2014.  He also obtained the shares from D1 to become the sole shareholder of Wincades on 23 September 2014.  I draw the inference that he then acquired control of the company.  However he still allowed D1 and D2 to control the bank account until 30 January 2015.

309.  I draw the inference that D3 must have agreed with D1 and D2 to use the account for the purpose of dealing with the proceeds of the crime.

The Result

310.  On Charge 1, I find D1, D3-8, and D16 guilty of the charge.  D9 and D15 are not guilty.

311.  On Charge 2, I find each of D1-3 guilty of the charge.

Appendix 1

Reasons for Ruling on the Special Issue

D9

1.  The written Grounds of Objection consisted of 7 pages of unnecessarily lengthy particulars of D9’s allegation. The main ground of objection was inducement.

2.  In a gist, D9 alleged that after his arrest, he was taken to Tsim Sha Tsui police station, where he learnt from “a male” who had just returned from investigation that a lawyer had been instructed by Wincades to visit them. D9 was later taken out from the detention area to a van by DSGT52854 (PW75), DPC 6758 ((PW45) and DSPC54566 (PW67).  After the van arrived at Mongkok police station, DSGT said there was no room for video recorded interview (“VRI”), then the van headed for Hung Hom police station.  During the journey to Hung Hom police station, DSGT suggested to D9 that he should say that he was taught by Jackco of Wincades to pretend to be staff member of a bank when he called customers.

3.  In Hung Hom police station, before the VRI started, D9 asked whether he could hire a lawyer.  DSGT replied that he could, but it would not make any difference and it would be a waste of time.  DSGT promised D9 that if he cooperated, they would let him call someone to pick him up after the interview. 

4.  The prosecution called the police officers being alleged of improprieties to give evidence. They all denied the alleged misconduct. They also denied that D9 was taken to Mongkok police station first.

5.  It is to be noted that DPC 49480 (PW69), an officer involved in the operation, agreed that on that evening, he saw a female counsel in the report room of Tsim Sha Tsui police station.  She gave him a list of arrested persons asking to see the people on the list.  As this was the responsibility of the report room, he just passed the list to the officer responsible.  It was put to him that the list contained 14 persons including D15.  PW69 said he could not remember the names or number of the arrested persons on the list. 

6.  D9 elected not to give evidence, nor did he call any witnesses on the special issue, which were his rights. I noted that D9 has a clear criminal record.

7.  In his closing submission on the special issue, Mr Tsoi clarified that there was no suggestion that before the VRI commenced, a lawyer had requested to see D9.

8.  Having considered all the evidence on the special issue, I found the police officers’ evidence consistent with each other and reasonable.  While the CCTV footage seized from the office of Wincades showed that PW45 must be incorrect when he said he only asked D9 one question, I did not think that he was lying in court.  The raid of Wincades office was a very large scale operation.  Many officers were involved and tasked with various different duties.  One can imagine the chaotic situation at the office of Wincades.  PW45’s making a mistake in his memory about the number of questions he had asked before he arrested and cautioned D9, not being recorded at the time, is entirely understandable. When there was no issue as to the voluntariness of D9’s answers after caution as recorded in the officer’s notebook, I did not find the officer’s mistaken memory cast any doubt on his credibility.

9.  Insofar the allegation of deprivation of his right to access to lawyer is concerned, I found it entirely unsupported by evidence and unfounded.  D9 had learnt that a lawyer retained by Wincades would visit the people arrested as soon as possible, it is implausible that D9 would ask whether he could hire a lawyer. It is also unreasonable that D9, believing a lawyer was coming to see him soon, would agree to be interviewed without his lawyer simply because the officers said he could be granted bail later.

10.  In the VRI, D9 appeared to be natural and relaxed.  In no way he demonstrated any fear or hesitation.

11.  I found that there were no improprieties on the part of the police officers. No threat or inducement were made by them.  D9’s right of access to lawyer was not violated. I was satisfied beyond reasonable doubt that D9 took part in the VRI voluntarily.  There was also no basis for the court to exercise its discretion to exclude the VRI, which was therefore admitted as evidence in the case.

D15

12.  Again, Mr Tsoi submitted a 6-page written grounds of objection consisting of lengthy particulars.  The grounds of objection were simply threat and inducement. In a gist, Mr Tsoi complained that PW50 did not, at the office of Wincades, caution D15 before questioning him.  PW50 repeatedly told D15 that the police would not arrest him as they were only interested in the main culprit.  If D15 did not speak out the truth, he would be in troubles.  When D15 denied ever seeing the “preamble script”, PW50 said no one would believe him. PW50 further said that D15 would not get into troubles if he admitted the offence.  After D15 answered the questions, however, he was arrested.  He was told to write on the notebook as PW50 directed.  Later they left Tsim Sha Tsui police station for Wong Tai Sin police station for VRI.

13.  In Wong Tai Sin police station, D15 asked if he could engage a lawyer.  PW50 said D15 had not been prosecuted, it would not be too late to find a lawyer after D15 was charged.  PW50 told D15 that all documents had been found on his desk and he could not deny. As he was only an employee, it would be no problem for him to plead guilty and make mitigation.  When he returned to Tsim Sha Tsui police station, he discovered that Wincades had sent lawyers to assist the arrested persons. 

14.  PW50 testified and denied all the allegations of D15. 

15.  D15 gave evidence on the special issue basically along the line of his written grounds of objection.

16.  I will first deal with the complaint that D15 was deprived of his right of access to lawyer. This complaint was twofold, (i) his lawyer’s request to see him was refused, (ii) his request to see lawyer was refused.

17.  The first allegation was unsupported by any evidence.  There was no evidence that the legal team in the police station had asked to see D15.  It was an admitted fact that the police arrested 16 persons.  Mr Choi put to PW69 that Ms Wu of counsel gave a list containing 14 persons.  By simple deduction, 2 arrested persons were not on the list.  PW69 could not remember the names and number of persons on the list. There was therefore no evidence that Ms Wu had requested to see D15.

18.  I found PW50’s evidence simple and reasonable.  On the other hand, while I noted that D15 has a clear record, I found the evidence of D15 confusing, evasive and unreasonable. His evidence was also implausible.

19.  He claimed that he was induced by PW50 who said the police would not arrest him.  However soon after he answered PW50’s questions, he was arrested for the offence of conspiracy to defraud. He would there and then realize that he had been deceived.  If his verbal admission was indeed a result of the inducement of PW50 before he was cautioned, it is improbable that he would agree to write down on the officer’s notebook and make further admissions in the VRI. I also found it improbable that D15 did not raise the request to see a lawyer again during the recording of VRI.

20.  D15 claimed that PW50 told him he should “mitigate to the judge”.  D15 should know that he could only mitigate to the judge after he was prosecuted and brought to court.  It is improbable that he would believe the officer’s “advice” that it would not be too late to see a lawyer after he was charged.

21.  D15 was evasive when he was cross examined about at what stage he realized he was a suspect. He was shifting his versions. Finally, he said he only realized that he was a suspect when he had been released on bail.   In the VRI, D15 did not appear to be nervous, hesitant or reciting lines.  He even initiated to correct and clarify his previous answers.

22.  I found the evidence of D15 unreasonable and against common-sense.  I rejected his evidence.  I found PW50 a credible witness and accepted his evidence.  I found that no police officers had threatened, or induced D15.  He did not at any stage request to see a lawyer. The initial questioning of D15 without caution was not improper. I found the statement of D15 recorded in the police notebook and the VRI voluntarily made by him.

23.  I found that there were no grounds for me to exercise my discretion to exclude the statements, which were therefore received as evidence in the case.

24.  In case that the list of persons to be interviewed given by Ms Wu should contain the name of D15, I accepted that PW50 was not aware of it. He was bona fide in conducting the VRI. I would still have refused to exercise my discretion to exclude the VRI.