R. v. YIU LAI KUEN

H E A D N O T E

Textile quotas - whether "property" within the meaning of the Theft Ordinance, Cap. 210.

Procedure - Judge admitted evidence from the Crown after final speech made on behalf of the defence - whether evidence given on matters arisen ex improviso - judge's discretion - whether material irregularity

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J U D G M E N T

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Wong J.,

1. This is the judgment of the Court.

2. The applicant was tried before His Honour Judge Whaley in the District Court on a charge sheet containing two charges of conspiracy to defraud and three charges of obtaining property by deception. She was acquitted on one charge of conspiracy (Charge 1) but convicted on all the other charges (Charges 2, 3, 4 and 5) and sentenced to concurrent sentences of 18 months imprisonment. Her application before us is for leave to appeal against conviction only.

3. The particulars of the conspiracy charge upon which she was found guilty allege that between December 1987 and April 1988 the applicant conspired with WOO Kwok-leung to defraud the Director of the Trade Department of the Hong Kong Government in the allocation of textile quota to Kin May Garment Factory by dishonestly (i) preparing and submitting and/or causing to be prepared and submitted documentation in particular Export Licence Nos. HKGB 7-6708924 and HKDE 7-2917409 which she knew or believed to be false or misleading; (ii) representing that the commercial transaction and purported export performance of Kin May Garment Factory reflected in the documentation was genuine when she knew were false and (iii) causing or permitting the Director of Trade to allocate textile quota to Kin May Garment Factory.

4. Charges 3, 4 and 5 allege that on the dates specified in the charges the applicant dishonestly obtained in the names of Abundance Textiles Company Limited (Charge 3), Kadoorie (Far East) Industrial Company Limited (Charge 4) and Kadoorie Industrial Company (Charge 5), from the Director of the Trade Department allocations of textile quotas by deception, namely preparing and submitting and/or causing to be prepared and submitted documentation upon which the allocation of the quotas was based and in particular Export Licence No. HKDE 7-2917043 (Charge 3): Export Licence No. HKDE 7-2916768 (Charge 4) and Export Licence No. HKGB 7-6324180 (Charge 5), falsely representing the material particulars contained therein to be true when the same were to her knowledge false or misleading.

5. Hong Kong is a party to the bilateral textiles agreements known as the Multi-Fibre Arrangement or the MFA with a number of countries or groups of countries such as the European Economic Community (EEC), Sweden and Finland etc. To implement the agreements, the Trade Department of the Hong Kong Government operates a textiles export control system, the main objective of which is to strictly control the export of textiles from Hong Kong to those countries in respect of certain textile products limiting the quantities which can be exported, and in respect of other products not setting any limits but regulating the export thereof for surveillance purposes.

6. The Import and Export Ordinance, Cap. 60 defines the legal framework and lays down the foundation of the system under which all textiles exports from Hong Kong are required to be covered by valid export licences issued by the Director of Trade. Applications are made by filling in Export Licence (Textiles) Form 5 forms and an application becomes the licence itself, duly endorsed by the Trade Department, once it is granted. The information to be supplied on the form consists of a description of the exporter, the manufacturer, the consignee, the category, nature, quantity and value of the goods to be exported. Both the exporter and the manufacturer must sign the declaration affirming that they are respectively the exporter and manufacturer of the goods in question; the particulars are true and the party who is supplying the quota has satisfied condition 3 as set out in full on the back of the form.

7. Any company wanting to participate in the quota system must register with the Department of Trade. Quotas are allocated on the basis of performance in the preceding year. A company fulfilling its quota will normally earn the same quota; a company falling short will normally forfeit that shortfall in the ensuing year.

8. A company can earn incentives and increases its quota under the Year End Special Shipment Scheme (known as "YESSS") which is designed to maximize the use of the unused quota and provide an opportunity for a genuine exporter or manufacturer to apply for free quota and licence for the ensuing year. A company may elect to accept a reduced quota and to pool proportional quantities with one manufacturer and provided that the conditions are fulfilled the company can achieve an increased quota.

9. The swing scheme allows a quota holder to surrender quota in one category or sub-category in exchange for an equivalent quantity of quota in another category or sub-category.

10. A booklet entitled the "Textile Export Control System" which describes the system in detail was produced as an exhibit at the trial.

11. It was against this background that these offences were committed by the applicant who was at the material times the major shareholder and a director of Abundance Textiles Company Limited (ATCL), the Kadoorie (Far East) Industrial Company Limited (KICL) and the sole proprietor of Kadoorie Industrial Company (KIC).

12. The essential features in this case are common to all the charges and it is therefore not necessary for us, for the purpose of this judgment, to deal with them separately or to go into the facts in any detail. It is not in dispute that the export licences in Charges 3, 4, 5 and the first export licence in the conspiracy charge (Charge 2) were all submitted by the applicant to the Trade Department. In so far as the second export licence in that charge is concerned it was signed by Woo Kwok-leung, the co-conspirator as the manufacturer and the applicant as the exporter and it is not clear whether it was Woo or the applicant who submitted it to the Trade Department but this is irrelevant.

13. There is, in our view, an abundance of evidence that virtually all the particulars filled in the export licences were either false or misleading. Condition 3 to which we have already made reference specifies that the company supplying quotas for goods covered by the licence must either:

(i) perform at least four of the following functions:

(a)receive order from the overseas buyer,

(b) receive payment from the overseas buyer for the goods,

(c) purchase or supply the raw materials for the manufacture of the goods,

(d) contract with the manufacturer for the manufacture of the goods,

(e) make payment to the manufacturer for the goods; and

(f) arrange the export of the goods. or

(ii) perform the principal processes in the manufacture of the consignment in question.

14. In this case, none of these functions was performed either by the applicant as the exporter or by the manufacturers named in the export licences. Documents evidencing contracts entered into with manufacturers, invoices, receipts, export orders, payment to the manufacturers, payment from the consignees and the cargo manifests were all bogus and an elaborate sham, as the trial judge has found, to give a facade of authenticity and legitimacy to the fraudulent scheme in the event that officers of the Trade Department might demand to see supporting documents. This fraudulent scheme or deception was conceived and engineered by the applicant with the collaboration and co-operation of Woo and the other manufacturers as well as the shipping agents in Hong Kong. There was never any intention to deliver the goods to the consignees mentioned in the export licences or even to contact the consignees because the consignments relating to these charges were destroyed by incineration in Hamburg, Germany on instructions of Messrs. Lam and Fung and Mok Sai Kwong of ASG (Hong Kong) Ltd., the Hong Kong shipping agents for the applicant. Evidence given by customs officers from Hamburg discloses that the contents of the consignments were cut-off sleeves, pieces of garments and bits of textile materials which they described as "rubbish". Representatives of companies named as consignees in some of the export licences were flown all the way from Hamburg to Hong Kong to give evidence and they all denied that their companies had ordered the goods. In one case, the name of the company, Four Seasons Trading in the United Kingdom was in fact fictitious and non-existent. To make things worse, the consignment sent to this company in the United Kingdom was also destroyed in Hamburg together with other goods and this was also done on the instructions of the applicant's shipping agents in Hong Kong.

15. It is to be noted that under the system quota is not obtained simply by successfully applying for an export licence which is only the first step to an allocation of quotas by the Director of Trade. An allocation is made on the strength of performance of the export authorized under the export licence. Once the Director is satisfied that the goods have been shipped on the production of the cargo manifest from the shipping company, quotas would be offered to the person or company who supplied the quotas for the export licence, either the manufacturer or the exporter as the case may be.

16. As a result of the false or misleading information, the applicant was given quotas under the swing system or mechanism in relation to the export licences in Charges 3, 4 and 5. Quota was also awarded for Export Licence HKDE 7-2917409 in Charge 2 under the Year End Special Shipment Scheme (YESSS) and Woo Kwok-leung was to get one half of the manufacturers free quota generated by the export in return for lending his name and co-operation to various bogus documents in the conspiracy.

17. Mr. Leung Ho Yin of the Trade Department testified that the export licences which are the subject matter of the charges in this case would not have been approved had the true state of affairs been known to those responsible for approving them in the Trade Department.

18. It is not argued before us that the particulars filled in in the export licences were not false or misleading as it will be apparent from the grounds of appeal to which we must now turn. We would have no hesitation to reject such an argument had it been advanced in view of the overwhelming evidence pointing to this direction.

19. Grounds 1 and 2 relate to the same matter and should be dealt with together. The first ground says:

"There was no evidence adduced at any stage of the trial that the textile quotas which were the subject matter of the 2nd, 3rd, 4th and 5th charges were "property" which belonged to the Trade Department."

The second ground goes on to allege that the trial judge failed to direct himself in this regard and sets out the arguments in support of this allegation. A distinction needs to be made from the outset between Charge 2 - conspiracy to defraud, contrary to Common Law - and Charges 3, 4 and 5, which were all of obtaining property by deception, contrary to section 17(1) of the Theft Ordinance.

20. Whether "property" has passed was of no significance on a charge of conspiracy to defraud, where all that the Crown needed to show was that the applicant intended to practise a fraud on the Director of Trade in the sense of causing him to act contrary to his public duty, even if there was no intention on the applicant's part to inflict upon him any pecuniary or economic harm: R. v. Wai Yu-tsang [1992] 1 H.K.C.L.R.26.

21. It was submitted by Mr. Sedgwick on the topic of "property" that before quotas were allocated to the exporters or manufacturers, the Director of Trade did not own the quotas and what he had was not property because the quotas only came into existence at the time they were allocated. The quotas were only created and became property when they were allocated and from the moment of their creation they were the property of the company to which they were allocated. CHAN Wai-lam v. R. [1981] HKLR 139, a decision of this Court was cited. In that case, teachers in the Sai Kung District were given the opportunity to apply for vacant flats originally built for those working on the construction of the High Island Water Scheme. The appellant completed and signed an application form declaring that neither he nor his wife owned any residential property in Hong Kong. This statement was false because his wife owned a residential property in Kwai Chung. He was charged and pleaded guilty to a charge of attempting to obtain property by deception contrary to section 17 of the Theft Ordinance. On appeal against sentence, the Court of Appeal quashed the conviction on the ground that the appellant could not have intended permanently to deprive the Crown of the full ownership because what he had intended was no more than to deprive the Crown of a lease, which was an interest less than that of the Crown in the land.

22. In our view, this decision is of no assistance to the issue whether quotas were "property" before they were allocated to individual exporters or manufacturers. Chan Wai-lam v. R must be regarded as having very limited application and confined to its own facts involving an interest in land less than full ownership.

23. The argument that quotas are not property of the Department of Trade before their allocation is, in our judgment, superficial and artificial. Section 5 of the Theft Ordinance defines "property" to include money and all other property, real and personal including things in action and other intangible property. In Attorney General v. Chan Nai-keung, Daniel [1988] HKLR 70, the Privy Council had the occasion to consider this definition and held that S.5 of the Theft Ordinance was intended to have the widest ambit and that export quotas were a form of 'other intangible property' capable of being stolen within the meaning of the section. It was further held that an export quota was something which was freely bought and sold and could be the subject of dishonest dealing which deprived the owner of the benefit of it.

24. Quota is a commodity of substantial value and its quantity is limited and defined by importing countries. The Director of Trade is under a duty to ensure that this quantity of quotas or the right to export as Mr. Schapel puts it, is distributed fairly and equitably to those who are entitled to apply for them. Any one who is not so entitled and obtains quotas by deceptive means will result in the quantity being diminished to the detriment of those who have a legitimate right to allocation. The evidence of Mr. Leung Ho Yin clearly established that the export licences would not have been approved in this case if the true state of affairs were disclosed. There is no doubt in our mind that the applicant had intended from the very beginning to utilize the quotas she was to obtain by her deception to her maximum benefit and thereby to permanently deprive the Director of the Trade of the ownership of those quotas.

25. We are firmly of the opinion, therefore, that quotas before allocation are as much property as when they are in the hands of the allocatees and quotas, in our judgment, include the right of the Director of Trade to issue quotas.

Grounds 1 and 2 therefore fail.

Ground 3 has been abandoned.

26. Ground 4 alleges that the trial judge was wrong in drawing the inferences that Messrs. Fung and Lam were acting throughout as duly appointed and authorized agents of the applicant whereas the evidence did not justify such an inference being the "only reasonable" inference. Further the trial judge was only capable of drawing that inference by reversing the burden of proof to the applicant.

The trial judge dealt with this aspect of the case at page 14 of his Reasons for Verdict and this is what he said:

"His (referring to Mok Sai Kwong) evidence established that his instructions to ship the containers in question to Hamburg and subsequently to order the destruction by incineration of the contents thereof were received from either Mr. Roger Lam Ka Lai who represented a company called Art-Muller or Mr. Fung: the two of them acted together and interchangeably in all their dealings with Mok. Lam and Fung were the designated shippers of the goods in question and everything which he (Mok) did was on instructions from them."

Over the page the learned judge continued:

"The only reasonable inference in the absence of any evidence to the contrary from or on behalf of the Defendant, is that they were acting throughout as the duly appointed and authorized agents, since she was the exporter of the goods in question."

27. We cannot see how the trial judge could have approached this matter in any other way. The applicant was the exporter named in the export licences and Mr. Mok's evidence further established that Fung and Lam were the shippers of the goods in the export licences of which the applicant was the exporter. According to Mr. Mok, it was either Lam or Fung who arranged with him for the shipping of the goods. It would be very strange indeed that the shippers of goods in several containers which had been sent all the way from Hong Kong to Hamburg at considerable expense would ordered the goods to be destroyed without instructions from or reference to the exporter.

28. There is no substance in this ground and it also fails.

29. Ground 5 says that there was a material irregularity during the course of the trial when the judge permitted the prosecution to re-open its case after the defence had made its final submission and the evidence adduced thereafter was relied upon by the judge to convict the applicant on Charges, 3, 4 and 5.

30. First, Mr. Sedgwick submitted that the additional evidence was available from the beginning of the trial and did not arise ex improviso. Second, the additional evidence given by Mr. Leung Ho Yin related to the "swing system". At no time had the prosecution opened its case on this basis. Third, the trial judge committed a further error in allowing Mr. Yu Chi-chiu, a Senior Computer Officer of the Trade Department, to be called to give evidence without which Mr. Leung's evidence would be inadmissible and of very little weight.

31. The decisions in R. v. Day [1940] 27 Cr. App. R.168, R. v. Kane [1977] 65 Cr. App. R.270 and R. v. Pilcher and others [1974] 60 Cr. App. R.1 were cited to us.

32. This particular issue was considered by the trial judge from page 18 to page 20 of his Reasons for Verdict. Briefly, he concluded that the matter had been broadly dealt with by Mr. Leung Ho-yin in his evidence in chief initially and that evidence was not challenged or disputed by the defence. On this basis, he allowed him to be recalled, having been satisfied that this did not cause any injustice or prejudice to the applicant and it was in the interest of justice to do so. Mr. Leung was not with the Trade Department at the time when the information regarding the quotas as particularized in Charges 3, 4 and 5 was fed into the computer and was not in a position to say that the computer was operating properly and was secure from unauthorized interference at the material time. The trial  judge therefore allowed Mr. Yu to be called for the first time to give what he said was formal evidence to that effect. The judge added that the additional evidence called by the prosecution was not seriously challenged.

33. Mr. Schapel for the Crown referred us to The Queen. v. Chan Ming-luen, Criminal Appeal No. 598 of 1986 (unreported) a decision of this Court comprising Silke J.A., Power and Penlington JJ (as they then were). In that case, the appellant was tried in the District Court on a charge of possession of dangerous drugs for unlawful trafficking. Crown Counsel forgot to tender in evidence the Government Chemist's certificate and forgot to call a witness to establish the substance found in the appellant's possession was the substance shown on the certificate to contain dangerous drugs. Counsel for the defence-drew attention to this omission in his final address. Crown Counsel successfully applied for leave to re-open his case to call the evidence. The judge granted leave and the appellant was convicted. It was held, in dismissing the appeal, that the prosecution was fully aware of the necessity of calling the evidence but there was an inadvertent failure to do so. The original agreement for a "paper trial" was a factor which clearly and properly played a part in the exercise of the trial judge's undoubted discretion.

34. The additional evidence called in the case before us clearly did not arise ex improviso. However, it is well established by authorities that the trial judge had a discretion in the matter. In this connection, we would respectfully refer to a passage of the judgment of the Lord Chief Justice in R. v. Pilcher at page 5:

"We do not say that in cases like the present where the matter has not arisen ex improviso the judge had no kind of discretion at all, but we are firmly of the opinion that in cases where the matter does not arise ex improviso the judge's discretion should not be exercised to allow the late introduction of an additional witness called for the prosecution whose evidence was available before the case for the prosecution closed."

It was held that the circumstances amounted to a material irregularity but the Court of Appeal applied the proviso and confirmed the conviction.

35. We would have no hesitation to apply the proviso if it had been necessary for us to do so. However, we are satisfied that this is not a case for the application of the proviso because the circumstances in Pilcher are different from this case in that the additional evidence of Mrs. Oddy in Pilcher was, in the words of the Lord Chief Justice, an extremely important piece of evidence on the vital question as to whether the parcel had gone in at 0908 or 0809.

36. The situation in this case is not dissimilar from The Queen v. Chan Ming-luen. Mr. Leung Ho Yin had broadly dealt with the issue and his evidence was not challenged or disputed by the defence when he first gave evidence. Both the judge and prosecuting counsel were led into believing that this was not a 'live' issue, an important factor which obviously prompted the judge to exercise his discretion just as the judge in R. v. Chan Ming-luen was prompted to exercise his because of the original agreement for a "paper trial".

37. The matter in this case goes further. Throughout the trial the prosecution case, as we understand it, had always been that the applicant submitted the export licences and on the strength of the export liences, all of which contained false or misleading information, she was given quotas to which she would not otherwise have been entitled. It is not an ingredient of the offence and therefore the prosecution is not required to prove that the quotas were allocated under the "swing system" or any other system.

38. We are not persuaded that there is any substance in the arguments advanced before us and we reject this ground.

39. We now move to Ground 6 which concerns solely conspiracy (Charge 2), alleging that the trial judge erred in failing to properly evaluate the whole of the evidence of Woo Kwok-leung.

40. Ground 6(i) and (ii) raise matters of certain remarks made by the judge in the course of the trial. We find no substance in the allegations and it is not necessary to go into them. We are satisfied that the trial was conducted fairly and properly.

41. Ground 6(iii) complains that the trial judge misdirected himself to find corroboration of Mr. Woo's evidence "by the evidence of other witnesses and the documents" because he wrongly failed to identify what corroborative evidence he relied upon and there was no evidence of other witness or documents that was capable of corroborating Mr. Woo's evidence as to the existence of the conspiracy.

42. On the question of corroboration, the judge dealt with it in this fashion at page 41 of the Reasons for Verdict:

"Looking at his (Woo Kwok-leung) evidence as a whole however, and having reminded myself that I must treat his evidence as an accomplice with considerable caution. I find that his assent to those bluntly leading matters which were put to him in cross-examination, does not neutralize the very clear and detailed evidence which he gave in chief, and which is objectively corroborated by the evidence of other witnesses and documents."

From this passage, there can be no doubt that the issue was very much alive in the mind of the judge. Mr. Sedgwick complained that it was not clear what documents the judge actually meant because the documents such as the invoice issued by Kin May dated 23 December, the packing list, a receipt of the Hang Tat Transportation Company, a size specification sheet, a confirmation of contract and the cheque for $80,000 referred to by the judge at pages 34 and 35 of the Reasons were all evidence coming from the accomplice and as such not capable of corroborating the evidence of the accomplice himself. Corroboration is independent testimony which confirms in some material particular the evidence of the accomplice not only that the crime has been committed but also that the applicant committed it and Mr. Sedgwick submitted that all the documents mentioned by the trial judge were not independent testimony because they all came from the same source.

43. We agree that those documents were not and could not be evidence of the kind that can afford corroboration. It would be helpful and indeed desirable if the judge had identified the documents and the evidence of any witness which he considered to be capable of corroboration.

44. It is the contention of Mr. Schapel that corroboration in this case came in the form of a body of circumstantial evidence which should not be looked at in isolation. He went on to point out documents which were capable of corroboration including the export licences, the shipping manifest and the cautioned statements given by the applicant to the ICAC. We will not recite everything that Counsel had said nor deal with all the evidence capable of corroboration. After reviewing the large body of evidence and documents, we are compelled to the conclusion that corroboration does exist in the documents and evidence. The cautioned statements of the applicant to the ICAC, which contain blatant lies, when read and considered in conjunction with the evidence of for example, Mr. Heinz Werner Betz, the freight manager of Otto Versand and Mr. Heinz Konecke, a German customs officer, both from Hamburg and documents such as the export licences and shipping manifest, are strong evidence of guilt which, in our view, afford ample corroboration of the evidence of the accomplice. The cumulative evidence is so powerful and compelling that it leaves no room for any doubt that the applicant was a party to the conspiracy playing the role that was attributed to her by the accomplice.

45. This ground of appeal must fail. Ground 7 of the Amended Perfected Grounds of Appeal reads:

"The Learned Trial Judge erred in law in failing to direct himself under the 1st Export Licence (HKGB 7-6708924), the quota was supplied by Kadoorie Industrial Company Limited (KICL) and therefore could not have given rise to any allocation of textile quota to the Kin May Garment Factory (KMGF)."

There is no merit whatsoever in this ground and we have no hesitation in rejecting it. There is still the second export licence and even Mr. Sedgwick conceded that Kin May could be allocated with textile quota under that licence. One must also not forget the evidence of the accomplice that he would get one half of the allocation for his part.

46. Accordingly, we refuse leave to appeal against conviction.