HKSAR v. CHAN KONG ON AND OTHERS

[English Translation 英譯本]
CACC 236/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 236 OF 2009

(ON APPEAL FROM DCCC 1159 OF 2008)

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(Heard Together)

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving judgment of the Court):

Background

1.  The three Applicants were the three Defendants in District Court Criminal Case No. 1159 of 2008 (hereinafter known as “D1, D2 and D3” respectively).  They were jointly charged with one count of “Conspiracy to defraud”, contrary to Common Law and punishable under s.159C(6) of the Crimes Ordinance (Cap. 200).  The particulars of offence are as follows:

“D1, D2 and D3, between the 1^st day of March 1999 and the 31^st day of May 2000, in Hong Kong, conspired with each other and with TANG Chun Lam and other persons unknown to defraud FOO Siew-choo Anna Aileen (“PW1” in short) of the sum of $500,000.00 United States currencyby dishonestly and falsely representing to PW1 that:

(i) the said $500,000.00 United States currency was to be invested in a high yield scheme to be managed by the top 25 European banks;

(ii) PW1 would receive $1.5 million United States currency to $2 million United States currency per month for ten months;

(iii) PW1’s “investment of $500,000.00 United States currency” was guaranteed by UBS AG Jersey Branch (“UBS” in short) in that she could withdraw $500,000.00 United States currency from the said UBS after the 3^rd day of May 2000 under a Bank Guarantee No. BG9905CI351. ”

2.  In late May 2000, PW1 made a report to the police for assistance.  Between 2000 and 2003, the three defendants and other persons were investigated by the police.  But it was not until October 2008 that the three defendants were arrested.  In November of the same year, they were charged with the above offence.  The case was heard by Her Honour Judge Mary Yuen in the District Court on 18 May 2009.  All three defendants applied for a permanent stay of the criminal proceedings on the ground of gross delay on the part of the prosecution in bringing them to trial, thereby causing their failure to call certain witnesses to give evidence. Having heard the evidence and submissions, Judge Yuenrefused the application.  The trial then commenced and lasted for 10 days.  On 9 June, the three defendants were convicted as charged.  On 24 June, D1 and D3 were each sentenced to immediate imprisonment for 12 months, whereas D2 was sentenced to immediate imprisonment for 18 months.

3.  The three defendants were aggrieved by the convictions and applied for leave to appeal against convictions in July 2009.  On 6 August 2009, the Department of Justice was granted leave by the Chief Judge of the High Court to apply for review of sentences imposed on the three defendants on 10 August.  The application for review of sentences and the application for leave to appeal against convictions are now dealt with together by this Court.

Prosecution Case

4.  At the time of the offence, D1 was an experienced insurance agent, D2 a practicing solicitor in Hong Kong and D3 a self-employed financial consultant.  D1 had been acquainted with PW1 for no less than 10 years.

5.  As early as in 1996, PW1 had heard D1 say that he was also engaged in some high return investment programmes for other people, in addition to his insurance work.  In 1998, D1 mentioned to PW1 again about a high return investment programme, the minimum investment sum of which being US$1,000,000 and the investor could receive a return as high as US$1,500,000 to US$2,000,000 per month in the following 10 months.

6.  PW1 was due to retire in mid-1999.  In around March or April of the year, she asked D1 to calculate the sum of her provident fund for her to decide whether she should receive provident fund or pension.  Meanwhile, D1 introduced those high return investment programmes to her again.  This time D1 told PW1 that only an investment sum of US$500,000 was required for her to participate in the investment programme, that she could still receive a return as high as US$1,500,000 to US$2,000,000 per month in the following 10 months, and that the capital of the investment programme would be used in backward countries for development.  D1 further stated that a big businessperson surnamed Tang wished to participate in the investment programme by contributing a total sum of US$30,000,000.  D1 said PW1 could participate in the high return investment programme together with the big businessperson surnamed Tang.

7.  After persuasion by D1, PW1 became interested in this investment programme.  In recommending the said investment to PW1, D1 said it would be looked after by he himself, along with a solicitor and an investment expert, and UBS would issue to PW1 a guarantee, pursuant to which PW1 could get her investment sum back in full one year later if the investment was unsuccessful.  D1 elaborated that PW1 had to share half of her profit with D1 and the participating solicitor and investment expert.  According to D1’s explanation, irrespective of whether PW1’s investment was successful or not, so far as she was concerned, it would be a sure-fire situation where there would not be any risk of loss.

8.  PW1 thus felt at ease to participate in the investment recommended by D1, and agreed to contribute US$500,000 for her participation in the investment programme.  Later, through the introduction of D1, PW1 came to know D2 and D3 who were the participating solicitor and investment expert as referred to by D1.  From then onwards, D1, D2 and D3 played their respective roles of a friend, a solicitor and an investment expert together on a number of different occasions.

9.  On 20 April 1999, D1 introduced D2 to PW1, saying D2 was a solicitor of Cheung, Chan and Chung Solicitors and Notaries and would act as a middleman and notary public in this investment programme.  D1 further said that D2 was at the same time representing the big businessperson and PW1, that D2 would “watch over” the investment programme on behalf of both parties in order to ensure the investment would go on smoothly, and that D2 would communicate on behalf of both parties should there be any problem.  In the presence of D2, D1 also pointed out to PW1 that D2 had dealt with similar investment programmes for other people before, and that D2 was very familiar with this kind of investment.  D1 reassured PW1 by telling her not to worry and pointed out again that the capital of US$30,000,000 would be invested in some backward countries for development, and that after PW1 had injected the capital, if the investment was successful, she could receive a return of US$1,500,000 to US$2,000,000 per month and half of her profit would be shared amongst D1, D2 and an investment expert.

10.  D2 did not raise any objection to what had been said by D1.  D2 also said he was well acquainted with the big businessperson who was running a huge business in the mainland, D2 would also “watch over” the progress of the said investment programme, and PW1, having with her the cash guarantee issued by bank, could feel at ease as she could get her principal back if the investment was not successful.

11.  On 27 April 1999, as appointed, PW1 went to the solicitors firm where D2 was working, and signed a set of Joint Venture Contract.  During this meeting D1 introduced D3 to her, saying that D3 was an investment expert.  D3 told PW1 that all along he had been engaged in this kind of high return investment.  D1 once again mentioned that the total capital of the programme was US$30,000,000 and the big businessperson was called Tang Chun Lam; PW1 was only required to contribute capital in the sum of US$500,000 whereas D1, D2 and D3 did not have to contribute any capital and the three of them would only assist in handling the investment programme; when the investment was successful, PW1 could get half of the profit as her share, while the remaining half of the profit would be shared amongst D1, D2 and D3.  Then the four of them signed a set of Joint Venture Contract (Prosecution Exhibit P-1).

12.  It was confirmed in the body of the contract that: PW1 shall contribute capital in the sum of US$500,000; D1, D2 and D3, as the “facilitator”, through an associated party, could arrange for the issuance of bank instruments (including a bank guarantee for a term of one year) and for the application for joining a high return investment programme to be managed by the top 25 European banks; D1, D2, D3 and PW1 agreed to set up a joint venture company in which PW1, D1 and D3 shall be its directors, PW1 shall hold half of its shares, and the facilitator shall hold the other half;  the facilitator’s associated party and the above mentioned joint venture company would form another joint venture company in which the associated party shall hold five-sixths of its interests while the latter shall hold one-sixth, and profit from investment shall be shared according to such proportion.  Attached to the contract was a copy of bank guarantee in the sum of US$30,000,000 as a specimen for reference, issued by UBS Jersey Branch in February 1999.  The same format and content would be adopted in the US$500,000 guarantee to be issued to PW1.

13.  Pursuant to the contract, PW1 set aside HK$100,000 from the US$500,000 investment sum as earnest money, and paid HK$20,000 for the acquisition of two companies, namely Artwin Investment Limited （雅慧投資有限公司）(“Artwin”) and Lansome Investment Limited （利森投資有限公司）(“Lansome”) at the request of D2.  Artwin was the first joint venture company referred to in the contract, in which PW1 held three-fourths of its shares and D2 held one-fourth.  Lansome was the joint venture company between Artwin and Tang Chun Lam, in which D2, Tang Chun Lam and PW1 were its directors, D2 also acted as its secretary, and Tang Chun Lam and Artwin respectively held five-sixths and one-sixth of its shares.

14.  On 28 April 1999, PW1 went to D2’s solicitors firm and signed another set of Joint Venture Contract (Prosecution Exhibit P-5) whereby Tang Chun Lam was appointed as the programme agent.  At the time of execution, Tang Chun Lam was not present, and PW1 signed in the capacity of Artwin’s director.  The body of the contract stated that: the investor shall pay capital in the sum of US$500,000; the programme agent would arrange for the issuance of a bank letter with a face value of US$30,000,000; the facilitator (namely, D1, D2 and D3) and the programme agent could arrange for the issuance of bank instruments (including bank guarantee) and for the application for joining a high return investment programme to be managed by the top 25 European banks.

15.  On the following day, PW1, accompanied by D1, D2 and D3, opened a bank account with Hang Seng Bank for Lansome, signatories whereof being PW1 and Tang Chun Lam.  Tang Chun Lam was not present at that time.

16.  On 3 May 1999, as prompted by D1 and D2, PW1 deposited HK$907,240 into Lansome’s account with Hang Seng Bank.  On the same day, she transferred US$370,000 from her Citibank account in New York to Lansome’s account with Hang Seng Bank.

17.  At the request of D1 and D2, PW1 signed some blank withdrawal slips in respect of Lansome’s account.

18.  D1 had told PW1 that bank guarantee was a matter to be dealt with between banks, and that the guarantee should be sent by post to a bank designated by PW1.  Therefore, on 4 May 1999 PW1 wrote to D2, asking D2 to inform the guarantee-issuing bank on her behalf to send the guarantee to Citibank, the bank designated by her.  On 7 May, PW1 wrote to Citibank, asking them to receive the bank guarantee on her behalf. Nevertheless, Citibank has never received any bank guarantee wherein PW1 is named as the beneficiary.

19.  Later, D1 told PW1 that D2 had mentioned to him that the bank guarantee had been sent by post to Tang Chun Lam, and that Tang Chun Lam had received a letter from the bank in acknowledgement of receipt of capital in the sum of US$500,000 from PW1.

20.  On 8 May 1999, Tang Chun Lam withdrew HK$900,000 in cash from Lansome’s account with Hang Seng Bank and remitted, in the name of Lansome, US$338,000 from the same account to a bank account opened in the name of Auan Li in Singapore.  On 5 June 1999, Tang Chun Lam further withdrew in cash HK$7,600 and HK$240,124 (which was converted from US$31,000) from Lansome’s account with Hang Seng Bank.  By then, the US$500,000 deposited by PW1 had almost been wholly taken away, with a remaining balance of US$275.

21.  Between May and June 1999, on one occasion while D1, his wife, D2, D3 and PW1 were having meal together in a restaurant, D2 passed an envelope of China Sources Co. Ltd. across the dining table to PW1.  The envelope contained a Letter of Guarantee with number BG9905CI351 in the amount of US$500,000 dated 3 May 1999 and issued by UBS to PW1, as well as a Bloomberg Security Display Print-out of the same day (Prosecution Exhibit P-11).  The documents were circulated to every person at the table.  D1 said he had called UBS for checking and found no problem, and that UBS was also one of the 25 biggest European banks.  D2 said Tang Chun Lam was a big businessperson and reassured PW1 by telling her not to worry.  D3 said he had checked via the Internet and that the bank guarantee bore signatures of two colours and thus it should be genuine document.  D1, D2 and D3 told PW1 not to show the bank guarantee to other people or to photocopy it.

22.  In June 1999, D1 told PW1 that his wife had a safety box and it could be used to safe-keep the bank guarantee on PW1’s behalf.  PW1 then handed the bank guarantee to D1 for safe-keeping.  In June 1999, PW1 returned to Canada for settlement.

23.  Since PW1 deposited US$500,000 into Lansome’s bank account, she has never received what all the Defendants had claimed to her, namely, a monthly profit in the sum of US$1,500,000 to US$2,000,000 for a period of 10 months.

24.  In November 1999, D1 called PW1, telling her that there were changes to the investment programme.  He said he had already signed a new set of Joint Venture Contract (Prosecution Exhibit P-21) on behalf of Artwin, and that PW1 could continue to participate in the said programme with the original conditions but D2 asked PW1 to further contribute a sum of HK$200,000.  PW1 told D1 that she did not have any extra money. Afterwards, D2 told PW1 that the investment programme could still continue to proceed without PW1 making further contribution.  PW1 then agreed.

25.  On 30 March 2000, PW1 returned to Hong Kong for holiday and had a gathering with D1 and D2, during which D2 told PW1 that the chance of success in the investment was high.  With her mind at ease, PW1 returned to Canada in April 2000.  In early May 2000, PW1’s bank guarantee was due to mature.  She asked D1 to get her investment sum of US$500,000 back on her behalf.

26.  On 17 and 18 May of the same year, PW1 learnt from D1 that they had lost contact with Tang Chun Lam, which resulted in their enquiries with the bank as to the authenticity of the bank guarantee.  On 25 May 2000, UBS Jersey Branch replied to PW1’s solicitor that the bank had never issued such guarantee in the sum of US$500,000 and that the document was a forgery. On 28 May, PW1 returned to Hong Kong.  After having consulted her lawyers, she made a report to the police on 31 May.

27.  In October 2008, the police arrested D1, D2 and D3.  On 30 October 2008, under caution, D2 participated in a video-recorded interview conducted by the police.

28.  The prosecution asserted that when D1, D2 and D3 made the three false representations in respect of the investment programme which allegedly would involve no risk of loss but would generate lucrative profits as specified in the particulars of offence, they did not really believe those representations to be true, and that those false representations were dishonest acts of persuasion which in the end led to tremendous financial loss suffered by PW1.  In paragraph 47 of her reasons for verdict, the trial judge has pointed out the crux of the case:

“The crux of the case lies on whether the three defendants did anticipate any risk of financial loss to be suffered by PW1? Was there any consensus amongst the three of them to persuade PW1 to participate in the investment programme, and were they fully aware that their acts of persuasion done to PW1 were dishonest?”

29.  Whether a defendant is proved to be dishonest must depend on two criteria.  Firstly, was his act dishonest according to the ordinary standard of reasonable and honest people?  This is an objective standard.  Secondly, was the defendant aware that his act was dishonest according to the said standard?  This is a subjective standard.  Both criteria must be met before the element of dishonesty can be proved.

Defence Case

30.  The three Defendants did not dispute that PW1’s guarantee in the sum of US$500,000 and the Bloomberg Security Display Print-out were false, nor did they dispute that they had signed the contracts mentioned above.  They did not deny that the three representations as specified in the particulars of offence did not materialize.  The particulars of offence, however, also stated that the conspirators, in addition to the three defendants, also included Tang Chun Lam and “other persons unknown”.  The question was whether the defendant knowingly joined the conspiracy to dishonestly defraud PW1.  The key areas of defence rested on the respective knowledge, belief and mentality of each defendant in relation to the investment programme, and on whether they believed or might have believed the three representations as specified in the particulars of offence to be true.

31.  PW1 was the only witness who gave evidence at the trial.  D2’s cautioned statement, which was a mixed statement, was produced in court as evidence without objection.  All three defendants elected not to give evidence or call any witness.

Verdict of the Trial Judge

32.  As none of the defendants gave evidence in court, the trial judge had to draw inferences on the mentality and intent of the three defendants at the material time, based on all the relevant evidence including circumstantial evidence, in deciding whether they were “innocent pawns being made use of by swindlers, or members of the fraudulent plot”.  Having analyzed all the details of the circumstantial evidence, the judge took the view that it was against common sense with regard to ordinary investment that the investment programme could generate a high return while involving no risk of loss at all.  As regards the suggestion that in the absence of sufficient collateral, the bank would undertake an extra risk which was equivalent to 9 times the value of the collateral, the judge was of the view that even an adult who had some knowledge on investment would not find such suggestion possible.  The only reasonable inference that could be drawn from the fact that the three defendants did not seek direct authentication of the bank guarantee from UBS through proper channels prior to May 2000 was that they knew fully well that the document was false.  In her reasons for verdict, Judge Yuen has separately analyzed and dealt with the mentality and intent of each defendant, and finally came to conclusion that on the standard of proof of beyond reasonable doubt, it was impossible for the three defendants to believe that the three representations made by them to PW1 might materialize or might be true.  The judge found that the representations made by them to PW1 were dishonest acts of persuasion and that they were guilty of conspiracy to defraud.

Defendants’ Grounds of Appeal

33.  Both D1 and D3 were represented by Mr. Joseph Tse, SC.  In D1’s Amended Perfected Grounds of Appeal, the following grounds were put forward in support of his argument that the conviction against him was unsafe and unsatisfactory:

(1) PW1, without the leave of the court, read her witness statement(s) every night during the period while she was giving evidence;

(2) The trial judge misunderstood PW1’s evidence in that she thought PW1 was saying that the investment scheme recommended to her by the defendants was “risk-free”.

(3) The trial judge had taken a preconceived view by holding a firm belief that D1 was a member of the conspiracy, before analyzing the facts relevant to him;

(4) The trial judge on her own initiative departed from the prosecution case and found, in the absence of any evidential basis, that the investment scheme did not exist at all;

(5) As a result of the trial judge’s misunderstanding of PW1’s evidence, she embarked upon speculation and found on her own initiative that the scheme did not exist at all, so that she erroneously found that D1 must have become suspicious of the scheme;

(6) On a number of occasions the trial judge embarked upon speculation against D2 by quoting from D2’s cautioned statement. She reversed the burden of proof, actually had adopted the standard of proof for civil cases and had overlooked the material evidence in the case, such as exculpatory evidence which was favourable to D1.

34.  D3’s grounds of appeal are similar to D1’s and need not be repeated here.

35.  D2 was represented by two counsel, Mr. Kevin Chan and Ms. Fiona Nam, who submitted the Perfected Grounds of Appeal containing the following points:

(1) The trial judge erroneously refused the three defendants’ application for a permanent stay of these criminal proceedings. She erroneously found that the evidence that Tony Yue, the witness that the defendant wished to call, could give would only be hearsay evidence which would not and could not be of any assistance so far as the issues at trial were concerned. She also failed to take into account any possible remedial measures or remind herself of the relevant directions in order to avoid, counteract or reduce the risk of unfairness;

(2) The trial judge should not have negated the existence and truthfulness of the investment scheme as claimed by D2 to PW1;

(3) The trial judge had given inappropriate weight to the account in D2’s statement which was a mixed statement;

(4) The trial judge erroneously and inappropriately drew unfavourable inferences against all the defendants.

36.  In the opinion of this Court, amongst all the grounds of appeal, the crucial ones are D2’s in respect of the application for stay of criminal proceedings.

Application for Stay of Criminal Proceedings

37.  At the commencement of the trial, all three defendants applied for a permanent stay of these criminal proceedings mainly on the ground that due to the gross delay in prosecution, they were unable to call witnesses whose evidence would be favourable to their defence.  D1 and D3 put forward two witnesses, namely Rodney Tang and Tony Yue, whereas D2 stated that Tony Yue was his key witness. This Court only needs to discuss the evidence that Tony Yue could give.  It is not necessary for us to deal with the evidence that Rodney Tang could give, as it is not relied upon by the grounds of appeal.

38.  In 2000, the police had taken witness statements from PW1 and the three defendants but had all along been unable to locate Tang Chun Lam.  The name “Tony Yue” was provided by D2 to the police in 2000.  In December 2003, the police arrested Tony Yue who then gave a statement under caution.  In January 2004, pursuant to the advice of the Department of Justice, no prosecution was brought against him and he was released unconditionally.  It was not until 2008 that decision was made to prosecute and arrest the three defendants upon review of the advice by the Department of Justice.  Each defendant had been having the status of a witness prior to his arrest in October 2008.

39.  It was not until January 2009 when D2’s lawyers received the “list of unused material” that they discovered that Tony Yue had once been arrested in December 2003 and released subsequently.  D2’s lawyers then asked the police to provide them with a copy of Tony Yue’s video-recorded interview.  They came to know about what had been said by him during the interview only after viewing the video-tape in March 2009.  Since 2001, the contact between D2 and Tony Yue had become less frequent.  In March 2009, D2’s lawyers advised D2 to contact Tony Yue immediately.  But D2 no longer had contact information of Tony Yue.  He had tried to contact Tony Yue through the people who were acquainted with Tony Yue, by fax and by telephone, but to no avail.

40.  On the third day into the trial, the prosecution provided to D2’s lawyers a movement record of Tony Yue, which showed that between December 2003 and October 2008, he entered Hong Kong for 143 times. But in 2008, there was an obvious drop in the number of times that he entered Hong Kong.  After all the defendants had been arrested in October 2008, Tony Yue entered Hong Kong only once in April and once in May of 2009.  On the third day into the trial, the prosecution also provided to D2’s lawyers a telephone number which might belong to Tony Yue.  But after attempts had been made, they were told that the person who answered the phone claimed that he did not know Tony Yue.

41.  D2 claimed that but for the delay in prosecution, there could have been a feasible chance of contacting Tony Yue successfully in 2003 to ask him to testify for his defence.

Tony Yue’s Role as Alleged by D2

42.  In D2’s cautioned statement, he claimed that Tony Yue and Tang Chun Lam were the masterminds behind the entire investment scheme, and that Tony Yue himself had knowledge about the investment scheme.  According to D2’s record of interview, Tony Yue was his friend in America, whom D2 came to know through the introduction of a client from his law firm.  Tony Yue told D2 that he had done some finance-related work for the US Government before.  In 1999, Tony Yue introduced Tang Chun Lam to D2.  To the knowledge of D2, Tang Chun Lam was engaged in trading and financial work and had a company known as China Sources.  D2 had also been to the company’s office situated in Sheung Wan.

43.  In 1999, Tony Yue and Tang Chun Lam had separately shown D2 some letters of credit and guarantees issued by banks.  Tony Yue had shown and told D2 that he had obtained a guarantee in the sum of US$30,000,000 in which Tang Chun Lam’s company was named as the beneficiary, and that they were having some investment programmes in progress.  Tony Yue also asked D2 if he had got any investors interested in participating in it so that they could co-operate together in making money.  D2 chose to ask his friend D3 as, to the understanding of D2, D3 was engaged in trading and financial business in the mainland and had a wider connection.  Afterwards, D3 introduced D1 to D2.

44.  In D2’s record of interview, he also mentioned that both Tony Yue and Tang Chun Lam had explained to him about the operation of the investment scheme.  After a sum of principal was injected by an investor, a major bank in Europe would issue a bank guarantee with a face value 10 times higher than the principal sum to guarantee the principal sum for a period of one year.  Meanwhile, they would make further investment by using this bank guarantee.  D2 chose to participate in this investment programme because he believed in the representations made by Tony Yue and Tang Chun Lam and that they already had a guarantee in the sum of US$30,000,000.

Tony Yue’s Video-Recorded Interview

45.  The account given by D2 above is substantiated by Tony Yue’s video-recorded interview.  Tony Yue said there had been a cooperative relationship between him and Tang Chun Lam, and he had knowledge about the operation of the investment programme. Tony Yue admitted that through him D2 came to know about the investment programme, and that as a result of what he had said, D2 came to have contact with Tang Chun Lam.

46.  Tony Yue, an American citizen, was engaged in investment business mainly in finance, and had his own financial company in the United States.  He said he arranged an investment plan with a higher-than-usual return for his clients by making use of his connection with banks, and the investment locations were mainly in Europe.  Through his friend, Mr Chiu, he came to know Tang Chun Lam.  In 1999 Tony Yue came to know through Mr Chiu that Tang Chun Lam and a person known as Lee Ching Ming (transliteration) [李政明] wanted to invest a sum of money on investment programmes.  Tang Chun Lam told Tony Yue that Lee Ching Ming could have a bank guarantee in the sum of US$30,000,000 issued to Tony Yue, asking Tony Yue to help in making investment.  The content of the investment scheme was that an investor had to inject money, which then would be used for drawing a “credit line” for the purpose of bills trading.  The investor’s money would be put into their bank(s) in the name of the investor.  As regards how the credit line would be arranged, it was a matter for the company in the United States to deal with, and it would not be revealed to him.  His role was a middleman.  If it was successful, he would have 1% commission.

47.  Tony Yue had given some documents pertaining to investment process and profit to Tang Chun Lam.  When he introduced the investment programme to Tang Chun Lam, he mentioned that (a) programme manager of the programme would make transactions with the invested capital.  Tony Yue was not responsible for making arrangement of the investment, instead he would ask his friend in America, who worked as a broker, to find a programme manager.  This broker friend would keep the information of the programme manager confidential and would not reveal it to Tony Yue.

48.  Tony Yue said D2 came to know about the said investment scheme because D2 had been acquainted with him before and had known that he could deal with the said investment scheme.  Tony Yue told Tang Chun Lam and D2 clearly that he could make it provided that there was a verified bank guarantee.  From the beginning to the end, Tony Yue had never told Tang Chun Lam the details of the scheme because he had to wait for the programme manager to inform him in black and white.

49.  Tony Yue did not think the investment scheme was problematic.  He knew that there were occasions in the United States where programme managers were summonsed by court and examined on matters relating to the profit they made, and that this type of investment scheme did exist because he had a friend who had earned profit from it and another friend who had earned commission from it.  Although he had never successfully introduced this type of investment scheme, he had personally made such referral on one or two occasions.  He started to be engaged in this type of investment scheme since 1995.  He said that after an investor had produced a copy of bank guarantee, once it had been verified, the investor could then apply for making investment.  He knew that there were really people who managed to make investment in this way, and he had personally seen successful cases.  He did not know the content of the investment scheme.  Based on his experience, he believed that this type of investment scheme did exist.

50.  Further, on 20 November 1999, Tony Yue also signed an Investment Contract [Prosecution Exhibit P-20] with Tang Chun Lam, Artwin and D2, in which it was stipulated that Tony Yue was responsible for implementing and arranging the application for participating in the said investment scheme. On 30 November 1999, D1 on behalf of Artwin signed the new Joint Venture Contract [Prosecution Exhibit P-21], because the arrangement in the original contract had been revised by the Investment Contract dated 20 November.

51.  During the video-recorded interview of Tony Yue, he had been asked about the subsequent enquiries made with UBS for verifying the bank guarantee.  He said it was probably in 1999 but did not say clearly about the exact time.  Apparently it took place after the signing of the Investment Contract on 20 November.

52.  Mr. Chan submitted that as can be seen from the above, Tony Yue’s role was very important in that he not only introduced the investment programme in question to Tang Chun Lam, but also facilitated the cooperation between D2 and Tang Chun Lam.  Tony Yue assisted Tang Chun Lam in verifying the bank guarantee and possessed knowledge to a certain extent about the operation of the investment, for instance, about the possibility of using a credit line for the purpose of bills trading.  Tony Yue had made a considerable amount of representations to D2, thereby influencing the belief of D2. According to Mr. Chan, the evidence that Tony Yue could give was highly relevant to the question as to whether it was impossible for D2 to believe the three representations as specified in the offence to be true, and it could be said that Tony Yue was an extremely crucial witness for the defence of D2.

Applicable Law

53.  The court has an inherent power to stay criminal proceedings permanently, although such power is exercised only in highly exceptional circumstances.  Where no practical remedial measure is available to remedy a situation whereby a fair trial for the accused is impossible and the continuation of the prosecution would amount to an abuse of process, a permanent stay of criminal proceeding would be granted by the court.  This is a more frequently adopted ground.  Another ground, which is relatively rare, is that although a fair trial is feasible, the entire prosecution has involved a serious abuse of process which offends the court’s sense of justice and propriety, then a stay of the criminal proceeding might also be granted by the court.  For the relevant legal principles, see the judgment of the Court of Final Appeal in HKSAR v. Lee Ming Tee [2001] 1 HKLRD 599.

54.  The ground adopted by the defendants in the present case is the first one, which is more commonly used.  The defendants contended that because they were unable to locate and call Tony Yue to give evidence in court, their defence had been unfairly prejudiced, whereby it was impossible for them to have a fair trial.  As regards this argument, the defendants had the burden of proof on the balance of probabilities.

55.  On the point of law regarding a missing witness, reference can be made to R v. Lam Tat Chung Paul & Anr. (1994) 6 HKPLR 147.  The learned trial judge, His Honour Judge Jackson in the District Court [as he then was], had set out in detail and comprehensively 14 applicable legal principles.  In assessing the importance of this witness, it is necessary for the court to consider all evidence relevant to the issue, including any statements made by this witness.  Whether or not the defendant can give the evidence which the witness is expected to give is not a factor which the court can take into account, because the defendant has the right to remain silent and the right to elect not to give evidence.  In considering whether the defendant can have a fair trial, it is necessary for the court to weigh the public interests of the two sides.  Firstly, anyone who has committed a criminal offence must be brought to justice.  Secondly, the community expects trials to be fair and to take place within a reasonable time after a defendant has been charged.  The evidence that a missing witness is expected to give need not be determinative of the issues of the case, but it must in a material way assist the accused, and therefore, the absence of such evidence would result in unfairness at trial.

56.  When an application for a stay of criminal proceedings is put before the court, it is the duty of the judge to consider whether there are any possible remedial measures to avoid or minimize the risk of unfairness, for example, by adjournments, by rulings on evidence, or by certain directions to the jury.  It is only when no practical remedial measures are available, whereby a fair trial has become impossible, that it is necessary for the court to exercise its inherent power to stay the proceedings (Secretary for Justice v. Cheung Chung Chit [2003] 3 HKLRD 447 paragraphs 13, 27, 29 and 30).

Prosecution Submissions

57.  One of the main reasons relied upon by the trial judge in refusing the application for a stay of the criminal proceedings was that even if Tony Yue were called to give evidence, his evidence would have been hearsay evidence which could not be admissible to prove the subsistence of the investment programme.  Ms. Fanny Wong, Senior Assistant Director of Public Prosecutions, for the Respondent, submitted that: Tony Yue himself had never dealt with this type of investment before; according to what he said, he only introduced investors to (a) programme manager and would earn 1% commission if subsequently the investment was successful; as regards the nature and method of the investment, he had no way to find out; none of the investors introduced by him had ever succeeded; therefore the information he could provide would only be hearsay evidence.

58.  Ms. Wong also pointed out that there were discrepancies between Tony Yue’s investment scheme and the investment scheme recommended by the defendants to PW1.  According to Tony Yue’s investment scheme, a credit line would be secured with the investor’s verified bank guarantee for the purpose of bills trading.  The investment scheme recommended by the defendants, on the other hand, was that the capital would be invested in some backward countries for development.  Tony Yue also did not mention that there would be a return 30 to 40 times the investment sum, or that a fixed sum equivalent to that level of profit would be distributed to the investor per month.  The two types of investment could not be lumped together.  Further, Tony Yue had no way to find out the nature and method of the investment scheme, it was unlikely that he could exert any influence to the belief of D2 as to the investment scheme, not to mention that the two schemes were different.

Decision of this Court

59.  It was held by the trial judge that the evidence of Tony Yue would be hearsay evidence.  With this we do not agree.  Of course, if this evidence was only to be used to prove whether the investment programme existed or not, it would indeed be hearsay evidence.  Nonetheless, the trial judge had overlooked that such evidence could also be used to prove the mentality and thinking of Tony Yue with regard to the investment scheme.  If this was the purpose of the evidence, then it should not be regarded as hearsay evidence.  In this regard, the trial judge was wrong.

60.  Although Tony Yue’s investment scheme was not entirely identical with the one recommended by the defendants to PW1, it cannot be denied that the two schemes are related.  This can be clearly seen from the joint venture contracts signed on the two occasions respectively in April and November 1999.  They are Prosecution Exhibits P-5, P-20 and P-21.

61.  If the trial judge had not ruled that the evidence that Tony Yue could give was hearsay evidence, she would not have made the mistake of holding that his evidence did not have any value.  Tony Yue had his own personal knowledge about the investment scheme, although he was not responsible for making arrangement for the investment and he just looked for a programme manager through his broker friend.  It was through Tony Yue’s facilitation that D2 and other defendants came to know Tang Chun Lam, before they came to have contact with this investment scheme.  The defendants claimed that the representations made by Tony Yue to D2, including those in relation to Tang Chun Lam’s bank guarantee in the sum of US$30,000,000., had exerted influence on D2’s and other defendants’ belief as to the investment scheme (and) on whether they believed or might have believed in the three representations as specified in the offence.  In the opinion of this Court, this is an important consideration.

62.  We take the view that Tony Yue is a crucial witness in the present case.  If he had given evidence in court, the trial judge could have had more direct evidence to make a finding on the mentality and acts of each defendant, and it would not have been necessary for the trial judge to draw inferences based on the facts and circumstantial evidence of the case. The failure of the Defendants to call him to give evidence has unfairly prejudiced them, thereby making it impossible for them to have a fair trial.

63.  Another error of the trial judge was that she did not consider or fully consider what possible remedial measures could have been taken to avoid or minimize the risk of unfairness.  Mr. Chan pointed out that when the application was being heard by the trial judge, there was the mention about issuing a subpoena to Tony Yue and putting his name into the Stop List of the Immigration Department, but the feasibility of these approaches was not further explored.  The judge also did not consider other measures which could assist the defendants to locate Tony Yue, such as by adjourning the trial, by issuing a letter of request, or by suggesting to the police to give an undertaking not to arrest Tony Yue in connection with this case in order to increase the chance of locating him and the chance that he would be willing to give evidence in court.

64.  In giving verdict of the case, the trial judge also failed to remind herself of certain directions such as those relating to the extent to which the defence of each defendant might have been handicapped and how the issues she had to decide had been affected due to the failure to locate and call Tony Yue to give evidence in court, in order to counteract any prejudice which the defendants might otherwise suffer.  On the contrary, it was emphasized by the trial judge from time to time that it was impossible for the investment scheme to actually exist, by saying, for example: “reasonable people would certainly be doubtful of the legality of such operation”; “this type of investment is indeed against common sense with regard to ordinary investment”; “it is contrary to common sense with regard to investment known to ordinary and reasonable people”; “as regards the allegation that it was completely risk-free, it is not a normal business operation that any reasonable person would find acceptable”; “the allegation that the investment would bring a return of profit 30 to 40 times without any investment risk is against the general concept on investment”.  All these remarks demonstrate that the trial judge had in effect refused the evidence that Tony Yue could give in relation to the investment scheme, and that she did not think the representations made by Tony Yue to D2 would exert any influence on D2’s and other defendants’ belief with regard to this investment scheme.  Therefore, the conviction against each defendant was unsafe and unsatisfactory.  See R v. Holgate (No. 1) [1996] 3 HKC 315, line E to line G in page 321 and line C to line E in page 323.

65.  It is noted by this Court that in the reasons for verdict, when the trial judge mentioned about Tony Yue, she addressed him as the “person who participated in the case” (paragraphs 62, 71 and 75).  Although the trial judge did not use the word “co-conspirator” which appeared in paragraph 95 to describe him, it can be seen from the matters described in paragraphs 71, 75 and 77 that she was treating Tony Yue and Tang Chun Lam, who was specified as a co-conspirator in the particulars of offence, as members of the same group. In the opinion of this Court, it was seriously wrong for the trial judge to treat Tony Yue as a co-conspirator, which was not the case relied upon by the prosecution, without informing the prosecution and the defence of such view beforehand. 

66.  By reason of the above errors, the trial judge did not fully consider the importance of the evidence which Tony Yue could give as far as the defendants were concerned, and erroneously exercised her discretion to refuse the application for a stay of the criminal proceedings.  This fundamental error cannot be rectified by this Court substituting its discretion for hers.  The only appropriate approach is to set aside the convictions, with the issue of a re-trial being reserved for consideration (see R v. Takeshi Machiya [1990] 1 HKC 73, line I in page 82 to line B in page 83).

67.  We have heard submissions on the other grounds of appeal advanced by the three defendants.  But in view of the above conclusion, it is not necessary to deal with those grounds, nor is it necessary to deal with the application by the Department of Justice to review the sentences.

68.  Leave to appeal against convictions is granted to the three defendants.  We treat the hearing of the application for leave as the hearing of the appeal.  The appeal is allowed and convictions against the three defendants are quashed.  At the hearing we have already given directions as to how to deal with the intended applications by both parties. The defendants intended to ask for costs of the appeal and of the trial at first instance.  The Department of Justice intended to ask for a re-trial.  If there is any application for a re-trial, this Court will decide, after having considered the grounds of application, whether it is necessary to hear the application in open court.  As regards costs, there will be open court hearing if the matter cannot be resolved by way of written submissions.

Translated by the Judgment Translation Unit of the Judiciary and approved by Mr. P. Y. Lo, Barrister-at-law.