HKSAR v. CHEONG BUN KWAN

DCCC1173/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1173 OF 2011

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Reasons for Verdict

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The defendant’s plea of not guilty

1.  The defendant enters a plea of not guilty to one charge of fraud, preferred against her pursuant to section 16A of the Theft Ordinance, Cap. 210.

Offence

2.  It is alleged in the Particulars of Offence that on or about 15 June 2007, the defendant, by deceit, presented fictitious Bills of Lading to JP Morgan Chase Bank, N.A., and falsely represented to the bank that the goods as stated in the said Bills of Lading were sold by Long Label Limited, and with intent to defraud, induced the bank to approve and pay to Long Label Limited a loan in the sum of US$299,997, resulting in benefit to Long Label Limited or in prejudice or a substantial risk of prejudice to the bank.

Prosecution case

3.  The defendant and her husband, Mr Yeung, used to be clients of Bank One, and in that capacity, they became acquainted with Mr Matthew Luk.

4.  In early 2005, Bank One merged with JP Morgan Chase Bank, at which time Mr Luk worked as a Vice President of JP Morgan Chase Bank charged with the duty to liaise with former clients of Bank One. 

5.  On 24 March 2005 the defendant acquired the only share of a US$1, BVI company called Long Label Limited and was appointed its only director.  

6.  On 25 July 2005, with the assistance of Mr Luk and in the presence of her husband, the defendant opened an account with JP Morgan Chase Bank in the name of Long Label.  She and Mr Yeung were signatories of the account, authorised to issue or confirm payment and non-payment instructions to the bank.

7.  That day, Long Label applied for and was granted facilities to deal with documentary credits under a Trade Financing General Agreement with the bank.

8.  In processing transactions under this agreement, the bank was authorised to accept telephone, facsimile and e-mail instructions from the defendant only (see Telephone, Facsimile and/or E-mail Instructions).

9.  The bank had, between July 2005 and January 2007, processed without incident a number of applications by Long Label for negotiation of Letters of Credit issued in its favour.

10.  Bank statements of Long Label for the whole of 2007 showed that there was but one such transaction.  It took place on 18 June 2007.

11.  That day the bank negotiated a telegraphic Letter of Credit submitted – together with documents stipulated in it, including Mantun Tranship Limited’s Bill of Lading – by Long Label and had a sum of US$299,705, net of bank charges, credited to Long Label’s account.

12.  Almost immediately afterward, the bank received from the defendant a remittance application authorising the transfer to a Taiwanese company a sum of US$287,997.  The bank processed the remittance accordingly.

13.  The bank then sent the issuing bank, namely, Taiwan Cooperative Bank, the Letter of Credit and the stipulated documents and asked for repayment of the sum of US$299,997.

14.  The issuing bank refused to do so, alleging the stipulated documents did not comply with the requirements of the Letter of Credit.

15.  Mr Luk contacted the defendant about the matter.  She said it was a trade matter and that she had to contact the buyer in Taiwan.  For a couple of months that followed, Mr Luk received no substantive reply from her. 

16.  On 29 August 2007 the bank sought repayment of the amount credited to Long Label’s account, but to no avail.

17.  On 27 September, the defendant signed a letter agreeing to repay the money by instalments.  The next day the defendant signed another letter and made a complaint of negligence against the bank.

18.  Despite her letter of complaint of 28 September, the defendant started to make repayment by instalments of the money with interests pursuant to her letter of 27 September.

19.  Meanwhile, the investigation department of the bank embarked on an enquiry into the case.  The goods referred to in the Bill of Lading were untraceable, and on 29 October 2007, Wan Hai Lines (HK) Limited, the carrier referred to in the Bill of Lading, certified the Bill a false bill.

20.  Up to 5 February 2008, the defendant had made repayment to the bank totalling US$77,632.17.

21.  On 19 February 2008 a team of police officers arrived at the defendant’s residence and had her arrested.  She exercised her right to remain silent.

22.  A house search was conducted in the defendant’s presence.  The police found, among other things –

Documents

(1) a pile of blank Bill of Lading of Mantun Tranship Limited,

(2) a pile of blank Air Waybill of Mantun Express Limited,

(3) original letter of the Bank of East Asia (China) Limited, Guangzhou Branch, to Long Label dated 14 June 2007, supplying Long Label with the original Letter of Credit,

(4) copy telegraphic Letter of Credit in the form of a Message Report between Taiwan Cooperative Bank and the Bank of East Asia (China) Limited, Shanghai Branch, dated 14 June 2007,

(5) original invoice of Long Label to Jiu-Bao-Tai Industrial Company Limited, dated 15 June 2007,

(6) original packing list of Long Label, dated 15 June 2007,

(7) original export transaction application of Long Label to JP Morgan Chase Bank, dated 15 June 2007,

(8) copy Bill of Lading of Mantun Tranship Limited,

(9) original remittance application of Long Label to transfer money to Servenet Technology Incorporation, dated 18 June 2007,

Other items

(10) one square chop ‘For and on behalf of Long Label Limited’,

(11) one oval chop ‘Mantun 1Tranship Limited’,

(12) one round chop ‘Long Label Limited’,

(13) one round chop ‘Mantun Tranship Limited’, and

(14) one electronic typewriter with ribbon.

  Items (4) to (8) constituted the full set of documents the defendant submitted to the bank for negotiation purposes.

23. There was no registration in Hong Kong of a company in the name of Mantun Tranship Limited.

Defence case

24.  The defendant, a person of clear record, gave evidence as follows.

25.  Brought up on the mainland in a family of a military background, the defendant could barely manage simple, common English words.  After completing her secondary studies in Guangzhou, she worked as a statistic officer of a construction company. 

26.  She got married with a Hong Kong resident Mr Yeung and came to Hong Kong in 1992.  After the birth of her son the following year, she returned – her son with her – to live in Guangzhou until July 1999.  She then settled in Hong Kong so that her son could attend primary school here. 

27.  In 1998 she and Mr Yeung purchased a flat under the Home Ownership Scheme.  The defendant had had no employment in Hong Kong and had stayed home to look after her son.

28.  Mr Yeung was a well-educated businessman, who had gone to Taiwan as an overseas student and completed his university studies there, and then obtained a Masters Degree in the United Kingdom.

29.  In the 1990s and early 2000s, many Taiwanese businessmen had their production lines set up on the mainland.  When their products were exported from China, they would prefer to receive the proceeds at a place other than the mainland.  The reason was that once received there, the money would be subject to restrictions on capital outflow.

30.  So after his academic pursuit, Mr Yeung acted as an agent for negotiation of documentary credits, so that proceeds of the sale of goods produced by Taiwanese firms on the mainland could be received in Hong Kong. 

31.  The defendant had never, she said in evidence, involved herself in her husband’s business.  After settling in Hong Kong in 1997, her husband took her to the Companies Registry to have a couple of companies registered for her.  Her husband did not tell her – and she never asked – why he did so.  She did not ask, she explained, because she was happy she could own some companies in Hong Kong.

32.  In 2000 Mr Yeung introduced to the defendant a person by the name of Gar Hing, said to be a shareholder of Mantun.  Gar Hing left some of his belongings inside the defendant’s study.  Mr Yeung told the defendant to make available to Gar Hing the use of the fax, computer, etc.

33.  In about 2003 the defendant hired an extra maid to look after her aged mother-in-law and discovered by chance that the maid had experience in shipping documents.  Since then, Mr Yeung had instructed the maid to deal with those documents in his business.

34.  In early 2005 Mr Yeung took the defendant to the Companies Registry and had Long Label incorporated in Hong Kong.  Mr Yeung asked the defendant to hold this company for him as he had to travel frequently for business, and it would be more convenient for the defendant to deal with the bank in his absence.

35.  Between 2000 and mid-2006, Mr Yeung and Gar Hing would work together once or twice a month inside the study of the defendant’s residence. 

36.  Mr Yeung’s business shrank in the mid-2000s.  The maid who had been assisting him left his employ towards the end of 2006 or in early 2007. 

37.  In June 2006 Mr Yeung left Hong Kong, after which time he would give prior notice by phone to the defendant whenever Gar Hing had to use the study.

38.  The defendant managed, for a time, to maintain telephone contact with Mr Yeung and had after the maid’s departure urged him to hire another person to run the business. Considering the low volume of business at that time, Mr Yeung told the defendant that Gar Hing would assist in dealing with the documents until Mr Yeung’s return – which, as it turned out, had never occurred.

39.  One day in June 2007, Mr Yeung called the defendant saying he had negotiated a US$300,000-worth bill and asked her to wait for the arrival of the documents.

40.  A couple of days later, the defendant received a packet by courier early in the morning.  It contained a set of documents, which the defendant sent by facsimile transmission to Mr Yeung in Taiwan. 

41.  After checking the documents, Mr Yeung called the defendant and said the documents could not be sent to the bank as there were multiple errors in the Bill of Lading.  He said he would contact the forwarder and would then call her again.

42.  Later the same day, Mr Yeung called to tell the defendant that Gar Hing would go to her home.  When Gar Hing arrived that afternoon, the defendant called Mr Yeung and then passed the phone to Gar Hing.  She then went inside her room leaving Gar Hing alone to use the facilities in the study and the computer in the lounge. 

43.  When Gar Hing finished preparing the documents, the defendant had them faxed to Mr Yeung.  Upon checking, Mr Yeung found an error, still, in the shipping document and instructed Gar Hing to initial the amendment and affix a round chop of Mantun against it.

44.  Mr Yeung told the defendant to ensure the original, erroneous shipping document must be torn in her presence.

45.  Gar Hing had all the documents sorted out.  Among them was a remittance application.  The defendant was told not to have the remittance application submitted to the bank as yet.

46.  Next morning the defendant took the full set of negotiation documents to the bank and handed them over to Ms Leung of the Bills Department in Shatin.  On her way home but before she had even left the Shatin area, Ms Leung called the defendant saying there was a problem with the documents.

47.  The defendant returned to the bank immediately and was told a minor amendment to the Bill of Lading was required.  The defendant called Mr Yeung, who arranged for Gar Hing to meet up with her in Shatin.

48.  Gar Hing turned up with the Mantun chop and stamped the amendment the bank required.  The defendant took him to the Bills Department, gave Miss Leung the full set of documents for negotiation, and asked her if any other amendments might be required.  When assured that no further amendment was necessary, Gar Hing went to the mainland.

49.  When she received notification that her application for negotiation of Letter of Credit had been accepted, the defendant sent the remittance application by facsimile transmission to the bank and had the better part of the proceeds transferred to a company in Taiwan.

50.  Some time later, Mr Luk informed her the issuing bank refused to settle repayment and asked if there might be problems with the documents she submitted to the bank.  The defendant became very nervous and asked Mr Luk to make a report to the police immediately.  Mr Luk declined to do so and told her not to ‘blow up the matter for the time being.’ 

51.  Towards the end of September 2007, Mr Luk asked the defendant for a letter requesting the bank to insist on repayment by the issuing bank.  As she was unable to write in English, Mr Luk drafted the letter on her behalf.

52.  The defendant attended Mr Luk’s office to sign the letter.  She was presented with an additional letter dated 27 September with the figures US$20,000 and US$30,000 in it.  She asked what that letter was about.  Mr Luk said it was important to make sure that Long Label’s account would not become stale and explained that this second letter was just like a letter of intention to make a repayment. 

53.  The defendant said in evidence that Mr Luk and his superior exerted pressure on her to get her to sign the letter, saying if she refused to sign it, Long Label’s account would be suspended.

54.  At that moment, neither the bank nor the defendant could reach Mr Yeung on the phone.  Thinking it was important to Mr Yeung’s business that the account should remain operative, the defendant signed the two letters and, at the same time, made the first instalment.

55.  Since then, the bank acted, the defendant said, like a debt collector and pursued her daily for repayment.  The defendant paid all she could, and then borrowed money and sold a piece of property she inherited from her father in Guangzhou to make repayment to the bank.  In the end she was declared bankrupt.

56.  When the police conducted the house search, they asked her, the defendant said in evidence, about the documentary exhibits and who used the facilities in the study and the computer in the lounge.  The defendant told the officers Mr Yeung and his friend had the use of the study; she knew nothing about the chops and the blank documents seized by the police; the computer was used by Mr Yeung and her son; and she did not know how to use the computer herself.

57.  Finally the defendant lost contact with Mr Yeung in early 2008.

Analysis

1. General consideration

58.  The prosecution bear the onus of proof to satisfy the court of the defendant’s guilt beyond all reasonable doubt, failing which the defendant must be acquitted.

59.  The defendant is a person of clear record.  This enhances the credibility of her evidence and supports the lack of propensity on her part to commit a crime.

2. Credibility and reliability of witnesses

2(A) Prosecution witnesses

2(A)(i) The first prosecution witness, Mr Luk

60.  By way of cross-examination, the defence raised a number of issues with Mr Luk.

61.  Mr Luk said he was never told that Long Label was a commission agent, and the bank had had no evidence of that.  The defence suggested, however, he had always known that Long Label was just a commission agent charged with the duty to receive the negotiation documents and the proceeds, having no interest in the goods referred to in the Bill of Lading at any stage. 

62.  In support of that suggestion, the defendant said – and Mr Luk agreed – Long Label had little assets and that commission agents were very common in Hong Kong.  The defence referred Mr Luk to his statement to the police in which he said the defendant had told him Long Label was but a commission agent. 

63.  Mr Luk maintained that the bank was not privy to the contractual arrangement between Long Label and the ultimate buyers, and the bank would require the beneficiary named in the Letter of Credit to have knowledge of the underlying sale and purchase of the goods. 

64.  On this issue, the court accepts Mr Luk’s evidence.  There was no conceivable motive whatsoever on Mr Yeung’s part to disclose the true status of Long Label to Mr Luk.  Such disclosure was uncalled for and could complicate the matter for Mr Yeung.  In Mr Luk’s statement to the police, he said the defendant told him Long Label was a commission agent only after the questioned transaction had taken place. 

65.  In any event, the defence agreed that documents submitted to the bank by Long Label, whether a commission agent or an import/export trader, should be true documents rather than fictitious.

66.  Further, it was suggested to Mr Luk that the account opening documents, which were all in English, had not been explained to the defendant when she opened the account.  Mr Luk disagreed and said the gists of the documents were explained to the defendant; in any event, Mr Yeung, who was fluent in English, was present at the meeting throughout.

67.  It goes without saying that as the defendant’s husband, Mr Yeung would have protected the defendant’s interest.  The court accepts Mr Luk’s evidence and finds that the defendant must have sufficient understanding of the nature of the account opening procedure and was not prejudiced in any way by her difficulty in the English language. 

68.  Mr Luk agreed with the defence the bank’s position had been that the stipulated documents answered the requirements of the Letter of Credit and that the issuing bank should have made repayment.  However, it was established in re-examination that the bank took that position well before they were told the Bill was a false bill.

69.  Another point that was raised with Mr Luk concerned whether Mr Luk had said to the defendant, albeit vaguely, that the stipulated documents submitted to the bank were false.  Mr Luk denied making any such direct allegations, or that the defendant had suggested calling the police.

70.  In the court’s view, it would have been unwise for Mr Luk to make any suggestion or allegation of foul-play.  Such allegations, if unsupported by the clearest of evidence, would be defamatory and would harm the bank’s relationship with its clients.  The court accepts Mr Luk’s evidence on this point: he had only asked the defendant whether there might be problems with the documents.

71.  Mr Luk said – fairly, in the court’s view – that rather than the defendant, it was Mr Yeung who had had control of the business prior to the questioned transaction.  Further Mr Luk agreed that apart from the negotiation of this Letter of Credit, Long Label’s account had been problem-free.  However, when the bank failed to obtain repayment from the issuing bank, it pursued the defendant for the money.  The court finds that this was only natural as the defendant was the account holder and applicant in the negotiation application.

72.  Mr Luk confirmed, again fairly, that in his discussion with the defendant about the matter, the defendant said she had had no knowledge of the underlying transaction.  The court notes the defendant’s clear record, which enhances the credibility of what she told Mr Luk, but the issue of her state of knowledge is one which the court has to decide in light of the totality of  evidence.

73.  Mr Luk conceded, honestly, of having assisted the defendant in drafting the two letters she signed towards the end of September 2007, one of which, the court notes, was a complaint letter against Mr Luk’s own employer – the bank. 

74.  In light of the entirety of evidence, the court finds Mr Luk truthful, honest, and reliable. 

2(A)(ii) The second prosecution witness, Inspector Leung

75.  Inspector Leung was called at the instance of the defence for cross-examination.  According to the police records, the Taiwanese buyer Jiu-Bao-Tai Industrial Company Limited referred to in the Bill of Lading could not be found.

76.  The court accepts Inspector Leung as an honest and reliable witness.

2(A)(iii) The third prosecution witness, Ms Esther Tong of Wan Hai

77.  Ms Tong gave evidence that she had inspected the Bill of Lading in question and conducted an enquiry based on the information in it. 

78.  As Manager of the Import and Export Department of Wan Hai Lines (Hong Kong) Limited, she could tell from looking at the Bill of Lading that Mantun was not an agent of Wan Hai.  If Mantun was an agent of Wan Hai, Ms Tong said, the Bill of Lading should have referred to Wan Hai by its full name, not just ‘Wan Hai’. 

79.  Further, by looking at their numbers, Ms Tong confirmed the several containers in the Bill of Lading did not belong to Wan Hai and were not those Wan Hai would normally rent from other companies.  She could from her personal knowledge identify Wan Hai’s containers and those rented by the company by reference to the prefix to the container numbers.

80.  With the help of others, she had also consulted the computer records of the company, and found by reference to the vessel name and voyage number that the batch of goods referred to in the Bill of Lading did not exist.

81.  Ms Tong remained unshaken under cross-examination.  There was nothing inherently improbable, unreasonable, or contradictory in her evidence.  The court finds her honest and reliable.

2(A)(iv) The fourth prosecution witness, Miss Leung Bik-yi of JP Morgan Chase Bank

82.  This witness remembered little of her involvement in this case.  Her evidence does not take the prosecution case further.

2(A)(v) The fifth to eighth prosecution witnesses

83.  These witnesses were tendered for cross-examination.  They denied that when the exhibits were seized from her home, the defendant had made any explanations about their use or ownership. 

84.  There was nothing inherently improbable, unreasonable, or contradictory in these officers’ evidence.  The court finds them honest and reliable. 

2(B) Defendant

85.  Despite her clear record, the court finds the defendant untruthful and unreliable as a witness.

86.  The defendant maintained she had no knowledge about business matters and was never involved in her husband’s business.  And yet, with virtually no prior discussion, her husband just took her to the Companies Registry to name her as director or shareholder of various companies, and she had never asked her husband why he did so.  The court finds this most unreasonable and contrary to common sense.

87.  By her evidence, the defendant suggested that Gar Hing had left behind in her study Mantun’s chop and blank documents.  A company chop is, in the court’s view, an important instrument.  It defies common sense for anyone to leave a company chop without retaining effective control over its use.

88.  Even if Gar Hing had to use the facilities at the defendant’s home, there would have been no reason whatsoever why he could not have the company chop and documents taken away after using the defendant’s facilities.

89.  In any event, when the questioned Bill of Lading needed to be amended, Gar Hing met up with the defendant in Shatin with another Mantun’s chop.  This demonstrates clearly Gar Hing could carry Mantun’s chop around and that it was totally unnecessary for him to leave Mantun’s chop, an important instrument of the company, at the defendant’s place. 

90.  The defendant said she signed the letter of 27 September 2007, in which she agreed to make repayment to the bank, because she wanted Long Label’s account to remain operative for her husband’s business. 

91.  However, bank statements of Long Label’s account showed that the company had had but one commercial transaction in the whole of 2007, namely, the questioned negotiation of Letter of Credit.  In this period, the defendant’s husband was out of Hong Kong and the defendant was the only person who could operate the account, the only person who had authority to instruct the bank to negotiate Letters of Credit in favour of Long Label.

92.  The court finds it impossible that the defendant would have had no knowledge that Long Label’s business had practically stopped that year.  It is most improbable, in the court’s view, that the defendant signed the letter of 27 September in order to keep Long Label’s account alive. 

93.  Mr Luk had hinted to the defendant that there might be problems with the documents.  The defendant said her reaction had been that a report should be made to the police.  All along she denied any wrongdoings.  But when the bank asked her for repayment, she agreed to do so rather than making a report to the police herself.  The court finds the defendant’s behaviour contrary to common sense. 

94.  When arrested and cautioned, the defendant remained silent.  At the police station (by which stage she was in the company of a lawyer), she continued to exercise her right to silence.  With this much the defence agrees.  Yet, the defendant said in evidence that when the exhibits were seized from her home, she had made various utterances the effect of which was, it seems clear, to distance herself from the incriminating items.

95.  Her evidence in this respect is clearly contrary to her stance of maintaining silence under caution, with and without legal assistance, and is contradicted by the evidence of four police officers, whom the court has found to be honest and reliable.  The court rejects the defendant’s evidence on this point.

96.  In making the above ruling, the court bears in mind it was the defendant’s right to remain silent under caution and ignores the prosecutor’s criticism of her for not revealing Gar Hing’s involvement at that stage.  No adverse inference could be drawn from the way she exercised her right in this regard. 

97.  A receipt chop on the back of the negotiation application showed that the bank received the application on 18 June 2007.  According to her evidence, the defendant must have received the packet of documents on the morning of 17 June, and Gar Hing must have prepared the Bill of Lading at the defendant’s home that afternoon.

98.  According to her immigration movement records, however, the defendant had been away from Hong Kong between 15 and 17 June 2007.  In cross-examination, she sought to explain she could not remember the date clearly given that the event had taken place several years ago.

99.  Gar Hing was, according to the defendant, specifically called in to deal with the seriously defective Bill of Lading; the defendant had had the documents faxed to her husband a couple of times for vetting; and her husband had demanded for the defective Bill of Lading torn up in her presence.  The defendant was able to recall these details without difficulty, and yet, failed to remember having had the packet of completed documents for several days before handing them over to the bank.  The court finds the defendant’s explanation unbelievable.

100.  In light of all the evidence of the case, the court is of the view that the defendant had indeed forgotten she had gone to Shenzhen between 15 and 17 June 2007 when she made up the story about Gar Hing’s involvement. 

3. The defence submission

101.  Counsel for the defence makes numerous submissions on the facts which clearly hinge upon the court’s determination on witness’s credibility and reliability.  It is unnecessary to deal with each and every of the points raised, nor is it necessary to canvass in depth the various authorities referred to by the defence, which the court has carefully considered.

102.  The defence takes, principally, two points: is there sufficient evidence showing, first, the Bill of Lading was fictitious, and second, the defendant was dishonest?

3(A) Was the Bill of Lading fictitious?

103.  The defence submits that Ms Tong’s evidence where it relates to her tracing the batch of goods referred to in the Bill of Lading is inadmissible.  It is argued that the prosecution have failed to provide the court with a computer printout and a certificate pursuant to section 22A of the Evidence Ordinance, Cap. 8, or alternatively, have failed to adduce evidence to satisfy the requirements of section 22 of the same Ordinance.

104.  Ms Tong was not called to establish any positive facts, but to give evidence on a negative fact, namely, the shipment of goods to which the Bill of Lading referred did not take place.  In this regard, section 17A of the Evidence Ordinance, Cap. 8, provides –

(1) Where in any criminal proceedings the happening of an event of any description is relevant, and it is proved that a system has been followed whereby a person acting under a duty has compiled a record of the happening of all events of that description, evidence that there is no record of the happening of the event in question should be admitted as prima facie evidence to prove that the event did not happen.

105.  For evidence of a negative fact to be admitted under this section, the prosecution have to prove that there was a system in Wan Hai in which a person acting under a duty had compiled a record of all shipments of goods via Wan Hai.  The question is whether there is evidence before the court from which inferences can be drawn that there was such a system in Wan Hai and a person in performance of his duty had compiled the relevant record. 

106.  Ms Tong gave evidence that Wan Hai was a well-established enterprise.  Its Head Office was located in Taiwan, it had branch offices in Hong Kong and all major cities on the mainland, it had its own vessels, and it was expanding.  The company had been computerised and would not keep documentary records.  All data, except the container numbers, were manually fed into the company’s computer; the container numbers were directly transposed from pier records.  Ms Tong confirmed that as a shipping company, it was absolutely necessary to be careful with the records, for fear that anything should happen to the goods.

107.  Had Ms Tong been called to testify to the occurrence of certain events, the court agrees that a computer certificate would be required pursuant to section 22A.  A computer certificate does not, however, form part of the requirements of section 17A, which requires the court to be satisfied, rather, that there has been a system by which a complete set of records was maintained.

108.  From Ms Tong’s evidence, the court finds beyond all reasonable doubt that a system must have been maintained at Wan Hai whereby a person or persons under duty would compile computer records of all shipments of goods via Wan Hai, and that her evidence that there was no record of the shipments of goods referred to in the questioned Bill of Lading is admissible.

109.  The defence complains that Ms Tong did not trace the loading of goods at Qing Tao.

110.  It was Ms Tong’s evidence that records of all Wan Hai’s shipments were kept in the Head Office.  The system at the Head Office was linked with Ms Tong’s system in the Hong Kong branch office, which she had checked; she confirmed that the shipment in question did not exist.  In the court’s view, there is no substance in the defence complaint about Ms Tong not conducting a check with the Qing Tao branch. 

111.  The defence further complains that the police had not conducted a search in Taiwan concerning Mantun.

112.  The Bill of Lading in question was purportedly issued by Mantun, but it contained no reference to Mantun’s address, telephone number, fax number, e-mail address, or any means of contact at all.  The police seized Mantun’s company chop and blank documents at the defendant’s home, a residential rather than commercial premises.  In these circumstances, the court finds that there was nothing improper for the police not to conduct a search world-wide for this company. 

113.  The defendant revealed in court for the very first time that a person with a Taiwanese connection, namely, Gar Hing, said to be Mantun’s shareholder, had been involved.  The court accepts that it was within her right to reserve her defence to the last minute, but is of the view that she cannot now be heard to be complaining that the police had not conducted an enquiry on Mantun in Taiwan.

114.  Was the Bill of Lading a true bill?  The court notes that the Bill of Lading contained no means of contact with Mantun, a company found to be non-existent in Hong Kong.  The containers referred to in the Bill did not belong to, nor were they those normally rented by, Wan Hai.  If Mantun had been an agent of Wan Hai, Wan Hai would have been referred to as the carrier by its full name.  The company chop of Mantun was found in the defendant’s home rather than any commercial premises. Further, it was Mr Luk’s evidence that theoretically, Long Label could have claimed the goods relying on the Bill of Lading (if it was not fictitious) and would have suffered little loss.  Yet, the defendant had to exhaust her savings and borrowing capacity to make repayment to the bank, which eventually led to her being declared bankrupt.

115.  Having considered the entirety of evidence, the court draws the only reasonable and irresistible inference that the Bill of Lading was a fictitious one in that the shipment of goods to which it referred did not exist.  This conclusion is reached independently of, but it turns out to be strongly supported by, Ms Tong’s computer search for the goods with negative result. 

116.  The case of Shanghai Tongji Science & Technology Industrial Company Limited v Casil Clearing Limited (2004) 7 HKCFAR 79 surely did not contemplate a situation in which the underlying transaction was fake, and the case is therefore distinguishable on this ground.

3(B) Was the defendant dishonest?

117.  The defence argues that the defendant, a person of clear record, had merely followed her husband’s instructions to deal with the documents not knowing the underlying transaction did not take place. 

118.  It has been pointed out to the defendant in cross-examination, and she agreed, that she could readily identify various commercial documents in English.  The court does not accept that the defendant was just a housewife with no knowledge of matters of trade and commerce. 

119.  The defendant maintained she could not use the electronic typewriter and the computer.  The defendant having worked as a statistic officer of a construction company, the court is unable to accept that the use of an electronic typewriter and the computer could be completely beyond her.  

120.  When pressed by the prosecutor, she admitted that the Mantun chop was kept among the company chops of Long Label.  She knew therefore of the existence of the Mantun chop at her home. 

121.  The defendant chose to make repayment to the bank, to the point of having to exhaust her savings and the limit of her credit cards, to borrow money from friends, and to sell her property in Guangzhou, and yet, has failed to do the most natural thing of all, namely, to make a report to the police and ask for an enquiry into Gar Hing.  This defies common sense.

122.  The defence argues that Long Label had in fact levied a commission before sending the proceeds to Taiwan, and this was, so the argument runs, consistent with the negotiation of the Letter of Credit being a regular, commissioned deal.  The defence submits therefore that this supports the argument that the defendant had had no knowledge of the underlying transaction.  In the court’s judgment, this aspect pales into insignificance when viewed against the numerous considerations referred to in the preceding paragraphs.

123.  On the totality of evidence, the court rejects the defence submissions and finds beyond all reasonable doubt that the defendant knew Mantun never existed; she was instrumental in the creation of the fictitious Bill of Lading, fictitious in the sense that the shipment to which it related never took place, of which she was fully aware; and she had been dishonest within the meaning of Ghosh in submitting the fictitious Bill of Lading to the bank.

3(C) Did the prosecutor put his case?

124.  The prosecutor cross-examined the defendant extensively on the circumstances of the creation of the Bill of Lading and on the involvement and existence of Gar Hing, who had, the defendant insisted, prepared the fictitious Bill.  The veracity of the Bill and the defendant’s knowledge of it were, in the context of this case, sufficiently raised by the prosecutor.

125.  The court finds no substance in the defence complaint that the defendant has been deprived of an opportunity to deal with these issues in evidence.

4. Conclusion

126.  The court finds beyond all reasonable doubt that the defendant knowingly and dishonestly presented the bank with the fictitious Bill of Lading, and falsely represented thereby that the goods stated in it had been sold by Long Label.

127.  The court accepts Mr Luk’s evidence that the bank would not have processed the negotiation application had it known that the Bill of Lading was false.

128.  The bank has suffered prejudice in that it was induced by the fictitious Bill of Lading and the false representation it contained into crediting Long Label’s account with US$299,705 and incurring bank charges in the sum of US$292; the bank’s loss totalled US$299,997. 

129.  In considering the evidence, the court has ignored Wan Hai’s letter certifying the Bill a false bill. 

Outcome

130.  All the elements of the offence having been established beyond all reasonable doubt, the defendant is accordingly convicted of the charge.