HKSAR v. YUEN KAI TAK

CACC 269/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 269 OF 2011

(ON APPEAL FROM DCCC NO. 981 OF 2010)

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REASONS FOR JUDGMENT

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Hon McWalters J (giving the judgment of the court):

Introduction

1. On 27 June 2011 the applicant was convicted after trial by District Judge Douglas Yau of five charges of being an agent, using a document with intent to deceive his principal, contrary to section 9(3) of the Prevention of Bribery Ordinance, Cap 201.  He was sentenced to imprisonment for 18 months.  He originally applied for leave to appeal both conviction and sentence but prior to the hearing of the appeal he abandoned his application for leave to appeal sentence.

2. At the hearing of the appeal we dismissed the application for leave and said we would give our reasons for doing so at a later occasion.  This we now do.

The Prosecution Case

3. The charges reflect a fraud on the Hong Kong Government’s Private Tenancy Scheme for civil servants.  The Government provided two different types of accommodation benefits to civil servants.  One was a mortgage subsidy scheme, known as the Home Finance Scheme (HFS) which was limited to a maximum of 10 years and was designed to enable civil servants to purchase their own residential property.  The other was a rental subsidy scheme which was in the form of an allowance to a civil servant to pay for his rental of a residential property. This rental allowance had no time limit on how long it could be received.  A civil servant could claim it for as long as he remained a civil servant and for as long as he rented his residential premises.

4. If a civil servant could contrive to obtain Private Tenancy Allowance (PTA) in respect of a residential property he was purchasing he could obtain a payment from the Government that was of indefinite duration and, if his rent was more than his mortgage repayment, was able to obtain more than he would have received under the HFS.

5. In order to exploit the system in this way some civil servants engaged in different ploys to conceal their true ownership of the premises in respect of which they were claiming PTA.  But in order to obtain the PTA a civil servant had to declare that he had “no financial interest” in the property he was renting.  When civil servants were suspected of having defrauded the Government the law enforcement agency’s investigation would focus on proving that the applicant for PTA was in fact the true owner of the property for which he was claiming the PTA and that he had therefore misled the Government into paying him the allowance by falsely declaring that he had “no financial interest” in this property.

6. The ploys by which civil servants might conceal their true ownership of the “rented” property were many and varied but otherwise they all had essentially the same goal.  In this way the civil servants were able to live in properties that they wished to own, obtain PTA from the Government in respect of these properties and finally obtain ownership of these properties.

7. In the present case the prosecution alleged the ploy took the form of what was known as a “mutual leasing” arrangement by which two civil servants would buy properties which the other wished to own and then rent to each other.  When PTA is no longer going to be claimed then the civil servants would sell their properties to each other.

8. The applicant was a doctor employed by the Department of Health.  He approached a colleague, Dr Tang, who was employed by the Hospital Authority, to participate with him in a mutual leasing arrangement.  Dr Tang became a witness for the prosecution and it was on his evidence that the prosecution case was based.

9. Dr Tang initially agreed to the applicant’s proposal but when the applicant determined upon a property he wanted to buy, Dr Tang had a change of heart and told the applicant that he no longer wanted to apply for PTA. However embarrassed at reneging on his previous promise he informed the applicant that he would still assist him by becoming the nominal (ie legal but not beneficial) owner of the applicant’s property.

10. The property purchase went ahead in June 1990 for the price of $1,620,000 but Dr Tang did not pay the initial deposit of $50,000, nor the further deposit of $112,000, for the purchase of the property.  The person who paid these monies was Dr Wong Pik-kei, another doctor friend of the applicant. The property was purchased with a mortgage of $1,458,000 taken out by Dr Tang in which the applicant was a guarantor.  Dr Tang says he regarded himself as only the nominal owner of the property.  He never paid anything for it, not even the stamp duty or legal fees for the conveyance, and never lived in it.  The lawyer handling the conveyance was a friend of the applicant.

11. Dr Tang said a tenancy agreement dated 9 July 1990 was created for the property and the applicant paid the rent by depositing the rental monies into the mortgage account.  Dr Tang said he has never used any of his own monies to repay the mortgage.

12. Dr Tang also said that the applicant took care of all expenses in relation to the property, such as management fees, government rates and utility bills.  He, Dr Tang, never paid any of these on-going financial liabilities in respect of the property.

13. The applicant made his first PTA claim on 12 July 1990, his second on 13 August 1992, his third on 25 July 1994, his fourth on 24 July 1996 and his fifth on 18 July 1998.  Each date represents a different rental agreement and each rental agreement necessitated a fresh PTA application form. Each PTA application form is the subject of a separate charge.

14. In mid-1995 Dr Tang, at the applicant’s request obtained a re‑mortgage loan of $1.35 million.  Again the applicant acted as guarantor of this loan and made all the repayments of it.

15. The applicant separated from his wife in 2000, divorced her and remarried in 2004.  Between 2000 and 2006 the applicant did not claim PTA. The period covered by the charges is therefore from July 1990 to 2000 and in this period the applicant received a total amount of PTA of $2,256,694.25.

16. In 2005 Dr Tang asked the applicant to be relieved of his position of nominal owner of the property.  The applicant then arranged for another doctor, Dr Ho, to purchase the property.  Dr Tang did not pay any of the fees arising out of the transfer of ownership of the property.

17. The property was sold for $3,500,000.  Of this amount Dr Tang was shown by the applicant, but not given, a cheque for $1.5 million.  Just over $2 million was disbursed by the solicitors for the purchaser on completion of the conveyance and of this amount $786,662.86 was paid to Bank of America to discharge a mortgage and effectively the balance was paid to Dr Tang.

18. In respect of the balance paid to Dr Tang the applicant instructed Dr Tang to draw four cheques in favour of four different people.  The total value of these cheques was $1,210,000.  Three of the cheques totalled $660,000 and each of these was explained by a prosecution witness (PW5 $110,000; PW6 $220,000 and PW7 $330,000).  All of these were loans to the applicant, although the one for $330,000 was said to be a loan to the applicant on behalf of the landlord for renovation work to be done on the property, the cost of which would in due course be refunded to the applicant by the landlord. The fourth cheque was drawn in favour of Dr Wong Pik-kei and was for $550,000.  Dr Wong, who now resides in Australia, did not testify at the trial.

19. The prosecution case also included a video record of interview conducted by the officers of the ICAC.  At this interview the applicant did not exercise his right of silence.  He provided an explanation and that explanation was that Dr Tang was the owner of the property and had bought it as an investment. The applicant said that when his wife left him in 2000 Dr Tang suggested selling the property but meanwhile allowed him to reside in the property rent-free.  This covered the period 2000 – 2006 during which time the applicant did not claim PTA.

20. The applicant said that he became aware that Dr Ho was interested in buying an investment property and so he told him about Dr Tang’s property.  This ultimately led to Dr Ho buying it and the applicant continuing to live in it as a tenant of Dr Ho, paying rent to him.

The Defence Case

21. The defendant testified that the true owner of the property was Dr Ho, the person to whom the legal title was sold by Dr Tang in 2006.  He said that Dr Tang knew that Dr Ho was the true owner of the property.

22. He said that in 1990 it was Dr Tang’s idea to engage in a mutual leasing arrangement but that he had a change of heart forcing the applicant to find someone else to replace him.  His friend, Dr Ho, wanted to invest in real estate and agreed to pay for the property.  Dr Tang had also refused to pay the deposit on the purchase and as the applicant did not wish to be seen to be paying monies for a property in respect of which he would be claiming PTA he asked his friend, Dr Wong Pik-kei, to pay the $50,000 initial deposit and the $112,000 balance of the deposit.  The applicant testified that Dr  Ho repaid Dr Wong these monies and that Dr Ho repaid him the $68,000 odd that he, the applicant, had paid for stamp duty and legal fees.  Despite Dr Ho agreeing to purchase the property the conveyance and mortgage still went through in the name of Dr Tang.  Thus it is the applicant’s case that Dr Tang was only the nominal or legal owner and Dr Ho was the true or beneficial owner of the property.  However the applicant had to concede in cross-examination that, prior to 2006, there was no documentary evidence to support this assertion.

23. In respect of the second mortgage the applicant said that it was needed to pay for the renovation and refurbishment of the property.  But as only $700,000 was needed for this purpose and the mortgage was for $1.35 million, the balance of $650,000 was given to Dr Ho as owner of the property.

24. The applicant also spoke of loans he made to a colleague of Dr Ho’s elder brother.  Dr Ho had already lent this person $700,000 and did not want to lend him more.  The borrower, Wong Chi-keung, was a police officer who claimed to need the money to build a house.  Dr Ho promised to act as guarantor. The applicant advanced, by two loans, a total of $800,000 to this person who refused to acknowledge his indebtedness in writing.  The applicant subsequently discovered that Wong Chi-keung was not building a house, that he was involved in some kind of legal proceedings and was dismissed from the Police Force. Dr Ho promised to repay the $800,000 to the applicant.  He also promised to contribute a further $300,000 to the renovation of the property but this was paid in advance by a good friend of the applicant’s (ie PW7).  The mortgage monies, which were specifically borrowed for the purpose of renovating the property, were obtained in 1995 but this $300,000 loan from PW7 was advanced much later in May 2005.  Be that as it may on the applicant’s evidence, as at 2006, Dr Ho was indebted to him in the sum of $1.1 million.

The Reasons for Verdict

25. The trial judge accepted the evidence of Dr Tang and disbelieved the applicant.  He set out in some detail his reasons for disbelieving the applicant.  These were:

(1)  the difference in the accounts the applicant gave to the ICAC and to the court;

(2)  the absence of any documentary evidence to support the account he gave in court;

(3)  the failure of the applicant to retain and preserve such documents as might support his account;

(4)  the applicant’s explanation in relation to the $800,000 was inherently incredible;

(5)  the absence of any evidence to explain why Wong Pik-kei would receive $550,000 from the proceeds of the sale of the property in 2006; and

(6)  the way the proceeds of the sale were distributed by the applicant to other persons.

26. After having made his findings he went on to make the following comments at paragraphs 213 ‑ 214 of his Reasons for Verdict:

“213. I find it most strange that all the defendant’s best friends have decided either to turn against him or to abandon him at the most crucial time of his life, when all they have to do is to come to court to tell the purported truth and then the defendant’s name would be cleared. According to the defendant PW1 had even decided to lie about PW1 not knowing that HCM had always been the beneficial owner of the property, supposedly in order to get out of trouble by agreeing to be an immunity witness.

  214  As for the refusal by HCM and WPK to give evidence as the defendant’s witnesses, first of all, it is not for the defendant to adduce evidence to prove his innocence.  It is however logical and reasonable to deduce that perhaps the simple explanation is that they just do not want to be part of the defendant’s lies.  This of course is pure speculation and it had in no way affected my decision process.  I think it is better to state what must be on everyone’s mind and then make sure it does not interfere with my decision process rather than let the uncertainty hang in the air.”

27. He then summarised his findings and the reasons for them at paragraph 215:

“215 I find that based on the fact that all mortgage payments were paid by the defendant from 1990 to 2000, that PW1 had never contributed anything to those repayments, and the control that the defendant had exerted over the use of the sales proceeds of property in 2006, the only irresistible inference is that the defendant was the beneficial owner of the property at all material times.”

The Ground of Appeal

28. The Perfected Grounds of Appeal originally contained two grounds of appeal but Mr Bruce SC, counsel for the applicant, indicated in his written submission that he did not intend to proceed with the second ground.

29. The first ground of appeal asserts that the District Judge erred in three areas of his reasoning when analysing the defence case.  The three areas are the judge taking into account:

(1)  the applicant’s failure to explain why in 2006 $550,000 was paid to Dr Wong Pik-kei out of the proceeds from the sale of the property;

(2)  the applicant’s failure to mention the true beneficial owner of the property in his video records of interview; and

(3)  that the applicant’s best friends had turned against him at a critical time in his life in relation to the trial of these charges (this being a reference to the judge’s comments at paragraph 213 of his Reasons for Verdict).

Discussion

The $550,000 cheque to Dr Wong Pik-kei

30. It was a fact that on the sale of the property in 2006 the applicant instructed Dr Tang to draw a number of cheques, one of which was in favour of Dr Wong Pik-kei for $550,000.  It was also a fact that the applicant provided no explanation for this.  Such a payment, if left unexplained, could cause a court to question the plausibility of the applicant’s claim that Dr Ho was the true owner of the property.  Testing the plausibility of various aspects of the applicant’s evidence is the approach the judge took.  He closely examined various areas of his testimony including the disbursement of the monies from the sale of the property.

31. When an owner sells a property, it is normal for him to receive the proceeds, subject of course to outstanding mortgages and legal and other fees. It is not normal for monies to be paid to persons unassociated in some way with the property or its sale.  Here there were a number of aspects of the applicant’s story which cried out for a convincing explanation.  The applicant obtained a second mortgage to renovate the property and borrowed $650,000 more than he needed; he subsequently lent $800,000 to a person he did not know in circumstances which defy belief; he carried this debt until 2006 even though he was short of money himself and had to borrow monies from friends in 2002 ($100,000 from PW5), in 2004/2005 ($200,000 from PW6) and in 2005 ($300,000 from PW7).

32. Even on his own account he was using $550,000 of the monies which Dr Ho repaid him to pay what must have been a debt he, the applicant, owed to Dr Wong.  But if the applicant was not a rich man his story about advancing $800,000 to a colleague of the brother of Dr  Ho becomes more implausible.  If this part of the applicant’s testimony is rejected then his evidence falls apart.  The $800,000 loan is the reason Dr Ho owes him money, which in turn is the reason why at least that amount of the $1.1 million money from the sale proceeds is his to distribute as he wishes.

33. It is hardly surprising that, in these circumstances, the District Judge regarded the absence of an explanation for the payment of such a large sum of money out of the sale proceeds as a ‘hole’ in the applicant’s story and as a reason for doubting its truthfulness.  There is nothing in this ground of appeal.

The applicant’s inconsistent accounts

34. This ground focussed on the difference between what the applicant said in his record of interview and what he said in his evidence.  In his record of interview the applicant said that Dr Tang was the true owner of the property and that he bought it because he, Dr Tang, wanted to make an investment.

35. In his evidence he said that Dr Tang was the legal but not beneficial owner of the property, that Dr Ho became the beneficial owner after Dr Tang decided not to proceed with the purchase, that Dr Tang’s initial involvement was not because he was interested in investing in property but rather because he wanted to assist the applicant in a mutual leasing arrangement.

36. In his testimony the applicant explained the reason for the different account in his record of interview by saying that firstly the ICAC did not ask him about Dr Ho and secondly Dr Ho is a very good friend of his and he wanted to protect him.

37. Mr Bruce recognizes that a court can have regard to the fact that the defence that a defendant advances at trial is inconsistent with the defence advanced by him pre-trial to a law enforcement authority.  However he says that this is not the position here.  He argues that a failure to mention every aspect of the defence is not advancing a different defence and that is the position here.  Consequently the judge erred in concluding that the applicant advanced a defence for the first time at trial thereby undermining the applicant’s right of silence.

38. The relevant principle was set out by the Court of Final Appeal in Lee Fuk Hing v HKSAR (2004) 7 HKCFAR 600 at paragraph 57 where it said:

“We may add that, of course, if an accused person makes a statement to the police (under caution or otherwise) which is inconsistent with his defence which can be fairly criticised on other grounds it is open to the prosecution to cross examine and comment upon that statement and its relevance to the defence. The judge may also invite the jury to draw relevant and fair inferences even if they are adverse to the accused.”

39. The first and obvious point to make is that this is not a case where the applicant exercised his right of silence.  He specifically waived it and did so for the purpose of advancing to the ICAC an exculpatory explanation.

40. Secondly, determining whether two accounts are inconsistent with one another is not a difficult exercise and simply involves a straightforward comparison of the key elements of each account.  Of course, minor differences or differences on peripheral issues will not usually be enough, without more, to render one account inconsistent with the other.  The differences must be sufficiently significant before a court can say that the two accounts are inconsistent.

41. In the record of interview the applicant said that Dr Tang wanted to buy the property as an investment and in his oral testimony he said Dr Tang resiled from purchasing the property and this caused Dr Ho to purchase it as an investment.  He did, by his evidence, seek to explain why the two explanations advanced by him are different and different they clearly are.  They don’t cease to be different just because the applicant explained how it was that he came to advance an explanation at the interview which is not the explanation he advanced at trial.

42. There is no doubt whatsoever that the applicant’s oral testimony is inconsistent with the answers he made under caution in his video record of interview.  There is nothing improper in the way the judge used this inconsistency as a reason, and it was only one of many, for finding that the applicant was lying about Dr Ho being the beneficial owner of the property.  There is no merit in this ground of appeal.

Speculating on the absence of evidence

43. This ground of appeal focuses on the judge’s comments at paragraph 213 of his Reasons for Verdict.  But this paragraph must be read together with paragraph 214.  All that the judge is doing in these two paragraphs is to openly ventilate what was a live issue in the trial, namely why Drs Ho and Wong should refuse to testify on the applicant’s behalf and why the applicant who had it in his power to compel at least Dr Ho to give evidence to corroborate his testimony, chose not to avail himself of this power despite the potentially dire consequences to him in not doing so.  Not surprisingly the prosecutor cross-examined the applicant at length on this curious decision.

44. At paragraph 213 where the judge observed that it was strange that the applicant’s friends, on his account, had deserted him, he was doing no more than testing the applicant’s credibility against the inherent implausibility of his story.  On his account his good friend Dr Tang, who from the applicant’s point of view, had done nothing wrong, is lying about him and doing so in a way which possibly incriminates himself and requires him to have an immunity from prosecution in order to testify, and his good friends Drs Ho and Wong are deserting him.  That is a perfectly legitimate observation.  It goes both to the applicant’s credibility generally and specifically to the credibility of his evidence on why he chose not to call Dr Ho.

45. Whilst paragraph 213 focuses on the applicant, his claimed state of mind and the credibility of his evidence, paragraph 214 looks to the state of mind of Drs  Ho and Wong.  Although there was implicit in the prosecutor’s cross-examination of the applicant the suggestion that the evidence of these two doctors would not be helpful to the applicant and that they were refusing to be a party to his lies, the judge refused to travel along this reasoning path.  Nothing could be clearer from paragraph 214 than that the judge is not going to speculate on why these two doctors have refused to assist their friend.

46. Nevertheless Mr Bruce asks us to conclude that the absence of these two witnesses has in fact infected the judge’s reasoning and, though not saying so, he has unconsciously used their absence adverse to the applicant by reasoning that they have not testified for the applicant because their evidence would not be helpful to him.  This he says is implicit from the contents of paragraph 213 and 214.

47. We can see nothing in either of these paragraphs to suggest that the judge, consciously or otherwise, used a speculative conclusion as to the reason for the absence of these two witnesses to influence the view he took of the applicant’s credibility or as the basis for any of his findings of fact.

48. The judge adopted what was a perfectly proper and wise course of action to, as it were, clear the air in respect of what was very much a live issue at the trial and to explicitly state his position on this matter.  There is no reason to look behind his very clear statement or to question whether he has acted otherwise than in accordance with it.  This ground also fails.

Conclusion

49. For the reasons we have explained the application for leave to appeal against conviction was dismissed.