HKSAR v. LUI SIU KEI AND OTHERS

CACC 446/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

criminal APPEAL NO. 446 OF 2006

(ON APPEAL FROM DCCC NO. 856 OF 2005)

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REASONS FOR JUDGMENT

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Hon Yuen JA (giving the reasons for judgment of the Court):

1.  At the conclusion of the hearing before this court on 21 February 2008, we dismissed all the applications for leave to appeal and announced that written reasons will be handed down in due course.  We do so now.

Introduction

2.  In late 2006 the trial of 16 defendants on 3 charges of conspiracy to defraud was heard over the course of 42 days by Deputy Judge Dufton in the District Court.  At the conclusion of the trial, for reasons set out in an admirably clear 98-page Reasons for Verdict, the judge convicted the 1^st to 5^th Applicants of some of the charges.  These Applicants have applied for leave to appeal against conviction (and in the case of the 2^nd Applicant and the 5^th Applicant, against sentence as well).  The 6^th Applicant who had pleaded guilty to Charge 3 on the 4^th day of trial applied for leave to appeal against sentence.

3.  The following table sets out the nature of each applicant’s application.

Applicant	Charge 2	Charge 3
D5   (A1)	Conviction only	n/a
D8   (A2)	Conviction & Sentence of 4 yrs	n/a
D9   (A3)	n/a	Conviction only
D12 (A4)	Conviction only	Conviction only
D14 (A5)	Conviction & Sentence of 4 yrs	Conviction & Sentence of 4 yrs*
D15 (A6)	n/a	Sentence of 2 yrs 8 mos

* 1 year of which is to be served consecutively to the sentence on Charge 2.

(For ease of reference, we will refer to the Applicants in the way in which they were identified at the trial).

Modus Operandi

4.  The schemes involved in Charges 2 and 3 were not novel.  In each case, a firm (‘Shun Kwong Development Enterprise Company’ in Charge 2 and ‘Wing Li Ka Trading Company’ in Charge 3) was set up using nominees.  In the case of Shun Kwong, the 8^th Defendant was the nominee, and in the case of Wing Li Ka, PW39 was the nominee.  The nominee was paid for doing nothing other than to lend his identity to set up the firm and to sign related documents such as a tenancy agreement for office premises, documents for opening bank accounts and blank cheques.

5.  In each case, newspaper advertisements were placed by the firm for positions not requiring high educational qualifications.  The victims would be taken on by the firm which purported to trade (in the case of Shun Kwong) in slimming pills and (in the case of Wing Li Ka) ‘bust–firming’ pills.

6.  Shortly after being employed, the victims were then required to attend a staff training session at which they would meet a person purporting to be a senior staff member and a group of persons purporting to be staff members.  After the senior staff member left the room, the other staff members would look at documents left in the room which purportedly showed substantial profits made by the firm from reselling the pills.  One of them would indicate that he/she knew a tour guide who wished to acquire the pills for people overseas.  In order to effect a sale to the tour guide, the staff member would then proceed to buy some pills privately from the purported supplier (in the case of Shun Kwong, a Fook Sun Trading Company and in the case of Wing Li Ka, a Po Fung Development Company) resulting in a profit for himself/herself and others who had taken part in that transaction.

7.  Shortly afterwards, the staff members would propose a larger private transaction for sale of the pills to a purported purchaser overseas.  The victims were persuaded to take a share in this transaction.

8.  After the victims had contributed money toward buying a large quantity of pills and had collected the pills from the supplier, the transaction would fall through when the overseas purchaser reneged, either on the basis that the firm had discovered the secret transaction and was threatening legal action against them, or on the basis that health certificates were not available.  The victims would be dismissed from their positions with the firm.  Some victims were left with a quantity of pills and some were persuaded to turn them over to a staff  member for disposal at a negligible price. 

9.  Either way the victims were unable to make the quick profits they had been led to expect by way of sale to the overseas purchaser.  As for the purported suppliers, a nominee [PW38] had been used to set up Po Fung.  The proprietor of Fook Sun has not been found.   

10.  Those victims who took part in the trial lost more than $200,000 in the Shun Kwong scheme and more than $500,000 in the Wing Li Ka scheme.

5^th Defendant

11.  At trial, a victim in the Shun Kwong scheme Madam Wong Wan-Chun [PW16] had identified the 5^th Defendant as “Jimmy”, one of the staff members who had persuaded her to take part in the purchase of pills for purported sale to the overseas purchaser.  There was no other evidence against him. 

12.  On appeal Mr Giles Surman who had also appeared for the 5^th Defendant below submitted that the judge had failed to resolve a ‘material discrepancy’ between the description of “Jimmy” given by PW16 to the police and the 5^th Defendant’s physical appearance, and he submitted that the judge had accordingly erred in accepting PW16's identification, rendering the conviction of the 5^th Defendant unsafe and unsatisfactory.   

13.  The basis for Mr Surman’s submission was that on 6 March 2004, when PW16 made a report to the police, she had given a statement in which she had described “Jimmy” as ‘aged 40-something’ and of ‘tall build’.  In fact the 5^th Defendant was 27 years old in 2004 and it is said that he is 5 ft 6 ins tall.  Mr Surman submitted that PW16's description of “Jimmy” was therefore materially different from the 5^th Defendant’s physical appearance.

14.  Mr Surman submitted that since PW16 had seen “Jimmy” over the course of 7-8 hours on 3-4 March 2004, shortly before the time when she gave her statement to the police, that description substantially detracted from her identification of him in the identification parade held on 26 August 2004, some 5½ months after she had last seen “Jimmy”.

15.  We did not consider that this rendered the conviction unsafe and unsatisfactory.  With regard to the cases cited by Mr Surman in his submissions to us, the situation might have been different had a witness’s description included an objectively visible mark, such as a birthmark or a tattoo, which the person identified did not have.  But that was not so in this case.  As defence counsel accepted, an individual’s perception of the age of another person is very subjective (§129).  A description of someone as “tall” is also necessarily relative.  In any event, as the judge observed, whilst the 5^th Defendant’s height of 5 ft 6 ins. “may not be regarded as tall in the sense of over 6' this cannot in my view be regarded as short height” (§129).  (We also observed that although the 5^th Defendant looked of average height when sitting down, his long limbs made him look much taller than 5 ft 6 ins. when standing up). 

16.  The judge was aware of the description of “Jimmy” that PW16 had gjven to the police in March 2004 but this did not cause him to doubt her identification.  He noted the length of time that she had spent with “Jimmy” (as I have said earlier, some 7-8 hours over the course of 2 days) and the significance of his role which would have marked him out for her attention.  After the training session, it was “Jimmy” who telephoned the purported supplier to check on availability of stock, and it was he who had returned with the money from the initial private sale (§121).  “Jimmy” also directly asked PW16 to speak to the purported purchaser and when she expressed some hesitation, he told her he would be next to her and would prompt her (§122).   “Jimmy” also went with PW16 to the purported supplier Fook Sun and he helped her load her share of the pills onto a taxi for her to take home (§123).  The next day when the sale fell through, it was also “Jimmy” who came up with the suggestion that he had a friend who could help them (§125).  These were clearly important events for PW16 and during those eventful days she was in the company of “Jimmy” for some 7-8 hours (§127).

17.  Against the backdrop of this evidence, the judge was clearly entitled to accept PW16's identification of the 5^th Defendant.  His application for leave to appeal against conviction was accordingly dismissed.

8^th Defendant

18.  We have earlier referred to the 8^th Defendant as the “nominee” for Shun Kwong (§4).  The evidence against him was that

-        he was the applicant for the firm’s business registration (§162);

-        he had rented its office premises (§164);

-        he had opened the firm’s bank account and was its sole signatory (§166) and

-        he had subscribed for a telephone number printed in the newspaper advertisements offering vacancies for employees (§167).

19.  The above facts were admitted by the 8^th Defendant in a video-recorded interview provided under caution on 25 March 2004.  In that interview, he said that he had got to know a person in a video games arcade by the name of Hung Hung-Yue.  A month later Hung asked him if he was in need of money and when the 8^th Defendant said he was, Hung said that if he would provide his identification particulars he would be given $2,000 a month without being required to do any work.  The 8^th Defendant agreed and provided Hung with his identification particulars (Exh. PD98B counter 36B).  He also signed documents for renting office space and opening a bank account.  When he was required to fill in his residential address for the Business Registration form, Hung told him that he did not need to put in his real address and told him that he would make one up for him to put in the form (Exh. PD98B, counter 442B).

20.  The 8^th Defendant contested the voluntariness of the video-recorded interview and gave evidence in voire dire proceedings. The judge ruled the interview admissible in evidence.  He gave brief reasons in his Reasons for Verdict (§135-160).   It is no longer contended on appeal that the interview was inadmissible.

21.  The 8^th Defendant did not give evidence on the main issue.  The judge found on the whole of the evidence including the interview that he was a party to the conspiracy knowing that he was involved in a scheme to defraud people.

22.  On appeal Mr David Ma (who also appeared for the 8^th Defendant at trial) originally submitted that in the 8^th Defendant’s video interview, he only admitted that a deception of some kind would be practised on people on the streets to go up to the firm.  He was not told what methods would be used to persuade them to buy the goods once they were there and those methods of persuasion may or may not have been unlawful. 

23.  At the hearing of the appeal however Mr Ma withdrew that submission as a result of his having re-read the transcript, which contained the 8^th Defendant’s admission that Hung told him he meant to “deceive some people in the streets into going up there and use their ways to deceive the people into buying (goods), thus making money” (Exh. PD98B, counter 46B).  I would add that at counter 80B, the 8^th Defendant also admitted that Hung told him that “this way is not so legal” and in fact he (the 8^th Defendant) remarked that it seemed “not so good” but he nevertheless agreed to Hung’s requests as he needed money.

24.  Mr Ma however sought to argue that the 8^th Defendant should not have been convicted as he did not know what means of deception would be used and therefore could not be said to have agreed to the use of the particular deception alleged in Charge No.2.

25.  We did not accept this submission.  The short answer is that it is clear from the answer at counter 46B (§23 above) that the 8^th Defendant was prepared to go along with “their ways to deceive”, whatever those ways may have been.   

26.  On the undisputed evidence of the 8^th Defendant’s participation as a nominee and taking into account the admissions made in his interview, the judge was clearly right to convict the 8^th Defendant of the 2^nd Charge.  The 8^th Defendant’s application for leave to appeal against conviction was accordingly dismissed.

27.  The 8^th Defendant was sentenced to a term of imprisonment of 4 years.  As far as his application for leave to appeal against sentence was concerned, Mr Ma submitted that he had a limited role, his remuneration was only $2,000 a month and he had only been paid twice.  He submitted that the sentence failed to distinguish him from the other participants in the conspiracy who had more active roles.

28.  We do not consider the sentence to be manifestly excessive.  A conspiracy like this requires persons who are prepared to provide the “fronts” – to start the “business”, to rent premises, to open bank accounts, etc.  It is the fact that these firms have all the appearances of a legitimate business (and have dealings with established landlords and banks) that victims are lured into a false sense of security.  As the nominee, the 8^th Defendant was as much a participant in the conspiracy as the others and we see no reason to distinguish him from the others.

9^th Defendant

29.  The 9^th Defendant was originally represented by Mr Jonathan Acton-Bond in his application for leave to appeal against conviction.  However at the commencement of the hearing of the appeal, he dispensed with Mr Acton-Bond’s services, apparently because he had insisted on counsel making submissions on some additional grounds.  Accordingly Mr Acton-Bond quite properly withdrew but of course we continued to consider the written submissions that he had supplied to the court before the hearing.

30.  There was no identification of the 9^th Defendant as a purported staff member or supplier or purchaser in the Wing Li Ka scheme.  However he was convicted of Charge 3 on the evidence that one month after that conspiracy, his fingerprints were found on certain incriminating evidence.

31.  The incriminating evidence on which his fingerprints were found included:

-        Wing Li Ka’s business registration document and

-        Wing Li Ka’s cheque book.

These documents were found inside the padlocked rear case of a motorcycle.  His fingerprints were also found on the padlock.  Inside the rear case were other relevant evidence including:

-        Wing Li Ka’s chop;

-        sim cards for telephone numbers used by Wing Li Ka’s purported staff members;

-        documents for the registration of Wing Li Ka’s purported supplier Po Fung;

-        a notebook with the names of some of the victims and some of the purported staff members and their telephone numbers.

That the motorcycle (or at least its rear case) was closely connected with the 9^th Defendant could be seen from the fact that some of his personal documents were also placed inside the rear case, such as:  -        his personal bank account passbook; and

-        two cheque books for his personal bank account.  

32.  The 9^th Defendant did not give evidence at trial.  The judge held that whilst acknowledging the 9^th Defendant’s right to remain silent, his possession of those documents called for an explanation - none was forthcoming (§277).  Accordingly the judge found that the only inference to draw from the incriminating evidence was that he was a party to the conspiracy.

33.  Mr Acton-Bond’s submissions were to the effect that due to the lapse of time between the end of the Wing Li Ka scheme and the discovery of the incriminating evidence, there were possible alternative inferences which might include innocent reasons. 

34.  We did not accept that submission.  It is well-established that the court should not speculate on possible defences or alternative inferences.  The 9^th Defendant’s failure to testify at trial was not to be held against him (as the judge acknowledged) but neither did it warrant speculation in his favour upon what explanation he might have offered, or defence he might have raised, if he had done so (Li Defan and another v HKSAR [2002] 1 HKLRD 234).

35.  The 9^th Defendant’s own submissions took some 15 pages (in the English translation).  Some of them were repetitive.  We will deal with the main submissions only. 

36.  First he submitted that there was insufficient evidence to lead to conviction as the prosecution had not produced the written sale and purchase agreements and relied solely on the oral evidence of the victims.  There is nothing in the point.  The judge was entitled to accept the oral evidence of the victims and there is no evidence that they ever had access to the written documents as they had only been invited to take a share in the private transactions which were initiated by the purported staff members.

37.  The 9^th Defendant also submitted that it was not a condition of the sale (by the supplier to the victims) that the goods were for export.  However again that is not to the point.  The fraud comprised the misrepresentation to the victims that they could make a quick profit from the transaction to a purchaser overseas and that the transaction fell through for want of health certificates required by the overseas country.  The victims were not expecting to buy the pills and then look around for a local buyer for resale.

38.  The 9^th Defendant’s submission based on what he called the “legislative intent” of the offence of conspiracy to defraud was essentially the same point.  He submitted that the victims made a loss only because they had failed to use their best endeavours to resell the products.  But that is to ignore the fact that these victims were not in the business of trading in the pills.  They had no intention of simply buying a stock of pills in the hope of a sale at some stage in a market of which they were ignorant.  The attraction that the conspirators presented to the victims was that there was a ready buyer for an immediate sale so that they could make a quick profit.

39.  The 9^th Defendant further submitted that the judge’s ruling contravened the “principle of fair trial” because the judge did not consider that in the motorcycle were found documents of other companies, some of which had or may have had legitimate businesses.  He himself was found in the office premises of Shun Tat Travel Entertainment Company (“Shun Tat”).  The judge had said he disregarded the prosecution’s suggestion that Shun Tat had been set up to carry out a similar fraud (§229).  The 9^th Defendant suggested that there were a number of possibilities as to what he was, such as an employer, an employee, etc.  and that no-one at trial had questioned what his duties were.  He submitted that it was possible that in the course of the performance of his duties for Shun Tat, he had come into contact with the motorcycle and left fingerprints on it.  He also submitted that the judge did not consider whether he was “a person of ignorance” or an ignorant victim.  He suggested that someone could have deliberately placed his personal documents with the other evidence to “create a fake sign” or “manipulate” a case making him a “scapegoat”.

40.  We did not accept this submission.  The 9^th Defendant was not concerned only with Shun Tat.  His fingerprints were found on important Wing Li Ka documents (its registration form and cheque books) which were found inside the rear case of the motorcycle , together with important personal documents of his own, such as his bank passbook and chequebooks.  The 9^th Defendant gave no explanation for that state of affairs at trial.  He gave no explanation of how someone else would have obtained such important personal documents of his such as his bank passbook and chequebooks nor did he testify that he had been instructed by some one where to place them.  A judge should not speculate whether a defendant was ignorant or not, or what possible explanations he might have in answer to the prosecution evidence.  We have earlier referred to the principle set out in Li Defan where the Court of Final Appeal has held that a judgewas entitled to regard the failure of a defendant to give an explanation on oath as strengthening the inference to be drawn from the prosecution case.

41.  The 9^th Defendant also submitted that the fact that his name and identity card number had been written on the front sheet of the licence renewal form of the motorcycle should not be regarded as incriminating.  In this respect the judge had found after taking into account:

(I)      that the 9^th Defendant’s fingerprints were on the padlock of the rear case of the motorcycle;

(ii)      that his banking documents were also inside;

(iii)     27 of the 9^th Defendant’s fingerprints were on the documents inside the rear case

that the only inference to draw was that he was in control of the contents of the rear case.  Although the judge “noted” that his name and identity card number had been written on the licence renewal form, the judge had been careful not to include that as one of the factors listed before making that inference (§273).  The 9^th Defendant’s submissions as to “ownership” of the motorcycle are not pertinent.

42.  As for what the 9^th Defendant called “selective fingerprint reports”, the 9^th Defendant has not referred us to what other fingerprints have been found on the evidence in the motorcycle.  But in any event the judge was entitled to infer that he had control of the incriminating evidence from the fact that important personal documents of his own had also been placed in the same case.

43.  The judge was entitled to convict the 9^th Defendant of the 3^rd Charge and his application for leave to appeal against conviction was accordingly dismissed.

12^th Defendant

44.  The 12^th Defendant was convicted of both the 2^nd and 3^rd Charges.  In relation to the Shun Kwong scam, he had been identified by PW19 as “Tommy” and in relation to the Wing Li Ka scam, he had been identified by PW30 as “Sam”. 

45.  On appeal Mr Phillip Ross submitted that the judge was wrong to find that the particulars of the charge had been established because there was no evidence to prove that the pills could not have been sold at a profit.  He submitted that the defendant may have been guilty of another conspiracy to defraud, based on the bogus nature of the purported purchaser, but that was a different conspiracy.  He referred to R v Gill [1969] Canadian Criminal Cases 115 and Gerakiteys v The Queen [1983] 153 CLR 316. 

46.  We did not accept that submission.  As we have said earlier, the victims were persuaded to part with their money on the misrepresentation that the pills would or could be readily resold in an immediate sale to a waiting purchaser for profit.  The misrepresentation of a quick “flip” was what induced these victims to do what they did.  Indeed in one case a victim was persuaded to break a time deposit in order to contribute her share.  If there had been a readily available market, then one would have expected Shun Kwong and Wing Li Ka to have at least done some business.  Their banking documents showed that they had not done any.  So even if it is assumed that the pills might eventually be resalable at a non-loss making price, that does not absolve the defendants from the fraud that was practised on the victims.  

47.  The cases Mr Ross referred to are distinguishable.  In Gill the charge was that the defendant had conspired with HW to commit abortions on two named women.  The evidence only proved that there was a general agreement between the defendant and HW that HW would direct women who wanted to have abortions to the defendant.  The general agreement was unrelated to the women named in the charge.  The conspiracy charged and that proved were distinct offences.  In Gerakiteys the charge was that G, H and 9 other persons were parties to one conspiracy.  However the evidence only proved 4 separate arrangements but no single arrangement involving all 11 persons in the charge.  In the context of those cases, of course the defendants were acquitted of the offence as charged.  The particulars of the charges in the present case however were established as in fact there was no ready market for resale.

48.  Accordingly we saw no reason to overturn the conviction. 

14^th Defendant

49.  The 14^th Defendant was identified by PW15 as “Jo” and by PW16 as “Timmy” in the Shung Kwong scam and by PW30 as “Mabel” in the Wing Li Ka scam.

50.  Although the grounds of appeal referred to the identification evidence, Mr Ross confined his submissions to the same point as that run on behalf of the 12^th Defendant.  For the same reasons as those given for the 12^th Defendant, we dismissed the application for leave to appeal against conviction.

51.  The 14^th Defendant also asked for leave to appeal against sentence.  She was represented by Mr Surman on this application.  She had been sentenced to 4 years imprisonment on each of Charges 2 and 3 but the judge ordered 1 year of the term for Charge 3 to run consecutively to that for Charge 2 so that the total term of imprisonment was 5 years. 

52.  Mr Surman’s submission was simple and was confined to the consecutive term.  He submitted that the sentence was manifestly excessive as the two charges have a sufficient nexus and can be said to have been committed in the course of a single transaction or course of criminal conduct.

53.  We did not agree.  Charges 2 and 3 clearly involved different firms with different purported suppliers and different victims.  They should not be regarded as one single transaction or conspiracy.  Accordingly we dismissed the application for leave to appeal against sentence.           

15^th Defendant

54.  The 15^th Defendant only pleaded guilty on the 4^th day of trial.  He was nevertheless given the full discount of one-third for his guilty plea and from a starting point of 4 years, he was sentenced to a term of imprisonment of 2 years and 8 months.  Mr Surman submitted on his behalf that the sentence was still manifestly excessive as he played only the role of the storekeeper of Po Fung, Wing Li Ka’s supplier and he had only received on one occasion a sum of $20,000 from one of the victims.  It was therefore submitted on his behalf that he had not “actively participated” in the deception.  It was also submitted that the evidence showed that he had only received money from one victim but the judge must have mistakenly thought that he had received money from more than one victim as he used the plural form in his reasons.

55.  We did not see anything in these submissions.  A conspiracy such as this would not work unless each conspirator played his part.  It mattered not whether the 15^th Defendant had been assigned to play the storekeeper of the supplier or a fellow staff member of the victims.  Their roles were still ones requiring deception practised on the victims, nor did it matter how many were so deceived.  Accordingly his application for leave to appeal against sentence was dismissed.