HKSAR v. CHU MAN HONG

HCMA 1221/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPELLATE JURISDICTION

MAGISTRACY APPEAL NO. 1221 OF 1998

(On appeal from ESCC 2385 of 1998)

-------------------

----------------------

J U D G M E N T

----------------------

1. The Appellant was convicted after trial at Eastern Magistracy of an offence of recklessly inducing a person to take part in an investment arrangement contrary to s. 3(1)(b) of the Protection of Investors Ordinance, Cap. 335.

2. The Appellant had been charged with a further similar offence under that same section in respect of an alleged inducement of another individual but was acquitted of that offence at the end of the trial.

3. The facts of the case were that the Appellant was a senior executive of a company operating in Hong Kong as, inter alia, a bullion investment company. It purported to trade in gold and silver bullion through an account with the Hong Kong Bank. The victim (PW3 at trial) was introduced to the Appellant by a friend (PW1 at trial) who was also a staff member of the Appellant's company and who was also herself the alleged victim of the offence in respect of which the Appellant was acquitted. PW3 was subsequently employed by the Appellant's company.

4. The Appellant subsequently urged PW3 at a meeting between them to open an investment account with the company. That account was to be opened for the purpose of trading in gold or silver. PW3 agreed and an account was opened with the sum of HK$30,000.

5. The prosecutions case was that the Appellant had further subsequently promised PW3 that if he invested an additional sum of $300,000 in a further account, a guaranteed return of principal and interest totalling $600,000 would be paid to PW3 after 2 months. PW3 agreed and a further account was opened by him with the Appellant's company into which PW3 paid the sum of $300,000. That money was lost in the course of trading.

6. Subsequent to investing the $300,000 in the new account PW3 had obtained the Appellants signatures on notebook or diary entries he had made summarising various aspects of their financial relationship and incorporating reference to the Appellant's promise to repay the $600,000 by the 15 November 1996 being the end of the 2 month period of the agreement.

7. The Appellant appeals on 5 grounds:

8. Firstly, that the learned magistrate accepted PW3's evidence as credible without properly considering issues relating to his evidence.

9. Secondly, that the learned magistrate analysed the evidence in the case wrongly relating to alleged signatures of the Appellant on the notebook entries of PW3.

10. Thirdly, that the learned magistrate reversed the burden of proof in respect of those alleged signatures of the Appellant in finding that they were the Appellant's.

11. Fourthly, that the learned magistrate wrongly concluded that if the Appellant had in fact signed Exhibit P3 (that is the notebook of PW3) then the Appellant was aware of the contents of that document.

12. And fifthly, that there was no sufficient evidence to support the learned magistrate's conclusion that the investment arrangement traded in "property" as required by the section.

13. As to the 1st ground the Appellant's main complaint as advanced by Mr Boyton for the Appellant was that the Appellant had been acquitted of the 1st charged offence relating to an allegation of an offence of a similar nature in respect of the witness PW1 who was also an employee of the Appellant's company.

14. The magistrate rejected PW1's evidence, amongst other reasons, because she had testified she had never read the standard form agreement relating to her investment or trading account with the company. That written agreement apparently had a standard phrase in it to the effect that investments in gold or silver may result in gains or losses, or at least words to that effect.

15. Because PW1 had attended a 7 day course at the Appellant's company relating to such trading the magistrate disbelieved her evidence that she was not aware of this possibility as she had never read the agreement.

16. Mr Boyton's point was that PW3 who also had worked for the Appellant's company had also said he had not read the standard form written agreement relating to his trading account but that the magistrate had accepted PW3's evidence in convicting the Appellant of the 2nd charged offence nevertheless, and that there was therefore an inconsistency in the magistrates findings which rendered the verdict unsafe.

17. What the magistrate had said in assessing PW1's evidence and concluding that he did not accept it was this:-

"I find that she is not an impressive witness. She was evasive in her testimonies and a lot of things said by her are unreasonable or illogical. She said that although she had signed the customer agreement she had not read it and did not know anything about the 'risk declaration statement' it contained. I find this to be unbelievable bearing in mind that she had attended a 7-day course of the company. At one stage of cross examination she became so evasive that she said she did not know what Hang Seng index was. This is hard to believe because she had said that she had been in business both in Hong Kong and China for a number of years. She said that she was unable to read the contents of the agreement as they were in English. However, it came out as a result of cross-examination that she was a graduate in English of a university in China."

18. It can be seen that the magistrate has given a number of detailed and considered reasons for rejecting PW1's evidence. Her disbelieved failure to read the contents of the written agreement was only one of those reasons, and, differently from PW3, who had not attended the same 7 day course dealing with the company's investment procedures, her evidence was disbelieved. The magistrate, regarding PW1's evidence, had doubts about her credibility and gave the Appellant the benefit of those doubts.

19. On the other hand, he accepted PW3 as a witness of truth and he was entitled to do so. He gave full and detailed reasons for doing so. Under this ground, Mr Boyton argues also that the magistrate had criticised PW3 for being evasive during the trial. That is not so. A reading of the transcript shows on occasion PW3 had not answered the question asked but had volunteered extraneous information. That is a common failure in even honest witnesses. This occurred relatively rarely and PW3 immediately answered the original question when asked to do so by the magistrate. At no stage did the magistrate suggest that PW3 was being deliberately evasive in his evidence.

20. The credibility of a witness can be determined by a range of factors including their demeanour. The court of trial is in the best position to assess these factors. The magistrate was entitled to accept PW3 as a witness of truth.

21. There is no merit in this ground.

22. The 2nd, 3rd and 4th grounds can conveniently be dealt with together.

23. Firstly, Mr Boyton argues that the magistrate drew the wrong conclusions from the fact that the 2 signatures, said by PW3 to be the Appellant's on 2 notebook or diary entries made by PW3 setting out the terms of the financial arrangements between them, were different in appearance.

24. The defence case during trial was that because they were different they could not have come from one person, that is the Appellant, as alleged by PW3. In that regard the learned magistrate said this in his Statement of Findings:-

"The alleged signatures of the appellant in the entries of 15 September and 25 October (Exhibits P3A & P3B) differ quite substantially from each other. If these signatures were forged it would be inconceivable and illogical that the person who forged them would have made them differ from each other in such a manner."

25. His finding in this regard was effectively in relation to an issue which arose at trial as to whether the Appellant or someone else had signed or initialled the entries in PW3's notebook. That issue went to the credibility of both the Appellant and also PW3 in addition to being one of simple fact.

26. Apparently during trial both prosecution and defence had accepted there were differences between the signatures and the magistrate's reasoning proceeded on the basis that there may have been apparent differences between the signatures. This was a finding in favour of the defence on the face of it. But the magistrate goes on in his Statement of Findings to say that if the signatures were forged by someone deliberately it seemed odd that they would be forged so as to appear to be different. That is what the learned magistrate plainly meant in the above excerpt from his Statement of Findings.

27. Indeed this reasoning was taken perhaps to its limit in that the magistrate concluded that the signatures therefore would not have been forged by someone else and that was one reason he disbelieved the Appellant who alleged they had been.

28. Mr Boyton says this is tantamount to reversing the onus of proof. I disagree. The magistrate had accepted PW3's evidence. Part of that evidence had been that the Appellant had commonly used different signatures. Further, PW3 had said the Appellant had signed these signatures. The magistrates comments in this regard must be placed in the overall context of his reasons in accepting the evidence of PW3 as to the Appellant signing these signatures. This aspect of the difference between the signatures was one of the matters the magistrate had considered in assessing the credibility of PW3 and the Appellant in this regard.

29. Immediately after considering this issue the magistrate reminded himself of the onus of proof being on the prosecution. In my view there was no reversal of the onus of proof. The magistrate was perfectly aware the onus laid on the prosecution. It may well be that the magistrates finding in respect of this particular issue could have been worded better where he says in respect of the Appellant's evidence:

"He could not have told the court the truth because it is impossible that the signatures on these two exhibits would differ from each other so substantially if they had been forged."

30. But it is plain from the rest of the magistrate's Statement of Findings that this was part of the magistrates reasoning in assessing the Appellant's, and also PW3's, credibility and was not itself a reversal of the onus of proof.

31. Finally once the magistrate had decided that, on the whole of the evidence in the case, these signatures had been made by the Appellant he was entitled to find that the Appellant had adopted those portions of PW3's notebook that the Appellant had signed.

32. That aspect of his reasoning cannot be criticised. That disposes of Grounds 2, 3 and 4.

33. As to ground 5 Mr Boyton argues that there was no proof in the case as to what property PW3 was induced to invest in. He points out it is a requirement of an offence under s. 3(1)(b) of Cap. 335 that the victim be induced to take part in or offer to take part in an investment arrangement in respect of property other than securities. But PW3 in his evidence had stated categorically that the Appellant had asked him to invest in gold and silver. This was repeated by him in evidence more than once. It is true that there was no proof of any actual investment being made on the part of PW3 by the Appellant or his company in gold or silver, bullion or otherwise but that is not necessary. S. 3(1)(b) of the Protection of Investors Ordinance, Cap. 335 makes it an offence to induce another person "to take part in or offer to take part in any investment arrangements in respect of property other than securities".

34. There can be no doubt from the magistrates Statement of Findings that he found PW3 had been induced to offer to trade in such property. The charge itself particularises the offer in these terms:-

"...... induced NGAI Lin to take part in an investment arrangement namely by depositing $300,000 Hong Kong currency in an account opened with the Doryick (the Appellant's company) for the alleged purpose of trading in bullion".

35. In other words it is not charged that trading in bullion did occur but that the victim was induced to open an account to allow such trading to occur. The whole trial proceeded on that basis. PW3 was found by the magistrate to have provided the funds to the Appellant to allow the Appellant to trade on his behalf in bullion. That must necessarily encompass an offer in terms of the section by PW3 to take part in an arrangement to purchase bullion whether or not such purchases occurred.

36. I might add that at one point of time, it was argued by Mr Boyton that gold and silver bullion were not property and that property for the purposes of Cap. 335 was defined by the proviso to the definition of "securities" in the Securities Ordinance, Cap. 333. There was no merit in this argument. "Property" in the Protection of Investors Ordinance, Cap. 335 is not in any way defined by the Securities Ordinance and must be given its plain meaning. Bullion is plainly property.

37. The Appeal is dismissed.