HKSAR v. YIU TO WING

CACC 294/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

criminal APPEAL NO. 294 OF 2004 

(ON APPEAL FROM NO. DCCC 779 of 2003)

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REASONS FOR JUDGMENT

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

1.  On 19 April 2005, we dismissed the application for leave to appeal against conviction and sentence. We indicated that we would give our reasons in writing and this we now do.

Background

2.  The applicant – Yiu To Wing, together with Wong Cho-tat, Eric (Eric), Wong Hon-yin, Perry (Perry), Chan Wing-yee, Joey (Joey), and others were charged with “Agents conspired to use documents with intent to deceive their principal – Great Eagle Engineering Company Limited (Great Eagle)”.

3.  The applicant pleaded not guilty to the charge before Deputy Judge Wyeth (the judge) in the District Court, but was convicted after trial and sentenced to three years’ imprisonment. He sought leave to appeal against both conviction and sentence.

Prosecution Case

4.  Great Eagle provided maintenance services to buildings of its holding company, including Great Eagle Centre and Citibank Plaza. The applicant and some of the co-conspirators were employed by Great Eagle, the applicant as the foreman of Great Eagle Centre earning about $14,000 per month, Eric as the chief engineer, Perry as the senior engineer of Citibank Plaza, and Joey as the project coordinator of Citibank Plaza.

5.  When maintenance or repair works needed to be done, job orders would be issued and technicians would be engaged to carry out the works. Materials or spare parts required for the works would be ordered from suppliers or taken from the stock in the warehouse. Sometimes, maintenance works might be awarded to outside contractors.

6.  When materials or spare parts were required from suppliers, purchase requisition forms prepared by either Eric or Perry setting out the details would be forwarded to the holding company for endorsement. Once endorsed, the accounts department of the holding company (A/C Department) would arrange for the purchase of the materials or spare parts from suppliers of a pre-approved list and the suppliers would then be paid.

7.  In April 1995, Eric, Perry and others set up four companies and had them registered as pre-approved suppliers of Great Eagle. Bogus job orders and invoices were prepared and submitted to the A/C Department for payment for works purportedly undertaken by the four companies.

8.  One of the companies so set up was Waston Electrical Engineering Company (“Waston”). Between August 1996 and March 2002, four different persons were registered, at different times, as proprietors of Waston and during such period, Great Eagle paid about $6.4 million against invoices issued by Waston.

9.  The most frequently mentioned spare parts or materials mentioned in the invoices were “VAV Controller”, “B5 pulley” and “16mm Cable” said to be supplied by the four companies, including Waston. In fact the four companies never supplied such items to Great Eagle.

10.  The payments from Great Eagle were deposited into the bank accounts of the four companies under the control of Perry. Perry would then transfer the monies to his own accounts before sharing them with his co-conspirators.

11.  In 1996, Eric and Perry recruited the applicant to the fraudulent scheme. The applicant became the registered proprietor of Waston in October 1999.

12.  Samples of the payments to the four companies indicated that 90% of the amount paid by Great Eagle were transferred to the accounts of Perry and his wife and then distributed to other co-conspirators, including the applicant.

13.  The payments to the applicant came from the proceeds of the fraud and the applicant was paid at the same time as the other co-conspirators by cheques bearing sequential numbers.

14.  Between May 1999 and February 2002, the applicant received the total sums of about $700,000 from Perry.

15.  The applicant admitted that apart from P10, which he claimed to be related to genuine transactions, about 90% of the other invoices issued by the four companies, including Waston, were bogus.

16.  When interviewed under caution, the applicant said he was told to set up Waston and $5,000 would be paid to him every month although he was not sure why. He agreed that the monthly payment subsequently increased to about $20,000, $30,000 or more, but he still had no idea why he was paid. He thought Perry had got some benefits from Waston and thus decided to pay him the money.

17.  The applicant denied being involved in the fraud or knowing anything about the operation of Waston. The applicant said he knew nothing about the bogus invoices issued by Waston despite the fact that some of them appeared to have been addressed for his attention.

18.  Soon after the ICAC investigation in February 2002, the applicant was replaced by a friend of Perry’s wife as the registered proprietor of Waston.

Prosecution Evidence Against the Applicant

19.  The existence of the conspiracy was not disputed. Indeed, both Eric and Perry pleaded guilty, not only to the charge of conspiracy, but also to other charges arising out of the same fraudulent scheme. Eric gave evidence for the prosecution whereas Perry gave evidence for the defence. Other co-conspirators also gave evidence under immunities.

20.  Eric detailed how he and others misused the system with false documentation to defraud Great Eagle of millions of dollars. He confirmed that Waston was set up to provide false invoices. He said the applicant and other co-conspirators assisted in the fraudulent scheme, but as he had no direct contact with the applicant, he did not know the details of what the applicant did.

21.  However, after the ICAC had approached Perry in February 2002, those involved in the conspiracy were asked to discuss the matter at two meetings. He said other co-conspirators, including the applicant, took part in the meetings and the applicant showed interest in what was being said.

22.  In particular at the second meeting, the applicant lowered his head and appeared to be worried. When it was suggested that the fraudulent scheme be stopped, Perry said, “What about Ah Wing?” (The applicant). Apparently Perry was concerned that if the deception and the corresponding payments to the applicant were to stop, it would have serious impact on the applicant’s economic situation as he had a heavy financial burden.

23.  Eric confirmed that 90% of the invoices issued by the four companies to Great Eagle, including P10, were false.

24.  Eric agreed that Perry was more involved in the operational matters and he was not sure what role the applicant played and how he became the registered proprietor of Waston.

25.  Eric also agreed that the applicant did “moonlighting jobs” on several occasions. However, he was unable to recall the details or whether such works related to Waston.

26.  Eric disagreed with the suggestion that the applicant was preoccupied with listening to horse racing during the meetings. He emphasized that the meetings were not social meetings, but for the discussion of ICAC’s interest in the fraud perpetrated against Great Eagle.

27.  PW2 – Ng Wai-kong was also employed by Great Eagle and was in charge of processing job orders and invoices. He said at the suggestion of Eric, he had used his girlfriend’s name to register as the proprietor of Waston for the purpose of issuing bogus invoices to Great Eagle. He agreed that he had never received any documentation from the applicant.

28.  PW3 – Chan Wai-ha, Heidi was one of the conspirators. She confirmed that the applicant was present at the meeting when there was discussion about the ICAC investigation. She even said at the second meeting that the applicant comforted her by telling her not to worry and that he would be responsible for the offences for her.

29.  PW3 denied the suggestion that she had wronged the applicant.

30.  PW4 – Au Yeung Kai-ming, another employee of Great Eagle involved in the fraud also confirmed the applicant’s presence at the meetings to discuss about the ICAC investigation. He also confirmed that the applicant had comforted PW3 by suggesting, “If anything happened, I will shoulder for you.” PW4 was unable to recall if the meeting took place on a racing night or whether the applicant was concentrating on listening to the racing results.

Defence Case

31.  The applicant did not give evidence, but called Perry as his witness.

32.  Perry admitted to have perpetrated the fraud against Great Eagle with Eric and others by setting up the four companies. He also detailed how the proceeds of the fraud were shared amongst the co-conspirators.

33.  However, Perry suggested that the applicant was not involved in the fraud and would have no knowledge of the falsity of the documentation.

34.  Perry said after PW2 left Great Eagle, it was necessary to get someone else to be the registered proprietor of Waston and the applicant agreed to take over. A bank account of Waston was set up, but he kept the chequebooks and the company chop.

35.  He also said he paid the applicant $5000 per month to be the registered proprietor of Waston. Perry admitted to have paid the applicant a total of about $700,000.

36.  Perry sought to account for the various payments. Apart from the regular monthly payments of $5,000, there were additional payments as personal loans, race winnings on joint betting, and share of dividend from investment as well as payments for “moonlighting works” undertaken by the applicant. He admitted, however, that P10 contained bogus invoices to defraud Great Eagle.

37.  Perry claimed that the money paid to the applicant was not for any dishonest activities and the applicant would not be aware of such activities.

38.  Perry agreed that the applicant was present in the two meetings when the ICAC investigation was discussed. He said, however, that the applicant arrived 20 minutes late in the first meeting.  As to the 2^nd meeting, he said the applicant was just invited to attend for dinner by chance. He said he was surprised to see the applicant at the meeting. In any event, the applicant was alone sitting on the opposite side of the lounge listening to horse racing results.

39.  Perry also said it was he and not the applicant who made the comforting remarks to PW3.

The Judge’s Findings

40.  The judge did not believe the evidence of Perry and concluded that he was giving dishonest evidence. The judge also rejected the applicant’s account said during the cautioned interviews that he was not involved in the conspiracy and knew nothing about the fraud against Great Eagle. The judge pointed out that the applicant did not say that the payments to him had anything to do with loans, racing wins, shares dividends or “moonlighting” income, an explanation put forward by Perry.

41.  The judge believed and accepted the evidence of Eric and the other prosecution witnesses.

42.  On the prosecution evidence, including the admitted facts, the judge concluded that the applicant was indeed a party to the conspiracy to defraud Great Eagle.

43.  The judge referred to the applicant’s presence at the two meetings to discuss about the ICAC interest, his assurance to PW3 and his prompt action in relinquishing his relationship with Waston and concluded that the irresistible inference was that the applicant had full knowledge of the fraud and was a party to it.

Grounds of Appeal Against Conviction

44.  Mr Nicholas Adams, on behalf of the applicant raised a number of grounds to support the application for leave to appeal against conviction. He said there was no direct evidence against the applicant and that the other evidence did not lead to the irresistible inference that the applicant knew about the fraud and was a party to it.

45.  Mr Adams suggested that there were innocent explanations for what the applicant did. He also suggested that the judge was wrong to reject the defence case.

46.  It was suggested that the incriminating evidence against the applicant could all be innocently explained; the payment of about $700,000, being a small fraction of the total amount paid to Waston by Great Eagle could have been paid for “moonlighting” works, the meetings could also have been a common reaction to the ICAC inquiry and not necessarily indicative of guilt, particularly when other non-conspirators were present, the assurance to PW3 by the applicant could have been a “gentlemanly gesture” only, and the prompt distancing from Waston could also have been the result of the applicant realizing that he could not continue with the “moonlighting” work.

47.  Mr Adams further suggested that there was reasonable doubt of the guilt of the applicant, particularly in the light of Perry’s evidence when he had no reason not to tell the truth.

48.  What the applicant said during the cautioned interviews was attributed to the absence of mind, surprise and hence the inability to respond properly to the allegations by the ICAC.

Discussion

49.  We were surprised by the suggestion that there was no direct evidence against the applicant.

50.  For no explainable reason, the applicant agreed to become the sole proprietor of Waston, the existence of which was for the main, if not the sole purpose of defrauding Great Eagle.

51.  He opened the bank account for Waston and allowed someone else to operate it. Millions of dollars were deposited and then paid out of the company account. Many of the bogus documents prepared to defraud Great Eagle were addressed to him, yet the applicant claimed not to know anything about them.

52.  Over a period of about twenty-nine months, the applicant was paid large sums of money, totaling about $700,000 and he claimed not to know exactly why he was so paid. The money received by the applicant was, of course, many times his monthly salary.

53.  The other co-conspirators, particularly Eric and Perry were paid much more. However, the applicant was a more junior staff of Great Eagle and he might not have been as extensively involved in the fraud as the others.

54.  In the cautioned interviews, the applicant did not say the payments related to any “moonlighting” work, let alone in the name of Waston. Perry’s suggestion that the applicant was paid for “moonlighting” work was contradicted by undisputed evidence and was rejected by the judge.

55.  When the applicant was aware of the ICAC investigation, he took part in meetings with the other major co-conspirators for the purpose of discussing the ICAC investigation.

56.  The presence of other possible non-conspirators, namely the wives of Eric and Perry, hardly supports Mr Adams’ submission. Eric’s wife was named as one of the conspirators. She clearly had knowledge about the fraud perpetrated against Great Eagle and the judge found her to be a co-conspirator.

57.  In any event, the position of wives was quite different from that of a colleague. It was inconceivable that the applicant would have been allowed to be present in the meetings, let alone taking part in the discussion about the ICAC investigation if he was not involved in the fraud against his employer – Great Eagle.

58.  The suggestion that, when the fraud was exposed and PW3 became worried, the applicant’s indication that he would shoulder the responsibility was a gentlemanly gesture was not something we could take seriously.

59.  It was not for us to speculate what motive, if any, that Perry might have to assist the applicant by giving false evidence. According to Eric, Perry was clearly concerned about the wellbeing of the applicant at the meetings. More importantly, Perry’s evidence, not only was inherently improbable and unsupported by the applicant’s own explanation at the cautioned interviews, but was contradicted by other evidence.

60.  The judge was clearly entitled to reject, as he did, the evidence of Perry. Mr Adams did not vigorously seek to argue otherwise.

61.  The judge considered all the circumstances of the case and then concluded that the only irresistible inference was that the applicant was aware of the fraud against Great Eagle and that he was one of the conspirators.

62.  On the evidence, we failed to see how the judge could have come to any other conclusion, particularly when the applicant chose not to give evidence to explain, undermine or contradict such evidence.

63.  None of the matters put forward by Mr Adams, either individually or collectively, would create any doubt about the applicant’s guilt. He was rightly convicted. The application for leave to appeal against conviction was therefore dismissed.

Ground of Appeal Against Sentence

64.  Mr Adams suggested that as the applicant’s role in the conspiracy was not clearly established, and as his role was not essential and was passive and minor, the sentence of three years’ imprisonment was excessive.

65.  Given the extent of the conspiracy and its nature, it would be indeed difficult to be precise about the applicant’s role. However, over a period of almost 30 months, the applicant registered himself as the proprietor of a company set up for the purpose of defrauding his employer with other colleagues. False invoices were issued to obtain over $6 million from the employer, of which the applicant himself pocketed almost $700,000.

66.  It was a most serious case of breach of trust. The sentence of three years’ imprisonment was appropriate.

67.  There was no basis for any reduction. We therefore also refused leave to appeal against sentence.