HKSAR v. CHAN CHI KWAN

CACC 470/00

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. CACC 470 of 2000

(On Appeal from DCCC No. 894 of 2000)

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REASONS FOR JUDGMENT

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Hon Woo JA (giving the reasons of the Court):

On 4 July 2001, after hearing counsel for the defendant, we dismissed the defendant's application for leave to appeal against conviction, his application for leave relating to sentence having been abandoned earlier. We said we should give our reasons in writing later. They appear below.

Background

2. The defendant was convicted on 7 November 2000 by District Judge Saunders on a charge of conspiracy to defraud, contrary to common law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200. The particulars of the offence were that between 23 November 1999 and 21 December 1999, the defendant conspired with other persons unknown to defraud CHAU Ping-shing of $1,000,000 by dishonestly and falsely representing that:

(a) Asia & Pacific Trading Company had 30,000 metric tonnes of steel to sell to Wing Hong Trading Company;

(b) the steel came from dismantling the superstructure of the former Air Cargo Terminal of the Kai Tak Airport;

(c) the shipping order and invoice dated the 18 December 1999 issued by Hoson Shipping Company for the delivery of 3,540 tonnes of steel to Nansha Port of the People's Republic of China were genuine; and

(d) the shipping order and invoice dated 20 December 1999 issued by Hoson Shipping Company for the delivery of 3,354 tonnes of steel to Nansha Port of the People's Republic of China were genuine.

The evidence

3. Mr CHAU Ping-shing, PW1, was the victim. He was requested by members of his family to assist in completing the purchase of a large quantity of scrap steel from the old Kai Tak Airport to be delivered to the Mainland. The purchase was to be made by his company, Wing Hong Trading Company. In late November 1999, PW1 used a telephone number and a name supplied by a customer in China and approached Asia & Pacific Trading Company and made contact with a man named CHAN Tze-kin. PW1 identified the defendant as the man named CHAN Tze-kin of Asia & Pacific Trading Company, although the defendant's name was CHAN Chi-kwan. It appeared that there were different romanizations of the defendant's name because of accent or dialect. Nothing turned on this difference of name. Moreover, PW1's identification of the defendant was not in any way challenged.

4. PW1 and his uncle PW2 then met the defendant with two other persons at a restaurant where they had lunch together. Following lunch, they went to an office of a solicitors' firm in which negotiations took place. PW1 and PW2 undertook the negotiation on the part of the purchaser and the defendant undertook the negotiation on behalf of the vendor, said to be the company named Asia & Pacific Trading Company. The negotiation was unsuccessful because the parties could not agree on whether a deposit of $1 million was to be paid immediately.

5. A few days later, there was a meeting in Shenzhen. Present were PW1, PW2 and a relative of them who lived in Shenzhen. It was PW1's evidence, unchallenged in cross-examination, that Asia & Pacific Trading Company was represented by the defendant alone. During the negotiation, the defendant did not have to seek instructions from anyone else by telephone. The parties reached agreement whereby the sum of $1 million would be deposited into the account of solicitors for Asia & Pacific Trading Company to be held there and released only upon consent being received from solicitors acting for Wing Hong Trading Company. The terms of the agreement were reduced in hand-written Chinese and signed by the defendant for Asia & Pacific Trading Company and PW1's Shenzhen relative. That was exhibit P7 before the Judge.

6. PW1 returned to Hong Kong and instructed his solicitors to prepare a formal contract which, after duly approved by solicitors for Asia & Pacific Trading Company, was executed by PW1 on behalf of Wing Hong Trading Company and one CHAN Shek-yin on behalf of Asia & Pacific Trading Company. The formal contract was produced as exhibit P8.

7. There was no evidence of any further involvement of the defendant with PW1 in any other subsequent action relating to the transaction. PW1 was contacted by and had a number of telephone conversations with a male by the name of "Mr Lui". PW1 was told by Lui that Lui was responsible to dismantle the steel and that he should deal with Lui to complete the transaction. During one of the conversations, PW1 was informed that Asia & Pacific Trading Company had engaged Hoson Shipping Company for the delivery of the steel to the Mainland. Lui gave a telephone number to PW1 in order that he might contact Mr Ho at Hoson Shipping Company. By telephone, PW1 duly contacted a man who said he was Mr Ho and PW1 was assured that Hoson Shipping Company had received instructions from Asia & Pacific Trading Company to despatch the steel to the Mainland.

8. PW1 was taken by Lui to the Kai Tak Airport where he was shown what he was told was the steel he had purchased. A subsequent telephone arrangement resulted in a further meeting with Lui at Jordan MTR station where Lui delivered to PW1 what purported to be shipping documents and invoice in relation to the first shipment of the steel, exhibit P2. As a result, PW1 authorized his solicitors to release a sum of $654,900 to the vendor.

9. On the next day, in a further meeting arranged in the same way, PW1 met Lui again at Jordan MTR station and received a second set of shipping documents and an invoice, exhibit P4. He authorised the release of the balance of the funds.

10. The shipping documents and invoices PW1 received were fraudulent. PW3, the proprietor of Hoson Shipping Company told the Judge that in mid-December 1999, he received a telephone inquiry from a man who said his name was Chan about the cost of transporting steel to the Mainland. At Chan's request, he faxed a shipping order to a number given to him by Chan. He heard nothing further from Chan. The shipping documents in exhibits P2 and P4, given by Lui to PW1, were copies of the shipping order faxed by PW3 to the man named Chan, save that the telephone and fax numbers on it had been altered. The invoices given by Lui to PW1 purported to be Hoson Shipping Company's invoices were not on the format used by Hoson Shipping Company and plainly fraudulent.

11. After authorising the release of the balance of the funds, PW1 was informed by his relative in the Mainland that the steel had not arrived. He endeavoured to contact the defendant and after some difficulty was able, by telephone, to contact a man who said he was "Mr Chan" who "claimed himself to be a person of Asia & Pacific Trading Company". This Mr Chan said that the batch of goods had been sold and that he could not deliver now. As a result of negotiations between them, PW1 received a cheque for $1 million drawn on Asia & Pacific Trading Company's bank account. However, that cheque was dishonoured and PW1 had never been able to locate Mr Chan again.

12. Mr LOK Chi-hung, the proprietor of Sing Chun Construction Company, testified before the Judge to say that he was engaged in a joint venture with Shun Hing Engineering Company to sell scrap steel from the old Kai Tak Airport. He had made a contract with Asia & Pacific Trading Company to sell scrap steel to that company but in mid-October 1999 that contract fell through when Asia & Pacific Trading Company failed to pay a deposit required by the contract. He said that Asia & Pacific Trading Company was introduced to him by a man named HEUNG Shing whom he believed to be a commission agent.

13. Following a submission of no case to answer made on behalf of the defendant, which was rejected by the Judge, the defendant elected not to give or call any evidence. The Judge convicted the defendant.

Grounds of appeal

14. Two grounds of appeal are raised on behalf of the defendant, namely,

(1) the Judge erred in law in that he used a statement of opinion (and/or speculation) as evidence of a primary fact to reach an inference adverse to the interests of the defendant; and

(2) the Judge erred in law in that he had reversed and/or shifted the burden of proof (to the disadvantage of the defendant) through a misdirection, so that inferences were more readily drawn against the defendant because he had elected not to give evidence in his own defence.

15. It is clear that there is no dispute that PW1 was defrauded by a conspiracy. The only issue was whether the defendant was a party to that conspiracy. The subject of complaint in the first ground of appeal is a passage in the reasons for verdict of the Judge, as follows:

"It is plain from the evidence that both PW1 and PW2 believed, in all of their dealings with the defendant, that the defendant was a part of Asia & Pacific Trading Company. The defendant certainly did nothing at all to dispel that belief and even went to the extent of signing the preliminary agreement, Exhibit P7, on behalf of Asia & Pacific Trading Company. He made no attempt to introduce CHAN Shek-yin, if it was he who was present, as the proprietor of Asia & Pacific Trading Company. No suggestion was ever made to PW1 or PW2 that the circumstances were such that the defendant would be entitled to a commission as an agent in the transaction. In this respect, there is a marked contract (sic) between the position of the defendant and Heung Shing, the first agent engaged by Asia & Pacific Trading Company." (emphasis added)

16. By reason of the words "believed" and "dispel that belief" used by the Judge, it is submitted that the Judge wrongly admitted a statement of opinion or speculation as evidence of a primary fact that the defendant was a part of Asia & Pacific Trading Company. It is also argued that the Judge had thereby reversed the burden of proof, to place the burden of proof on the defendant to disprove that he was a part of Asia & Pacific Trading Company. We do not agree. This is a classic example of taking words out of context. The above cited passage was to show how the Judge assessed the evidence in response to a submission made on behalf of the defendant that the evidence enabled the inference to be drawn that the defendant was an agent or intermediary acting to bring the contracting parties together and that the defendant had no knowledge of subsequent events that comprised the fraud. The Judge had never reversed the burden of proof as suggested and indeed he was dealing with the defendant in a very fair manner. He said:

"It was admitted by the prosecution that the defendant had a clear record and in assessing the evidence, I had due regard to that fact. In assessing the evidence I had due regard to the fact that the burden of proof lay squarely on the prosecution throughout and that no burden lay upon the defendant."

17. In the passage cited in paragraph 15 above, the Judge was referring to the evidence of PW1 and PW2 in their dealings with the defendant. The evidence from these two witnesses showed very clearly that the defendant was a part of Asia & Pacific Trading Company. It was also their belief at the time based on all surrounding circumstances and that the defendant did not say or did anything to dispel that belief of the witnesses. That was the evidence of the two witnesses, and it was not that the Judge drew an inference based on speculation or the witnesses' belief. The Judge concluded:

"In those circumstances and in the absence of evidence to the contrary, the inference that the defendant was a part of the fraud is very strong. They are circumstances which cry out for an explanation from the defendant. The defendant, as I have said, elected not to give evidence. That is his right and that he should not give or call evidence does not in any way displace the burden on the prosecution. Neither may I, nor do I, draw any inference against him because he has exercised his rights in that way. But if he elects not to give evidence, there may be no challenge to the evidence that has been given and he cannot complain if inferences are more readily drawn against him.

There was nothing in the evidence before me to suggest that the defendant was merely an intermediary. There is nothing to indicate that he was a middleman who, for a commission, brought parties together. It was not suggested that he ever said so during any of the negotiations. He signed on behalf of the company. The defendant's involvement in the establishment of the contract at a time when Asia & Pacific Trading Company's right to the steel had lapsed by reason of the failure of its contract of purchase raises, without any answer being available on the evidence, the inference that the defendant knew of the subsequent events. I accept that agents, middlemen or intermediaries are regularly used in commercial transactions but there is simply no evidence before me that that was the defendant's role. He did not even say so himself. That agents are used in commercial transactions is not sufficient to raise the inference on these facts that the defendant's role was one of an intermediary.

In the absence of evidence to the contrary, the inference that the defendant was a knowing part of the fraud perpetrated on PW1 is overwhelming. He is accordingly convicted as charged." (emphasis added)

18. The second ground of appeal alleging that there was a misdirection is based on the words "very strong" and "overwhelming" highlighted in the above passage. In view of the fact that the defendant elected not to give or call any evidence, the evidence available to the Judge was all adduced by the prosecution. The evidence at the time of the submission of no case to answer and at the close of the defence case was the same. It is argued therefore, that there was no logical justification for the Judge to have elevated the quality of that evidence from "very strong" at the no case submission to "overwhelming" at the conclusion of the case. It shows, so the argument runs, that either that the Judge had used the defendant's election not to give evidence to elevate the strength of the prosecution's evidence, or alternatively, the Judge should have acceded to the no case submission merely based on "very strong" but not "overwhelming" evidence.

19. We must say that these arguments are specious and have little substance. The Judge was using different terms when dealing with two different aspects in the progression of the case. When he was dealing with the no case submission, what was crucial for determination was whether there was a prima facie case established by the prosecution's evidence that the defendant was involved in the conspiracy. That was a stage when the Judge did not know whether the defendant would elect to give evidence or not. By using the term "very strong", the Judge was merely saying that there was much more than prima facie evidence from the prosecution as to the defendant's guilt. After the defendant had elected not to give or to call any evidence, the Judge reviewed all the evidence available and came to the conclusion that he evidence was "overwhelming" of the defendant's guilt. He did not reverse the burden of proof to the disadvantage of the defendant or at all, and there was no misdirection on his part. He had expressly said on no less than two occasions that the burden of proof lay squarely on the prosecution throughout. Nor had he used the absence of evidence from the defendant to strengthen the prosecution's case, as suggested.

20. It appears that there is also complaint about the Judge's statement that as the defendant did not give or call any evidence, "he cannot complain if inferences are more readily drawn against him." The Judge was merely following the utterances of the appellate courts in Hong Kong. In R v SUNG Shui-sing [1962] HKLR 587, Hogan CJ in the Full Court said:

"No accused is under any compulsion to give evidence on his own behalf or, in any but the most exceptional circumstances, to shoulder the onus of proving his innocence; but where the prosecution have established facts which a tribunal might reasonably infer a fraudulent intent, it does not lie in his mouth to complain if such an inference is made and of this inference is reached more readily because of his decision not to afford to the tribunal the benefit of his version of his intentions."

The Court of Appeal in Lam Tsz-wah v The Queen [1984] HKLR 54 at p 63 echoed the same view, as follows:

"... since the applicant chose not to go into the witness box to explain the circumstances ... he cannot complain if a proper inference is drawn, and if it is drawn more readily in view of his election."

There can be no justification for saying that the Judge had elevated the strength of the prosecution's evidence because the defendant had elected not to give or call any evidence. What "an inference more readily drawn against" the defendant simply means that in the absence of any evidence from the defendant that may create any reasonable doubt on the inference consistent with guilt or give rise to the consideration of an inference consistent with innocence, the inference of guilt will be more readily drawn. The complaint is without substance.

21. As said before, there is, and can be, no dispute that PW1 was defrauded by a conspiracy. Although there was no evidence that the defendant took any part in showing the steel at the Kai Tak Airport to PW1 or was instrumental in passing the forged shipping documents and invoices to PW1 that caused PW1 to part with his $1 million, there was ample evidence for the irresistible inference to be drawn that the defendant was party to the conspiracy and he had knowledge of the fraudulent scheme perpetrated on PW1. The main evidence consisted of the facts that all the negotiations leading to the signing of the preliminary agreement, exhibit P7, were made by the defendant alone on behalf of Asia & Pacific Trading Company, that the defendant himself signed that agreement, and that at the time of such negotiations and the signing of exhibit P7, the contract that Asia & Pacific Trading Company had to purchase the steel had fallen through by mid-October 1999. In the general context of commercial transactions like that in the present case, of course, there could be commission agents or intermediaries, whose services were either to put the intending contracting parties together or to assist them in entering into a contract. That was the suggestion of the defence counsel at the trial before the Judge. However, as the Judge had clearly pointed out, during the whole course of negotiations between PW1 and PW2 on the one part and the defendant on the other part, the defendant had never said or done anything that intimated that he was but a commission agent or intermediary. Indeed, the evidence was to the contrary effect. The defendant did not need to seek instructions from anyone else when he negotiated the terms of the preliminary agreement with PW1 and PW2 and their Shenzhen relative. The defendant signed the preliminary agreement himself for Asia & Pacific Trading Company. The only irresistible inference that can be drawn from this state of evidence is that the defendant had knowledge of the fraudulent scheme and he was instrumental in putting through a part of that scheme to defraud PW1. That was the inference that the Judge drew and his description of the inference as "overwhelming" is, in our judgment, correct.

22. It is pertinent to refer to Lawton LJ's judgment in R v Kenneth Mutch (1972) 57 Cr App R 196, where he said at p 199:

"But at the same time members of the Jury, you must not think that in not giving evidence he is not doing what he is perfectly entitled to do. He is entitled to sit where he is as he has done and please do not think that the onus of proof is shifting, it isn't. It remains fairly and squarely upon the shoulders of the prosecution but, at the same time, I have to tell you this: the Jury are entitled to draw inferences unfavourable to the prisoner where he is not called to establish an innocent explanation of facts proved by the prosecution which, without such explanation, tell for his guilt."

23. In TAN Sien-gim [1995] 2 HKC 513, Lord Keith of Kinkel when delivering his opinion in the Privy Council also had the following to say at p 517G:

"It is a significant feature of the case that the appellant did not give evidence in her defence. The matters revealed by the evidence for the prosecution cried out for some explanation on the part of the appellant which might be consistent with her innocence. The nature of these matters was such that the Jury would have been well entitled to consider that the absence of any evidence to the contrary from the appellant, she must be taken to have been aware of the true character of ARFL's activities."

24. In the circumstances, it is unnecessary for us to deal with the authorities cited by Mr Boyton in support of his argument which would only tend to confuse the issue.

The Ghosh test

25. Mr Boyton also attempts to submit that the Judge had not expressly referred to the Ghosh test but that contention is premised on his argument that the Judge had failed to consider an alternative and competing inference that was to the defendant's favour, namely the defendant was not dishonest. Mr Boyton, however, accepts fairly that in Hong Kong, it is trite law that a judge sitting alone without a jury need not remind himself of Ghosh. On the evidence of this case, there can be no dispute that there was a fraudulent conspiracy perpetuated on PW1 and that the scheme of the conspiracy was dishonest; the only issue being whether the defendant was a party to that conspiracy with knowledge. All this makes it plain that the Ghosh test had no application.

Conclusion

26. For all the above reasons, the application must be dismissed.