HKSAR v. LAM CHOI LAN

CACC 91/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 91 OF 1999

(ON APPEAL FROM DCCC 771/1998)

__________________

______________

J U D G M E N T

______________

Hon Leong JA (giving the judgment of the Court):

1. On 22 January 1999, in the District Court before H H Judge Sweeney, the applicant Lam Choi-lan (D1) was convicted jointly with Lo Jock-huen (D2) of one count of false accounting (the 2nd charge) and by himself, of three counts of false accounting (the 4th, 5th and 6th charges). He was acquitted of two counts of conspiracy to defraud (the 1st and 3rd charges). Both the applicant and D2 appealed against conviction. D2's appeal was dismissed on 2 September 1999. The present appeal concerns the applicant's application for leave to appeal against convictions only.

2. The false accounting charges are as follows:

"2nd Charge (against both accused)
Statement of Offence

False accounting, contrary to s19(1)(a) of the Theft Ordinance, Cap. 210.

Particulars of Offence

LAM Choi-lan and LO Jock-huen, on or about the 5th day of July 1996, in Hong Kong, together with LIANG Jin-wen and LUI Wai-hung, dishonestly with a view to gain for themselves or another or with intent to cause loss to another, falsified a document made or required for an accounting purpose, namely a commercial invoice of Erbal International Limited ('Erbal') numbered Inv-136/96 and dated the 5th day of July 1996, by making or concurring in the making of an entry thereon which was or may have been misleading, false or deceptive in a material particular in that it purported to show that goods to the value of $1,800,000 United States of America currency were sold by Erbal to CAC Brake Company Limited.

4th Charge (against D1 only)
Statement of Offence

False accounting, contrary to s19(1)(a) of the Theft Ordinance, Cap. 210.

Particulars of Offence

LAM Choi-lan, on or about the 5th day of September 1996, in Hong Kong, together with LIANG Jin-wen and WONG Tong-ming, dishonestly with a view to gain for themselves or another or with intent to cause loss to another, falsified a document made or required for an accounting purpose, namely a commercial invoice of Solarworld International Limited ('Solarworld'), numbered 00018 and dated the 5th day of September 1996, by making or concurring in the making of an entry thereon which was or may have been misleading, false or deceptive in a material particular in that it purported to show that goods to the value of $980,000 United States of America currency were sold by Solarworld to CAC Brake Company Limited.

5th Charge (against D1 only)
Statement of Offence

False accounting, contrary to s19(1)(a) of the Theft Ordinance, Cap. 210.

Particulars of Offence

LAM Choi-lan, on or about the 5th day of September 1996, in Hong Kong, together with LIANG Jin-wen and WONG Tong-ming, dishonestly with a view to gain for themselves or another or with intent to cause loss to another, falsified a document made or required for an accounting purpose, namely a commercial invoice of Solarworld International Limited ('Solarworld'), numbered 00019 and dated the 5th day of September 1996, by making or concurring in the making of an entry thereon which was or may have been misleading, false or deceptive in a material particular in that it purported to show that goods to the value of $1,080,000 United States of America currency were sold by Solarworld to CAC Brake Company Limited.

6th Charge (against D1 only)
Statement of Offence

False accounting, contrary to s19(1)(a) of the Theft Ordinance, Cap. 210.

Particulars of Offence

LAM Choi-lan, on or about the 3rd day of October 1996, in Hong Kong, together with LIANG Jin-wen and WONG Tong-ming, dishonestly with a view to gain for themselves or another or with intent to cause loss to another, falsified a document made or required for an accounting purpose, namely a commercial invoice of Solarworld International Limited ('Solarworld'), numbered 00023 and dated the 3rd day of October 1996, by making or concurring in the making of an entry thereon which was or may have been misleading, false or deceptive in a material particular in that it purported to show that goods to the value of $1,090,000 United States of America currency were sold by Solarworld to CAC Brake Company Limited."

3. All four charges involved Liang Jin wen ("Liang"), one of the co-conspirators who had absconded. Liang was at the material time the general manager of CAC Brake Company Ltd ("CAC"). He had applied for the issue from the Guongdong Development Bank ("GDB") of four letters of credit ("LCs"), without authority from CAC, with supporting documents which included the four invoices particularised in the four charges. These four invoices purported to show that there had been sales of goods to CAC but they were false in that there were in fact no such sales and no goods had been delivered. These LCs were discounted and the proceeds were distributed, some of which went to the applicant's account.

4. The main prosecution evidence against the applicant on the 2nd charge is the evidence of PW3 Lui Wai-hung and on the other three charges, the evidence of PW4 Wong Tong-ming. PW3 was the person in charge of Erbal International Ltd ("Erbal") and he made out the false Erbal invoice in the 2nd charge. PW4 was the person in charge of Solarworld International Ltd ("Solarworld") and he made out the false invoices in the other three charges. Both PW3 and PW4 gave evidence under immunity.

5. PW3's evidence may be summarised as follows:

6. D2 contacted PW3 and asked for his assistance to find a bank to discount a LC. PW3 agreed to assist D2 on payment of a commission of 0.2% of the discounted value of the LC. D2 told PW3 the LC was for purchasing a set of brake production line equipment by CAC but PW3 would only be concerned with discounting the LC. The sale and delivery of the goods would be D2's concern. PW3 found a Galaxy Co. Ltd ("Galaxy") for D2. D2 subsequently introduced the applicant to PW3. D2 told PW3 that if he (D2) was not in Hong Kong, the applicant was to be contacted and the applicant would be responsible for dealings in connection with the LC and for the delivery of the goods. D2 also instructed PW3 to send the net proceeds to the applicant's company, Che Lap Hong Co. Ltd. D2 supplied PW3 with a false certificate of cargo inspection and a false cargo receipt purporting to show goods had been taken delivery by CAC from Galaxy, whereas all those concerned in the operation knew no goods had originated from Galaxy. Subsequently, the applicant went to see PW3 and told him that the LC could not be discounted at Galaxy. PW3 then agreed to use his own company Erbal as the beneficiary of the LC. It was decided that the Galaxy LC should be cancelled and to open a new LC in favour of Erbal. PW3, using the process of cut and paste and then photocopying, amended the supporting documents which included the packing list, the contract of sale and the invoice particularised in the 2nd charge, to show the goods originated from Erbal. The applicant was given a cheque by PW3 and this represented 80% of the value of the LC but it was post-dated to 13 July 1996 by which time the applicant expected all the supporting documents for the issue of the LC would have been complied with. The applicant later supplied PW3 with a bill of lading, cargo receipt and certificate of cargo inspection to show the goods were shipped to and received by CAC from Erbal whereas there were no such goods shipped or delivered. The set of documents were then sent to GDB and the LC was subsequently issued. The LC was discounted and the applicant presented the post-dated cheque for payment.

7. PW4's evidence may be summarised as follows:

8. In June 1996, the applicant discussed with PW4 on the phone about issuing LCs to raise funds and the applicant told him that no goods would be delivered. Subsequently they met and the applicant told PW3 that he was authorised by CAC to discuss with him on the matter of LCs. A second meeting was held in the office of PW4 where the applicant told PW4 that two LCs would be issued and asked to make Solarworld as the beneficiary. The applicant told PW4 that he would prepare all the supporting documents except the packing lists and invoices which would be prepared by Solarworld according to the particulars supplied by the applicant. These would show a sale of brake production machinery by Solarworld to CAC but the applicant made it clear to PW4 that no goods would be delivered by Solarworld. The LCs would be discounted by a Best Finance Company with Solarworld acting as middleman for a commission of 13.5% of the value of the LC. Based on the information supplied by the applicant, PW4 instructed his staff to prepare the packing lists and invoices particularised in the 4th and 5th charges well knowing no goods had been sold by Solarworld.

9. In September 1996, based on the information supplied by the applicant, PW4 prepared documentation including a packing list, contract of sale and the invoice particularised in the 6th charge for the issue of a LC. These documents purported to show that CAC had purchased from Solarworld a scorching machine whereas there was no such sale. The applicant then supplied PW4 with a cargo receipt and a certificate of cargo inspection showing that the cargo had been received by CAC. The LC was issued on the strength of these documents. The proceeds were deposited into the bank account of the applicant's company on the instructions of the applicant.

10. The defence is that Liang told the applicant CAC had an injection of US$10 million in capital funds and was replacing the old production equipment with new ones already ordered in Europe. The supplier in Europe would only accept LCs payable at sight and Liang was looking for someone to discount a 360 day LC. The applicant then approached D2 who was acting as middleman and who in turn introduced Galaxy to the applicant but that required Galaxy to be made the supplier of the goods and the beneficiary of the LC. The applicant considered that that was nothing wrong. Liang had for exchange control reasons, also asked him to receive the proceeds of the LC. But subsequently Liang wanted him to go to Erbal for discounting the LC. Thereafter PW3 did all the documentation. The applicant said he had no knowledge of what took place in Erbal.

11. The applicant's defence on the other three charges is that he introduced Solarworld to Liang to discount the 360 day LCs and PW4 took over the whole matter. He only acted as middleman. The discounted sum was paid into the applicant's company accounts for exchange control reasons. He would then remit the money to Liang's private account for him to take it into China secretly for depositing into the CAC account.

12. The Judge rejected the applicant's evidence and found him to be "telling an inherently incredible story". The Judge analyzed his evidence and concluded "he did not believe any of his evidence on the important issues in this case".

13. On such evidence the Judge said that the applicant's evidence did not raise any reasonable doubt in his mind and he said:

"I find that there is ample evidence in respect of all four false accounting charges that he faces and the prosecution have proved its case beyond all reasonable doubt that D1 made or concurred in the making of the false invoices specified in each of the said four charges and did so dishonestly and with a view to gain for himself."

14. He convicted the applicant of the four charges.

15. The first ground of appeal is that the Judge erred in convicting the applicant in that there was insufficient evidence that the applicant falsified any commercial invoice made or required for an accounting purpose.

16. On this ground, Mr Marash SC for the applicant submits that the Judge was wrong to say that the invoices were for the accounting purpose of the issuing bank, the GDB or CAC. He submits that the invoices were generated solely to deceive GDB and other banks and would not form part of the records of the CAC since it was not the prosecution case that the documents would form part of those records. There was also no evidence that the applicant appreciated that GDB required an invoice for negotiating a LC nor an invoice is always required for that purpose. There was no evidence that the applicant was involved in the preparation of the Erbal invoice or had seen the LC which involved this invoice.

17. Mr Marash submits that there is no justification for the proposition in Attorney-General's Reference (No. l of 1980) [1981] 1 WLR 36, equating a document made specifically for the purpose of accounting with one made for some other purpose but which is required for an accounting purpose. He submits that this proposition has been criticised in Professor Griew's text book on the Theft Acts. Moreover, the correct approach should be that the maker must be proved to know that the invoice was made or required by GDB for an accounting purpose.

18. In our view, there was ample evidence in each of the four charges that the applicant had participated or concurred in the making of the four invoices which were false and he knew they were false because there were no sales and no goods had been delivered under the purported contracts of sales. The applicant knew and intended that these invoices were to be used as supporting documents for the issue of the relevant LCs by GDB. These invoices were required to enable the bank to know the underlying transactions for the LCs. Without these supporting invoices, no bank would have issued them.

19. We are not persuaded that we should prefer the view of Professor Griew to the authority of Attorney-General's Reference (No. l of 1980). In our view, the invoices were required for accounting purpose even if they were not to be included as part of the accounts. The phase "document made or required for any accounting purpose" should not be limited to accounting records or financial statements. It should include the documents that would be required for the preparation of accounting records or financial statements and an invoice would fall within that category.

20. The purpose or motive for the creation of the false invoices is not relevant and as long as the invoices were falsified by the applicant being a party to the falsification for an accounting purpose, it is not necessary to prove that the applicant knew that they were for the accounting purpose of the GDB. The case of R v Graham [1997] 1 Cr App R 302 referred to R v Mallet [1978] 1 WLR 820 and Attorney-General's Reference (No. l of 1980) and in that case Bingham CJ said this:

"The effect of this section is not to be whittled down and we are not for our part persuaded that knowledge of the purpose for which any record or document is made or required forms any part of the mens rea of the offence. The section focuses on the existence of an account or record or document made or required for an accounting purpose and these are the essential ingredients of the offence."

21. The second ground of appeal is that the acquittals of the conspiracy charges are inconsistent with the convictions on the false accounting charges.

22. The Judge had acquitted the applicant of the two charges of conspiracy to defraud on the ground that there was no evidence from GDB.

23. Mr Marash submits that the conspiracy in the present case is based on a dishonest agreement by the named conspirators to do acts which they realised would expose GDB to risk of economic loss namely the presentation of the false documents to the bank for the purpose of inducing it to open LCs and pay sums of money to the beneficiaries and no evidence is required to prove the bank had been defrauded. There was ample evidence for the Judge to convict on the conspiracy charges once the evidence of PW3 and PW4 was accepted by the Judge. The reason the Judge acquitted the applicant of the conspiracy charges, so Mr Marash submits, must be more than because there was no evidence from GDB. The acquittals can only be rationalised on the basis that the Judge was not satisfied the applicant and the co-conspirators agreed to the presentation of the documents knowing they were false. The acquittals are inconsistent with the convictions on the false accounting charges which required proof of knowledge on the part of the applicant that the invoices were false.

24. We do not accept that argument. The two offences are distinct in their elements that are required to be proved. As we have said earlier, the essence of the offence is the falsification of a document made or required for an accounting purpose and it would be sufficient if the invoices particularised in the charges had been proved beyond reasonable doubt to have been prepared by the applicant knowing they were false or he had concurred in their preparation for the purpose of supporting the LCs. It may well be that the evidence of PW3 and PW4 supports a verdict of guilty of the conspiracy charges by the applicant and acquitting him purely on the ground of lack of evidence from GDB is wrong. But a wrong acquittal does not make a ground to disturb a correctly founded conviction on a different offence. In our view there is ample evidence to support the conclusion of the Judge.

25. The remaining ground of appeal complains that the Judge failed to deal adequately with the conflict in the evidence which he relied on to convict the applicant and his consideration of the case against the applicant on the 4th, 5th and 6th charges was insufficient and therefore the convictions cannot be safe and satisfactory.

26. We do not see any substance in this ground. The Judge had considered all the evidence. In particular, he had warned himself of the need to be cautious when considering evidence given by accomplices under immunity. There was ample evidence to support his conclusions. The fact that he did not set out in details the evidence he relied on and resolved the conflict in the prosecution evidence does not mean that he had not considered all these matters. As said in R v Sheik Abdul Rahman Bux [1989] 1 HKLR 1, the trial Judge was not required when setting out his reasons as required by s 18 of District Court Ordinance to state precisely what evidence he accepted or rejected.

27. In the present case, the Judge had considered the whole of the evidence and it is not a case that we see any reason to disturb the verdict. In the circumstances and for the reasons given above, the application for leave to appeal against convictions by the applicant is dismissed.