HKSAR v. LAU YUK WAN

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1997, No. 656
(Criminal)

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

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

J U D G M E N T

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

Mayo, J.A. (giving the judgment of the Court):

1. The Applicant seeks leave to appeal against his conviction for delivering counterfeit notes, contrary to section 99 (1)(b) of the Crimes Ordinance, Cap. 200.

2. Particulars of the offence were:

"LAU Yuk-wan, on the 24th day of September 1995, in Hong Kong, delivered to another, 435 pieces of counterfeit banknotes purporting to be banknotes of denomination of $100 United States of America currency issued by or on behalf of the Government of the United States of America, which was and which he knew or believed to be counterfeit notes, intending that the person to whom it was delivered or another, shall pass or tender it as genuine."

3. The Applicant was convicted after a trial before H.H. Judge Wilson in the District Court. He also seeks leave to appeal against the sentence of 4 years' imprisonment which was imposed upon him.

4. There were two principal prosecution witnesses. PW1, Mr. Schade an American citizen and PW2, Mr. Zygowicz who was an agent of United States Government. PW1 had known the Applicant for a number of years. They had done business together in China. It was common ground that PW1 had in the past bought some genuine 1934 issue US$100 notes from the Applicant. PW1 had obtained an opinion from an expert that these notes were worth more than their face value. He had been anxious to acquire some more for onward sale to collectors of antiquarian notes. PW1 had bought some more notes and when he had attempted to sell them in United States of America had been informed that these notes were counterfeit. He had then demanded the return of the purchase moneys he had paid to the Applicant. The Applicant had put him off on a number of occasions and it was then he decided to report the matter to the United States Authorities. He had done this and PW2 had been instructed to represent the United States. He liaised with the police in Hong Kong.

5. PW1 had originally been satisfied that the notes he had received from the Applicant had been genuine. He had been told that a colourful history had attached to the notes. Apparently the Kuomintang had left the notes behind when they escaped from the Communists.

6. So far as the more recent purchase was concerned after he had informed the Applicant that the notes were fakes the Applicant had refused to reimburse the purchase moneys and PW1 made arrangements with the authorities to get the Applicant to come to Hong Kong. He had informed him that he had a potential purchaser who was interested in purchasing notes. The Applicant had then said that this would provide a solution to the problems which existed. He was told that this purchaser would be in Hong Kong and would be prepared to purchase the notes. The Applicant came to Hong Kong and a meeting was set up at the Wharney Hotel where there could be negotiations.

7. Two adjoining rooms were taken at the hotel. Police officers were to be in one room and the meeting would take place in the other.

8. PW1 introduced PW2 as the potential purchaser of the notes. The Applicant asked PW2 for 30% of the face value of the notes. Eventually, the price was agreed at 20% . At this stage PW1 absented himself from the room and the police officers came in from next door to arrest the Applicant and seize the notes.

9. Later a search was conducted at the Applicant's residence and various documents were found which were indicative of an interest in counterfeit notes.

10. The Applicant's main line of defence was his ignorance of the fact that any of the notes were counterfeit. He claimed that PW1 had only told him about political difficulties concerning the notes and oppressive Federal Reserve Regulations. It was on account of this that he had been prepared to sell the notes at only a fraction of their face value.

11. The Judge viewed the Applicant's testimony with a large measure of scepticism. In particular he noted that the Applicant had not taken any steps to himself verify the nature and extent of the problems which were alleged to exist concerning Federal Reserve Regulations but that he had been prepared to sell the notes at a very large discount.

12. More importantly he had accepted the evidence of PW1 and PW2 to the effect that the Applicant was fully aware of the fact that the notes were counterfeit.

13. The 1st ground of appeal is that:

"The Learned Judge misdirected himself in law in ruling that the alleged conversation between the Appellant and PW2 was admissible."

14. The Judge had been asked to make a ruling on this after hearing submissions from counsel. The relevant part of the ruling which is at p.307 of the transcript reads:

"The defence application relies heavily upon the case of Bryce decided by the English Court of Appeal in 1992 which I have read. I am of the view that Bryce depended upon largely its own special facts; in particular Bryce initially made a denial and the subsequent unrecorded conversation was introduced in effect by a trick to circumvent the code. In the present case, I find it difficult if not impossible to separate the encounter from the conversation at the encounter. Once it is accepted that there was nothing unfair in the undercover operation in itself, then it appears to me that all the circumstances surrounding it must be probative, whatever criticism may be made on their weight.

PW2, if he was a police agent, was acting as part of the investigative process. He had to establish by some words, by some discussion, what the defendant intended to do or intended to offer and to maintain his cover as a legitimate part of the subterfuge.

The long delay in taking a statement from PW1 is indeed a legitimate criticism going to the weight of PW1's evidence and the absence of a recording device may go to weight at the end of the day but I find neither is a ground for excluding the evidence altogether. It has been emphasised that my residual discretion is not a licence to exclude evidence which is relevant and probative. I am not persuaded in all the circumstances that the alleged conversation was more prejudicial than probative or was unfair or would have an adverse effect upon the trial, that is to say upon me as a jury, and I therefore must decline the application."

15. Before us Mr. McGowan complained that the Judge had misunderstood the submission he had been making. The Judge had based this decision on the second limb of R v Bryce [1992] 4 All ER 567 and not the first as he had contended for. In particular he placed reliance upon the passage from Lord Taylor CJ's judgment at p. 572:

"In our judgment, that series of questions by an undercover officer would clearly offend against the caveat this court stated in R v Christou. It would blatantly have been an interrogation with the effect, if not the design, of using an undercover pose to circumvent the code.

The two questions of which Mr. Thomas makes strongest complaint did not go as far as that. They were single, isolated questions in separate conversations. There was no extended interrogation. However, they did go directly to the critical issue of guilty knowledge. Moreover, they were hotly disputed and there was no contemporary record. In R v Christou there were questions from the undercover officers as to the area where it would be unwise to resell the goods, the answers being obliquely an indication that the goods had been or may have been stolen from that area to the knowledge or belief of the suspect. However, in that case the whole interview was recorded both on tape and on film. The circumstances to be considered by the learned judge in that case in deciding whether the admission of the evidence would have an adverse effect on the fairness of the trial and how adverse were therefore quite different from those in the present case. The film and sound record eliminated any question of concoction. Not so here. The questions asked were direct, not oblique, the conversation was challenged and the appellant had no means of showing by a neutral, reliable record what was or was not said. For those reasons we consider that the learned judge erred here in admitting those answers."

16. The important point to note is that the Lord Taylor's comments were based upon the Code of Practice for the Detention Treatment and Questioning of Persons by police officers made in accordance with the provisions contained in section 66 of the Police and Criminal Evidence Act 1984. This code has no application whatever to Hong Kong.

17. Mr. McGowan made no attempt to make a comparative analysis of the English Rules with the Secretary for Securities guidelines in Hong Kong. We are satisfied that it would be wholly wrong to place reliance upon the observations made by Lord Taylor in a significantly different context.

18. The Court of Appeal considered the question of the admissibility of the evidence in a situation in some ways similar to the present case in R v LAM Ka-fai [1995] 1HKCLR 155. Power V.-P. had this to say on p.161:

"There is a 'general discretion' but it is limited to the exclusion of evidence obtained 'unfairly or by trickery' and is exercised only when the use of such evidence will prevent the accused from obtaining a fair trial. There are two quite different considerations involving 'fairness'. In the first the court must look at the evidence impugned and determine whether it was unfairly obtained. In the second, being satisfied that there is evidence which was so obtained, the court must determine whether the admission of such evidence might prevent the accused from receiving a fair trial. If it might then the court must exercise its discretion and exclude it. The 'fairness' involved in the first consideration is wholly different from the 'fairness' involved in the second consideration.

The first, if established, calls into play the real issue which is whether the evidence is such as might prevent the accused from obtaining a fair trial.

Lord Diplock made this clear, in R. v. Sang when he said, at p.436:

'Outside this limited field (the power to exclude confessional statements not proved to have been made voluntarily) in which for historical reasons the function of the trial judge extended to imposing sanctions for improper conduct on the part of the prosecution before the commencement of the proceedings in inducing the accused by threats, favour or trickery to provide evidence against himself, your Lordships should, I think, make it clear that the function of the judge at a criminal trial as respects the admission of evidence is to ensure that the accused has a fair trial according to law. It is no part of a judge's function to exercise disciplinary powers over the police or prosecution as respects the way in which evidence to be used at the trial is obtained by them. If it was obtained illegally there will be a remedy in civil law; if it was obtained legally but in breach of the rules of conduct for the police, this is a matter for the appropriate disciplinary authority to deal with. What the judge at the trial is concerned with is not how the evidence sought to be adduced by the prosecution has been obtained, but with how it is used by the prosecution at the trial.

A fair trial according to law involves, in the case of a trial upon indictment, that it should take place before a judge and a jury; that the case against the accused should be proved to the satisfaction of the jury beyond all reasonable doubt upon evidence that is admissible in law; and, as a corollary to this, that there should be excluded from the jury information about the accused which is likely to have an influence on their minds prejudicial to the accused which is out of proportion to the true probative value of admissible evidence conveying that information. If these conditions are fulfilled and the jury receive correct instructions from the judge as to the law applicable to the case, the requirement that the accused should have a fair trial according to law is, in my view, satisfied; for the fairness of a trial according to law is not all one-sided; it requires that those who are undoubtedly guilty should be convicted as well as that those about whose guilt there is any reasonable doubt should be acquitted. However much the judge may dislike the way in which a particular piece of evidence was obtained before proceedings were commenced, if it is admissible evidence probative of the accused's guilt it is no part of his judicial function to exclude it for this reason.'

Evidence is not automatically excluded because it has been obtained by some perceived unfairness. If there has been unfairness the judge is called upon to determine whether it is such as requires him to exercise his discretion to exclude the evidence. He must do so if the admission of the evidence will deny the accused a fair trial - that is the determining factor. This determination must depend upon the facts in each case"

19. It is then necessary to consider whether in the circumstances of the present case the evidence was admissible following the guidelines referred to by Power V.-P.

20. Mr. Schapel for the respondent submitted that it would be unrealistic to suggest that when the police are in possession of information which leads them to believe that a person is in possession of counterfeit notes that they should not be able to ascertain what the true position is and whether that person intends to deliver the notes to anyone else.

21. It could certainly be argued that the exercise involved a trick. That however, is not the real issue. What must be asked is whether it was an illegitimate trick, evidence of which would preclude a fair trial, or a legitimate sting operation evidence of which could properly be given and to which answer, if there was one, could be made by the defendant. This issue the Judge identified. He was satisfied that it was a legitimate sting operation and rightly admitted the evidence.

22. Ground 2 is that:

"The Learned Judge failed, when considering the evidence of the alleged accomplice Mr. SCHADE (PW1), to direct himself adequately or at all on the dangers of relying on his evidence."

23. The answer to this ground is simple. There is no necessity for a professionally qualified Judge to state in his Reasons for Verdict that he has directed himself on the dangers of placing reliance upon the testimony of accomplice witnesses.

24. It is clear from reading the Reasons for Verdict as a whole that the Judge was fully aware of the role which had been assumed by PW1. It does however have to be borne in mind that PW1 did of his own volition make a report to the relevant authorities and this inevitably would have opened up channels of inquiry concerning his own conduct. It does also have to be accepted that PW1 did obtain an immunity from prosecution when he gave evidence. It was his testimony which appears to have been accepted by the Judge that according to the advice he received the first batch of 1934 US$ notes were genuine. It is true that he did not initially make a report to the authorities when he became aware that the subsequent notes were counterfeit. It would also appear to be the case that PW1's main motivation for making the report to the authorities was the failure of the Applicant to reimburse him the moneys he had expended in purchasing the notes which he came to realise were counterfeit. What is clear however is that the Judge was fully mindful of all of the circumstances of the case when he made his adjudication.

25. Ground 3 is that:

"The Learned Judge erred in his dismissal of the many inconsistencies in Mr. Schade's evidence."

26. Mr. McGowan drew our attention to a number of inconsistencies in PW1's evidence. What he is in effect doing on this application is to invite us to retry this case. Having regard to the passage of time involved it was inevitable that there would be inconsistencies in PW1's evidence. We are satisfied that the Judge was fully mindful of these inconsistencies when he assessed all the evidence in the case. We do not see any reason to interfere with the Judge's findings of fact.

27. Ground 4 is that:

"The Learned Judge failed, when considering the evidence, to consider the relevant improbabilities in the Prosecution case."

28. This was a rather extraordinary case. However the Judge did weigh and consider all of the relevant evidence. In doing so he concentrated his attention upon the relevant factors which had to be weighed. He bore in mind the evidence which overwhelmingly pointed to the fact that the Applicant was fully aware that the notes which were produced at the Wharney Hotel were counterfeits. The Judge gave his reasons for coming to this conclusion. There was ample evidence to support this conviction.

29. Ground 5 complains that:

"The Learned Judge failed to direct himself as to the Appellant's previous good character."

30. Again the simple answer to this complaint is that there is ample authority for the proposition that a professionally qualified District Judge is not required in his Reasons for Verdict to state that he has given himself a direction concerning the Applicant's previous good character.

31. Mr. McGowan argued that the present case was an exceptional one as the credibility of the Applicant was of crucial importance. He also argued that the Applicant was himself a victim as he had believed that the notes he had acquired were genuine. Clearly the Judge was fully aware of the Applicant's clear record and would have given him appropriate credit for this.

32. Ground 6 and 7 can conveniently be dealt with together.

33. Ground 6 complains that:

"The Learned Judge failed, when assessing the Defence case, to make any proper assessment of the consistency in the Appellant's account of events immediately after arrest, thereafter when being interviewed by the police, and subsequently in oral testimony."

34. Ground 7 complains that:

"The Learned Judge reached many conclusions as to facts which were not supported by the evidence."

35. In both of these grounds we are in effect being invited to retry this case. The Judge did carefully evaluate the defence case. He gave valid reasons for rejecting this evidence. The conclusions which were reached by the Judge were fully supported by the evidence. This verdict was in no way unsafe or unsatisfactory and this application is dismissed.

Sentence

36. Besides, the general complaint that the sentence was manifestly excessive and wrong in principle the only other matter upon which reliance is placed is that it is claimed there was an insufficient discount to reflect the entrapment. As indicated earlier in this judgment there was in reality very little entrapment in this case. The Applicant had been a willing participant and undoubtedly would have sold the notes to someone else if he had been able to do so. There was no necessity to significantly discount the sentence imposed.

37. Having regard to the large number of notes involved and the seriousness of this case the sentence of 4 years' imprisonment was in no way excessive. This application is also dismissed.