HKSAR v. TSANG YAU MAY AND ANOTHER

CACC 16/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 16 OF 2016

(ON APPEAL FROM DCCC 73/2015)

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REASONS FOR JUDGMENT

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1.  The applicants (A1 and A2)[1] applied for leave to appeal against their conviction of one joint charge of ‘conspiracy to defraud’ (Charge 1).  On his own, A2 applied for leave to appeal against his conviction of one further charge of ‘money laundering’ (Charge 2).  Having heard submissions, I dismissed their applications.  These are my reasons.[2]

CASE OVERVIEW

The Alleged Acts

2.  A1 was a director and minority shareholder of a company owned by her deceased half-brother.  The allegation was that she depleted the assets of the company by entering into a sham agreement to purchase 200 pieces of jade from A2 at a highly inflated price ($12M).[3]  In receiving $10.13M for the jade, A2 was further accused of dealing with the proceeds of an indictable offence.

Factual Background

3.  A1’s half-brother, Tsang, died intestate in 2001.  His company, Maryo Development Limited, had no business other than to hold two properties which, in any event, were sold upon Tsang’s death.  Civil action to contest Tsang’s estate commenced in 2004.  In 2009, the Court of Final Appeal granted the estate to Tsang’s side of the family, in the person of her full sister, PW4.  PW4’s many requests for A1 to transfer Tsang’s shares of the company to her were, however, ignored.  Even in face of a court order dated 6 January 2012, the transfer was not effected until after a further delay of two months.  It took more litigation for PW4 to become a director of Maryo; and it was only in June 2012 that she discovered that the company was completely depleted of funds, with just $5,000 left in its account.  A report was made to the police.

Dealings between A1 and A2

4.  Subsequent investigation revealed that :

(a)   On 14 September 2010, A2 bought a company, Bright Jade International Limited, off the shelf.  Incorporated in December 2009, Bright Jade had no previous business nor any assets.

(b)   Less than one month later, and nearly three months after Tsang’s estate was passed to PW4, on 5 October 2010, Bright Jade entered into a “Cooperation Agreement” with Maryo for “developing trading and business promotion of jade, herbs, coffins, catering or other potential investment projects in Hong Kong, China, South east Asia and all over the world”.  Under this agreement, a loan of $10M was made to Bright Jade leaving $0.84M in Maryo’s account.

(c)   On 6 May 2011, Bright Jade repaid the $10M loan to Maryo.

(d)   On 22 July 2011, at a price of $12M, Maryo signed an agreement to purchase 200 pieces of jade from A2 (the “July Agreement”). However, only $10M was paid.  It was paid into A2’s personal account, opened on the same day.  This left $0.48M in Maryo’s account.

(e)   Four days later, on 26 July 2011, A2 applied to de-register Bright Jade.  Of the balance of $2M, plus interest, that was payable to A2 by 12 installments, only $0.13M was ever paid.  Moreover, it was paid some six months later on 3 February 2012.

5.  There was no evidence as to the exact nature of the relationship between A1 and A2, except that they were parties to the Cooperation and July Agreements.

Valuation of the Jade

6.  As a whole, the jade was valued at around $0.5M by PW8 (the prosecution expert).  DW4 (A2’s expert), whose credentials the judge also accepted, put it at $1.2M – $1.4M.[4]

Exhibits, Out of Court Statements & Defence Case

7.  Upon the applicants’ arrests on 31 July 2012, the police conducted searches and found on the floor of A1’s living room the 200 pieces of jade in question.  They were in two unlocked plastic boxes placed inside a blue nylon bag next to piles of waste paper and newspapers.  In A2’s home, the police also found 20 pages of photographs with descriptions.  They were part of an exhibit prepared by PW4 to be used in court proceedings to fight for Tsang’s estate.  None of this was disputed.

8.  Under caution, A1 remained silent. Subsequently, in a prepared statement, she told the police she had legal advice and was told that, as a director, she could do business in Maryo’s name.  She said Tsang had wanted to get involved in the jade business to follow their father’s footstep.  She said she got involved with Bright Jade and A2 because the jade market was profitable and the supply of jade was dwindling.  She said she bought the jade intending to open a jade shop to make money.  She said she had the jade at home but had intended to put it into a safe deposit box.  By agreement of the parties, this statement was admitted into the evidence as Exhibit P55.  As A1 elected not to give evidence, that was the extent of her case.

9.  Under caution, A2 is alleged to have said, “I didn’t have any business dealings with Maryo”.  At trial, during the alternative procedure, A2 denied making this statement and in effect asserted that it was something made up by the police.  The judge, however, believed the police witnesses and admitted that statement into evidence.  As regards the general issue, A2 had elected not to testify.  His defence, as advanced by his counsel, was that A2 was a genuine businessman.  If the jade he sold to A1 was really worth a fraction of $12M, it was a price that A1 was happy to pay.

JUDGE’S FINDINGS

10.  The judge (Judge Woodcock) accepted that there was no direct evidence implicating the two applicants.  She convicted them, just as the prosecution case was based, on purely circumstantial evidence.  Her Reasons for Verdict (‘R/V’) runs to 48 pages in length.  Inferences were drawn from the following facts :

As regards A1

(a)   Whether one relies on the valuation of PW8 (approximately $0.5M) or the valuation of DW4 ($1.2M – $1.4M), both these figures were still a far cry from the purchase price of $12M.[5]

(b)   On the day of the search, which is one whole year after its purchase, the jade was found to be sitting in idle.  No shop had been set up to onward sell it.  If A1 had really believed that it was worth $12M, which means she had to sell it at an even high price to make a profit, the way how she had casually left them at home on the floor is astonishing.  Her account of a pending transfer to a bank safety deposit box is unsatisfactory.[6]

(c)   Maryo did not have sufficient funds to honour the full purchase price at the signing of the July Agreement.  Since the company did not have any ongoing business, neither was there any foreseeable future income for it to make up the shortfall of $2M.  Yet A1 pressed ahead with the purchase and spent all of Maryo’s cash.[7]

(d)   There is no evidence of A2 chasing for the outstanding balance of approximately $2M, which amounted to some 15% of the purchase price.  A year after the July Agreement, it was still unpaid.[8]

(e)   As is evident from P55, A1 was involved in the long-drawn out litigation over Tsang’s estate.  What she said in that statement, as well as her and/or her family’s reluctance to make good the transfer of shares to PW4, clearly demonstrate that there were grievances over the Court of Final Appeal’s decision.[9]

(f)   The date of A2 acquiring Bright Jade and the date of the Cooperation Agreement were suspiciously close to the granting of Tsang’s estate to PW4.  Under the terms of that Agreement, Maryo was to commit all its funds to a no-track record and off-the-shelf company in a 10-year investment plan of uncertain outcome.[10]

(g)   For some unknown reason, the Cooperation Agreement came to an end only seven months after its signing.  Two months later, through the purchase of jade with all the curious features as above-mentioned, the returned $10M found its way back to A2’s personal account which A2 had opened on the same day.  Four days after that, Bright Jade was dissolved upon A2’s application.[11]

As regards A2

(h)   On the day of his arrest, A2 had delayed the admission of the police into his home for hours.  Under caution, he made a denial of having ever done business with Maryo.[12]

(i)   The suspicious timing and circumstances under which (i) Bright Jade was bought off the shelf and de-registered; (ii) the Cooperation Agreement was signed and abandoned; and (iii) the July Agreement was signed and incompletely carried out insofar as it concerned the recovery of the full purchase price.[13]

(j)   The lack of reason for A2 to have in his home the photo album that PW4 had prepared for the litigation over Tsang’s estate.[14]

GROUNDS OF APPEAL (1^ST APPLICANT)

Grounds 1 - 3

11.  These almost identical grounds, only slightly varied in wording, all argue that the judge was wrong to find that there was a conspiracy to which A1 was party.  The judge is said to have erred in :[15]

“ (1) speculating that [A1] “felt very aggrieved her mother had lost her claim to the deceased’s estate and [the half-sister] was getting closer to ownership of the 998 shares” as being the motive for committing the offence and taking that into account in reaching her verdict [AB/p.78/§139];

(2)   considering the behaviour of [A2] on his arrest and denial under caution as evidence against the [A1] [AB/p.78/§140];

(3)   failing to consider or properly consider that there was no sharing of the HK$10.13million amongst any or all the Accused [AB/p.68/§111];

(4)   failing to properly direct herself of the clear record of [A1] in considering the explanation given by her in the written statement [P55; AB/p.62/§94; p.80/§143; pp.60-61/§§87-90];

(5)   failing to make any findings as to when [A2] came to know of the litigation (if he did) [AB/p.78/§140];

(6)   attaching too much weight or undue weight to only an immaterial portion of the purchase price of the jade was not yet honoured and [A2] had not yet chased Maryo for payment as of the date of the arrest [AB/p.78/§140];

(7)   considering evidence as to how [A1] dealt with the jade as evidence against [A2] [AB/pp.78-79/§§140-141];

(8)   failing to consider or consider properly that from [A2’s] perspective, the purchase price of the jade does not necessarily lead to the only irresistible inference that he knew the transaction was not genuine [AB/p.78/§139]; and

(9)   with reference to [points (5) to (8) above], there was no basis to find that [A2] was a party to the conspiracy as charged.  In these circumstances, there was no evidence to prove that there existed the alleged conspiracy for reason that [A1] was found not to be a party to it.”

Discussion

12.  The reason why I have spent time in setting out the various facts of the case is to show the weight of these combined facts as evidence against the two applicants.  Against the cogency of this collected mass of circumstantial evidence, A1’s complaints are either totally misconceived or but attempts to isolate and then attack particular parts of the judge’s analysis.

13.  Instances of the former category are points (2) and (7).  The fact that these complaints are wrong should be obvious to anyone who has read RV109 to RV136, there being a clear break at RV133 where the judge turned her attention to A2 and said, “The position of [A2] is very different …..”  Using that as a dividing line, A1’s casual treatment of the jade, and A2’s suspicious behavior at the time of his arrest, appear respectively before and after that break in the judge’s analysis.  It is misleading for A1 to focus on one or two final paragraphs where the judge was wrapping up her verdict with a general recap of her findings.

14.  The rest of A1’s complaints are of the second category.  Beginning with point (1), there is no merit in arguing that what the judge did was “speculation”.  Given A1’s assertions in P55, particularly about her mother being the provider of some of Maryo’s capital, and also the long-drawn out battle over Tsang’s estate between the two sides of the family, the judge was undoubtedly entitled to that inference.  Likewise, point (6) is unmeritorious because it is unusual behaviour for A2 not to have pursued the remainder of the purchase price, in the region of $2M.  Moreover, it was not wrong for the judge to say that there was no evidence of him making such a pursuit.  It was certainly not mentioned in P55 and, if such a pursuit did take place, it was for A1 and A2 to raise it; but they elected not to give evidence.

15.  Point (8) is misguided because the inflated price of the jade was but one factor that the judge relied on to find against A2, through the finding of a conspiracy between A1 and A2. If RV133 to RV136 are anything to go by, then the judge was placing more reliance on the three matters mentioned in paragraphs 10(h) to 10(j) of this decision than on the price factor.  In order to put the matter to rest, however, I would point out that, in my judgment, the price factor was as relevant to the case of A2 as it was relevant to the case of A1.  It calls into question why, unless there was a conspiracy, A2 (a trader) should think he could get away with such an exorbitant asking price and, if he was not the one who came up with that price, why A1 (another trader/investor) should so misguidedly offer it?  The point is: how could either or both of these traders (as opposed to consumers) have got it so totally off the mark?  In terms of what money can buy, the difference between $1.4M to $12M is more than a quantum leap.

16.  Being one pointer pointing towards one direction amongst multiple other pointers pointing towards the opposite direction, point (3) is far from the unsettling doubt that A1 tries to make it out to be.  Moreover, depending on the degree of trust between A1 and A2, of which there is admittedly no evidence, it is not impossible that there was no sharing of the $10.13M between them.  It must also be remembered that cash flows are open to tracing, if there be any investigation.  In arguing point (5), A1 once again falls into the error of isolating and then over-emphasizing one factor amongst many others.  On the contrary, it was from a combination of facts that the judge had found against him.  With points (5) to (8) falling away, point (9) also is not made out.

17.  Under point (4), it is complained that, in relation to A1’s clear record, the judge had only directed herself on ‘propensity’ (see RV94, RV110 and RV143) whereas she should also have directed herself on the issue of ‘credibility’ in relation to what A1 had said in P55.  The short answer to that is: on the one hand, P55 is a prepared and unsworn out-of-court statement that had not been subject to the test of cross-examination, which means it has little evidential value; and, on the other, there is no discernible unfairness in how the judge had drawn adverse inferences against A1.  As said, the circumstantial evidence against the applicants was overwhelming.  I do not see how it can be argued that A1 was prejudiced by a non-direction on ‘credibility’.

Ground 4

18.  The complaint here is that, during the voir dire that was held to determine the expert status of PW8,[16] the judge did (a) conduct her own research on PW8’s credentials[17] and (b) interrupt defence counsel’s cross-examination on valid issues.[18]  It all goes to show that the judge had prejudged the issue, or at least gives the impression that she had done so, it is submitted.

Discussion

19.  As I have said during the hearing, there may or may not be merit in this ground but, at the end of the day, it can only be a matter of limited importance because, even if one were to disregard PW8’s evidence altogether, there would still be DW4 whose valuation of the jade remained a mere $1.2M – $1.4M.

20.  Of course, A1 makes the point that, according to DW4, the market price of jade may go up to ten to 20 times more than its true value, but it was a point that the judge had dealt with adequately and to satisfaction.  The following is what the judge said (note the reference to “traders” making an “investment”) :[19]

“ 119. Mr. Chung, [A2’s] expert valued all the jade at between $1,168,400 and $1,394,000 without saying as of when. That is less than 10% of Mr. Sham’s valuation and much much closer to PW8’s valuation. He is, like PW8 a qualified gemologist and a collector cum trader of jade for over 30 years. He too, like PW8, was of the view this jade was of low end quality. His expertise was not challenged nor was his evidence. He did qualify his valuation with a comment that the value of jade can fluctuate 10 to 20 times higher than its assessed price. Yet, in cross examination he agreed he‘d not pay more than his assessed price for any one of the 200 pieces as a trader. Surely, that must be the clearest indication that that was what he considered to be the real value.

120. He, like PW8 stresses it is hard to value jade and someone may pay more than what he considered fair market value for a piece but to agree the price here may fluctuate higher by 10 to 20 times to bring it in line and even possibly over the $12 million purchase price paid to [A2] is to be in my view contradictory; not true to himself and not standing by his own convictions. But then, if he did not agree, his evidence would be detrimental to [A2] .

121. In view of the obvious difficulties in valuing jade outlined by PW8 and Mr. Chung, I would not disregard his figures of between $1.1 and $1.4 million valuation but I do not place weight on his comment that the value could fluctuate 10 to 20 times or rather I do not find he means that this jade could be worth 10 to 20 times his valuation. In fact, when I asked if he was now saying his valuation was between $1.1 and $20 million he said no. He qualified that comment and I accepted it. Obviously a person may pay more for a piece than it’s worth if they want it and are willing but that scenario does not apply here to Maryo buying 200 pieces as an investment.

122.   In accepting both Mr. Chung and PW8 as credible and qualified experts there is a still the question of the difference in their valuations.  I accept there will be a margin either way of their valuations and do not find one more likely to be more accurate than the other.  The main point is that both their valuations are much lower than Mr. Sham’s valuation as well as the purchase price.  Even accepting Mr. Chung’s valuation, it is still over $10 million less than what Maryo paid.”

21.  The same theme was picked up when the judge was rounding up her verdict :[20]

“ The fact that the jade was not dealt with for example, not sold after 12 months, when supposedly bought because it was such a good investment is damning.”

Ground 5

22.  This ground is closely related to Ground 4.  It attacks the judge for wrongly rejecting DW4’s evidence that the market price of jade can be ten to 20 times more than its true value.

Discussion

23.  For the reason I have already alluded to, namely, the judge was focussing on the unlikelihood of such an eventuality arising in a trader-to-trader situation,[21] which is the same point I made in paragraph 15 of this decision, I do not find it to be a valid criticism.

GROUNDS OF APPEAL (2^ND APPLICANT)

As against Charge 1

24.  A2’s perfected grounds read as follows :

“ 17. The Prosecution’s evidence did not show that the 2^nd Applicant was involved in the civil litigation in respect of the estate of the late Dr. Tsang at any stage. The trial Judge accepted that there was no direct evidence to prove: (a) that the 2^nd Applicant had any knowledge of the fraudulent intent of the 1^st Defendant and/or the 2^nd Defendant (“the 1^st Applicant”) to deceive Maryo and (b) that the 2^nd Applicant had agreed to participate in the conspiracy alleged by the Prosecution. In drawing the only irresistible inference that the 2^nd Applicant had conspired with the 1^st Applicant to defraud Maryo, the trial Judge erred to place excessive and undue weight to the damning facts set out in paragraphs 134 to 136, 140 and 141 of the Reasons for Verdict. [Reasons for Verdict: §§134-136, 140 & 141; AB/76-79].

18.   A photo album was found in the 2^nd Applicant’s home which was used in the probate litigation between the biological mother and the step mother of the late Dr. Tsang.  As there was a dearth of evidence to prove: (a) at which point in time and under what circumstances the photo album was taken to the 2^nd Applicant’s home, and (b) the 2^nd Applicant had any knowledge of the dispute involved in the probate litigation prior to the sale of the 200 pieces of jade, the trial Judge erred to rely on the presence of the photo album at the 2^nd Applicant’s home to draw the irresistible inference that the 2^nd Applicant was a party to the conspiracy.

19.   The facts that the 1^st Applicant did not deal with the 200 pieces of jade after purchase and left them casually on the floor of her home may be relevant to her guilty mind.  However, the trial Judge erred to take into account of the 1^st Applicant’s conduct in assessing the guilt of the 2^nd Applicant.

20.   The trial Judge wrongly ruled against the 2^nd Applicant in the special issue.  The fact that the 2^nd Applicant had delayed in allowing police access into his home was insufficient to draw any adverse inference against him.  Further, the trial Judge did not give any proper or any sufficient consideration to the fact that the 2^nd Applicant’s refusal to append his signature on the notebook of the arresting officer (PW1) at home should provide support to the 2^nd Applicant’s case that he was not cautioned by any of the police officers.

21.   The trial Judge wrongly held that the 2^nd Applicant’s denial that he had any dealings with Maryo at the time of arrest could be used as a compelling factor in determining that he was a party to the conspiracy.  [Reasons for Verdict: §§140, AB/78 & 79].

22.   In drawing the only irresistible inference against the 2^nd Applicant, the trial Judge failed to take into any consideration of the facts that the whole batch of the jades were genuine and the proceeds did not route back to either of the co-defendants.

23.   In all circumstances of the case there was insufficient evidence to prove the 2^nd Applicant was a party to the alleged conspiracy; accordingly, the conviction of Charge 1 was unsafe and unsatisfactory.”

Discussion

25.  These grounds are narrative, and do not comply with Practice Direction 4.2.

26.  Form aside, these grounds are also of questionable merit.  For example, in complaining about the dearth of evidence on when and how PW4’s photo album came to be in his residence, A2 seems to be forgetting that, for something as exclusive to his personal knowledge as this, the evidential burden is on him to provide an explanation (see Li Defan v HKSAR (2002) 5 HKCFAR 320).  If such an explanation is not forthcoming, then the judge was naturally entitled to infer that there was more to the relationship between A1 and A2 than can be seen on the surface.

27.  Regarding A1’s casual handling of the jade by leaving them on the floor, I have, at paragraph 13 above, already pointed out that that was not one of the factors the judge had relied on to find against A2.

28.  28. The attack on the ruling on the special issue is again unmeritorious.  Correctly, the judge had pointed out at RV41 that, “In this case the only question is who I believed.” She went on to say, “I was sure after a careful review of the evidence that [the police witnesses] were telling the truth …. I note [A2] refused to sign P49 or write a declaration …. but that does not convince me he did not utter those words.”  That being the case, it must be the end of the matter.  I also agree with the judge that A2’s denial of previous dealings with Maryo was probative against him.

29.  Paragraph 22 of A2’s grounds I have dealt with in paragraph 16 of this decision.  They are on the same point.

30.  It is to be noted that, throughout A2’s submissions, not a single reference has been made to the suspicious timing and circumstances surrounding the Cooperation and July Agreements.  They are, as the judge said, “damning”.

As against Charge 2

31.  A2 submits :

“ 24. Charge 1 and Charge 2 against the 2^nd Applicant should stand or fall together. As the 2^nd Applicant was wrongly convicted of Charge 1, the conviction of Charge 2 cannot stand.”

Discussion

32.  As there is nothing to suggest that the conviction on Charge 1 is unsafe, the challenge on Charge 2 must also fall away.

CONCLUSION

33.  For the above reasons, I refused the applicants’ applications for leave to appeal against conviction.

S.83W WARNING

34.  The applicants are duly advised, here as at the time of the hearing, that they have the right to renew their application for leave to appeal against conviction.  But they are also warned of the consequences of so doing, which may include a direction that part of the time spent in custody pending their appeal should not be reckoned as part of their sentence – if the Court of Appeal were to come to the view that there was no justification for the renewal of the application.