R. v. KWAI YING HO

IN THE COURT OF APPEAL

1992, No. 527
(Criminal)

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J U D G M E N T

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Litton, J.A. delivering the judgment of the court:

1. The applicant Kwai Ying Ho was convicted on 1st December 1992 by Deputy District Judge To on one charge of conspiracy to defraud the Citibank. The charge period was August 1990 to January 1991. The conspiratorial agreement averred in the charge sheet (erroneously entitled "indictment" by prosecuting counsel) contained three elements. (1) Dishonestly representing to the Citibank that one Soong Kin Tak was the proprietor of a shop at Royal Garden Hotel Shopping Arcade and conducting a genuine business called Royal Company. (2) Causing the Citibank to enter into a merchant agreement with Soong granting him credit card facilities for the business and (3) making false claims to Citibank by submitting records of charges for bogus Royal Company transactions and obtaining payment from the Citibank. Particulars (1) and (2) were not proved. The case proceeded on the basis that the scope of the conspiratorial agreement was to make false claims to obtain payment from Citibank as particularised in sub-paragraph(3).

2. The evidence bearing upon the charge can be summarised as follows. (1) The applicant was the sole person seen running the company. (2) On two consecutive days, the 12 and 13 January 1991, purported credit sales of products by Royal Company were effected totalling $382,446.87. This was exceptionally large as credit card sales processed through the Citibank for the previous three months totalled only $13,200. (3) On 19 January 1991 these alleged credit card transactions, numbering ten in all, were processed through the Citibank. (4) At the time when the ten purported transactions were effected the shop was closed. The acts which led to the Citibank crediting Royal Company for these sales were effected outside the shop premises. The applicant admitted that it was he who handled those ten transactions, that is to say, swiping the credit cards or the purported credit cards through the imprinting machine thereby obtaining the Citibank's approval code electronically transmitted to the terminal, and making out the sales slips which were forwarded to the Citibank. The applicant had lied to the police when he said that the transactions were generated within the shop. The evidence of the surveillance team indicated conclusively it was not so. (5) The Citibank's cheque for $382,446.87 in discharge of its liability incurred on account of these purported transactions was deposited into the Happy Valley Branch of the Hongkong Bank; on the same day, 22 January 1991, the applicant attempted to withdraw funds from the same branch by using Royal Company's ETC card but it was swallowed by the ETC machine: doubtless because by that time the operations were closely monitored by the police. (6) Within ten minutes of that event, the applicant went back to the Hongkong Bank with Fu Chak-ming, the person named as the co-conspirator in the amended charge sheet. Fu posed as Soong, the registered owner of Royal Company to retrieve the card; he represented to the bank that he was Soong and forged Soong's signature. The applicant and Fu were thereupon arrested by the police. (7) In the boot of Fu's car were found the POS terminal and the imprinting machine which were in fact the instruments by which the fraudulent transactions effected on 12 and 13 January were effected.

3. There seems no doubt on the evidence that the applicant had attempted to obtain money from the Citibank by fraudulent means; the judge's finding that the ten transactions effected on 12 and 13 January were bogus has not been challenged in this court. The only issue is whether the applicant had conspired with Fu and/or with other persons to effect the fraud as alleged.

4. The judge's finding that the applicant had conspired with an unknown person to practise the fraud was based solely upon the evidence of the police surveillance team on 13 January 1991 which showed in essence as follows. (1) The applicant and that man had gone together to open the shop and thereafter left the shop on several occasions together between the hours of 13.10 and 14.47. (2) That unknown man left the shop at 15.43 and the applicant left two minutes later. (3) The six fraudulent transactions which took place on 13 January were then effected outside the shop by the applicant some time between 16.11 and 17.02. (4) The applicant and the unknown man returned to the shop together at 17.07, that is five minutes after the last transaction and (5) they closed the shop and left together about ten minutes later. No evidence was led that during the time when the fraudulent transactions were effected the applicant and that unknown person had been together.

5. The fact that they left the shop within two minutes of each other does not seem to us sufficient to warrant the inference that they were together between 16.11 and 17.02 and jointly effected the fraudulent transactions during the crucial period.

6. The judge's finding that this applicant had conspired with that unknown person seems to us not sustainable upon the evidence and upon this basis leave to appeal should be given. We might add that the judge's finding that this applicant had also conspired with the unknown supplier of the credit cards is even more tenuous and gives further grounds for giving leave to appeal.

7. The matter therefore turns upon the further finding of a conspiracy between this applicant and Fu to effect the fraudulent purpose as particularized in paragraph (3) of the charge sheet. The judge's finding on page 26 of his admirably detailed Reasons, rendered immediately upon the conclusion of the hearing, was to this effect. Having regard to the underlying facts and to the fact that Fu (1) masqueraded himself as Soong to collect the ETC card, (2) was found in possession of the imprinting machine and the POS terminal and (3) the further fact that the fictitious transactions were all executed using these pieces of equipment, these cumulatively constituted evidence on which a jury properly directed could conclude that Fu was a party to the conspiracy. We cannot see how this can on the evidence be faulted. There is the further factor that these facts cried out for an explanation by the applicant; any inference of guilt to be drawn from these facts must be strengthened by the fact that the applicant chose not to give evidence at trial. In our judgment the judge's finding that the applicant had conspired with Fu as alleged cannot be faulted and the application for leave to appeal against conviction must therefore be dismissed.

Sentence

8. We deal now with the appeal against sentence. The appellant was sentenced by the Deputy District Judge to imprisonment for four years and nine months. His counsel Mr. Sakhrani has submitted that the sentence is both manifestly excessive and wrong in principle.

9. The basis upon which the judge sentenced this appellant was that the crime involved "some breach of trust in that it is the merchant who was given the credit card facility who practised a fraud on the bank". By "the merchant" the judge must have meant Soong and that of course was how the Crown opened its case against the appellant. But, as things transpired, that was not proved and the case proceeded on the basis that Soong was not implicated; nor did the Crown seek to aver at the end of the day that the Royal Company was set up as a bogus company nor that the credit facilities procured from the Citibank were procured by fraudulent means.

10. The judge also proceeded on the basis that the appellant was a "front man" for the purposes of this scheme. This again plainly is not correct because that could only be right on the basis of what Mr. Sakhrani called the broad conspiracy alleged by the Crown in its opening rather than the limited one established by the evidence.

11. The judge proceeded on the basis of a breach of trust vis-a-vis the victim, that is to say, the Citibank. This on the limited facts established at trial also cannot be right. Accordingly the basis upon which the judge proceeded to sentence the appellant has been shown by Counsel to be erroneous and we treat the appeal against sentence upon this basis.

12. Credit card frauds have in recent years been an insidious poison in the community. It affects a large number of citizens. It erodes the credit card system and damages Hong Kong's standing in the international community. Any fraud of this kind must therefore be dealt with severely. It generally involves, as does this case, careful planning; to be successful the fraud requires detailed knowledge of the workings of the electronic credit card system. It was only through the vigilance of the police and the careful surveillance they mounted that, in the end, the Citibank was not defrauded. But this meant that a great deal of time, and energy have been spent on the part of the police, the bank officials and eventually, in the prosecution of the case, experts and lawyers.

13. The fraud itself involved false representations, forgeries and deceptions and on any view must be taken seriously. However, having regard to the fact that the judge proceeded in sentencing on an erroneous basis, the sentence of imprisonment of four years nine months must be set aside.

14. We take into account the fact that the appellant is a relatively young man, 25 years old at the time of the commission of the offence, and that for all practical purposes he can be treated as a man with a clean record. With these considerations in mind, in setting aside the sentence of four years and nine months, we substitute one of three and a half years.

Penlington, J.A.:

15. There is only one thing I would also like to add, although it was not a matter of comment at this hearing. It seems from the record that the charge against the first accused Fu was adjourned at the request of the Crown sine die as Soong, the main prosecution witness, could not be located. There is authority that no criminal charge should ever be adjourned sine die. There should always be a definite date fixed when, as in this case, the Crown can inform the court as to the progress, if any, in locating a witness who has failed to appear.