HKSAR v. FONG MEIJI

CACC 235/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 235 OF 2007

(ON APPEAL FROM DCCC NO. 10 OF 2007)

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J U D G M E N T

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

Introduction

1.  This is an application for leave to appeal against conviction.

2.  The applicant was tried before Judge Remedios in the District Court upon a charge of using a copy of a false instrument, contrary to s. 74 of the Crimes Ordinance, Cap 200.  The particulars alleged that in February 2003 he used a copy of a bank guarantee of the Bank Negara Indonesia (BNI) which was, and which he knew or believed to be, a false instrument with the intention of inducing a man called Su Bao-sheng (Su) to accept it as a copy of a genuine instrument and by reason of so accepting it to do or not to do some act to his own or any other person’s prejudice.

The evidence in-chief

3.  Su is the managing director of a Mainland state-owned company, Zhong Nan.  In 2001, he was seeking to raise capital to expand that company’s business and in the course of that endeavour, he was introduced to the applicant by a man called Tan, the business manager of Zhong Nan.  Su’s evidence was that the applicant represented himself to be an expert in finance and that he told Su that he worked for a capital and asset management company called Madison Global (‘Madison’).  He proposed raising funds for Zhong Nan by issuing an insurance bond.  It was common ground that on 31 May 2001 a service agreement was signed by which Madison would raise finance for Zhong Nan.  The contract was between Madison and a company called Lighton Capital Ltd (‘Lighton’), established by Su at the applicant’s suggestion (so Su said) for the purpose of the transaction in question.

4.  The agreement provided for the payment by Lighton to Madison of the sum of US$500,000 for services to be rendered by Madison.  By the terms of the agreement, payment was required in three tranches: US$100,000 by 2 June 2001; US$100,000 by 30 June 2001; and US$300,000 by 9 July 2001.  It is common ground that two sums, each in the amount of US$100,000, were paid by Lighton, the first in mid-June and the second in mid-July 2001 and that receipts were issued for those payments.  Each written receipt was acknowledged on its face by Su.  It is also common ground that the US$200,000 thus paid was intended for the benefit of a company called Pallas which the applicant told Su was to prepare a finance report about Zhong Nan for would-be investors.  It was further common ground that Pallas never produced the report; and that the balance of $300,000 was never paid.

5.  Su said that he had no financial qualifications and that his company relied on experts.  He was persuaded, not least because of Madison’s suggested location in the Bank of America Tower in Hong Kong, to believe that the applicant’s company was of high standing.  The head office was said to be in the USA and the “boss” of that company was represented by the applicant as a person named MacKenzie.  Su testified that he repeatedly asked the applicant to meet Mr MacKenzie but that this was never arranged.

6.  The finance report was never produced.  According to Su’s evidence, he asked for copies but was told by the applicant that there was no point in him having a copy because the report was intended for supply to potential investors only.

7.  Su said that in early 2003 he was told by the applicant that the “investment pool is closed” wherefore, before and during the Lunar New Year 2003, Su pressed the applicant for the return of the US$200,000.  The applicant’s response was that the applicant would obtain a standby letter of credit from BNI in the sum of US$50 million and that if Su could secure a buyer for it, Su might retrieve his US$200,000 plus some profit.  Quite how it would work is not clear but the applicant said that he, the applicant and the purchaser of the letter of credit would earn commission and from that Su would be reimbursed his US$200,000 and would earn profit as well.

8.  Su’s evidence was that he asked the applicant to fax documents to him as soon as possible so that he could try to “get some friends to help to see if it is possible to complete the deal.”  In due course, they met at the Hong Kong - Macau ferry terminal where the applicant handed to him the document which is the subject of the charge.  Su read the document and understood its contents.  It was his intention to ask friends to verify the authenticity of the document and then try to find a finance company to see whether it was possible to find a buyer for it.  Su made enquiries through a barrister in Hong Kong and he learned from friends that the authenticity of the document was questionable.  It appears that he made an enquiry from a bank and learnt of its falsity.

9.  He met the applicant a number of times after he had received the so-called letter of credit but there came a time when he was not able to contact him any longer.  He also discovered that there was no Madison office at Bank of America Tower, nor one called Pallas.

10.  The applicant was arrested on 7 August 2005.

Cross-examination

11.  The applicant did not give evidence nor call any on his behalf.  Save for what appeared on the face of documentation put to Su in cross-examination, the essence and detail of the case put on the applicant’s behalf, denied by Su, was unsupported by evidence.  Given the nature of the grounds of appeal, it is necessary to recount the thrust of the cross-examination.

12.  A number of matters emerged during cross-examination, some to the discredit of Mr Su, upon which emphasis was laid by Mr Yeung on the applicant’s behalf.

13.  It appears that Mr Su is an educated man with a degree in technology and also in economics, degrees obtained through curricula conducted in English.  Zhong Nan has a department of legal advisers as well as accountants.  These points were drawn out in an attempt to demonstrate that it was inherently improbable that Su would have believed that a duplicate document presented in the form that it was, and given its requirement for production of an original, could be sold directly as a financial instrument and, further, that it was inherently improbable that a fraudster would have produced a document of this nature: it would have been easier for him to produce a document that purported to be the very original that its terms required. 

14.  One of the matters to his discredit is that Su’s passport disclosed him as having been born in Manila when that is not true.  He answered questions about this saying that he had ‘clarified’ this error with the relevant authorities in the Philippines.  However the same assertion, that he was born in the Philippines, appeared in his statement to the police in connection with this case.  He said that he had also subsequently clarified that with the police.

15.  He said that he first came to know Mr Tan in the year 2000, yet a company document was produced purportedly showing Mr Tan that had been chairman of the Hong Kong investment arm of Zhong Nan as long ago as 1996.  Mr Su explained this by saying that that document was a forgery produced for the purpose of the fund-raising exercise, and was produced at the applicant’s insistence. 

16.  It was put to Su that the service agreement included a provision that upon default by Lighton, there would be no compensation or reimbursement of any funds paid to the service provider, Madison; and, more particularly, that by a document dated 13 August 2001, Su had acknowledged that Lighton was in breach of the service agreement and that “no refunds or compensations” were to be made “in relation to this agreement”.  Su accepted that he had signed this document but no questions were asked either in cross-examination or, more importantly in the event, in re-examination about the circumstances in which he came to sign it. 

17.  It was further put on the applicant’s behalf that Pallas did not provide the report because Su had not supplied the documents necessary for its preparation.  Because there was no report, it was not possible to raise funds for the insurance bond.  It was asserted that in about August 2002, Su asked the applicant to help him to obtain alternative financing and this the applicant did by introducing him to a person called Brian Kong and after that introduction Su told the applicant that Brian Kong had agreed to issue a bank guarantee which would satisfy Su’s need for finance. 

18.  According to this account, Su telephoned the applicant in March 2003 and told him that Kong had sent him (Su) an e-mail which had been copied to the applicant and that there was an attachment to it which Su wanted the applicant to print out in colour since he, Su, did not have a colour printer.  The applicant then printed the attachment in colour and handed it to Su at his office on the Mainland.  It was that attachment that was the (copy) false bank guarantee.  According to this account, Brian Kong had sent the document to Su to show that he had the capability to obtain guarantees of that kind.  There was no question of the applicant telling Su that the document could be sold or traded.

The judge’s reasons

19.  The judge noted that the document in question – entitled “12-Month Bank Guarantee” but in fact in the nature of promissory note – appeared to be a computer printout because there was a reference on the document itself to a ‘JPG file’ and the ‘guarantee’ did not occupy the whole page.  Furthermore, the word “Duplicate” is stamped across the face of the page.

20.  She noted as well the contentions made on behalf of the applicant that Su was not a credible witness and in particular that the account he gave was inherently improbable: first, that had the applicant been intent on defrauding Su he would have handed him a false original, not something marked as a duplicate and, secondly, that there was no possible reason to issue a purported guarantee in the sum of US$50 million when the debt was only US$200,000.  The defence assertion was that the nature of the document itself sat comfortably with the account put to Su on the applicant’s behalf, yet sat ill with Su’s testimony.

21.  The judge concluded that Su was an honest and reliable witness.  She rejected the case put on the applicant’s behalf as being inconsistent with common sense: given that “it was [Su’s] view that the [applicant] should pay back the US$200,000”, it was not believable that Su would return to him and ask for fresh financing.  She accepted Su’s denial of ever having heard of Brian Kong, let alone having dealt with him.  Most particularly, she found it absurd that Su would need to ask the applicant to print out the document for him.  She concluded that Su had, perhaps naively, trusted the applicant’s representation that the duplicate guarantee was an effective instrument by which to raise finance and that the applicant had used the document in an attempt to stave off Su’s pursuit of the US$200,000 that was owing.  Two years or so passed between the presentation of this ‘guarantee’ document and the applicant’s arrest.  As to this, the judge said that she had heard no evidence as to why Su had not been able to contact the applicant; that the applicant “had essentially disappeared”; and that the only reasonable inference to be drawn from “the defendant’s evasion of [Su]’s contact is that the [applicant] was evading [Su] as he knew the bank guarantee was false.”

Points of concern

22.  There are a number of grounds amongst which there are two points that have caused us concern.

23.  It was sufficiently clear from the tenor of the cross-examination of Su that it was being put to him that there was in fact no outstanding debt and that the account which he provided was false.  Most particularly, Mr Keith Yeung, who also acted for the applicant at trial, presented Su with the document dated 13 August 2001 (headed “Liability Disclaimer”) and Su accepted that he had signed it.  It is a document that on its face constituted an acknowledgment by Su that Lighton was in breach of the service agreement and that no refunds or compensation were due from Madison to Lighton.

24.  In the submissions made on behalf of the applicant at trial, counsel on his behalf submitted that this document, the “Liability Disclaimer” document, was one that, in counsel’s words “clearly exonerated the defendant and/or Madison to repay any money.  Your Honour, faced with those documents the inference is that there was no need for the defendant to have resorted to any forgery … .”  It was not then suggested by counsel on behalf on the prosecution that this was a point that had not been made sufficiently clear, and there was no attempt by counsel for the prosecution (who did not appear on this appeal) to ask the witness Su any questions on this material point: in particular no attempt to clarify why, if indeed Su thought the sum to be outstanding, he had signed a document which said quite the opposite.  We do not think that it was for counsel for the applicant to seek such clarification, since the challenge to Su’s credibility on the point was in our judgment sufficiently raised by clear implication in the course of cross-examination.  The matter should have been pursued in re-examination but it was not.

25.  The issue was central to the case because if in fact there was no debt of US$200,000 and, more specifically, if Su knew that there was no such debt – alternatively, if the applicant believed there to be no such debt – the basis of the prosecution case fell away; for it was the prosecution case that the forged instrument was presented by the applicant because he knew US$200,000 was owing and that he dishonestly led Su to believe that use of the document which is the subject of the charge would discharge the debt.

26.  In this regard, the judge’s finding was as follows:

“He [the applicant] had presented this [‘guarantee’] to [Su] to avoid [Su] from chasing him for the debt.  He also led [Su] to believe that he was settling the matter with him.  The defendant was stalling for time as well as leading [Su] to believe he would be reimbursed.”

27.  With respect to the judge (whose conduct of this case was made difficult in the face of an unsatisfactory presentation of it by the prosecutor), that finding made an assumption that there was a debt to be settled and that both parties knew that.  Yet, whether in fact there was a debt and whether Su and the applicant believed there to be a debt was a cardinal fact in dispute.  It was an assertion by Su which was not accepted by the defence and which was put in direct issue by the production of the “Liability Disclaimer”.  In our judgment, it was important for the judge to state why, despite the existence and content of that document, she nonetheless accepted Su’s contention that US$200,000 was owing or, at least, that he believed it to be owing and that the applicant well knew that it was owing.  Unfortunately, she did not do so.

28.  Mr Lee SC on behalf of the respondent has invited us to say that the “Liability Disclaimer” document is of no relevance.  He has suggested that the contract for the payment of US$200,000 to Pallas was a matter quite separate from the Madison-Lighton agreement or, at least, was so viewed by Su; alternatively, that the document and the circumstances of its signing are suspect.

29.  We think that the points made by Mr Lee would have been worthy of exploration at trial, particularly with the witness Su, but are not supported by the evidence which in fact emerged.

30.  It is clear that the receipts, each in the sum of US$200,000, were referable to the service agreement, since the service agreement number is stated on each receipt, the dates of actual payment acknowledged by the receipts correlate closely to the first two instalment payments demanded by the service agreement, and each receipt refers to a balance owing which ties in with the full amount agreed under the service agreement.  What is more, it was the prosecution case at trial that these two receipts were in respect of the first two instalments demanded by the service agreement.

31.  It seems clear enough, as well, that the “Liability Disclaimer” document on its face engages payments already made by Lighton to Madison.  It refers to an agreement that there would be no refunds and no reimbursement.  The only monies that had been paid by Lighton to Madison were the two sums of US$100,000.  In other words, on the face of the service agreement, the receipts, and this document (the “Liability Disclaimer”), no money was owing to Lighton or Su.

32.  It may very well be that had Su been asked to explain the basis upon which he continued, notwithstanding the documentation, to assert a belief both by himself and by the applicant in an indebtedness of US$200,000, he would have provided a feasible explanation.  The facts of the case are riddled with dishonesty, including dishonesty to which Su was, on his own admission, party and it was the very fact of his willingness so to admit that perhaps supported the judge’s finding that his evidence was believable.  Nonetheless, in our judgment, the explanation was never sought and, on the face of the reasons for verdict, the issue was not addressed.  Given the centrality of the issue to the case, we are of the opinion that the failure expressly to address it is a material omission and for this reason alone, we would grant leave to appeal and allow the appeal.

33.  The second point that has caused us concern is the basis upon which the judge concluded that the applicant knew that the “guarantee” document was false, namely, that the applicant was deliberately evading Su’s attempts to contact him.  Whilst we accept Mr Lee’s submission that it is unrealistic to suggest that this was the only basis upon which the judge came to the finding as to the applicant’s guilty knowledge, it seems from the way in which the matter has been framed that it was nonetheless a material finding.  What the judge said was this:

“I have heard no evidence why [Su] was not able to contact the defendant after the bank guarantee was handed to him.  The defendant had essentially disappeared.  The only reasonable inference to be drawn from the defendant’s evasion of [Su’s] contact is that the defendant was evading [Su] as he knew the bank guarantee was false.  The defendant was not located until some two years after he had given [Su] the bank guarantee.”

34.  Mr Lee accepted, correctly in our view, that the finding that the applicant was evading Su was not, on the basis of the limited evidence that emerged, a safe finding.  He asserts, however, that in the context of the evidence as a whole there was so much else that demonstrated guilty knowledge as to make this error one of no significance.

35.  In so far as the passage from the Reasons for Verdict cited at [33] above implies that there was no contact at all after the “guarantee” was handed to Su, that is not accurate because Su’s evidence was that after receipt of the letter of credit he was in contact with the applicant and that “during that period of time he and I met both in mainland and in Hong Kong.”  In relation to a failure to establish contact with the applicant, the admissible evidence in this regard was constituted by one question and one answer in examination in chief:

“Q: Did there come a time when you were not able to contact the defendant?

    A: Yes.”

36.  We say “admissible evidence,” because there was evidence from Su that he sent his secretary to check the Bank of America Tower and she found that there was no Madison or Pallas office there.  However, the secretary was not called – a remarkable omission given the importance of the evidence – and no evidence was led as to when this visit to the Bank of America Tower was made.

37.  The question and answer to which we have referred at paragraph [35] above was lacking in any particular.  One knows not what efforts were made to contact the applicant or when; what reason or reasons were given, if any, on the applicant’s behalf for his absence when enquiries were made; or how often and when the two met on the Mainland and in Hong Kong after the “guarantee” document had been delivered.  There was not, therefore, in our judgment, a satisfactory evidential basis upon which the judge could base her finding that the applicant “had essentially disappeared” and was deliberately avoiding Su.  In this regard, our attention has been drawn to immigration records that disclose frequent trips by the applicant in an out of Hong Kong in and after 2003, an indication in itself that the applicant had not gone to ground.

38.  It may be that if this second point had stood on its own there would be enough to uphold the conviction by an application of the proviso to section 83(1) of the Criminal Procedure Ordinance, Cap 221 on the basis that there was much else upon which the judge could conclude – and must have concluded – that the applicant knew of the falsity of the “guarantee” document.  But such a route would have to presuppose a supportable finding by the judge as to the credibility of Su on the core issue of his and the applicant’s belief that US$200,000 was owing.  However, as we have explained, that finding is made in the face of evidence which the judge ought, in our opinion, to have addressed but did not.

Conclusion

39.  For these reasons, we grant the applicant leave to appeal against conviction, treat the hearing of the application as the appeal, allow the appeal and set aside the conviction.