HKSAR v. XU ZHUO

CACC 139/2021

[2021] HKCA 1550

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 139 OF 2021

(ON APPEAL FROM DCCC NO 149 OF 2019)

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D E C I S I O N

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Introduction

1.  This is an application for bail pending appeal.

2.  The applicant was one of three defendants (with the trial designation of D1) who stood trial before District Court Judge Eddie Yip (the judge) on the following charges:

Charge 1: Conspiracy for an agent (D2) to accept advantages, against D1 and D2.

Charge 2: Conspiracy for an agent (D3) to accept advantages, against D1, D2 and D3.

Charges 3 to 6: An agent accepting an advantage, against D2 as an alternative to Charge 1.

Charge 7: An agent accepting an advantage, against D3 as an alternative to Charge 2.

3.  At the conclusion of the trial on 15 June 2021, D1 and D2 were convicted of Charge 1 but acquitted of Charge 2, and D3 was acquitted of Charges 2 and 7. The end result was that the judge only found Charge 1 proven.

4.  On 30 June 2021, the judge sentenced D1 to 1 year and 10 months’ imprisonment with a compensation order of $128,790; and D2 to 2 years and 6 months’ imprisonment.

5.  On 2 July 2021, D1 filed a notice of application for leave to appeal against conviction (Form XI). At trial, D1 was represented by Ms Charlotte Draycott, SC, Mr Benson Tsoi YM and Ms Leticia Tang Hon Ling, instructed by Messrs Haldanes, solicitors. The Form XI contains initial grounds of appeal against conviction signed by Haldanes, which read as follows:

Ground 1: The judge’s inferential finding that the applicant (D1) conspired with D2 for D2 to accept secret commission (the alleged advantage) is flawed;

Ground 2: The judge rejected D1’s evidence without proper reasoned analysis;

Ground 3: The judge failed to give reasoned analysis to matters that contradicted an inference of guilt;

Ground 4: The judge’s finding that D2’s employer (the principal) did not have knowledge of the illegality of the chartered flights provided by D1 is flawed: and

Ground 5: The judge erred in vacating oral closing submissions.

The test for bail

6.  A defendant having been convicted of a criminal offence has a right of appeal. He or she can apply for bail pending appeal which an appellate court may grant if it is just to do so. It is an exceptional remedy after conviction which may be granted where it appears that the appeal has a strong likelihood of success (the “merits ground”), or where there is a likelihood that all or a substantial part of the sentence would be served before the disposal of the appeal (the “time ground”). In considering the time ground, it must also be demonstrated that the appeal is at least reasonably arguable or promising.[1] In other words, the grounds of appeal are reasonably arguable in that they afford some real chance of success.[2]

The bail application

7.  Mr Tsoi, who represents the applicant in this application explains that perfected grounds of appeal have not yet been filed because trial transcripts are still not available. He makes the present application on the time ground and limits his submission to three points, which he submits are reasonably arguable.

8.  First, the judge did not properly assess the central issue in D1’s defence: whether D2 may have lied to D1 about having obtained consent from his principal to accept the commissions in question. The judge neither considered the evidence which was relevant to this issue nor provided reasoned analysis on it.

9.  Secondly, the judge did not provide proper reasoned analysis for concluding that D1 had the necessary guilty knowledge (that is, that D2 lacked permission or consent from his principal to accept the commissions) and had conspired with D2 as charged. In doing so, the judge did not provide sufficient separate assessment of the facts pertinent to D1’s position and the improbability inherent in the prosecution's case before drawing the guilty inference against her.

10.  Thirdly, there was material irregularity in the trial as the defence was not allowed the opportunity to make any oral closing speech. It appears that both the prosecution and the defence filed lengthy written closing submissions and there was correspondence with the court about vacating the hearing for oral closing addresses. The written closing submissions of D1 was 53 pages in length.

The brief facts

11.  D1 was the sole director and shareholder of a company, Joy Fly Jet Limited (JFJ), which conducted jet sales business and also jet charter broker business, arranging private jet charters for clients. She was also an employee of a jet management company, Bellawings Limited (Bellawings), which conducted business maintaining and managing jets for private jet owners. D2 and D3 were employees of another jet charter broker company L’Voyage Limited (LV), which arranged private jet charters for clients.

12.  The prosecution case alleged that D1 and D2 conspired between 4 July 2017 to 19 March 2018 for D2 to accept advantages by way of commissions from D1, without lawful authority or reasonable excuse, in return for LV placing jet flight orders with JFJ for LV’s clients (Charge 1); and that Dl, D2 and D3 conspired between 4 July 2017 to 2 February 2018 for D3 to accept advantages by way of commissions from D1, without lawful authority or reasonable excuse, in return for LV placing jet flight orders with JFJ for LV’s clients (Charge 2).

13.  The subject matter of the offences was the chartering of jet planes by clients through a charter broker. The usual transaction involved a client passenger engaging a jet charter broker, such as LV, to charter a private jet for a specific journey. As LV was not a jet operator, it could not on its own provide the jet for the client. Instead, it would either engage a jet operator to provide the charter flight, or alternatively, if LV could not locate an operator with available jets, it would contract with another charter broker, such as JFJ, to find a jet operator that could provide the requested flight for the client passenger.

14.  At the trial, the cost that the client paid to LV was called the “Sell Price”, the cost that LV had to pay, whether to an operator or another broker, in order to obtain the charter jet was the “Buy Price”, which was usually marked up. The profit margin LV made would be the difference between the “Buy Price” and the “Sell Price”. The profit that JFJ made would be the difference between the “Buy Price” and the “Operator’s costs”, that is, the costs that JFJ had to pay Bellawings for providing the jet.

The issues at trial

15.  Both D1 and D2 testified at trial. There was no dispute that D1, on behalf of JFJ, paid commissions to D2 and D3, employees of LV, in respect of flight charters JFJ had arranged. There was also no dispute that it was D2 who approached Dl to solicit such commission in a conversation that took place at the end of August 2017.

16.  The central issue in D2’s case was whether he in fact had permission or consent from his employer to accept the commissions in question. This issue affected both the conspiracy charges and the alternative charges against him. However, in D1’s case the central issue was different. Her case was that D2 had told her that he had his principal’s consent to accept the commissions and that he had lied to her about this matter. As a consequence, the defence argued that even if D2 failed to establish lawful authority or reasonable excuse for receipt of the payment of the commissions, in order to prove the conspiracy charge the prosecution had to prove that D1 knew D2 did not have his employer’s permission or consent to accept the commissions in question.

17.  Mr Tsoi submitted that how D1 could have known of D2’s lack of authority was therefore a central issue in D1’s case. He argues that the prosecution did not put forward any positive case as to how D1 acquired knowledge that D2 lacked authority to accept commissions from the commencement of the conspiracy period. Nor did the judge make any findings on this issue.

18.  Mr Tsoi submitted that assuming D2 in fact never obtained his employer’s consent to accept the commissions in question (as the judge ultimately found), then there were only three possible scenarios when the alleged conspiracy commenced:

(i) D2 told Dl that he did not in fact have permission or consent from his employer to accept commission (and D1 nonetheless agreed to pay such commission);

(ii) D2 lied to D1 that he had his principal’s permission or consent to do so;

(iii) D1 and D2 did not have any conversation on this matter of the principal’s permission.

19.  Mr Tsoi argues that only the first scenario could constitute the conspiracy charged, while the second scenario was the core of D1’s defence. He contends that it was incumbent on the judge to provide reasoned analysis why he could by inferential reasoning, conclude that it was the first scenario, to the exclusion of the other two scenarios that were consistent with innocence. This, he argues, was important because as a matter of logic, one may view that an agent, such as D2, who was attempting to solicit payment of a commission from another, namely D1, in a business where commission payments was common practice, would likely have told that other person he had the consent from his principal to do so. He contends it would be inherently improbable for the agent to admit that he in fact had no permission to accept such commission payment.

20.  D1 gave evidence that in June 2017, D2 approached her on an urgent basis to ask her to assist in arranging a flight for one of LV's important clients. The owner of Bellawings had available jets but they did not have any licence to carry out commercial chartering. D1 consulted the jet owner, who ultimately agreed to provide the jet for the flight. This was done on condition that no written contracts should be made regarding the charter since it was an “illegal” charter. It was not disputed that on this occasion no illicit commission was paid.

21.  Towards the end of August 2017, Dl was approached again by D2 to arrange a flight for the same LV client. D2 explained to D1 that due to the illegality of the Bellawings’ charters and the lack of written contract, LV could not pay him the commission for those charters directly, but his principal, Diana Chou of LV, had consented that he could obtain commission from JFJ instead, by way of marking up the “Buy Price” so that JFJ could pay the commission to D2 from the inflated “Buy Price”. Dl agreed. Dl’s evidence was supported by the fact that D3 had used a similar arrangement on another operator by asking that operator to pay commission to D3 from an inflated “Buy Price” (to a company bank account designated by D3, which company did not in fact exist).[3]

The reasons for verdict

22.  The prosecution case was that D1 made 15 payments into D2’s bank account as secret commissions affecting LV’s business interest without LV’s consent (Charge 1); and 4 payments into D3’s bank account with the aid of D2 as secret commissions affecting LV’s business interest without LV’s content (Charge 2).[4]

23.  The 19 payments made by D1 to D2 or D3 fell into four categories: (1) “Reimbursement to D2 and token of appreciation for D2’s doing a foreigner (‘Do a Foreigner Category’)” - payments 1, 2, 5 and 6; (2) “Commissions to D2 (‘Commissions Category’)” - payments 3, 4, 7, 9, 10 and 12; (3) “Money Exchange or Remittance for Apex Air under D1’s Instruction (‘Remittance Category’)” - payments 1, 5, 11 and 15; and (4) “Transactions not upon D1’s Instruction (‘No Knowledge Category’)” - payments 13, 16 and 18.[5] The judge found that the prosecution had not proven that the categories of payments to D2 and D3 from D1 in (1), (3) and (4) were advantages as alleged. This left the payments 3, 4, 7, 9, 10 and 12 to D2; and payment 8 to D3 to consider within the terms and scope of the conspiratorial agreements under Charges 1 and 2.[6]

24.  The judge did not find the conspiracy in Charge 2 proven. He did find proven the conspiracy in Charge 1 but only in respect of payments 3, 4, 7, 9, 10 and 12, which D1 did not dispute were commissions paid to D2.

25.  D1’s case was that she paid the commissions to D2 but he had lied to her that he had his principal’s permission or consent to receive them. It was her case that it was common place for commissions to be paid in chartering a flight through a charter broker.

26.  Mr Tsoi argues that, whether D2 lied to D1 about having his principal’s permission or consent to be paid commissions and whether D1 believed that to be the case was a critical aspect of the defence case, the judge did not address these matters.

27.  Whilst the judge rejected the evidence of D1 and D2, Mr Tsoi argues that the judge must have accepted D1’s evidence in relation to the other payments, which he found did not come within the terms and scope of the conspiratorial agreement under Charge 1.

28.  Mr Tsoi complains that the only time the judge addressed D1’s case was in the following paragraphs:

“78. D1 says that after D2 so spoke of Diana’s concern and consent, she believed D2 had the authority to represent LV. She did not contact Diana for confirmation despite their close relationship because she thought it a trivial matter. She therefore entered into the JFJ Commissions Agreement. I do not believe her evidence that she ever heard anything like that from D2.

79. As seen in the WeChat messages between D1 and D2, D1 was at liberty to cite any amount of commissions without reference to any formula or percentage. It is inconceivable that LV would have given such liberty to D2 and agreed to pay the inflated buy price. It is also inconceivable that being an employer herself, she would have consented to it if it was ever raised by D2 to be considered by her. She believed D2 was authorized to have such unfettered commissions. I find this implausible.

80. As pointed out by the Prosecution in closing (at para 59), there was an incident which supports the inference that the payments under the Commissions Category was not requested or consented by Diana or the management of LV. In the aftermath of the two cancelled flights (order nos 170122 and 170126 originally booked with JFJ), refund had to be made to LV by D1/JFJ. D1 had to chase after D2 for refund of his and/or the middleman’s share before D1 could transfer the money back to LV. Had LV requested for or consented to the JFJ Commissions Agreement, the easiest way for refund to be made would have been for D1 to pay JFJ’s share and notify LV the remaining portion was given to D2 and/or the middleman pursuant to LV’s instructions so LV could chase D2 and/or the middleman itself. D1 claims that she had thought of this method but she deemed it better for her to gather all the fund before returning the same to LV. Such a claim does not make sense as she should have selected a method refunding her part to LV at the earliest opportunity in order to alleviate her own part in the situation. It is equally strange that she did not contact Diana to see how best to cope with the situation but relied on D2’s assurance that he could handle the situation. There is no reason why D1 would have to let D2 deal with the situation. D1, as a reasonable businesswoman, would and should have protected her own interests instantly by refunding her own part to LV. I agree with the Prosecution that the only reason why D1 had to wait for D2’s and/or the middleman’s share before the refund to LV was that D1 knew very well that LV did not know the sum included secret illegal commissions to D2.”

29.  The person named Diana is Diana Chou who was described as the boss of LV. It seems it was the practice for LV to pay D2 and D3 commissions for successful transactions. It was D2’s case that if the charter involved an illegal flight extra commission would be paid that would not be shown on LV’s records.[7] Diana did not give evidence at the trial, but another member of LV, who was the director of finance and operations, gave evidence instead. He testified that according to his knowledge and based on the available records, D2 had not asked Diana or the management of LV for permission to receive any commissions from JFJ.[8]

30.  Mr Tsoi argues that it is apparent from the quoted passage of the judge’s reasons that he did not address the central issue of the defence case, given that D2 had admitted that he had lied in relation to this case.

The time ground

31.  I have set out as best I can the basis of the applicant’s appeal in order to address the time ground, as it is a relevant consideration. The applicant was remanded in custody upon her conviction on 15 June 2021. She was sentenced to 22 months’ imprisonment on 30 June 2021. I am informed that the earliest release date of the applicant from prison custody, taking into account a third remission for good conduct, is 31 August 2022. She has about 10 months to serve before she is eligible for release.

32.  I am satisfied that the applicant should be granted bail pending appeal on the time ground. I have made this decision on the basis of the materials and submissions before me at this stage of proceedings.

33.  Mr Tsoi has submitted a list of conditions for bail which I will separately address.