HKSAR v. CAO YUE HUI

CACC65/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 65 OF 1999

(ON APPEAL FROM DCCC 1266 OF 1998)

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J U D G M E N T

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Stuart-Moore, V.-P. (giving the judgment of the Court):

1. On 20th January 1999, following a trial in the District Court before Judge Wright, the Applicant was convicted on a charge of furnishing false information, contrary to section 19(1)(b) of the Theft Ordinance, Cap. 210. The Applicant was sentenced on the same day to 15 months' imprisonment and he now seeks leave to appeal against conviction. He has indicated that he does not wish to pursue his application relating to sentence and this application we have now dismissed.

2. The material particulars of the charge read as follows:

"... on or about 24 day of December 1992 ... in furnishing information to the Nanyang Commercial Bank Limited for the purpose of obtaining the proceeds of Letter of Credit 92-0327 from the Koram Bank, ... dishonestly, with a view to gain for himself or another or with intent to cause loss to another, produced or made use of a commercial invoice issued by Freeley Development Ltd to Lotte Trading (Hong Kong) Limited dated 21 December 1992 and a Bill of Lading number JS-9 dated 18 December 1992, which to his knowledge were or may have been misleading, false or deceptive in a material particular."

3. The long delay before trial was due to the fact that the Applicant, following his arrest on 8th April 1993, and interviews in May and June 1993, left Hong Kong for Mainland China on 24th June 1993. He was not re-arrested until 11th November 1998, almost 51/2 years later, when he tried to return to Hong Kong from Macau.

4. The judge in a most thorough review of the evidence, set out a summary of the prosecution's case in his Reasons for Verdict, much of which was undisputed. The majority of the evidence came from documentary evidence and from the two witnesses who gave oral evidence. These were Kim Won Sok (PW1) and Lai Lee (PW2), who was a former staff member of one of the Applicant's companies. Concentrating on the crucial evidence affecting events in November and December 1992, the judge set out the companies established by the Applicant and his wife ("the wife"), some of the accounts to which they were solely or jointly signatories and a company known as Lotte Trading (Hong Kong) Company Limited ("Lotte") of which PW1 was a director for about two years. In summary, the companies were New Star Industrial (Hong Kong) Company ("New Star") operated by the wife; Freeley Development Limited ("Freeley") where, before October 1992, the Applicant and the wife had been sole directors and shareholders and, after that month, a further director named Gao had joined them; and New Wave Group Company Limited ("New Wave") where the Applicant and the wife were sole shareholders and directors. Freeley and New Wave had accounts at Nanyang Commercial Bank Limited ("Nanyang") where the Applicant and the wife were both authorised signatories for New Wave and where the Applicant and Gao were authorised signatories for Freeley.

5. New Star had been trading with Lotte for about two years and, in respect of an earlier transaction, was indebted to Lotte in the sum of approximately US$770,000.

6. In November 1992, the Applicant, the wife and PW1 were all present at the discussions relating to the discharge of New Star's indebtedness to Lotte. The conclusion reached was that Lotte would open a Letter of Credit in an amount of US$400,000 with Koram Bank ("Koram") in favour of Freeley in respect of the purported sale by Freeley to Lotte of 1,031 tonnes of cast iron goods. The profits from the sale of those goods would be used to reduce New Star's debt to Lotte. As Lotte had not previously traded in such goods, PW1 was anxious to ensure the sale of the goods and an agreement was reached that they would be repurchased by New Wave for US$406,028.42, payable in two instalments. PW1 took the agreement he had drawn up (Exh. P1) to the Applicant on 3rd December 1992 which he duly signed on behalf of New Wave.

7. On 15th December 1992, Lotte received a faxed "contract" (Exh. P5) bearing the number FDL/92/068 from Freeley for the cast iron goods. This appeared to show that it had been despatched from New Star. The date of the shipment was shown as 28th December 1992, the terms of payment were "At Sight L/C" and the amount payable was US$400,028. The balance between this amount and that which was shown on Exh. P1, a difference of about US$6,000, was to cover Lotte's expenses, interest on the Letter of Credit and a small profit.

8. The Letter of Credit itself (Exh. P4) was arranged through Lotte's bankers, Koram. Payment was made on condition that various documents were first produced to Koram namely, a signed commercial invoice and a packing list, both in triplicate, a certificate of origin in duplicate and Bill of Lading.

9. On 24th December 1992, an application was made to Nanyang by Freeley for collection of the amount due under the Letter of Credit. Freeley's collection order bore the company stamp and was signed by the Applicant. There was a minor typographical error in the contract number but it clearly, in all other respects, related to the same transaction. The collection order was accompanied by a commercial invoice (Exh. P18), a Bill of Lading (Exh. P2), a packing list (Exh. P17) and the original Letter of Credit. The Bill of Lading had Freeley's stamp upon it and was signed by the Applicant. Exhibits P17 and P18 each bore a Freeley company stamp but the signatures on them were not the Applicant's.

10. Exhibits P2 and P18 are the documents to which reference is made in the charge. It is their use or production which form the basis of the allegation that to the Applicant's knowledge, they were or may have been misleading, false or deceptive in a material particular. The documents, including these two exhibits, were transmitted by Nanyang to Koram. They were accompanied by two drafts of Nanyang drawn by Freeley, each bearing the Freeley company stamp and the Applicant's signature.

11. The evidence revealed that the submission of these documents by Freeley to Nanyang was six days after the Letter of Credit had been issued and was, most importantly, four days before the "date of shipment" referred to in Exh. P5.

12. On 4th January 1993, payment, after the deduction of bank charges, was made under the Letter of Credit by Koram to Nanyang in the sum of US$399,435.46. Two days later, this amount was credited to one of Freeley's accounts with Nanyang. On 12th January 1993, US$399,000 from the proceeds were transferred to an account of New Wave. The withdrawal slip was signed by the Applicant and chopped with a Freeley company stamp. On the same date, US$400,025 was telegraphically transferred from the New Wave account to an account operated by Lotte. In February 1993, New Wave were due to make an initial payment of US$150,000 under the terms of Exh. P1. PW1 attempted to contact the Applicant and, on 23rd February 1993 managed to speak to him. The Applicant said that the wife was missing. PW1 went to the Applicant's office only to be informed by the Applicant that the cast iron goods were non-existent, that the Bill of Lading was a forgery or a fraud and that no goods had ever been shipped. The Applicant said that in consequence he was not liable to make payment to Lotte.

13. The remainder of the relevant events, which are set out in the Reasons for Verdict, at page 21 of the appeal bundle, were as follows:

"On 8th March 1993 PW1 went to the Accused's home at his request: the Accused complained of the wife's disappearance, discussed with PW1 his family affairs and sought to enlist PW1's assistance in locating the wife: at PW1's request the Accused wrote a note which reads 'When Miss LI Mei-hua returns a solution will definitely be found to repay Lotte US$400000.00' (Exhibit P3). This is consistent with his unchallenged evidence that, at that meeting, the Accused had indicated that when the wife returned he, the Accused, was willing to repay the full amount of $400000.00.

Only on 8th April 1993 did PW1 report the matter to the police: he testified that the reason for the delay was that he wanted to wait for the full amount payable by New Wave to fall due on 31st March 1993 in the hope that payment would be made.

On 8th April 1993 the police executed a search warrant at the Accused's office where they seized ... an electric typewriter as well as a large quantity of documents relating to this matter which are detailed at paragraph 3 of the Agreed Facts (Exhibit P36): of particular note is Exhibit P12 which is an unsigned version of the commercial invoice of which signed copies were tendered in support of the request for payment under the Letter of Credit:

The typewriter seized from the Accused's office was subsequently tested by the Government Chemist to establish whether it had been used to produce the Bill of Lading, Exhibit P2: although there were no impressions found on the ribbon in the typewriter which matched the content of the Bill of Lading, the Government Chemist opined that '... size and design of typeface and typeface alignments ... are consistent with the typewriter ... having been used to produce ...' the Bill of Lading (Exhibit P2).

PW2 had been employed by New Wave from about October 1992, having been employed by the Accused:

it is correct to say, and understandable, that her recollection of events is poor;

both the Accused and the wife had given her documents with which to work and instructions in connection with her employment;

she had dealt with many documents on a daily basis;

at the time she worked for New Wave she was aware of the existence of New Star: she had not performed any work for it: she was aware that it was under the control of a 'Miss Li' who, from cross-examination, it was revealed was the wife;

she was also aware of the existence of Freeley although she knew little about it; she did know that it had no staff members;

the Accused was 'mainly' in control of New Wave and he would be assisted by the wife:

Although not specifically asked of her it was apparent from her evidence that the business and/or administration of all three companies was carried on from the same premises: this would account for Freeley apparently having access to New Star's fax machine as suggested by Exhibit P5:

It is an established fact that:

although the Bill of Lading indicates that the goods were to be shipped to Hong Kong on board a vessel named 'James-1' no such vessel has entered Hong Kong waters between November 1989 and October 1996 (Exhibit P32); and

the wife left Hong Kong on 16th February 1993 for Korea and has not returned."

14. The Applicant elected not to give evidence in his own defence at trial.

15. It has been necessary to set out the prosecution's case in some depth because of the nature of the perfected grounds of appeal settled by Mr. Mitchell-Heggs which he was prepared to concede were in the style more of a skeleton argument than grounds of appeal. Although they occupy about six pages and purport to give four separate grounds they are, in essence, a complaint that the trial judge erred in drawing certain inferences from established facts.

16. Mr. Mitchell-Heggs was in the course of developing his arguments when the Applicant interrupted the proceedings by asking for an adjournment. At the conclusion of the adjournment, he indicated that he wished to proceed with the appeal himself, and because of this, Mr. Mitchell-Heggs remained in court to act as amicus should the need arise. In fact, the Applicant then began to give us a very long account of matters which he had chosen not to give evidence about in the District Court. We indicated to him that it was not acceptable to hear evidence that should have been given in the court below if it was to be given at all. We made it clear to the Applicant that this was not a retrial of events that had already been tried in another court. The Applicant then curtailed his long history of events, indicating that he was innocent of the charges.

17. In these circumstances, we have thought it right to return to the grounds of appeal that Mr. Mitchell-Heggs advanced. He had appeared on behalf of the Applicant in the court below and essentially Mr. Mitchell-Heggs had pointed to the absence of the wife from the trial itself and to her significant role in the background to this fraud. Effectively, it was submitted that the inferences to be drawn from the evidence at trial were equally consistent and, in the light of the wife's disappearance, perhaps more consistent with the wife being the true culprit in the commission of the crime.

18. Mr. Mitchell-Heggs also referred in his perfected grounds of appeal to the Applicant's exculpatory remarks made to PW1 on the one hand and to the police on the other which he suggested were given insufficient weight by the judge when concluding the Applicant was guilty. He complained also that the judge convicted upon suspicion that the Applicant was involved and that the conduct of the Applicant after the fraud had been carried out was consistent with innocence on his part, as contrasted to the wife's complete disappearance.

19. We have given a sufficient outline of the nature of the case to demonstrate that there was a strong prima facie case against the Applicant, which he chose not to contradict or to explain by giving evidence himself. That was, of course, his perfect right if he so wished.

20. There was overwhelming evidence that the Applicant was instrumental in furnishing the two false documents referred to in the charge. If he did so, the questions to be addressed by the judge were, firstly, did the Applicant know the information was false when he furnished it? If the answer to this was in the affirmative, then secondly, did the Applicant act dishonestly when he furnished the false information?

21. The judge addressed these issues in precise terms. Starting at page 23 of the appeal bundle, he said:

"... the Accused was intimately involved in these transactions throughout .....

It has been suggested that there is no direct evidence as to who it was that physically transmitted the documents to Nanyang. Of course there is not, but that is not the point. By signing the collection order, particularly, and the Bill of Lading and drafts there can be no doubt that it was the Accused who 'furnished information' to the bank - which is further reinforced by his dealing with the proceeds after payment.

The issue really reduces to this: at the time the documents were submitted to Nanyang did he know that they were or may have been misleading, false or deceptive in a material particular. Answering it in the negative obviously results in the prosecution failing to prove essential elements of the offence whilst answering it in the affirmative logically must result in the conclusion that he did so dishonestly as contemplated by the test laid down in Ghosh. An affirmative answer must also result in the conclusion that, at the least, the action would cause loss to another as there was only a duty on Koram to pay out the amount of the Letter of Credit against presentation of genuine documents and a gain to his company, Freeley.

Looking at the compelling evidence implicating him it becomes apparent that this is a matter which cries out for an explanation. This is not to suggest, for one moment, that there is any onus upon him: that remains squarely upon the prosecution throughout. It has been suggested that the Accused has given an explanation: that he explained on at least two occasions to PW1 and also made an explanation to the police."

22. The judge then embarked with meticulous care upon the subject of the statements made by the Applicant to PW1, and nowhere, before the Applicant jumped his bail, did he say that his wife was responsible for the crime when speaking to the police. He first alleged this to the police on his return to Hong Kong about 51/2 years later. At this stage, when shown a number of documents signed by him, he gave answers to police that the judge did not find credible. In conversation with PW1, on the other hand, the Applicant had referred to his wife as having "taken all the money", but this also was not a sensible answer in the mind of the judge as the proceeds of the Letter of Credit had gone to Lotte.

23. The judge reached his conclusions eventually in this way, when at page 27, he said:

"... the Accused was at the November 1992 meeting; he was a shareholder and director of both of the companies involved in the two transactions with Lotte; he signed the original contract on behalf of New Wave which flowed directly from the November meeting; he later signed on the Bill of Lading - which was bogus, a fact which he himself acknowledged subsequently; he signed the collection order upon which payment was made and which was accompanied by a variety of documents including the Bill of Lading; the typewriter found in his office was consistent with having produced the Bill of Lading; he signed drafts in support of the application.

On this basis it seems to me, whilst taking into account all of the evidence, that the only possible inference which I am able to draw is that, at the time when the documents were submitted to Nanyang for the purpose of obtaining payment of the amount due under the Letter of Credit, the Accused produced or made use of Bill of Lading number JS-9 dated 18 December 1992, which to his knowledge was or may have been misleading, false or deceptive in a material particular. As necessary inferences from that, that production or use, in the circumstances, would have been dishonest and would have been with a view to gain for another, Freeley, or with intent to cause loss to another."

24. It may well be said that there was strong evidence that the wife was also implicated but there is nothing in our judgment about the verdict, based as it is on the flawless reasoning of the judge, which leaves this Court able to say that the Applicant's conviction was unsafe or unsatisfactory. On the contrary, all the evidence pointed to his complicity in the crime.

25. Accordingly, the application is dismissed.