HKSAR v. CHAN KAI YIU

CACC257/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 257 OF 2009

(ON APPEAL FROM DCCC NO. 771 OF 2008)

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BETWEEN

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JUDGMENT

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Hon McMahon J (giving the judgment of the Court) :

1.  The applicant was convicted after trial before Deputy District Judge Johnny Chan of two offences of conspiracy to defraud (Charges 1 and 2) and one offence of conspiracy to falsify accounts (Charge 3).

2.  The charges were particularised in the following terms :

“1^st Charge

          MAK Kwun-yiu and CHAN Kai-yiu, between the 1^st day of February 2000 and the 5^th day of February 2001 (both dates inclusive), in Hong Kong, conspired together and with CHAN Man-chuen, VONG Pak-cheong, MUI Man-fai, CHENG Pui-yi and other persons unknown, to defraud the BII Finance Company Limited by dishonestly:

(i) causing and permitting applications to be made by the Luen Cheong Tai Construction Company Limited to the said BII Finance Company Limited for granting of Invoice Financing Loan in favour of Cheung Shing Engineering Company, Chung Fai Engineering Company and Barex International Limited (‘the said Beneficiaries’);

(ii) causing and permitting the falsification of documentationrequired for the said applications for Invoice Financing Loan;

(iii) causing and permitting payments to be made to the said Beneficiaries pursuant to the said applications for Invoice Financing Loan;

when there were no underlying commercial transactions relating to the said Invoice Financing Loan.

2^nd Charge

          MAK Kwun-yiu and CHAN Kai-yiu, between the 5^th day of June 2000 and the 28^th day of February 2001 (both dates inclusive), in Hong Kong, conspired together and with CHAN Man-chuen, VONG Pak-cheong, MUI Man-fai, CHENG Pui-yi and other persons unknown, to defraud the Jian Sing Bank Limited by dishonestly:

(i) causing and permitting applications to be made by the Luen Cheong Tai Construction Company Limited to the said Jian Sing Bank Limited for granting of Invoice Financing Loan in favour of Cheung Shing Engineering Company, Chung Fai Engineering Company (‘the said Beneficiaries’);

(ii) causing and permitting the falsification of documentation required for the said applications for Invoice Financing Loan;

(iii) causing and permitting payments to be made to the said Beneficiaries pursuant to the said applications for Invoice Financing Loan;

when there were no underlying commercial transactions relating to the said Invoice Financing Loan.

3^rd Charge

          MAK Kwun-yiu and CHAN Kai-yiu, between the 1^st day of March 2001 and the 12^th day of June 2002 (both dates inclusive), in Hong Kong, with a view to gain for themselves or another or with intent to cause loss to another, conspired together and with CHAN Man-chuen, VONG Pak-cheong and other persons unknown, to falsify the accounts or records or documents made or required for any accounting purpose relating to the Luen Cheong Tai International Holdings Limited.”

3.  The applicant was sentenced in total to 3 years and 6 months’ imprisonment.  He originally sought leave to appeal his convictions and sentence, but his application concerning sentence was abandoned and dismissed prior to the hearing.  His application concerning conviction remains.

BACKGROUND

4.  The applicant at all material times was an executive director of a Hong Kong publicly listed construction company, Luen Cheong Tai International Holdings Limited (“LCTIH”). The subsidiaries of LCTIH included the wholly owned Luen Cheong Tai Construction Company Limited (“LCT”), Finestyle Maritime Services (“FMS”) and Mictech International Corporation (“Mictech”).  The holding company was incorporated in the Cayman Island.  The subsidiaries were British Virgin Islands corporations.

5.  The named co-conspirators of the applicant in both Charges 1 and 2 were, in the case of Chan Man Chuen (“Chan”), Vong Pak Cheong (“Vong”) and Mak Kwun Yiu (“Mak”), co-directors of LCTIH (all being founding directors and Chan being the group chairman).

6.  Cheng Pui Yi was the company secretary of LCTIH who became PW1 at trial.  Mui Man Fai held no executive position within the group but worked on one of its construction sites.  He became PW2.  The prosecution case was that he was used by his fellow conspirators to open bank accounts and registered companies used in the frauds the subject of Charges 1 and 2.

7.  Chan and Vong avoided prosecution by fleeing overseas.  Mak was the applicant’s co-defendant at trial and was also convicted of the present charges.

8.  In 1999 LCTIH had opened an invoice financing facility with BII Finance Company Limited (“BII”), the victim of Charge 1.  By that facility companies within the group, the relevant company being LCT, were able to present invoices from approved suppliers for direct payment by BII to that supplier. 

9.  The supplying companies concerned in the frauds the subject of Charges 1 and 2 were bogus.  They were Cheung Shing Engineering Company (“Cheung Shing”), Chung Fai Engineering Company (“Chung Fai”) and Barex International Limited (“Barex”). Barex was used only in the 1^st charged fraud.  They were BVI companies opened by what were referred to during the trial as “stooges”, namely employees or associates of the LCTIH group. 

10.  As we have said, Mui (PW2) was one of those “stooges”, others were Tsang Chen Chee (PW3) and Tai Yu Man (PW4).

11.  Bogus invoices were issued in the names of the three suppliers to LCT and presented to BII, and the three suppliers received direct payment from BII.  The monies received by them were then paid back into the bank accounts of LCT by cheque. Those payments were disguised as business receipts in LCT’s accounts.

12.  The modus operandi in respect of Charges 1 and 2 were identical, save that the victim bank in Charge 2 was Jian Sing Bank Limited (“Jian Sing”), now known as China Construction Bank, and that Barex was not used as one of the bogus suppliers.

13.  The prosecution case against the applicant in respect of Charges 1 and 2 came from two primary sources.  The first was documentary.  The frauds particularised in Charges 1 and 2 required a large number of bogus documents in the nature of invoices, loan drawdown requests and trust receipts to be made, signed and presented at the time of each drawdown of the financing facility.

14.  Of the 15 drawdown transactions comprising the overt acts of Charges 1 and 2, the applicant was involved in signing documents (together with another director and co-conspirator) in 12 of those transactions.  The 15 transactions amounted to $10,540,861.

15.  The second primary source of evidence was PW1.  She gave evidence that the applicant not only signed the documents referred to above but that he also used and kept on occasion the company chops of Cheung Shing, Chung Fai and Barex in his office. According to PW1, the applicant also helped her to construct the false particulars referred to in the bogus invoices so as to make the invoice more realistic.  The prosecution case was that the applicant was able to do this as he had a civil engineering degree and was aware of the appropriate monetary figures for the construction materials, machinery and services set out in the invoices.

16.  The prosecution case on the 3^rd charge was that towards the conclusion of the conspiracies the subject of Charges 1 and 2, the group chairman Chan had decided to sell the financially ailing LCTIH.  A prospective purchaser was located.  However, by this time LCTIH had outstanding debts in its books of account of some $58 million.  Those debts were unrecoverable and were to be written off.  The asset value of LCTIH would thereby drop by an equivalent amount and the sale of the company would be prejudiced.

17.  In order to maintain its level of asset valuation, the applicant and other directors, primarily Chan and Vong, embarked on a scheme whereby two BVI companies, Hardmeadow and Gonhaven, were to be purchased by a subsidiary of LCTIH, Mictech.  Each company was said to own the rights to a website which would be used in the construction industry.  The two companies were to be valued at $58 million ($20 million and $38 million respectively) thereby compensating for the bad debts of the group which were to be transferred to Mictech as consideration for the purchase of the two companies.

18.  The applicant was said to be one of the main movers in this scheme together with Wong Chi Keung (“PW7”), the creator of the two websites.  The scheme had been arrived at in the following way : PW7 was by profession an accountant who operated a company, Digital Asia Limited, which specialised in the making of commercial websites.  He knew the applicant and that he was a director of LCTIH and tried to persuade the applicant that LCTIH should set up a website.  He met the applicant and Chan on a number of occasions for this purpose and on one occasion learned that Chan wished to sell LCTIH.  PW7 was able to locate a potential purchaser.  The problem remained of the write-down of LCTIH’s asset value.  PW7 and the applicant checked the balance sheet of LCTIH and confirmed that some $58 million of debts owed to LCTIH could not be recovered.  The plan was then devised involving Hardmeadow and Gonhaven.

19.  Hardmeadow and Gonhaven were dormant BVI companies.  The two websites had yet to be created. PW7 set about constructing them.  In due course they were ready and, on the basis of information supplied to him by LCT, PW8, a valuer at LCH Pacific (a company specialising in valuing corporate assets and which was unrelated to LCTIH) valued them, and therefore Hardmeadow and Gonhaven, at $58 million.

20.  The scheme went ahead.  The bad debts were transferred at book value to PW10 and PW9, the stooge directors and shareholders of each of Hardmeadow and Gonhaven respectively, as consideration for Hardmeadow and Gonhaven’s share capital which was valued at, coincidentally, the book value of those debts, and their shares were transferred to Mictech.  The two websites obviously generated no revenue at the time of their transfer.  Once again, the underlying transaction was said by the prosecution to be bogus.

21.  As matters transpired the sale of LCTIH fell through.  Eventually the two websites were, as a result of concerns raised by the auditors of LCTIH for the accounting year ending 2001, revalued at $1 each.

22.  As will be seen later in this judgment the judge eventually concluded he could place no reliance on the evidence of PW7 and the issue so far as the Charge 3 offence was concerned simply became whether the remaining evidence was sufficient properly to allow the judge to convict the applicant.

23.  The applicant did not give evidence at trial.  His case was contained in his video recorded police interview and the cross-examination of prosecution witnesses.  It was in short that both PW1 and PW7 were unreliable witnesses, that in respect of Charges 1 and 2 the applicant had simply signed documents placed in front of him without checking that their contents were correct and that so far as he had been involved in board meetings relating to the acquisition of the websites from Hardmeadow and Gonhaven and signed the deeds of assignment to Mictech and deeds of indemnity relating to the transaction, he had done so in ignorance of the underlying fraud.

GROUNDS OF APPEAL

24.  The grounds of appeal advanced by Mr Robert Tibbo for the applicant were in their original state repetitive and unnecessarily complex in their presentation.  We have taken the liberty of summarising and re-ordering them as follows :

Charges 1 and 2

(1)   The evidence of PW1 was wrongly accepted by the judge as :

(a)   it was inconsistent and contradictory;

(b)   in the course of her evidence PW1 had read her witness statement; and

(c)   her evidence was without corroboration.

(2)   The judge wrongly rejected the applicant’s case as set out in his interview with the police.

(3)   The judge’s findings were inconsistent in that he concluded that PW2 was knowingly involved in the conspiracies the subject of Charges 1 and 3, yet he made no such findings in respect of PW3 and PW4 who he also found to be reliable witnesses and who, like PW2, were involved in the fabrication of documents.

(4)   The judge made incorrect findings of fact.

Charge 3

(5)   Having rejected the evidence of PW7 the judge was wrong to find there was sufficient other reliable evidence to found a conviction on Charge 3.

(6)   The judge was wrong to reject the applicant’s case as set out in his interview with the police.

Ground 1(a) : Inconsistencies and flaws

25.  Mr Tibbo argues that PW1’s evidence was “unreliable and incredible being so flawed vague and contradictory that it should have been rejected”.

26.  He points firstly to PW1’s evidence that at various times the four directors of LCTIH (including the applicant) gave directions to her as to the production and contents of the bogus invoices used in the course of the Charge 1 and 2 conspiracies.  He complains that PW1 was unable to provide specific times or dates as to when such instructions were given or as to the precise instructions given in respect of any particular invoice.  There is no merit to that complaint.  As the judge said PW1 was giving evidence of events which had taken place nearly 10 years earlier and it was unrealistic to expect that sort of detail from her.  She was firm in her evidence that the applicant had been one of those instructing her to produce the bogus invoices and the judge was entitled to accept her evidence in this regard.  As the judge said in his reasons for verdict :

“308. Given the long lapse of time, I do not find it surprising that PW1 cannot identify what D2 had said on a particular occasion where PW1 says instructions were given by D2. While PW1 cannot recall the date when instructions were given or details of the instructions given on a particular occasion, I find her evidence credible that instructions had been given by D2. Because of his professional qualifications, D2 was able to provide PW1 with details of the goods in English, and PW1 has a clear recollection that she had received instructions from D2 on matters related to preparation of invoices and related loan application documents.”

27.  Complaint is also made that PW1 said that, when she required clarification about particular transactions, she spoke to Chan and Vong, but did not say she sought clarification from the applicant.  It is said it makes no sense that although the applicant gave her instructions she, when necessary, only sought clarification from Chan and Vong.  We see nothing unreasonable in that.  Chan was the chairman of the group and Vong was the most senior of the remaining directors.  PW1 acted as secretary to Chan and to Vong.  She was not the applicant’s secretary.  This is a point wholly without merit.

28.  A further complaint is that in none of PW1’s four witness statements was there “a single accusation made against the applicant”.  If that were so then that would considerably undermine PW1’s reliability as a witness.  Mr Tibbo however in supporting that assertion relies upon the following cross-examination of PW1 :

“Q. You see, do you agree with me, and we can show you the document after lunch if you wish to see it, do you agree with me that in none of your statements to the police do you ever actually attribute words to the defendant in the case?

COURT: I think what counsel meant was that you never mentioned anything in your statements that the defendant said certain things at — on…

MR ODERBERG: Specifically.

MR ACTON-BOND: Specifically, I think.

MR ODERBERG: Yes, specifically. Yes.

COURT: Certain specific things on certain occasion?

MR ODERBERG: Yes. Yes. Thank you.

…

A. Correct. The police did not ask me that. …

…

A. … I did not know what I was supposed to say so I did not mention about that.”

29.  PW1 had obviously mentioned in her statements that Chan, Vong, Mak and the applicant had asked her to do things, including document preparation, in the course of the two conspiracies.  She was simply, in her statements, non-specific as to who had said what to her on particular occasions.  That is very different from counsel’s assertion before us that nowhere in her statements was a single accusation made against the applicant.

30.  It is suggested that PW1 was inconsistent in her evidence as to who instructed her to draw cheques for the purpose of the circulation of funds.  Initially when giving evidence as to the general procedures involved, she mentioned only Chan and Vong but then, when asked specifically who gave her such instructions she referred also to the other directors, that is, Mak and the applicant.  If this was an inconsistency it is wholly explained by the witness, as a result of examination, going from the general to the specific in her evidence and cannot, in the context in which it arose, form any substantive basis for a criticism of her reliability. 

31.  Similar complaints concern PW1’s evidence of who used the chops of the bogus supplier companies to apply their names to the false invoices.  It is suggested that PW1 changed her evidence in that regard.  But these assertions by Mr Tibbo are based in large part on misreadings of PW1’s evidence and on the taking of aspects of her evidence out of context.

32.  A more substantial complaint relates to the signature PW1 used when she signed some bogus invoices at the suggestion of Chan and Vong.  She used an “unorthodox” signature and agreed that she did so to conceal her identity.  But she said she was not sure whether she was an authorised signatory or not in those circumstances.

33.  Mr Tibbo criticises this aspect of her evidence as being evasive.  But again, putting things in context, PW1 had explained she had often been asked by persons to prepare their invoices for them as they were unable to speak or write English, and that in the beginning of her signing invoices for the bogus suppliers she thought the situation was similar.  In that context, much of the force leaves this particular complaint of Mr Tibbo.

34.  Issue is taken also with PW1’s initial denial to the police that she had done anything criminal, and her reluctance in evidence to accept that she also had acted criminally in the preparation and signing of documents relating to the conspiracies.  In particular, Mr Tibbo points to PW1’s non-prejudicial interview with the police on 9 April 2010 where she said she had “no idea” to whom the signature belonged. It was in fact her unorthodox signature, or one of them.  We accept she was very likely untruthful in this regard.

35.  However the judge was aware that on occasion, whether in her witness statements or in her evidence, PW1 had tried to minimise her culpability and had addressed the matter in his reasons for verdict :

“301. The evidence of PW1 is not without drawbacks, there are obvious attempts on her part to understate the extent of her involvement in the invoice loan transactions concerning Cheung Shing, Chung Fai and Barex. She did so when she was spoken to by the police when she gave her statement under caution in August 2007. She did so when she gave her NPS in 2008. She did not tell the police she signed some Chung Fai invoices with her unorthodox signature. She did so when she testified in court. She was reluctant in admitting she knew she was doing something illegal when she prepared the documents of Cheung Shing, Chung Fai and Barex.

302.   I accept that PW1 could only realise what she was doing was illegal when she had a full picture, but the fictitious invoice loan transactions for Cheung Shing and Chung Fai had been going on for some time after Cheung Shing and Chung Fai were set up and by the time the transactions under complaint took place, PW1 could be under no illusion about the illicit nature of the scheme.”

36.  The judge’s eventual acceptance of PW1’s evidence as to the applicant’s involvement in the frauds followed a careful consideration of other evidence which supported that of PW1 :

“304. Her evidence is to some extent supported by PW2 to 4, the respective nominal owners of Cheung Shing, Chung Fai and Barex who had no knowledge of the invoices and the underlying transactions as well as the signatures purportedly signed for the invoice issuer.

305.   PW1’s evidence as to how she helped to set up Chung Fai, Cheung Shing and Barex, how she helped PW2 to 4 to open bank accounts for these businesses, how she caused the cheques of these businesses to be signed by the nominal owners are also supported by PW2 to 4 to some extent, minor discrepancies apart.”

and later :

“314. I have considered carefully whether PW1 would prove her value as an immunised witness by fabricating evidence against D2. Having heard PW1’s evidence in court and all matters taken into consideration, I agree with Mr Acton-Bond that PW1 did not come across as a cunning and devious witness. She admitted she played a key role in the scheme and was instrumental in creating the invoices and loan application documents. I accept PW1’s evidence of how she received instructions from Chan, Vong, D1 and D2 to be true and reliable.”

37.  Even given PW1’s initial reluctance to admit she had done anything criminal and her untruthfulness in her witness statement to the police, the judge was entitled, after the careful consideration he had obviously given her evidence, to conclude that she was a credible witness.  It should be borne in mind in this regard that PW1’s reluctance in evidence to admit she had acted dishonestly was tempered by her willingness to agree she had done “something wrong” and had forged various documents.  She explained that apparent inconsistency on the basis she had acted out of loyalty to her employers and not from dishonesty.

38.  The applicant complains of other aspects of PW1’s evidence.  It is said that PW1’s evidence that the applicant was one of the directors who gave her instructions as to the preparation of the false documents required for the conspiracies to defraud the two banks is fatally flawed by her assertion that these directions were given to her at the end of directors meetings and that she then prepared the documents.

39.  Mr Tibbo’s complaint comes about because immigration records produced at trial established that on the dates of six (wrongly in his written submissions said to be eight occasions by Mr Tibbo) of the 15 invoices relevant to the 15 drawdowns on the invoice loan facilities at BII and Jian Sing, the applicant was not in Hong Kong.  The obvious conclusion, argues Mr Tibbo, is that the applicant could not have given instructions to PW1 to prepare those invoices on the day they were dated.

40.  This submission overlooks two realities.  The first is that in her evidence PW1, when asked why the date on an invoice would differ significantly from the drawdown date (usually by a period of two to four weeks), had said that either Chan or Vong would on various occasions tell her to put a particular date on an invoice so as to make the invoice date and the documents relating to the application for a drawdown on the particular facility “further apart from each other”.  In other words, her evidence was that the dates on the invoices presented to the banks were often fabricated.

41.  Her evidence was plainly understood in this light by counsel representing the applicant at trial because in cross-examination it was never suggested by him that the discrepancies between the dates on the bogus loan documentation and the absence of the applicant from Hong Kong was such as to significantly undermine PW1’s evidence.  In any event, PW1 had also identified the applicant’s signature on the loan drawdown application documents.  The applicant’s signature appeared on at least part of those documents in all but 3 of the 15 transactions.

42.  The second reality is that PW1 said she simply got any two of the four directors to sign the documents.  The fact therefore that the applicant did not sign the documents in respect of a particular transaction is not surprising and throws no light upon whether or not he had been present at the board meeting which initiated the bogus transaction.  The minutes of those meetings were not produced. 

43.  In any event, it seems to us to matter little that the applicant may not have attended each and every directors meeting regarding the transactions.  He was certainly involved in the vast majority of the documents created for the transactions.  It is neither here nor there that PW1 may have forgotten he was absent on a few occasions when the directors meeting regarding a particular transaction was held.

44.  It is also asserted that PW1’s evidence was contradictory as to her own attendance at directors meetings.  She had initially said she “seldom” attended them, then said she had never attended, then finally that she thought she had attended one or two times.  These are inconsistencies in her evidence arising in the course of a dozen or so questions in cross-examination.  But they are certainly not of a magnitude to significantly undermine her credibility.  Nor is it significant that in her witness statements she had not mentioned the applicant’s presence in the directors meetings.  Those statements were understandably not as detailed as her evidence which lasted some seven days and extends over 175 pages of transcript.

45.  There were said to be other inconsistencies in PW1’s evidence involving other clerical staff in LCTIH also having a role in signing some of the documentation of the 15 transactions; whether PW1 had worked, in the course of her employment with LCTIH, with FMS and where the company chops of Cheung Shing, Chung Fai and Barex were kept.

46.  Much of what is said to be inconsistencies in PW1’s evidence in this regard were not, on a proper reading of her evidence.  And where an inconsistency could be established it was trivial or immaterial.

47.  In short, there was nothing so fundamentally flawed or wrong in PW1’s testimony so as to prevent the judge from properly relying on its important parts.

48.  We might conclude this discussion of the complaints made by Mr Tibbo of PW1’s evidence by saying this.  On a number of occasions in his submissions Mr Tibbo, no doubt inadvertently, misstated aspects of the evidence of PW1 which he relied upon to further his arguments.  For example, his written submissions asserted that there was “absolutely no mention of the Applicant’s involvement” in the initiation and creation of false invoices.  This was incorrect, as any fair reading of PW1’s testimony would reveal.  On other occasions aspects of PW1’s evidence were simply taken out of context.

49.  There is, regrettably, a tendency in the prosecution of too many criminal appeals for phrases or passages of evidence to be relied upon out of context.  It is most important for the integrity of these proceedings that counsel’s submissions are grounded on properly contextual references to the evidence.

Ground 1(b) : reading of statements

50.  During cross-examination PW1 volunteered the information that she had read her witness statement the previous evening.  Her evidence in that regard had gone as follows :

“Q. … Two days ago in this court you told his Honour in answer to a question not from me but from my learned friend the Prosecutor and you said in the following words, ‘I had nothing to do with the FMS invoices.’ You told his Honour that, didn’t you?

A. Yes.

Q. You lied to his Honour, didn’t you?

A. No, not the case. As a matter of fact I refer back to my statement last night.

Q. I’m sorry.

A. At the time — at the time when I testify in court I was very nervous. I already forgot my involvement in those invoices.

Q. I’m sorry. What did you do with your statement last night?

A. Because I had given two statements previously I only read back the statement dated January 2009. I didn’t realize that those contents in my statement dated April 2008 would be…

COURT: Stop there, please.

A. … would be referred to in the — in the — in my testimony. So last night I read back my statements dated April 2008.

MR ODERBERG : In view of this evidence I would ask for us to stand down for five minutes. I need to speak seriously to my learned friend about this. I think your Honour will understand what is concerning me and what’s probably concerning my friend at this stage.

COURT ;  Yes.  Five minutes.”

51.  Following that, the evidence of PW1 resumed after the following warning was given to her by the judge :

“COURT : Yes, Miss Cheng, before we continue there’s another direction that I think I should give you that concerns the refreshing of your memory by reading your statements. Now that you have started your evidence in court the rule is that you are not allowed to refer to your previous statements by reading them without the court’s permission. Every time you think you need to refer to certain parts of your statement to refresh your memory you have to ask for permission from me. Without my permission you’re not allowed to read, you’re not supposed to read these statement in court or at home. I am not criticising you for that you have read your statement but I need to give you this direction at this state. And to make sure that no such mistake is made I think the officer in charge will ask you to give — to return the copies of the statements to him at the end of this — of today’s hearing. Do you understand?

A.      Understand.”

52.  And that was the end of the matter.  It is apparent that PW1 read her statement only once while giving evidence, she did so only as a matter of refreshing her memory, she was unaware she was not permitted to do so (otherwise she would not have volunteered this information) and she read it only in respect of a memory refreshing exercise as to two matters which were of marginal relevance to the issues in the trial, i.e. whether she had signed invoices of FMS and, as she said later in her evidence, as to when she had last received her salary from LCTIH.  One subsequent answer she gave to the effect she had given her evidence “in relation to both what was in her mind as well as what is stated in my statements”, must be accepted in that specific context.  There was no further cross-examination on that point.

53.  While the reading of her statement during cross-examination was an irregularity it was not material.  The judge, in his reasons for verdict, dealt with the matter in this way :

“309. … I am satisfied that PW1 did not know she was not supposed to read her statement after she had started to give her evidence. She was only told not to discuss her evidence with others during adjournment but not that she should not read her statements.

310.   The fact that she had inadvertently read the statements when she went through her documents to find out when she lasted received her salary does not affect my assessment of her credibility.  I have borne in mind this incident of statement reading by PW1 when I consider the reliability of her evidence.  In my judgment, the incident had little impact on the reliability of PW1’s evidence.”

54.  This complaint could not found a ground of appeal, and in context was so unmeritorious that it ought not to have been advanced. 

Ground 1(c) : Corroboration

55.  Mr Tibbo’s final complaint concerning PW1 is that her evidence should not have been accepted without corroboration.  His argument was that regardless of the provisions of section 60 of the Criminal Procedure Ordinance, “the unique circumstances of this case warranted a reminder to the effect that it would be dangerous to convict the applicant on the evidence of PW1… without testimony corroborating her version of events.”

56.  Nothing was put before us pointing to the unique circumstances said to exist, apart from the fact that the case against the applicant on Charges 1 and 2 depended on the evidence of PW1 and that aspects of her evidence were said to be unreliable.

57.  The judge was aware that the case against the applicant depended in significant measure on the evidence of PW1.  At an early stage in his reasons for verdict he warned himself of the nature of the accomplice evidence he had heard :

“300. For each of the immunized witnesses, I warn myself it is dangerous to accept their evidence without corroboration. I warn myself that each of them may have his or her own interest to serve in testifying for the prosecution under immunity. Given the voluminous evidence adduced in this case, it would not be practicable for me to recite the evidence I heard or received in great detail over and on top of what I have outlined. Suffice to say that I have considered all the evidence and submissions. In the event that I have not referred to a particular piece of evidence or submissions, it does not mean the same has escaped my attention.”

58.  The judge then proceeded to deal with PW1’s evidence in some detail and considered in particular the “drawbacks” in her evidence before accepting her as credible in her descriptions of the applicant’s role in the conspiracies the subject of Charges 1 and 2.  The judge’s analysis of her evidence was thorough and even-handed.  He was a professional jurist who was aware of the pitfalls of an accomplice witness.  We think in those circumstances his warning to himself was sufficient and was all that was required in the circumstances of the case. His eventual acceptance of PW1 as a witness of substantial truth was reasoned and cautious.  The findings of fact the judge arrived at based upon his acceptance of her evidence were entirely proper.

59.  There is no merit in the first ground.

Ground 2 : The applicant’s case

60.  Mr Tibbo complains that the judge was wrong to reject the applicant’s case as set out in his video recorded interview with the police.

61.  The primary argument of Mr Tibbo in this regard is that because the applicant’s case as set out in his interview was consistent with the evidence of PW2, PW3 and PW4 that the judge was wrong to reject the exculpatory parts of that interview.

62.  With respect, that argument completely ignores the nature of the evidence of PW2, PW3 and PW4.  Those witnesses were the “owners” or “proprietors” of Cheung Shing, Chung Fai and Barex.  They were, and it was not in issue at trial, “stooges” who were ordinary workers connected with LCTIH who simply signed documents and blank cheques at the request of Chan and Vong.

63.  Their involvement in the conspiracies the subject of Charges 1 and 2 was simply to provide the documentary basis for the frauds to take place, those documents primarily being blank cheques, bank account mandates and company minutes for their respective companies.  It was never suggested by the prosecution that they had any particular dealings with the applicant.  The fact that they did not does not in any way assist the applicant so far as his case, as set out in his interview, was concerned.

64.  We might add that in respect of Charges 1 and 2, the applicant cannot complain that the judge attached too little weight to the exculpatory parts of his record of interview.  His case was effectively a denial of any criminal intent and an assertion that he simply signed documents without giving them great thought or checking the accuracy of their contents.  Those assertions of the applicant were unable to be tested by cross-examination and remained as bare denials. 

65.  In any event, the judge gave reasons for rejecting the applicant’s denials of criminal knowledge. Primarily they were that the applicant, on occasions when he signed bogus invoices to confirm the delivery of machinery, could have himself checked that information, or had someone else do so; that given his genuine and fraudulent involvement with LCTIH invoice facilities with BII, his assertions in his interview that he was not familiar with BII rang hollow and finally that his knowledge of LCTIH’s financial difficulties would have given him good reason to check that the deliveries of the expensive equipment particularised in the bogus invoices had taken place.

66.  There is no merit in this ground.

Ground 3 : PW2’s involvement

67.  PW2, PW3 and PW4 were, as we have said, workers within the LCTIH group who became directors and proprietors of the “bogus” companies, Cheung Shing, Chung Fai and Barex.  They were, as we say, categorised by the prosecution as “stooges” and opened bank accounts for those companies and signed cheques in blank on the instructions of PW1.  All gave evidence under immunity.  The judge found each of them to be a reliable witness.

68.  Mr Tibbo complains that the judge found that PW2 was knowingly involved in the conspiracies the subject of Charges 1 and 2.  He says that was inconsistent with the absence of any such finding by the judge in respect of PW3 and PW4 whose evidence was broadly similar to that of PW2.

69.  The complained of inconsistency relates to the following paragraphs of the reasons for verdict :

“351. From the evidence for Charge 1, I am satisfied that Chan, Vong, PW1, PW2 and D2 had conspired to defraud BII by dishonestly making applications with the use of false documents to BII for granting of invoice financing loan in favour of Cheung Shing, Chung Fai and Barex, and causing and permitting payments to be made to these three companies when there were no underlying commercial transactions relating to the said invoice financing loan.

352.   From the evidence for Charge 2, I am satisfied that Chan, Vong, PW1, PW2 and D2 had conspired to defraud Jian Sing by dishonestly making applications with the use of false documents to Jian Sing for granting of invoice financing loan in favour of Cheung Shing and Chung Fai and causing and permitting payments to be made to these two companies when there were no underlying commercial transactions relating to the said invoice financing loan.”

70.  The plain and simple explanation for the “inconsistency” is that in those paragraphs the judge was setting out his findings in the same formal terms and with reference to the same individuals referred to in the 1^st and 2^nd charges as co-conspirators.  He did not mention PW3 or PW4 simply because they were not specifically named in those charges as co-conspirators and it was unnecessary for the judge to make a finding in regard to them.

71.  This ground is devoid of any merit.

Ground 4 : Incorrect findings of fact

72.  Mr Tibbo complains of a number of findings of fact made by the judge.  The argument presented to us was that these findings were made in error and rendered the convictions on Charges 1 and 2 unsafe.

73.  It was said that there was no support for the judge’s findings that the applicant had ever been a director or shareholder of a group subsidiary Luen Yip Engineering Company. That is wrong.  PW1 at the commencement of her evidence‑in‑chief had been questioned about a number of companies.  One was Luen Yip Engineering Company. She described the directors and shareholders as including the applicant.

74.  It was said the judge was in error in finding the applicant to have been present at directors meetings when the dates placed on the application documents for invoice financing were often dates upon which the applicant was not in Hong Kong.  We have already dealt with this matter in the course of considering the 1^st ground, and it is sufficient to say here that it was PW1’s evidence that the dates on at least the invoices were fabricated to create a more convincing period between the invoice date and the application.

75.  Assuming the date of the actual drawdown requests provide a greater degree of accuracy there were only five occasions when the applicant was absent on the date of the drawdown request, and on one of those occasions he left the day the request was dated.

76.  In any event, as we have said, the fact the applicant was on occasion absent from Hong Kong when the documents for some of the 15 transactions were prepared is a trivial matter.  It was never the prosecution’s case that the applicant was personally involved in each particular transaction.

77.  A further complaint made of the judge is of his finding that the applicant, because he spoke English, was able to assist PW1 in her creation of the bogus invoices.  The finding complained of is the judge’s statement in his reasons for verdict that “Because of his professional qualifications [the applicant] was able to provide PW1 with details of the goods in English”.  Mr Tibbo complains that there was “no evidence adduced by the prosecution showing the applicant had the academic qualification or practical experience and capability to provide any instructions in specifying or providing details for machinery”.

78.  The argument misses the point.  The judge was not referring to the applicant’s expertise in machinery specifications.  He was plainly referring to that part of PW1’s evidence which went as follows :

“A. It can be put that way. Take this page 225 as an example. The contents therein relate…

…

A. … relates to the construction material. I’m not familiar with the construction materials. Those names of the materials, the price therein were provided by the defendant. Either Mr Mak or defendant would give me the content of the invoice for me to prepare. Mr Mak and the defendant would tell me that these materials were the construction site that mostly used, and they cost a lot of money.

Q. Miss Cheng, even now, even now, this late in the day, you’re saying it’s in respect of the first one, it’s Mr Mak or it’s the defendant who gave you the information.

A. Yes, because this information is in English and the material was to be used in the construction site, they would be more familiar with this kind of information.”

The judge’s finding of fact was based properly on the evidence.

79.  Other more minor complaints are made of specific findings of the judge.  Those complaints in large part are a repetition of Mr Tibbo’s argument that the judge was wrong to accept PW1 as a reliable witness or on other occasions are based on a misconception either of the nature of the judge’s findings, or of the evidence given in support of those findings.

80.  There is no merit in this ground.

CHARGE 3

Ground 5 : Insufficient evidence

81.  Another immunised witness, PW7, gave evidence against the applicant in respect of the offence the subject of this charge.  We have briefly outlined his role in setting out the facts of the offence at the beginning of this judgment. 

82.  The judge decided he would place no weight on the evidence of PW7, saying :

“318. … but I do not feel comfortable as a fact-finder to attach any weight to the evidence of PW7 inasmuch as PW7’s evidence is uncorroborated.”

83.  Following that however the judge was of the view that even in the absence of PW7’s evidence there was sufficient other evidence to warrant a conviction.  He found in that regard that :

“362. … From the evidence, ignoring the evidence of PW7, there is sufficient evidence for me to draw the only inference that D2 knew there was an arrangement to prepare false paperwork for the acquisitions. Given the consideration involved in the acquisitions, those who were in the agreement must have realised that those false paperworks would be required for an accounting purpose.”

84.  The point sought to be made by Mr Tibbo under this ground is that the other evidence was insufficient safely to found a conviction.  He argues that in the absence of the evidence of PW7 there remained only the documentary evidence signed by the applicant consisting of minutes of directors meetings relating to the transaction and purchase and debt assignment documents in respect of the shares of both Gonhaven and Hardmeadow.  The fact that for the Gonhaven transaction the applicant went with D1, PW9 and Vong to the office of the law firm where PW9, then a proprietor of a construction company to which Chan owned money, signed documents which transferred the company Gonhaven (of which he was stated to be the sole shareholder and director, but with which he had never had anything to do) to Mictech a company of which the applicant was a director, is said by Mr Tibbo to not take the matter further.

85.  It was common ground that the consideration given for the sale of Hardmeadow and Gonhaven was $58 million of receivables said to be owed to LCT and FMS (two subsidiaries of LCTIH).  It was the prosecution case that these debts were worthless and unrecoverable at that time and that the applicant was aware of that and therefore knew when he signed the transfer documentation that the consideration for the transactions was bogus.

86.  It is true that once the evidence of PW7 was rejected by the judge that the prosecution lost the primary witness concerning the 3^rd charged offence.  PW7’s evidence was important to two aspects of this offence, the background and motive for the offence and the nuts and bolts of the creation of the websites and the purchase of the two companies which were to own and sell them i.e. Gonhaven and Hardmeadow.  His evidence in large part was concerned with the applicant’s knowledge of and involvement in these matters.

87.  But there was other evidence which implicated the applicant in the offence.  The judge in his reasons for verdict dealt with the evidence which remained after he had rejected the evidence of PW7 and his conclusions from that evidence were as follows :

“359. For the website transactions, D2 went with PW9 to the solicitors’ firm in Central where he signed documents. PW9 and D2 did not talk to each other. While PW9 was asked by Chan to sign the documents in question, it is interesting to see why Chan would arrange PW9 to meet up with D1 and D2 in Central. If D2 was in the dark as to the bogus nature of the consideration, would Chan arrange D2 to accompany PW9 to go to the solicitor firm together? Was there a risk D2 would talk to PW9 or that he would try to find out more about the transactions by reading the documents or by asking the lawyer present?

360. All these point to the inference that D2 was in the know. He knew what was going to happen at the solicitors’ office, and that was the reason why there was no conversation between PW9 and D2, PW9 being the vendor of the two websites. PW9 is obviously an unsophisticated man. It is also inconceivable that D2, having seen PW9 and knowing PW9 was going to sell two websites to Mictech, would have no suspicion.

361. There is evidence from the admitted facts as well as evidence from PW1, which is accepted by me as true and reliable, that D2 signed deeds of indemnity in relation to the sales of Gonhaven and Hardmeadow (P155 and 174) as well as the deeds of assignments to Mictech (P156 and 166) and LCT (P159, 161, 163, 164, 169, 170, 172 and 173).

362.   D2 also signed minutes of the board meetings related to the acquisitions and assignments.  Given the role of D2 in LCT and LCTIHL, the only inference is that he must be aware of the contents, nature and effect of the documents that he signed. …”

88.  The judge also took into account that in the applicant’s interview with the police he had admitted that he was aware that the asset of $58 million worth of receivables to be used as consideration for Gonhaven and Hardmeadow was worthless.  That admission was in these terms :

“A: And who suggested using those account receivable as the consideration for the purchase of website, and who was the ‘ting dim’ (transliteration)?

B: Really don’t remember which one, but everyone of us knew that, for these account, even if I didn’t take (them) away, (they) would still be equivalent to zero, [A: Yes.] it’s because when the accountant came in the following year, would say—in the coming year, this could no longer be taken as receivable, [A: Mm.] would be taken as bad debt, [A: Yes.] taken as zero, that’s it.”

89.  The judge was entitled to accept this admission though he had placed no weight on other exculpatory parts of the applicant’s interview.

90.  It is therefore plain from the evidence before the judge that the applicant knew that the consideration paid for the shares of Hardmeadow and Gonhaven was worthless. That conclusion is magnified when it is realised that some of the debtors were, given the applicant’s role in the transactions the subject of Charges 1 and 2, known by him to be bogus companies.  As the judge said it must follow that the applicant was aware that something dishonest was transpiring.  Added to that was the applicant’s knowledge that PW9, whom he knew, was not the sort of person who would be involved in, via a BVI company Gonhaven, the ownership of a $20 million web-site.  We do not think the fact that PW10 (who performed the same role in respect of Hardmeadow as had PW9 with Gonhaven) did not know the applicant lessens the strength of this point. Perhaps the final brick in this wall of proof is PW9’s evidence that at the solicitors’ firm D1, the applicant and Vong were present (apart from a lawyer) and that the applicant had reassured him, PW9, that there would be no problems and that he should go ahead and sign the documents.

91.  We were concerned at one stage that proof that the applicant knew that the transaction was bogus was not necessarily sufficient to prove he had conspired, in the terms of Charge 3, to “falsify the accounts or records or documents made or required for an accounting purpose”.

92.  In that regard after considerable thought, we accept the argument of Mr Tam for the respondent that, given the nature of the documents signed by the applicant for the purposes of that which he must have known to be a bogus transaction, it follows that the applicant must have known that the value attached to the assets of Gonhaven and Hardmeadow would be a false value and that the accounting records of the group of companies and therefore of LCTIH would reflect that falsity.

93.  As the judge said, and which is worth repeating in this context :

“362. … From the evidence, ignoring the evidence of PW7, there is sufficient evidence for me to draw the only inference that D2 knew there was an arrangement to prepare false paperwork for the acquisitions. Given the consideration involved in the acquisitions, those who were in the agreement must have realised that those false paperworks would be required for an accounting purpose.”

We are satisfied from the nature of the documents signed by the applicant and his dealings with PW9 in respect of Gonhaven that the judge was entitled to arrive at that conclusion.

94.  In the course of arguing this ground Mr Tibbo complained of certain aspects of the evidence of PW9 and PW10 (who signed as the shareholders of Gonhaven and Hardmeadow respectively in the “sale” transactions) and of the evidence of PW11 to PW16 who were the proprietors of the companies (some genuine and some simply shell companies) which were the alleged debtors making up the total receivables of $58 million.

95.  Mr Tibbo’s submission in this regard categorised their evidence as “unreliable and/or incredible, being so flawed vague and/or contradictory such that the learned judge erred by relying upon it to found the conviction”. Nothing could be further from the truth.  In large part Mr Tibbo’s criticisms are based on a taking out of context of the witnesses’ evidence or a sheer misunderstanding of what was said.  He makes particular criticism of PW9, but upon a reading of that witness’s evidence it is clear that the witness, while a little irritated on occasion, was candid and as consistent as may be expected of an honest witness.  The same, with immaterial differences, applies to the vast majority of the remaining witnesses.  The judge was entitled to accept their evidence to the extent that he did.  Their evidence established that the very large part of the $58 million in receivables were bogus debts.

GROUND 6

96.  The final ground is to the effect that the judge was wrong to reject the applicant’s claim, as set out in his interview with the police, that he did not know the transactions concerning the transfer of Gonhaven and Hardmeadow were bogus.  He admitted knowing the $58 million of debts were unrecoverable and in the interview said also he had tried unsuccessfully to “dun” for the debts.  He admitted going with PW9 to sign the Gonhaven documents.

97.  The judge in his reasons, said :

“357. D2 in his VIR admitted that he knew the debts were worth nothing. He even said he had dunned for them, but he could not get the debtors to pay.

358.   I agree with Mr Acton-Bond that inasmuch as a great majority of those debts did not exist, D2 was not telling the truth when he said he had dunned for the debts and the debts were worth nothing.  I do not think D2, who knew PW9 for some time, could reasonably think PW9 was someone who was capable of setting up the websites.”

98.  He had earlier said in considering those aspects of the applicant’s interview which set out his defence (again one of ignorance) to Charges 1 and 2 that :

“341. I have considered the VIR of D2 carefully. I do not think the explanations given by D2 are credible. For the signatures on the invoice, D2 sought to explain that he signed on an invoice to confirm the goods in question had been received on a construction site. I agree with Mr Acton-Bond that for the bogus invoices in question, the subject matters of Charge 1 and 2, there were no goods delivered and D2 could not have confirmed that the goods had been delivered. If he had gone to the site, he would have noticed that no goods were delivered under the invoices. If he relied on others to do the inspection, one would expect those who carried out inspections on the construction site would sign to acknowledge receipt of the goods. We do not see such acknowledgement on the invoices.”

99.  Bearing in mind that the applicant did not give evidence and that his assertions of ignorance of the true nature of the Gonhaven and Hardmeadow transactions could not be tested in cross-examination, the judge had given sufficient reason for finding the applicant had not told the truth in his interview.  He was entitled to reject the exculpatory parts as being of no weight.

100.  There is no merit to this final ground and for the reasons set out above the application is dismissed.