HKSAR v. HO CHUN NGOK

DCCC 309/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 309 OF 2014

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REASONS FOR VERDICT

1. The defendant pleads not guilty to five charges of fraud, contrary to section 16A of the Theft Ordinance, Chapter 210.

Fraud

2. The offence of fraud is committed where any person by any deceit and with intent to defraud induces another person to commit an act or make an omission, which results either in benefit to any person other than the person induced or in prejudice or a substantial risk of prejudice to any other person including the person induced. 

Introduction

3. Between 2002 and 2008 Stone Advance Technology Limited (“Stone”) acted as a distributor of electronic semi-conductor devices for Renesas Electronics Hong Kong Limited (“Renesas”).  Stone would place orders with Renesas and then onward sell the products to the end customer.  The defendant was the general manager of Stone and responsible for handling the orders placed with Renesas.  

4. In late 2008 Stone ceased dealing in electronic semi-conductors and placed the last order with Renesas in October of that year.  The defendant was told by Stone that he could no longer place any orders on behalf of Stone with Renesas. The defendant however wished to continue the business in the name of his own company Wisetone Advance Technology Limited (“Wisetone”), which he had established in 2003, however Renesas rejected Wisetone taking over from Stone.

5. The charges refer to five orders placed by the defendant between April and October 2010.  The prosecution case in summary is that the defendant practised a deceit with intent to defraud Renesas by falsely representing that these orders were placed by Stone thereby inducing Renesas to part with and deliver the semi-conductor electronic products particularised in each charge. 

6. The defence case in summary is that at no time was the defendant ever told that Renesas rejected the application for Wisetone to take over from Stone.  Quite the contrary the defence say that Mr Samuel Liu, the sales manager of Renesas, told the defendant he could use the name of Stone.  The defendant therefore did not practise a deceit with intent to defraud whereby Renesas were induced to part with and deliver the semi-conductor electronic products.

Deceit

7. "Deceit" means any deceit (whether deliberate or reckless) by words or conduct (whether by any act or omission) as to fact or as to law, including a deceitrelating to the past, the present or the future and a deceit as to the intentions of the person practising the deceit or of any other person.

False representation

8. The defendant having been told not to place orders with Renesas the representation that the five orders were placed by Stone was false.  The main issue is whether the defendant thereby practised a deceit with intent to defraud Renesas to part with and deliver the semi-conductor electronic products.

Evidence

9. With this in mind I turn to consider the evidence.  The prosecution called one witness Samuel Liu (PW1) and tendered for cross-examination Leung Tao Chiu (PW2) and Stella Wong (PW3), who both worked for Renesas and whose statements were read pursuant to section 65B of the Criminal Procedure Ordinance, Chapter 221 (exhibits P14 & P15).  Also read was the statement of Ho Ka Keung (exhibit P13) relating to the delivery of the goods subject of the five orders.

10. Evidence has been admitted pursuant to section 65C of the Criminal Procedure Ordinance, (exhibit P16), including the employment of the defendant with Stone; the establishment of Wisetone; and that after Stone ceased dealing in electronic semi-conductors in late 2008 the defendant was told he could no longer place orders with Renesas.     

11. The defendant elected to give evidence.  Two witnesses were called on his behalf, namely, Wang Si Zhong (DW1) and Ruth Lai (DW2) who both worked in Stone and Wisetone.  Also admitted in evidence are two video interviews (exhibits P11 & P12).  In reaching my verdict I have considered the inculpatory and exculpatory parts of both interviews in accordance with the principles in R v Sharp (1988) 1 WLR 7.    

12. Also admitted in evidence is that the defendant has a clear record (see paragraph 5 of the admitted facts, exhibit P16).  I direct myself in accordance with the decision in HKSAR v Tang Siu Man [1997-98] 1 HKCFAR 107. 

13. I remind myself of the burden and standard of proof and that the burden is on the prosecution throughout.  The defendant has to prove nothing.  I direct myself that before I can convict I must be sure of the guilt of the defendant on each charge, each charge being considered separately.  On the other hand if the court thinks that the defence evidence pointing to innocence is true or may be true, it would follow that the defence has raised sufficient doubt in the prosecution case and the defendant entitled to be acquitted.

14. I remind myself that when drawing inferences from the evidence the inference must be a compelling one and the only one that no reasonable man could fail to draw from the direct facts proved.

15. In considering reliability and credibility I remind myself that the inherent probabilities and improbabilities provide a better yardstick than reliance upon demeanour of witnesses.  The evidence can conveniently be considered in three parts; the application by Wisetone to be the agent of Renesas; the rejection of that application; and the five orders subject of the charges.

Application by Wisetone to be the agent of Renesas

16. The last order placed by Stone with Renesas for semi-conductor electronic products was in October 2008 at which time the defendant was told he could no longer place purchase orders on behalf of Stone (see paragraph 5 of the admitted facts).  By letter dated 18 December 2008 (exhibit P4) the defendant wrote notifying Renesas that with effect from 1 January 2009 the business of Stone will be converted to Wisetone.

17. The defendant testified that the letter was sent at the request of Samuel Liu.  At the end of October or the beginning of November 2008 when Samuel Liu paid a visit to the end customer Kelon in Shunde on the Mainland the defendant informed him of the decision of Stone to cease dealing in electronic semi-conductors.  The defendant said he would like to use his own company Wisetone to continue the business which change was supported by the end customers.

18. Samuel Liu told the defendant that as he knew the customers very well and had a long term relationship with the customers he was sure the business would be handled by Wisetone and that there would probably be no problem in changing the name from Stone to Wisetone.  Samuel Liu then requested the defendant to send him the business registration and certificate of incorporation of Wisetone. 

19. After emailing this information the defendant received a phone call from Samuel Liu requesting him to send a letter about the change showing that there was a relationship between Stone and Wisetone.  The defendant then sent the letter dated 18 December 2008.

20. Another visit to the customer in Shunde followed when Samuel Liu informed the defendant there might be some difficulties in changing the name. Samuel Liu again assured the defendant that Wisetone would be able to deal with the customers and that an application would be made for Wisetone to be the new agent.  In the meantime Samuel Liu confirmed that the name of Stone could be used.  This evidence was supported by the testimony of the defence witness Wang Si Zhong (DW1).   

21. That the defendant was told there was problems with the change of name and that an application would be made for Wisetone to be the new agent is consistent with the evidence of Leung Tao Chiu (PW2), who was the Senior Manager of the Finance Department of Renesas in 2008.  In the afternoon of the 18 December Mr Leung received the letter notifying Renesas of the change from Stone to Wisetone together with a copy of the business registration certificate and certificate of incorporation of Wisetone. 

22. Mr Leung was suspicious of the letter and notified the sales department of Renesas, including Samuel Liu, by email of his suspicions.  In the email Mr Leung stated this was not a change of name and that Wisetone would have to go through registration procedures for new clients and sign a new distributor agreement.  Mr Leung refused the request to change the name and instructed his subordinates to do a credit check on Wisetone (see witness statement, exhibit P14). 

23. In cross-examination Samuel Liu said that in a meeting in Shunde at the end of October/beginning of November 2008 the defendant probably told him about Stone ceasing business of electronic semi-conductors.  Samuel Liu however had forgotten whether the defendant told him that the end customers were happy to deal with Wisetone.  Samuel Liu said that it was possible that he told the defendant to draft the letter dated 18 December 2008 but did not remember if he advised the defendant to show some relationship between Stone and Wisetone.  Samuel Liu also said that he agreed to the suggestion that Wisetone take over the business of Stone but could not remember whether he told the defendant he could continue to use the name of Stone while the approval process was on going.

24. Notwithstanding these events are over six years ago I was not impressed with the evidence of Samuel Liu.  Whilst the finer details of what happened maybe forgotten one would expect Samuel Liu to remember significant matters, including whether he told the defendant how to draft the letter for a change of name and whether or not he told the defendant he can continue to use the name of Stone. 

25. The maintaining of a good relationship with end customers so as to ensure the smooth continuation of the business was clearly beneficial to everyone.  In these circumstances I find it is not inherently improbable that Samuel Liu would give an assurance to the defendant that Wisetone would be able to deal with the customers and that the defendant could continue the business pending approval of the change. I therefore proceed on the basis that the defendant was told or led to believe he could continue using the name of Stone while the approval process was pending. 

Rejection by Renesas of the application by Wistone to be the new agent

26. A new client registration application from Wisetone was submitted by the sales department of Renesas and received by Mr Leung on the 4 February 2009.  This application has not been produced to court.  Mr Leung rejected the application the same day and again notified the sales department, including Samuel Liu, by email of the rejection.  The email has been produced (exhibit P14C) and lists eight reasons for rejecting the application.

27. The evidence of Samuel Liu as to notification of the rejection to the defendant is somewhat unsatisfactory.  In evidence-in-chief Samuel Liu said he communicated this rejection to the defendant but gave no details as to how this was communicated.  In cross-examination Samuel Liu said he believed he sent an email to the defendant informing him of the rejection but could no longer find this email.   

28. The defendant says he was never notified.  I have no hesitation in rejecting this evidence.  Notwithstanding the unsatisfactory nature of Samuel Liu’s evidence I am nevertheless satisfied the defendant was informed of the rejection.  This in my view is very clear from the first video interview where the defendant states that Renesas did not accept Wisetone placing orders with them (see in particular counters 150-160 and 445-456).

29. In answer to the court the defendant says this was said in relation to the changing of the name from Stone to Wisetone.  I have no hesitation in rejecting this explanation.  In the video interview the defendant says Renesas did not accept Wisetone placing orders with them because their registered capital was too small, which is the first reason set out in the email (exhibit P14C) rejecting the application of Wisetone.  Furthermore I find inherently improbable that having been told by Mr Leung of the rejection Samuel Liu would not communicate this to the defendant.  I am therefore satisfied the defendant was told about the rejection on or about 4 February 2009.

The five orders

30. Notwithstanding the rejection further orders were placed by the defendant using the name Stone.  In the first interview the defendant says he used the name Stone because the people of Renesas suggested he did so because Wisetone could not open a new account (see counter 162).  Samuel Liu on the other hand testified that he regarded the five orders as being placed by Stone and that he would not have approved the orders had he known they were not placed by Stone. 

31. The five orders were placed between April and October 2010 some 14-20 months after the rejection of the application.  These were not however the only orders placed since the rejection.  Both in-chief and in cross-examination Samuel Liu said that the orders with Stone continued until September 2010 at which time Renesas no longer accepted any more purchase orders from Stone.  During this period Samuel Liu said he thought the orders were placed on a monthly basis. 

32. The prosecution case is that after the defendant was told in late 2008 he could no longer place purchase orders with Renesas all orders placed in the name of Stone were fraudulentalbeit all orders are not the subject of charges including part of one of the five orders SO-10/0901 relating to 20,000 goods which were delivered in November 2010 under invoice no: USDI20L3452 (see the witness statement of Stella Wong, exhibit P15).

33. Having been told in October/November 2008 that Stone were no longer carrying on the business and Renesas having rejected the application of Wisetone in February 2009 Samuel Liu when approving subsequent orders placed in the name of Stone seemingly did nothing to check whether the orders were actually placed by Stone.  I find inherently improbable that for a period of over a year Renesas and in particular Samuel Liu did not know that the orders were actually placed by Wisetone. 

34. There is documentary evidence supportive of the fact Samuel Liu and others in Renesas knew that it was Wisetone who were placing the orders. Emails (exhibits D1, D3-D4 & D6-D7) covering the period August to November 2010 i.e. prior to delivery in December 2010 of the goods subject of the charges, all show email addresses of Wisetone indicating that Wisetone and not Stone were handling the orders placed with Renesas.  Emails D8 & D9 also with email addresses of Wisetone relate to the non payment of the five orders subject of the charges.

35. In cross-examination Samuel Liu said that he did not find the use of Wisetone in the emails strange because many clients use different emails.  I do not find this explanation credible, in particular considering that Renesas had rejected the application of Wisetone and the defendant had told Samuel Liu that Stone were no longer carrying on the semi-conductor business.  I also find that it is highly unlikely there would be communication using email addresses of Wisetone if the defendant did not want Renesas to know the orders were placed by Wisetone.

36. Financial documents (exhibits D2, & D10-D14) show Wisetone making payments between April 2009 and August 2010.  Payment made by Wisetone in October 2010 is also indicated in exhibit D5.  Whilst subsequent payment would not, as Mr Necholas correctly submits, render an unlawful act into a lawful one (see paragraph 6 of Mr Necholas’s written submission) the fact payment was made in the name of Wisetone is indicative that Wisetone placed the orders and that Renesas were aware of this. 

37. In considering whether Renesas were aware that the orders were actually placed by Wisetone I have not overlooked the defendant issued the removal notice (exhibit P5) in which he falsely stated the office and warehouse of Stone would be moved. The defendant testified that when Wisetone moved office he telephoned Samuel Liu and asked whether the removal notice should be in the name of Wisetone or Stone.  Samuel Liu told the defendant that because the account of Stone was being used the notice had to be on Stone’s letterhead. 

38. In cross-examination when put that he advised the defendant to issue the notice under Stone’s letterhead otherwise the logistics department could not make the change in their system Samuel Liu replied “Yes”.  In answer to the court Samuel Liu explained he answered yes because this was the usual practice where there was a change of address and that it was possible he did tell the defendant what to do but was not very sure.  Again notwithstanding the notice was sent over four years ago in the circumstances of the case this is a matter I would expect Samuel Liu to have remembered.

39.  Although grave suspicion attaches to the defendant by the fact of submitting documents which were not authorized by Stone having carefully considered all the evidence I find I am left with a doubt that the defendant practised a deceit with intent to defraud Renesas and that Renesas were induced to part with and deliver the semi-conductor electronic products.  The benefit of the doubt is given to the defendant and he is acquitted of the charges.