HKSAR v. CHEUNG HON KEUNG

HCMA679/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.679 OF 2003

(On Appeal From NKCC 1494 Of 2003)

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J U D G M E N T

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1. The appellant was convicted on 12 June 2003 of two charges of fraud and was sentenced on 2 July 2003 to a community service order for 120 hours. The appellant now appeals both of those convictions.

2. The appellant was an officer with the Correctional Services Department at the time the facts giving rise to the charges arose. Each charge relates to an application by the appellant for a loan from a finance company. The first loan was sought on 29 March 2000 and the second loan was sought on 5 July 2000. It was alleged in respect of each of those applications that the appellant falsely represented his indebtedness at the time of the application for each loan and falsely represented the monthly payments that he was obliged to pay in respect of other outstanding loans.

3. On 17 August 2000, the appellant petitioned for his own bankruptcy, having secured/non-secured debts totalling $2,219,083.00 and assets of $666,487.00 giving him a net deficit position of $1,552,596.00.

4. In respect of the first count, the loan was sought from Shun Sing Finance Company Limited. The appellant was an old client of that company, and previously had loans from it. He was known to them as a civil servant. On 23 March 2000, PW1, a clerk of that company testified that she dealt with an application for a personal loan from the appellant. She said that she obtained all the information in respect of the application from the appellant and told him that all the information he gave had to be true and correct. She said she told him to list his debts and his payments, and when asked if there were debts other than those disclosed in the application form, he replied that there were none. He was only required to declare personal loans and not credit card payments or debts. It was suggested to this witness that the company had solicited the appellant to come in and sign up for what was in effect a pre-approved loan. This was denied.

5. PW2 was a manager of Shun Sing who made the decision to approve the loan for the appellant. The basis upon which she approved the loan was that if the total amount of repayments of debts owed by the appellant in respect of personal loans did not exceed 70% of his salary, then she would approve the loan. She said if she knew the appellant at that time had, as he did, a liability to monthly payments of $34,569.32 and a debt of $387,836.20 with a monthly salary of $28,205.00, she would not have approved the loan.

6. In respect of the second charge which related to JCG Finance Company Limited, there were two witnesses. The first, PW3, was a customer officer, he knew the appellant and he knew that he was employed by the Hong Kong government. The appellant was an old customer. At the time of the application he had an existing debt with the company. The loan applied for by the appellant was to in part satisfy the outstanding balance of the previous loan and leave him with a cash balance. PW3 testified that he asked the appellant if he had any debts outstanding in respect of either loans or credit cards not mentioned on the application form to which the appellant replied that all the information was contained in his passbook and there were no others. The passbook only revealed the repayments set out in the application form. At that time the appellant was liable to make repayments of $86,836.80 per month on loans owed by him and he had an outstanding loans balance of $1,276,756.10. Had this been known to the company the loan would not have been granted. At that time the salary of the appellant was declared by him to be $29,105.

7. The fourth and last witness who testified was the branch manager of JCG Finance Company Limited who was given the completed application form of the appellant by PW3. Again, the yardstick for approving a loan was that repayment of the totality of loans should not exceed 70% of the salary. On the face of the application form signed by the appellant in respect of this loan, the payment amount was only 40% of his salary. The loan was approved, the existing loan was expunged and a cash balance was given to the appellant.

8. That was the case for the prosecution.

9. The appellant elected not to give evidence nor to call any witnesses.

10. The sole ground of appeal in respect of each of the charges was that they were unsafe and unsatisfactory for a number of reasons. Firstly, that the magistrate erred in finding that the appellant had been deliberate in his omission and practised a deceit which he knew full well had operated on the minds of those approving the loan, that he failed to consider whether, inter alia, in view of their long-term relationship and his status of a civil servant with steady employment and previous loan repayment history, the company did not care about his outstanding debts and failed to make adequate enquiry of him and were thereby not deceived. There was clear evidence before the magistrate that in respect of each charge, the appellant was asked to reveal all loans outstanding by him and the repayments he was due to make in respect of those loans.

11. In respect of the first charge, this passage appears in the evidence of PW1 :

"	Q.	Cheung Hon-keung had disclosed to you that there were three loans. Had you ever asked Cheung Hon-keung whether he had other loans? I mean personal loan.
	A.	I asked him.
	Q.	Did Cheung Hon-keung make any answer?
	A.	Yes.
	Q.	What did he say?
	A.	He said, 'That's all.'"

PW1 went on to say that on two occasions in her evidence that she had asked the appellant whether the particulars written on the application form were correct, and he had on each occasion answered "yes".

12. In respect of the second charge, PW3 gave this evidence :

"	Q.	What debts had Cheung Hon-keung tell you that he had such outstanding payment, not yet settled?
	A.	I don't understand.
	Q.	What did Cheung Hon-keung tell you as to the debt of him?
	A.	The information shown in his passbook.
	Q.	So that you had written on the application form for Cheung Hon-keung?
	A.	Right.
	Q.	Had you ever asked Cheung Hon-keung was there any other debts apart from the loan as written on the application form?
	A.	Yes, I did ask.
	Q.	Had you ever told -- had you ever asked Cheung Hon-keung whether he had credit card loan other than those loan declared in the application form?
	A.	Yes. I did.
	Q.	What did Cheung Hon-keung tell you with regard to other loan?
	A.	He said all the information was shown in his passbook, there were no others."

13. It is clear from this evidence that in respect of both applications, the company from whom the loan was sought was interested in ascertaining the current indebtedness of the appellant at the time of his application and based the decision as to whether to approve the loan upon the answers that he gave. It is also clear that his long-term relationship with each of those firms and the fact that he was a civil servant would have assisted him in his application and would have made his dealings with the companies easier. These conditions however do not detract from the fact that the loans would clearly not have been granted on the basis of his employment nor on his long association with those companies.

14. The magistrate considered fully the evidence before him that above all else the credit worthiness of the appellant had to be established in each case before a loan was made and had the true circumstances of his financial position been made known to the companies he would not have been granted either loan. In each charge the magistrate also had before him clear evidence that the appellant failed to reveal, when asked, loans other than those referred to in the application form and the magistrate found this to be a deliberate omission and evidence of the practice of a deceit which he knew full well would operate on the minds of those approving the loan. The appellant not only intended to deceive but the loan company in each instance was deceived. I cannot criticize that statement. It is consistent with the evidence and it is a proper and appropriate finding by the magistrate.

15. The second matter which Ms Panesar, for the appellant, argues makes the conviction unsafe and unsatisfactory was that the magistrate failed to consider at the material time that the appellant had no intention to defraud the companies and failed to take into account evidence that the appellant had paid 50% of the instalments to Shun Sing Finance Company Limited and one repayment to JCG Finance Company Limited and erred in finding there was no evidence of his intention to repay the two companies and/or to cause them economic loss or expose them to such a risk.

16. The magistrate said this in his findings :

" This omission on the part of the appellant to declare the complete picture of his liabilities, and the fact that his actual monthly loan repayment liabilities well exceeded his monthly income at the time of the application, leads me to the irresistible inference that the appellant had been deliberate in his omission and practised a deceit which he knew full well had operated on the minds of those approving the loan. Because of the true size of the loan repayment per month (and the full outstanding loan due), there was little prospect that the appellant would be able to repay the loans and it was obvious that there would be substantial risk of prejudice to the lending institutions ie. Shun Shing and JCG. (HKSAR v. TAM Sze-yan Cynthia - HCMA 1003/2002)."

17. The intention of the appellant which is relevant to each charge is what he intended at the time when he made the declaration to each of the companies. That intention is to be determined by what he did and said at the time of the making of the application and his general circumstances as revealed then and afterwards as his financial circumstances over the period when he applied for the loan and when he was due to repay it.

18. Whilst the magistrate did not specifically mention the point, he was entitled to consider that the only income available to the appellant was that set out in the application form and that he was obliged to pay in respect of all his outstanding debts a greater sum of money than he was earning each month by some thousands of dollars. It is an irresistible inference that his deceit in not revealing the other outstanding loans must have been deliberate. The only point in the concealment was to operate on the minds of those approving the loan to put himself in what appeared to be a far better financial position than existed in reality. It is also an irresistible inference that given his debt position and given his income, there was little prospect that he would be able to repay the whole of the loans and a substantial risk of prejudice to each of the companies existed at the time of the making of the application. It is true that some repayments were made on the loans : about 50% in respect of the first charge and one payment in respect of the second, but this does not help the appellant as an overall view of his financial position from the time of the taking of the first loan showed he would never have been able to repay in full either of the two loans that he applied for.

19. The third matter raised was that the magistrate failed to evaluate adequately the evidence of PW1 to PW4 in determining whether they were honest or credible witnesses. The magistrate set out in considerable detail the evidence of each of those four witnesses and I have been taken through much of the transcript during the course of this appeal. I have found nothing to indicate that the magistrate's précis of the evidence of these four witnesses anything but accurate. In respect of those witnesses he said this :

" I found the prosecution witnesses to be honest and believable and I accept what they say. Throughout my whole consideration of the evidence I kept in mind the fact that the appellant has a clear record, and everything that flows from that."

There was little more the magistrate could have said. He set out the evidence of the witnesses, he evaluated it, he found them to be truthful witnesses whom he could believe.

20. The last matter raised by Ms Panesar was that the magistrate erred in disallowing cross-examination aimed at establishing the attitude and practices of JCG Finance Company Limited in determining of loan applications. This related to cross-examination relating to the practices of that company in respect of applications made by Filipino domestic servants. The magistrate clearly disallowed the line on the basis that it related to a category of persons who were in a different position from the appellant and that those practices, even if established, would not determine the policy in respect of this appellant. There is nothing in this ground.

21. I am satisfied, having considered all of the arguments and the Statement of Findings of the magistrate and having considered the transcript of the trial below, that the convictions are both safe and satisfactory. The appeal against conviction in this matter is dismissed.