HKSAR v. WONG CHOR WO AND ANOTHER

CACC 314/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 314 OF 2006

(ON APPEAL FROM DCCC NO. 554 of 2005)

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Dates of Hearing:  6-7 May 2008

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J U D G M E N T

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Hon Saunders J (giving the reasons for judgment of the Court):

The charges:

1.  The Applicants, seek leave to appeal against their conviction, on 19 July 2006, by Deputy District Judge Adriana Tse.

2.  The 1^st Applicant, Wong Chor-wo, faced 17 charges, and was convicted on all charges.  The charges were:

(i)      theft, contrary to s 9 Theft Ordinance, Cap 210, (counts 1-7);

(ii)     furnishing false information, contrary to s 19(1)(b) Theft Ordinance (counts 8-11);

(iii)    using false instruments, contrary to s 73 Crimes Ordinance, Cap 200, (count 12-14);

(iv)    using copies of false instruments, contrary to s 74 Crimes Ordinance, (count 15);

(v)     an officer of a company knowingly making a false statement to auditors, contrary to s 134 and 351 Companies Ordinance, Cap 32; (count 16), and

(vi)    publishing a false statement, contrary to s 21 Theft Ordinance (count 17).

The appeal relates to counts 1-15, and count 17.

3.  In simple terms the case for the prosecution against Wong Chor-wo may be summarised in this way.  Using seven cheques drawn on a wholly-owned subsidiary, Wallmark Enterprise Company Ltd, (Wallmark), of a public company, Wealthmark International (Holdings) Ltd, (Wealthmark), of which he was chairman and majority shareholder, Wong Chor-wo stole $20.8 million, (counts 1-7, the theft charges).  Subsequently, in order to cover up the theft, Wong Chor-wo used a number of false documents and supplied false information, in an attempt to justify the withdrawal of the funds from Wallmark.  The following was the case for the prosecution in respect of those charges.

4.  In the course of the preparation of the Wallmark ledger, Wong Chor-wo supplied to the accounting staff of Wallmark four false receipts purporting to come from Guangzhou Construction Co Ltd (GCCL), a non-existent mainland company, for the receipt of the sum of $20.8 million in consideration for the purchase of land and construction of a factory in Huizhou, (count 8-11, furnishing false information).

5.  In the course of the preparation of the audit of Wealthmark, Wong Chor-wo supplied the auditor with a false contract with GCCL and the four receipts, (count 12, using false instruments).  When the auditor was still not satisfied he supplied the auditor with four false subcontracts purportedly made with GCCL for construction work in Cambodia and Huizhou, (count 13, using false instruments), and false documents which had the effect of falsely increasing the purchase price of land and buildings in Cambodia, (count 14, using false instruments).

6.  Upon yet further enquiry by the auditor, who was still not satisfied, he supplied the auditor with copies of false quotations and receipts relating to construction work undertaken in Huizhou, (count 15, using copies of false instruments).

7.  When further pressed by the auditor to provide a resolution substantiating a board meeting he supplied the auditor with a false set of minutes in relation to a meeting that had not taken place, (count 16, company officer making a false statement to auditors).

8.  In the annual report of Wealthmark, the public company of which he was chairman of directors, and from whom the $20.8 million had been taken, he made false statements as to the application of that sum, those statements purporting to justify the expenditure in terms of the false documents supplied to the auditor, (count 17, publishing a false statement).

9.  Wong Chun-ping faced two charges of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to s 25(1) & (3) Organised and Serious Crimes Ordinance Cap 455, (counts 18 & 19).

10.  The evidence to substantiate these charges, as set out in the following summary, was either not in dispute, or found to be proved by the Judge, and not challenged on the appeal.  References to currency, except where indicated, are to Hong Kong dollars.

Background:

11.  Wong Chor-wo was the Chairman of Wealthmark.  He was also a director, and the authorised signatory of the bank accounts, of Wallmark, a wholly owned subsidiary of Wealthmark.  Wong Chor-wo was responsible for the overall management of both companies.  Wallmark was a business that had been operated for many years by Wong Chor-wo prior to the incorporation of Wealthmark, the inclusion of the business of Wallmark within that of Wealthmark, and the public listing of Wealthmark.

12.  Wong Chun-ping is Wong Chor-wo’s paternal cousin.  He was sole proprietor of CK Trading Company, (CKTC), which had existed since June 1995.  Wong Chor-wo had physical possession of the cheque books of both CKTC, and Wong Chun-ping’s personal bank account.

13.  Mr Eric Po (PW1, Mr Po), gave evidence under immunity.  He was an executive director of Wealthmark, and, following its public listing, Financial Controller and Company Secretary of the group of companies operated by Wong Chor-wo under the umbrella of Wealthmark, including Wallmark. 

14.  Ms Astor Cheng, (PW2, Ms Cheng), was the only staff member of the accounting department of Wallmark.  From time to time she would draw cheques on the accounts of both CKTC and Wong Chun-ping’s personal bank account, on the instructions of Wong Chor-wo.  On many occasions these cheques had been pre-signed by Wong Chun-ping in blank.

15.  On 16 January 2001, Wealthmark became a public listed company.  By an initial public offering, (IPO), a sum of $32 million was raised.  The prospectus stated that the directors intended to apply $18 million of the proceeds to the construction of a new factory at Huizhou, $7 million for the acquisition of new machinery and equipment, and the balance of $7 million as working capital.

16.  As mentioned earlier, Wallmark was a wholly-owned subsidiary of Wealthmark, Wong Chor-wo and his wife were the only directors of Wallmark.

The withdrawal of $20,800,000 from Wallmark:

17.  Between 16 February 2001 and 21 March 2001, seven cheques, totalling $20.8 million were issued by Wallmark.  There is no doubt that the source of the funds was Wealthmark, in all probability, from the proceeds of the IPO. 

18.  The first six cheques were written by Ms Cheng on the instructions of Wong Chor-wo, the seventh cheque was written by Wong Chor-wo himself.  Each cheque was signed by Wong Chor-wo.   Ms Cheng did not know the purpose of the cheques and was not given any supporting documents in relation to the cheques.

19.  The first two cheques, totalling $4 million, dated 16 February 2001, were made payable to CKTC, and were deposited in CKTC’s bank account.

20.  The next two cheques, dated 22 February 2001, were made payable to cash, and were deposited in Wong Chun-ping’s bank account.  The fifth cheque, dated 17 March 2001, was made payable to Wong Chun-ping, and again was deposited in his bank account.  The sixth cheque, dated 19 March 2001, was made payable to cash, and was deposited in Wong Chun-ping’s bank account.  The seventh cheque, dated 21 March 2001 was also made payable to cash, and again was deposited in Wong Chun-ping’s bank account.  In all $16,800,000 was deposited in Wong Chun-ping’s personal bank account.

21.  Consequently, by seven cheques, a total of $20,800,000 had been withdrawn from Wallmark’s bank accounts.  The prosecution say that the withdrawal of these funds by Wong Chor-wo was theft, pure and simple, from Wallmark.  These seven cheques constitute counts 1-7, of theft, preferred against Wong Chor-wo.

The disposal of the funds from CKTC and Wong Chun-ping’s bank accounts:

22.  The evidence was that from time to time Wong Chun-ping would sign cheques on both his personal account, and the CKTC account, in blank, for future use.  On occasions, he would sign completed cheques.  The evidence did not establish that any of the cheques drawn on the two accounts, to withdraw the $20.8 million that had been deposited, had been completed prior to signature by Wong Chun-ping.

23.  On 28 February 2001, the whole of the $4 million that had been deposited, was withdrawn from CKTC’s account by way of one cheque.  Although the payee of the cheque is known, there is no evidence as to the ultimate destination of that sum.

24.  Between 14 March 2001 and 22 March 2001, $9 million was withdrawn from Wong Chun-ping’s account by way of four cheques.  One cheque, for the sum of $200,000, was a cash cheque, and was found by the Judge to have been cashed by Wong Chun-ping.  As to the balance of $8,800,000, although the payees of the three cheques are known, there is no evidence as to the ultimate destination of that sum.

25.  Of the remaining $7,800,000, from the $16,800,000 deposited in Wong Chun-ping’s account, a sum of $7,704,501 was withdrawn by four cheques, all of which were paid into bank accounts of Wallmark.  This had the effect of returning those funds to their source.

26.  Consequently, $12,800,000 had been withdrawn from the bank account of Wallmark, placed into two accounts belonging to Wong Chun-ping, and then withdrawn, there being no evidence as to the ultimate recipients of the proceeds of the withdrawals.

Dealing with the $20,800,000 withdrawals in Wallmark’s accounts:

27.  In March 2001, Ms Cheng was required to prepare the Wallmark ledger.  She asked Wong Chor-wo about the purpose of the seven cheques, totalling $20,800,000.  Wong Chor-wo gave her four receipts, purportedly issued by GCCL, and told her that they related to the seven cheques.

28.  The first receipt, dated 19 February 2001, was for the sum of RMB4,280,000.  The second receipt, dated 26 February 2001, was for RMB4,066,000 The third receipt, dated 19 March 2001, was for RMB8,560,000.  The fourth receipt, dated 26 March 2001, was for RMB5,350,000.

29.  The first three receipts, being dated between 19 February 2001 and 19 March 2001, all pre-dated the first of the three withdrawals from the bank accounts of CKTC and Wong Chun-ping, which were made between 28 February 2001 and 22 March 2001.  They could not have been receipts issued in relation to payments consequent upon the three withdrawals.

30.  The four receipts are the subject matter of counts 8-11, of furnishing false information,  preferred against Wong Chor-wo.

The original GCCL agreement:

31.  On 1 February 2001, at a directors meeting of Wallmark, an agreement proposed between Wallmark and GCCL for the purchase of land and the construction of a new factory in Huizhou was tabled and approved.

32.  In March 2001, Wong Chor-wo gave to Mr Po an agreement dated 1 February 2001, (the original GCCL agreement), purporting to be an agreement between Wallmark and GCCL for the acquisition of land and the construction of a new factory at Huizhou.  The agreement was signed by Wong Chor-wo on behalf of Wallmark, and by a Mr Chan Yuk Sing, apparently the proprietor  of GCCL.  Wong Chor-wo also gave to Mr Po a document which purported to be a business licence of GCCL, and the four GCCL receipts.

33.  The agreement with GCCL showed that company agreed to construct a new factory in Huizhou for Wealthmark.  The price was RMB27,820,000, (approximately $25 million).  The price was to be paid by three instalments.  The first instalment of $ RMB10,700,000 was to be paid before 28 February 2001.  The second instalment of RMB11,556,000 was to be paid before 31 March 2001.  The third and final instalment of RMB5,465,000 was to be paid before 31 August 2002.

34.  The total value of the four GCCL receipts, (RMB22,256,000), was equal to the total of the first two instalments due under the original GCCL agreement.

35.  The original GCCL agreement, and the four receipts form the subject matter of the 12th count, using false instruments.

The auditor seeks information:

36.  PricewaterhouseCoopers, (PwC), were the auditors to Wealthmark.  The audit of Wealthmark necessarily involved an examination of the accounts of the wholly-owned subsidiary, Wallmark.  PwC were first required to audit the accounts of Wealthmark for the year ended 31 December 2000.  In April 2001, in the course of that audit, PwC received the minutes of the directors meeting referred to in paragraph 31 above, but, as that meeting fell outside the relevant audit period, no enquiry was made at that time in relation to the GCCL contract.

37.  In March 2002, PwC were conducting the audit of Wealthmark for the year ended 31 December 2001.  The PWC partner concerned was Mr Wong Kai Man, (Mr Wong).  Mr Wong saw copies of the seven cheques by which the sum of $20.8 million had been withdrawn from Wallmark.  He also received the original GCCL agreement, the four GCCL receipts, and the GCCL business licence.

38.  As a result of enquiries made by PwC into GCCL, and the business licence, Mr Wong was not satisfied as to the validity of the business licence, and raised the matter with Mr Po.

39.  On 20 March 2002, Mr Wong received a number of documents from Wealthmark.  The purpose of these documents was to substantiate in part, for audit purposes, the payment of the $20.8 million.  The documents related to the acquisition of property by Wallmark in Cambodia, and a variation of the agreement with GCCL.

The Cambodian acquisition:

40.  On 28 May 2001, Wealthmark, by a wholly owned subsidiary, Glory Access Ltd, (Glory Access), had entered into a Preliminary Agreement with a Cambodian company called Kimberley Industrial Company Ltd, (Kimberley).  The agreement was to purchase the assets of Kimberley for the sum of US$500,000, ($3,900,000).  The agreement was signed by Wong Chor-wo and a Mr Huang Hai Ing, (PW3, Mr Huang).

41.  The consideration was to be paid by instalments, first, US$120,000, upon the official signing of the agreement by both parties, which sum would enable Kimberley to repay a mortgage on the property.  The second instalment of US$280,000 was to be paid when the official documents of ownership were resumed and handed to the purchaser.  A further US$50,000 was to be paid by a cheque, post-dated to 30 December 2001, and the remaining balance of US$50,000 by a further cheque, post-dated to 30 June 2002.

42.  The necessary documentation was prepared by Richards Butler, a reputable firm of commercial solicitors in Hong Kong.

43.  In July 2001, Mr Huang came to Hong Kong and a sale and purchase agreement, (the July agreement) and other formal documents were executed for the acquisition of Kimberley by Wealthmark.  The documents were settled by Richards Butler.  No formal announcement of the Kimberley acquisition was made by Wealthmark to the SEHK, as the transaction was not one which required formal announcement.

44.  Kimberly began production for Wallmark in the summer of 2001.  Wong Chun-ping managed the Cambodian factory for Wallmark.

Variation of the GCCL and Kimberley agreements:

45.  On October 2001, Wong Chor-wo told Mr Po that the consideration of the acquisition for Kimberley would be $7 million, (an increase of $3,100,000), and that the original GCCL agreement would be shelved indefinitely. 

46.  A formal announcement was then made through the Hong Kong Stock Exchange saying that Wealthmark intended to acquire Kimberley for the sum of $7 million, and the execution of the sale and purchase agreement was expected on or before 22 December 2001.  The announcement also said that Wealthmark had entered into a supplementary agreement with GCCL, (the GCCL Supplementary Agreement), on 6 November 2001, to suspend the acquisition of land and construction of a new factory in Huizhou.

47.  Following the announcement, a second sale and purchase agreement for the acquisition of Kimberley, (the December Agreement) and other formal documents were executed.  Again, Richards Butler were involved in advising on the terms of the agreement, and were aware of changes in the agreement, and the change in consideration.

48.  The December Agreement and six formal documents made pursuant to that agreement form the subject matter of the 14th count, using false instruments.

The GCCL Supplementary Agreement:

49.  In November 2001, Wong Chor-wo gave Mr Po the GCCL Supplementary Agreement.  This now said that GCCL would build a silkscreen and carton factory in “the old factory at Ziamazhuang”, (in Huizhou), and a leather products factory was to be built at Hua Bian Nan Rd , also in Huizhou, near to Ziamazhuang.

50.  The GCCL Supplementary Agreement also said that GCCL would secure a contractor for the renovation of the Cambodian factory.

51.  It further said that the works fee that had been previously been paid was to be returned to Wallmark, after the deduction of the fee for the new construction works.  The GCCL Supplementary Agreement recorded that subcontracts for the various works would be signed later.

52.  Between November 2001 and March 2002, Wong Chor-wo gave Mr Po a number of subcontracts.  Although four subcontracts had been referred to in the GCCL Supplementary Agreement Wong Chor-wo gave Mr Po five subcontracts.

53.  The first subcontract, dated 26 July 2001, was for a leather products factory, the contract price at $550,000, with completion due on 31 August 2001.  The second subcontract, dated 30 August 2001, was for the a silkscreen factory, the contract price at $1.24 million, with completion due on “31 September 2001”.  The third subcontract, dated 30 August 2001, was for a warehouse, the contract price at $700,000, with completion due on “31 September 2001”.  The fourth subcontract, dated 30 August 2001, was for renovations to the Cambodian factory, the contract price at $6.43 million, with completion due on “31 September 2001”. The fifth subcontract, dated 27 September 2001, was for a carton factory, at a contract price at $1.4 million, the work to be completed by 31 October 2001.

54.  There had been no reference to the warehouse subcontract in the GCCL Supplementary Agreement.  The total value of the five subcontracts was $10.32 million.  As the Judge noted, three of the subcontracts were due for completion on “31 September 2001”, a nonexistent date, there being only 30 days in September.

55.  Notwithstanding his position as group Financial Controller and Company Secretary, Mr Po had not previously been aware of any construction work going on in any of the factories before he received the subcontracts from Wong Chor-wo.

56.  The GCCL Supplementary Agreement and the five subcontracts form the subject matter of the 13th count, using false instruments.

The use of the documents for audit:

57.  In the course of audit during March 2002, Mr Po, on the instruction of Wong Chor-wo, gave to the auditors the GCCL Supplementary Agreement, and the December Agreement and the related documents.  The plain purpose in using these documents was to satisfy the auditors that there had been a change in the usage of the IPO proceeds, in that $7 million was to be used to acquire Kimberley and another $10.3 million had been used to meet the contract price on the subcontracts.

58.  In the course of a meeting with PwC in April 2002, during the audit of the Wealthmark accounts for the year 2001, the auditors requested, amongst other things, that the money transactions between Wallmark, CKTC and GCCL, should be formally ratified by resolution.  Mr Po drafted the resolution, which was given to Wong Chor-wo, who returned it several days later signed.  The minutes purported to show that there had been a meeting of all of the executive and non-executive directors of Wealthmark, on 24 April 2002, at which all the above payments and other transactions had been retrospectively approved.  In fact no such meeting ever took place.

59.  The resolution of 24 April 2002, forms the subject matter of the 16th count, knowingly making a false statement to auditors by the officer of a company.  There is no appeal against the conviction on this charge.

Further documentation is revealed by Wong Chor-wo:

60.  In the course of the audit, Wong Chor-wo gave Mr Po copies of the seven cheques that had been drawn on Wallmark’s account, dispersing the $20.8 million.  These revealed, for the first time, that the money had not gone directly to GCCL, but to CKTC, and Wong Chun-ping’s bank account.

61.   Wong Chor-wo also gave Mr Po a letter from CKTC, dated 18 February 2001, (Ex P3), purportedly guaranteeing the completion of the works in relation to the contracts signed between GCCL and Wallmark.  There is no suggestion that CKTC had any active role in the performance of the contract by GCCL, nor that it had any capacity whatsoever to make such a guarantee worthwhile.  The purpose of giving a letter to Mr Po was to pass it to the auditors.

62.  In addition to that letter, Wong Chor-wo gave Mr Po a letter dated 10 April 2002, (Ex P5), signed by Wong Chun-ping, on the letterhead of the company called CK Trading Company Ltd, (CKTCL).  This company had apparently been formed by Wong Chun-ping to operate the business of CKTC subsequent to the transactions at issue.

63.   The letter asserted that the sum of $20.8 million received from Wallmark had been remitted to GCCL.  A further letter, dated 12 April 2002, also signed by Wong Chun-ping, again on the letterhead of CKTCL, purported to set out the application of $20.8 million.  It asserted that $7 million had been paid to Mr Huang for the purchase of a Cambodian factory on 13 December 2001, and that other payments had been made in respect of the five subcontracts.  It asserted that the unused balance of $3,480,000 would be returned to Wallmark before 22 April 2002.

64.  Again, it was the intention of Wong Chor-wo that these documents should be used to satisfy PwC in the course of the audit.

The Wealthmark accounts are to be qualified:

65.  The auditors were not satisfied with the documentation that had been supplied to them by Wong Chor-wo, in his efforts to justify the expenditure of $20.8 million, which he said had gone to GCCL for building works, and for the acquisition of Kimberley.

66.  The auditors consequently informed Wong Chor-wo, by telephone, that the accounts would be qualified.

Further documents are produced to satisfy the auditors:

67.  Having been informed of the auditors’ intention to qualify the accounts, and in the hope that he could change their mind, Wong Chor-wo gave Mr Po further documents to pass to the auditors.

68.  These included first, four “works budget settlement sheets”, (WBSS), and four receipts issued by Hua Chang Metal Works Department, (Hua Chang), and second, a quotation and receipt issued by Spa Construction & Management Company Ltd, (Spa).

69.  The four WBSS, and the related receipts were as follows:

(1)     WBSS, dated 15 July 2001, for the leather products factory, amount RMB506, 867.00, receipt dated 29 August 2001;

(2)     WBSS, dated 20 July 2001, for the warehouse, amount RMB671,634, receipt dated 29 August 2001;

(3)     WBSS, dated 20 July 2001, for the silk screen factory, amount RMB1,137,980.50, receipt dated 20 September 2001;

(4)     WBSS, dated 20 July 2001, for the carton factory, amount, RMB1,291,267, receipt dated 26 October 2001.

70.  The Spa quotation was dated 3 July 2001, in relation to the Cambodian factory, for US$741,298.  The receipt was dated 20 December 2001.

71.  These documents were sent to PwC by fax on 23 April 2002, and form the subject matter of the 15th count, using copies of false instruments.

72.  It must be noted that the “Hua Chang WBSS” documents all pre-dated the GCCL Supplementary Agreement relating to the five subcontracts in substitution for the original land acquisition and construction.  It must further be noted that the Spa quotation predated the December Agreement in relation to the Kimberley acquisition in Cambodia.

73.  Further, the total amount of the contract price in the GCCL contract exceeded the amount of the Hua Chang receipts by $1,166,143.82.  There was no explanation for this difference, and no invoice from GCCL for commission on the transaction.

The Annual Report of Wealthmark:

74.  The annual report of Wealthmark for the year ended 31 December 2001, was published on 24 April 2002.  The auditors report was qualified in the following terms:

“However, the evidence available to us was limited in respect of certain payments made by the Group during the year.  As detailed in note 12 to the accounts, the Group made payments totalling HK$20,800,000 which were allocated to fixed assets, goodwill and other receivables in these accounts.  There was insufficient appropriate evidence to enable us to verify the costs and nature of the amount allocated to fixed assets and other receivables totalling HK$13,800,000.

There were no other satisfactory audit procedures that we could adopt to confirm the amounts recognized as assets described above.  Any adjustment to these amounts may have a consequential effect on the profit for the year ended net assets as at 31st December 2001.”

75.  Note 12 to the accounts described how $20,800,000 had been applied to the purchase of a Cambodian factory, ($7 million), renovation of the Cambodian factory, ($6,430,000), renovation of the leather factory, ($550,000), construction of a silk screen factory, ($1,240,000), construction of a warehouse, ($700,000), and the construction of the carton packing factory, ($1,400,000).  Other than the Cambodian factory the other five matters were said to be at Huizhou.  A balance of $3,480,000 was described, without any detail, as constituting “other receivables”.

76.  Wong Chor-wo had signed the Chairman’s Statement, which had been drafted by Mr Po.  It explained how the proceeds of the IPO had been used in relation to the Cambodian factory, the leather products factory, the silk screen factory, the warehouse and the carton packing factory.  It also explained the reason for the acquisition of Kimberley, the suspension of the original GCCL Agreement and the construction and renovation works in Cambodia and the Mainland.

77.  It asserted that the relevant contractors in the Mainland and Cambodia had not supplied sufficient documents to the Group regarding the allocation of costs, and that consequently PwC had not been able to be completely satisfied with the available evidence and documents.

78.  Wong Chor-wo speaks only a little English, and Mr Po had drafted the statement in English.  Wong Chor-wo had taken the draft of the statement and a Chinese translation away, and returned the signed draft one or two days later.

79.  This statement forms the subject matter of the 17th count, publishing a false statement.

The existence of GCCL:

80.  A central and contentious issue in the trial was whether or not GCCL actually existed.

81.  The business licence of GCCL described as its owner, a Mr Chan Yuk Sing, and the address of the company at Room 1901 Good World Commercial Centre, in Guangzhou.

82.  Mr Chan Yuk Sing, (PW4 Mr Chan), was called to give evidence.  Mr Chan has been operating a demolition business known as Kingsland Concrete Drilling Company Ltd in Hong Kong for 20 years.  He began to carry on business in Guangzhou in about May 1999.  Initially he conducted business through his Hong Kong company but since March 2000, has operated Ho King Luen Concrete Drilling Technology Co Ltd from Room 1901 in Good World Commercial Centre in Guangzhou.

83.  Mr Chan had never seen the original GCCL agreement and had had no contact with Wallmark.  Room 1901 was used exclusively by his companies and could not be, and was not, used by any other company as a correspondence address.  The signature on the original GCCL agreement was not Mr Chan’s signature.  He had never seen the GCCL receipts before, and did not know the signatory to those receipts, one Lee Jun.  He has had no business in Huizhou.

84.  Mr Chan had never seen the GCCL Supplementary Agreement, and by the time of that agreement, November 2001, was then operating his business from Hua Lin Broadway.  He had never heard of, nor subcontracted work to, Hua Chang.  He had never seen any of the subcontracts in relation to work in Cambodia.

85.  The Judge found him to be a truthful witness.  There can be no challenge to this finding.

86.  In the light of this evidence the Judge found that GCCL did not exist.  Counsel for Wong Chor-wo challenges this finding on appeal.

87.  Having found that GCCL did not exist and its business licence was false, the Judge proceeded to find that the original GCCL agreement, the four GCCL receipts, the GCCL Supplementary Agreement, the subcontracts arising therefrom, the December agreement, and the Hua Chang and Spa documents were false.  The Judge found that Wong Chor-wo knew that all of those documents were false.  Upon those findings Wong Chor-wo was convicted upon all charges he faced.

The charges against Wong Chun-ping:

88.  Wong Chun-ping faced two charges of dealing with property known or believed to represent the proceeds of indictable offence, contrary to ss 25(1) & (3) Organised and Serious Crimes Ordinance.  In simple terms he was charged with money laundering.

89.  The first charge related to the two cheques, (totalling $4 million), that had been paid into the bank account of CKTC, and the withdrawal of those funds from the account using cheques signed by Wong Chun-ping.  The second charge related the remaining five cheques, (totalling $16.8 million), that had been deposited into Wong Chun-ping’s personal account, and the withdrawal of those funds from the account, again using cheques signed by Wong Chun-ping.

90.  It is an essential element of both charges that Wong Chun-ping must be shown to have known of the fact of the transactions through his accounts.  Further, the burden lies on the prosecution to establish that he must have known or had reasonable grounds to believe that the sums were the proceeds of an indictable offence.

91.  In order to establish his knowledge of the transactions the prosecution relied upon the two letters, Ex P3 and Ex P 5, signed by Wong Chun-ping, dated 10 April 2002 and 12 April 2002, (both over a year after the transactions in the bank accounts), and referred to in paragraphs 61 and 62 above.  It was asserted that he would not take it upon himself to account for the usage of the money if he had taken no part in the movement of the funds, nor would he agree to sign such letters if he knew nothing of the truth of the contents.  It was further asserted that he would not be trusted to sign such letters, containing falsehoods, unless he was part of the criminal scheme alleged.

92.  The judge accepted those submissions and, when weighing into the account her conclusion that GCCL did not exist, and the absence of any explanation as to why Wong Chun-ping would allow Wong Chor-wo to use his bank accounts, convicted Wong Chun-ping on both counts 18 and 19.

The appeal by Wong Chor-wo:

93.  Although the perfected grounds of appeal contained a number of contentions, at the end of the day, Mr Martin Lee SC advanced as the primary ground of appeal a contention that there had been a substantial change in the prosecution case during the course of the trial, as a result of which the defence had no proper opportunity of dealing with the case as finally advanced.  The submission relied upon R v Cross & Channon (1971) 55 Cr App R 540 and R v Falconer-Atlee (1974) 58 Cr App R 348.

94.  Mr Martin Lee argued that the prosecution opened on the basis that the leather products factory, the carton factory and the silkscreen factory did not exist, and that new works were not done at the Cambodian warehouse.  He said that in the light of that opening the whole defence was directed towards proving that the factories existed and that the works at the warehouse had been carried out.  He said that at the close of the prosecution case, the case had changed, with the prosecution now acknowledging that the leather products factory did exist.  He said that by the time closing speeches had been made the prosecution case had changed further, with an acknowledgement that the three factories did exist, and that work had been done at the warehouse.  Now, he said, the case for the prosecution was that none of the work was carried out by GCCL, and that any work that had been done had not been done on the dates alleged or for the prices alleged.

95.  We reject the submission on two grounds.

96.  First, we are satisfied that there is no foundation whatsoever for an assertion that the prosecution case changed.  The position of the prosecution was abundantly plain from paragraph 5 of the opening address:

“Prior to the public listing of Wealthmark Huizhou Wallmark operated out of the factories situated at Xia Ma Zhuang, He Nan, Huizhou City, (the Xia Ma Zhuang factory).  This factory was leased (Ex 261 p 2896).  The Court will also hear reference to another factory address at 7 Mai Di Hua Bian Rd, Huizhou City, (the Hua Bian factory).  The Prosecution believes that this factory did not exist at the material time.  Much of this case turns around documentation created to suggest that works were being carried out at these premises when in fact they were not.” (Our emphasis).

97.  The non-existence or otherwise of the Hua Bin factory was plainly left open, the prosecution asserting only to a belief that it did not exist “at the material time”, and not a positive assertion that it did not exist.  That position was reinforced at paragraph 34 of the opening when the following statement was made:

“The same document also includes an agreement to renovate the Hua Bin factory (if it existed) and for GCCL to arrange for large-scale renovation of the Cambodian factory.” (Our emphasis).

98.  The central theme of the prosecution case, as it was opened and throughout, was that GCCL did not exist.  Consequently, as it did not exist, the many documents relied upon to substantiate the withdrawal of funds from Wallmark by the seven cheques, being payments to GCCL, were false, in that they could not have been for payments to a non-existent company.  That is plain from the following exchange between the court and counsel the prosecution during the closing speech of counsel for Wong Chor-wo:

“Court:  I think that the prosecution says some projects might have been done, it wasn’t done by GCCL and they queried whether they were done for that amount of money they said definitely it wasn’t out of the seven cheques.  That’s what they say.

Prosecution counsel:  Your Honour’s got it better than me.”

99.  It is right that, in the course of the closing speech for Wong Chor-wo, following a statement by defence counsel as to the prosecution shifting position, the judge acknowledges a shifting of position.  But it is equally plain that the reference to that shifting of position is nothing more than an acceptance by the prosecution that the buildings may well exist.  That acceptance did not detract in any way from the fundamental proposition that was plain from the opening address, namely that the central theme of the prosecution case was that the GCCL simply did not exist.

100.  Second, any acknowledgement by the prosecution that the buildings existed could not have taken the defence by surprise, nor could the defence have been prejudiced in any way by this acknowledgement.  The assertion that the buildings existed and that the work had been done in Cambodia was central to the defence case.  It did not constitute a new allegation, and did not introduce into the trial any new element to be met by the defence.  In fact, a good deal of the trial time was devoted by the defence to the examination of that issue.

101.  The circumstances of the present case are a long way removed from the authorities cited.  This is simply not a case in which the prosecution case has changed to the detriment of a defendant.

The existence of GCCL:

102.  Mr Martin Lee submitted that the fact that a company called GCCL did not carry on its business at its registered address did not give rise to an irresistible inference against corporate existence of GCCL.  He said that as there was evidence to substantiate the assertion that some work had been done both in Huizhou and Cambodia, that meant that the work must have been done by some entity and it might have been GCCL.  The submission does not assist his case.

103.  The evidence that GCCL did not exist was simply overwhelming.  The purported registered proprietor of the company was called by the prosecution to deny its existence and his evidence was unchallenged.  There was no such company that he knew of and it did not operate from the registered premises.  The fact that some work might have been done for Wallmark did not in any way detract from the plain inference on the evidence that GCCL did not exist.  The fact that work might have been done for Wallmark by some other company goes nowhere at all to raise any inference that any of the documents used by Wong Chor-wo, and the subject of the various charges, all being dependent upon the existence of GCCL, were anything other than false.

104.  Indeed, once it was established that GCCL did not exist, it inevitably followed that all documents involving GCCL, including any documents purporting to represent transactions with subcontractors by GCCL, or transactions by GCCL with mainland authorities, were false.  That is also quite apart form the fact that the documents contained discrepancies.  For example, we have already highlighted the aspect of pr-dating, (see paragraph 72 above).  In those circumstances convictions on counts 8-17 were inevitable.

105.  In reaching the foregoing conclusions we have had regard to the further submissions made by Mr Martin Lee, by letter dated 9 May 2008.  This involves a submission that GCCL may have been in existence, though not at the given address of the business licence.  There is nothing in the evidence to support such a contention.

106.  The application for leave to appeal by Wong Chor-wo must be dismissed.

The appeal by Wong Chun-ping:

107.  The two charges against Wong Chun-ping relied upon an assertion by the prosecution that he must have known of, and participated in, the transactions through the bank account of CK Trading Company, and his personal account, and that he knew or had reasonable grounds to believe that the funds passing through his account represented the proceeds of an indictable offence.

108.  In the normal course of events, if a man allows another person to use his bank accounts to deposit and withdraw funds, in the absence of evidence to the contrary, the inevitable inference will arise that the holder of the bank account has reasonable grounds to believe that the funds passing through the account represent the proceeds of an indictable offence.

109.  The Judge was quite right to rely upon this proposition, as she did in paragraph 490 of the reasons for verdict.

110.  That the account is used to conceal the transactions is an inference which inevitably arises from the fact that a person uses another’s bank account to undertake transactions without any explanation to the holder of the bank account.

111.  From the fact that the transactions are concealed, in the absence of evidence to the contrary, the inference inevitably arises that some offence has been committed in relation to the transactions that requires to be concealed.  When the funds are of the magnitude as in this case, the inference is that that offence will be an indictable offence.

112.  It may well be that an innocent explanation may also arise, when a bank account holder permits another person to conduct transactions, quite unrelated to the account holder, through his bank account, but for the reasons set out in paragraphs 110 and 111, at the same time the inference will arise that the transactions involved the proceeds of an indictable offence.

113.  The sums involved in the two offences faced by Wong Chun-ping total some $20.8 million.  The two bank accounts through which the transactions were made, the CK Trading Company account, and the personal account of Wong Chun-ping, showed further transactions in the relevant period, each of very substantial sums, totalling, in respect of the CK Trading Company accounts, $12.7 million, and the personal account of Wong Chun-ping $20.6 million.  The prosecution did not say that those transactions were suspicious transactions.  We raised this issue with counsel in the course of the hearing and invited further submissions, which were made in writing.

114.  We are satisfied that the fact that there may be an innocent explanation for those transactions, an inference arising from the fact that there is no charge in relation to those transactions, does not dispel the inevitable inference arising in relation to the charged transactions, as set out in paragraph 108 above.

115.  We adopt the following passage from Archbold Hong Kong 2007, at paragraph 41-73:

“The Court of Appeal in HKSAR v Yam Ho Keung, unreported, CACC 555/2001, affirmed the reasoning of the trial judge that where there are reasonable grounds for believing in a range of scenarios which might have given rise to the property being dealt with, the defendant holds reasonable grounds for believing in them all.  If one of those scenarios is related to an indictable offence, that is a sufficient basis to convict.  The essential point is whether the defendant was aware of those reasonable grounds, not the actual belief he had formed on the basis of those reasonable grounds.”

116.  The appropriate test was identified by Mayo J in HKSAR v Yam Ho Keung as involving answering two questions:

“….whether, objectively, reasonable grounds existed for the belief, and if so, whether subjectively the defendant was aware of the existence of those reasonable grounds.”

117.  In the present case it is clear that, objectively, reasonable grounds existed for the belief.  Those grounds arose from the mere fact that Wong Chun-ping had given unlimited access to the two bank accounts to Wong Chor-wo.  Equally clearly, Wong Chun-ping knew of the existence of those facts, and consequently, the reasonable grounds which existed for the belief that money transacted through the accounts by Wong Chor-wo may be the proceeds of an indictable offence.

118.  That was where the evidence stood.  There was nothing in the evidence to dispel those inferences, and the fact that an inference of innocent transactions also arose, in the absence of evidence to the contrary, does not assist Wong Chun-ping to say that he could not have believed that the transactions were the proceeds of an indictable offence.

119.  That must be all the more so in the absence of any evidence from Wong Chun-ping.  If there were some innocent explanation for the transactions, Wong Chun-ping would have been able to provide the reasons, but none emerged at the trial. The Judge was, in such circumstances, as the court said in Li Defan and Anor v HKSAR [2002] 1 HKLRD 527, at 540:

“…..perfectly entitled to regard the failure of the accused to give any explanation on oath as strengthening the inference to be drawn from the prosecution case.”

120.  The point made for Wong Chun-ping, relying upon the letters from CKTC and CKTCL, subsequently signed by Wong Chun-ping, (see paragraphs 61, 62 and 91 above), was that Wong Chun-ping may not have had the relevant belief at the time of the transactions.  We reject this argument. 

121.  We are satisfied that on the whole of the circumstances the judge was perfectly entitled to rely upon the fact that Wong Chun-ping knew that the accounts would be used for the movement of funds by Wong Chor-wo, when he gave over control of the accounts and signed cheques, (see Reasons for Verdict paragraph 487).  That alone is sufficient to raise the inference that Wong Chun-ping, knowingly, both received and disposed of the funds in the two accounts.  In those circumstances, and in the absence of evidence to the contrary, the judge was perfectly entitled to find that the statements made by Wong Chun-ping in the letters he subsequently signed were statements made in the knowledge that the funds had been transmitted through the account.

122.  The application for leave to appeal by Wong Chun-ping must be dismissed.

The appeals against sentence:

123.  Each appellant has filed an appeal against the sentence.  We adjourned those appeals pending the outcome of the appeals against conviction.  The appeals against conviction having failed, the appeals against sentence will be listed for hearing at the first available opportunity and the parties advised of the dates.

The underground banking system:

124.  For completeness it is necessary to say a word about the underground banking system.  The evidence established that prior to the business of Wallmark becoming a wholly-owned subsidiary of a public company, Wong Chor-wo had from time to time used the “underground banking system” to remit funds to China.  The underground banking system, while involving breaches of mainland exchange control regulations, is a system whereby debts, lawfully due between mainland and Hong Kong residents, may be met with funds passing between the two systems in a “convenient” manner.

125.  The case for Wong Chor-wo at trial involved an assertion that on the evidence an inference arose, which was not dispelled by the prosecution, that the funds removed from the CKTC account and Wong Chun-ping’s personal account may have been remitted to GCCL by way of the underground banking system.  Such an inference, it was argued, must leave the court in a reasonable doubt as to the theft of the funds, and raise an inference that all documents supplied were genuine.

126.  There was nothing whatsoever in the evidence to demonstrate even an inference that the recipients of the funds withdrawn from either the CK Trading Company accounts, or from Wong Chun-ping’s personal account, totalling $12,800,000, were in any way involved in or concerned with the underground banking system.  While it may well have been that Wealthmark had used the underground banking system in the past, there was nothing whatsoever to raise the inference that these very substantial funds, drawn on the bank account of a wholly owned subsidiary of a public company, in any way might have passed through the underground banking system.

127.  Any such assertion necessarily involved dealing with the fact that three of the four GCCL receipts predated the first three withdrawals from the bank accounts of CKTC and Wong Chun-ping.  Mr Martin Lee submitted that it may well be that in the operation of the underground banking system such receipts were issued once the intended recipient in the mainland was informed that the funds had been deposited in an account in Hong Kong.  There was simply nothing on the evidence to substantiate such an assertion.

128.  An application by Mr Martin Lee to call new evidence pursuant to s 83V Criminal Procedure Ordinance Cap 221 in relation to the underground banking system was not seriously pursued, and was bound to fail in any event, as the involvement of the underground banking system was always a part of the defence case.

129.  Again, for completeness, we record that other applications pursuant to s 83V were, sensibly, not pursued by Mr Martin Lee in the course of the appeal.