HKSAR v. HUI RUSSEL AND ANOTHER

CACC 64/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 64 OF 2009

(ON APPEAL FROM DCCC NO. 57 OF 2008)

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J U D G M E N T

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Hon Hartmann JA (giving the judgment of the Court):

Introduction

1.  On 15 January 2009, following a trial in the District Court before Deputy Judge Dufton, the two applicants were convicted of conspiracy to defraud, contrary to common law and punishable under s.159C of the Crimes Ordinance, Cap. 200.  The first applicant was sentenced to 10 months imprisonment, the second applicant to a term of 12 months imprisonment.

2.  The first applicant was further convicted of an offence of bribery, being sentenced to a term of 10 months imprisonment for that offence.

3.  The applications for leave to appeal first came before us on 19 June 2009.  On that occasion, however, it was not possible to hear counsel for both applicants.  Only the applications of the first applicant were heard that day, the applications of the second applicant being adjourned.

4.  The first applicant did not seek leave to appeal his conviction of conspiracy to defraud.  Nor did he seek leave to appeal the sentence imposed upon him for that offence.  He sought leave only to appeal his conviction of the bribery offence and the sentence imposed for that offence.  The first applicant’s applications for leave were dismissed by us.

5.  Accordingly, this judgment looks only to the application of the second applicant to appeal his conviction of conspiracy to defraud.  He has abandoned his application for leave to appeal against sentence.

Background

6.  In January 2005, a residential development known as the Merton came on the market.  It had been built by way of joint-venture between a private property developer, New World, and a statutory body, the Urban Renewal Authority.

7.  The sales campaign orchestrated by New World and the Authority commenced with the offer of apartments to persons deemed to have a close connection with the developers.  The first and second applicants were able to take advantage of this opportunity.

8.  When interviewed under caution, the second applicant said that he and the first applicant had taken advantage of the offer in order to speculate, that is, to purchase apartments and resell them at a profit.  Two companies were used to make the purchases, Lucky Wise Holdings and Fat Tack Development.  Whichever company was used, said the second applicant, was a matter of convenience.  The agreement was that he and the first applicant would share their net profits equally.

9.  On 7 January 2005, being able to purchase ahead of the market, the applicants secured 24 apartments in Block One of the development.  In particular, using the company Lucky Wise Holdings as purchaser, they secured four apartments on the 19^th floor: apartments A, B, F and G.

10.  That same day, they were able to resell those four apartments on the 19^th floor, three of them at a profit.

11.  The Stamp Duty Ordinance, Cap. 117, directs that an agreement for the sale of immovable property is chargeable with stamp duty, the duty being calculated according to the sale price.

12.  Stamp duty may be payable even if an agreement for sale is not performed provided a “specified event” taking place.  One such specified event takes place when the agreement for sale is not performed because another agreement for sale is made between the vendor under the initial agreement and a party introduced to the vendor by the purchaser under the initial agreement: s.29C(11)(b)(iii) of the Ordinance.

13.  In respect of the charge of conspiracy to defraud, it was alleged that the first and second applicants did exactly that.  When they resold the four apartments on the 19^th floor, they did not enter into fresh agreements with the buyers, their company, Lucky Wise Holdings, being the vendor. Instead, they introduced the buyers to the vendor’s agent so that their agreements (‘the initial agreements’) could be set to one side and agreements entered into direct between the vendor’s agent and the new buyers (‘the following agreements’).  These following agreements made direct between the vendor’s agent and the new buyers reflected the same price as the initial agreements.

14.  In respect of the deposits paid under the initial agreements, they remained undisturbed except that they were now credited to the names of the new buyers.

15.  The applicants then received payment direct from each of the new buyers of an amount equal to the deposits and, in respect of the three apartments sold at a profit, an amount equal to those profits.  The true purchase price was thus greater than that reflected in the following arguments.

16.  The prosecution accepted that there was nothing criminal in this manner of proceeding provided both the initial and following agreements were declared to the Collector of Stamp Revenue so that the full amount of duty due could be collected in respect of them.

17.  What was alleged, however, and what the judge found to be proved, was that the applicants conspired together, and with others, to defraud the Collector by dishonestly concealing the existence of the four initial agreements and, in respect of the four following agreements, by understating the true purchase price paid by the buyers for the apartments that were the subject of those following agreements

18.  At trial, it was an admitted fact that in the result the Collector had sustained a loss in excess of $500,000.

First ground of appeal: the second applicant’s cautioned statement, while voluntary, should not have been admitted into evidence because, in so doing, he was denied a fair trial

19.  The evidence against the second applicant was contained almost entirely in a record of interview conducted on 10 July 2006.  The voluntariness of that interview was never in dispute.

20.  At the commencement of the interview, the second applicant was cautioned in respect of three suspected offences of conspiracy to offer or solicit bribes.  All three offences related to the purchase and onward sale of the apartments at the Merton.  The first suspected offence related to offering some form of advantage to the vendor’s agent in order to secure the ability to buy apartments ahead of the market and to sell them on.  The second related to the offering or soliciting of some form of advantage either to real estate agents or individual buyers in order to be able to sell on the apartments.

21.  The second applicant was not cautioned in respect of any offence of conspiracy to defraud related to the avoidance of stamp duty, the offence with which he was later charged.

22.  At trial, the evidence revealed that in the early stages of the overall investigation, several weeks before the second applicant was interviewed, a suspect had been cautioned and interviewed for conspiracy to defraud by way of avoiding stamp duty.  However, the judge accepted that the officer who interviewed the second applicant, a different officer, had not been instructed to caution him for conspiracy to defraud and at no time during the course of the interview did he have such an offence in mind.  His intention at all times had been to investigate possible offences of corruption.  Indeed, as the judge noted, the only mention of stamp duty was made when the second applicant was asked how he and the first applicant had shared the proceeds of their joint venture and he replied that it had been shared equally after deduction of expenses such as stamp duty.

23.  Accordingly, while the second applicant was not cautioned in respect of any possible offence of conspiracy to defraud related to the avoidance of stamp duty, when the interview commenced he could have been under no misapprehension as to the focus of the questions to be asked.  They would relate to the manner in which he and the first applicant had been able to buy apartments ahead of the market and sell them on; this would include an examination of the nature of their dealings with the vendor’s agent and the nature of their dealings with third parties in order to secure onward sales.

24.  As it transpired, in answering questions put to him concerning suspected conspiracies to gain commercial advantage by the use of corruption, it was the finding of the judge that the second applicant made admissions relevant to a separate form of conspiracy, that is, a conspiracy to gain commercial advantage by way of evading payment of stamp duty.

25.  It was submitted that the second applicant’s right to silence was undermined because, when he answered the questions asked of him, he did not appreciate the complexity of what he was being led into.  We do not see that he was being led into anything.  The questions which he answered were focused on the nature of his dealings in respect of the purchase and onward sale of the apartments in the Merton.  That was known to him from the outset.

26.  Nor was it a case of the second applicant, during the course of the interview, being led into a new area of investigation, one dependent on a new range of facts.  The questions that were integral to the suspected corruption offences were, as it turned out, integral also to the avoidance of stamp duty offence.

27.  Before both the trial judge and ourselves, reliance was placed on R v Kirk [2000] 1 Cr App R 400.  However, the facts of that case were very different.  The appellant had been charged with snatching a handbag off an old lady who in the process had been knocked to the ground.  Although, during the course of the interviewing process, the police learnt that the old lady had died in hospital, they refrained from charging the far more serious offence of manslaughter to see if, by continuing to interview the appellant in respect of lesser offences, they could obtain further admissions.  In the present case, the judge rejected any suggestion that the interviewing officer had deliberately refrained from cautioning the second applicant for conspiracy to defraud.

28.  As to the second applicant’s admissions made in the course of his cautioned statement, the question is whether the making of those admissions, although not occasioned by the unfairness of the interview process itself, has nevertheless undermined the second applicant’s right to silence so that it was unfair to use the cautioned statement against him at his trial.

29.  A judge has an overriding duty to ensure that an accused receives a fair trial.  It is open to him therefore, even though a confession has been made voluntarily, to exclude it if, in the exercise of his discretion, he is satisfied that it would be unfair to use it against him.  But, that being said, when a confession is voluntary, the circumstances for its exercise will be rare.  In this regard, see Secretary for Justice v Lam Tat Ming and Another (2000) 3 HKCFAR 168, at 180, per Li CJ:

“… where a caution has been administered and the confession is established to be voluntary, it has been rightly observed in many Hong Kong authorities that the residual discretion to exclude the admissible evidence consisting of the voluntary confession should seldom be employed.  First, because relevant and admissible evidence would be withdrawn.  Secondly, because the kind of conduct complained of should already have excluded the confession as in voluntary.”

30.  What fairness demands is determined by having regard to the circumstances of each case.  In the present case, the second applicant was informed that he was suspected of criminal conduct in respect of the purchase of apartments at the Merton.  The second applicant therefore understood the factual focus of the investigation.  He was informed that he was suspected of conspiring with others to act corruptly in respect of those dealings.  He chose to answer the questions put to him.  In explaining what had occurred, rejecting any suggestion that he had acted corruptly, he implicated himself in another form of conspiracy in respect of the same set of dealings.  It was his choice to give the explanation he did.  We do not see how his trial was rendered unfair because he was held to that explanation.

The second ground of appeal: the four initial agreements were not “agreements for sale” in terms of the Stamp Duty Ordinance and were not therefore subject to duty

31.  After the four initial agreements had been superseded by the four following agreements, the evidence revealed that they were disposed of.  The agreements, before their disposal, had been signed on behalf of Lucky Wise Holdings.  That much was clear.  Less clear was whether they had also been signed on behalf of the vendor.

32.  In his cautioned statement, the second applicant spoke of himself and/or the first applicant (together with their wives) being present when the agreements were prepared.  He spoke of the agreements being signed and the initial deposits being paid by way of cashier’s orders.  But he also spoke of the vendor’s agent requiring a period of time to complete internal documentation in respect of each sale.  Whether that exercise included signing the agreements was uncertain.

33.  In light of this lack of evidence, it was submitted that the judge was obliged to consider whether the agreements, unsigned by the vendor’s agent, constituted agreements that attracted duty.  It was submitted that, until such time as the agreements were signed on behalf of the vendor, there could be no agreement for sale, only an offer to purchase which conveyed no rights.

34.  However, the absence of a signature is not determinative of whether an agreement is chargeable with duty.  Section 29C(2) of the Ordinance provides that agreements for sale, as defined in s.29A(1), remain subject to duty even if they have not been executed by all the parties who are required to do so.

35.  The four initial agreements constituted options to purchase.  This is set out in Clause 1 of each standard form agreement.  But s.29A(1) of the Ordinance includes options to purchase within the definition of agreements for sale chargeable with duty.

36.  Options to purchase, therefore, even if not signed by one of the parties, may still constitute agreements of sale subject to duty.

37.  The judge was satisfied that, having regard to all the facts he found proved, the four initial agreements were chargeable with duty.

38.  In his cautioned statement, the second applicant was clearly of the view that the agreements conferred rights of ownership on the company, Lucky Wise Holdings, that were sufficient for resale.  He said that, after signing, he and the first applicant owned the apartments and could re-sell them.

39.  Even if the vendor’s agent had not yet signed the initial agreements, this did not dissuade the second applicant from immediately seeking to secure buyers for onward sale.  As we have said, four apartments on the 19^th floor were re-sold that same day, this being done before the vendor’s agent had completed the internal documentation in respect of the 24 apartments purchased by the applicants.  In short, in seeking buyers for re-sale, the applicants acted as owners.

40.  As for the vendor’s agent, the method of substitution of the agreements could have left no doubt that the applicants had re-sold.  That in itself constituted acknowledgment by the vendor’s agent that, as he saw it, sufficient equitable rights in the apartments had passed to the applicants to enable them to resell.

41.  Accordingly, whether or not the four initial agreements had been signed by the vendor’s agent, all parties acted as if, with the initial agreements duly completed and signed on behalf of the purchaser and a deposit paid, sufficient equity in the apartments had passed to the applicants to enable them to dispose of those apartments.

42.  We are satisfied therefore that the judge was correct to find that the four initial agreements, whether signed on behalf of the vendor or not, were agreements subject to duty.

Third ground of appeal: even if the four initial agreements were subject to duty, the judge failed to give sufficient consideration to whether a “specified event” had taken place under section 29C of the Ordinance

43.  S.29C(5A)(b) of the Ordinance provides that an agreement for sale which is cancelled, annulled or rescinded or is otherwise not performed by reason of the occurrence of a specified event remains subject to stamp duty.

44.  S.29C(11)(b)(iii) describes one such specific event.  It occurs if “another agreement for sale” is made for the sale of the property between “the vendor under the first agreement and a party introduced, directly or indirectly, to the vendor by the purchaser under the first agreement” or “under the direction of or upon the request of the purchaser”.

45.  The four apartments that were resold were the subject of a second set of agreements.  Those second agreements were between the vendor under the original agreements and the secondary buyers.  The secondary buyers were introduced to the vendor’s authorised agent by the applicants, the applicants themselves acting as the representatives of Lucky Wise Holdings, the company that had been the purchaser under the first set of agreements.

46.  In our judgment, what took place in respect of the resale of the four apartments on the 19^th floor fell exactly into the terms of the specified event described in s.29C(11)(b)(iii).  It was central to the prosecution case.  The judge was well aware of it.

47.  The submission by Ms Draycott SC, the second applicant’s counsel, appears to have been focused on the asserted lack of clear evidence as to who exactly it was who represented Lucky Wise Holdings in introducing the secondary buyers to the vendor’s agent.  We do not find anything in this point.  In his cautioned statement, the second applicant made clear that he and the first applicant, together with their wives, acted in concert in respect of the purchase and resale of the apartments, it being a matter of pure convenience which of their two companies they used for any particular purchase.  On that basis, it is apparent that, if any of them were not in fact officers of Lucky Wise Holdings, they were acting under the authority of those who were.

Ground four: there was not sufficient evidence that the second applicant was dishonest

48.  It was submitted that the issue of the second applicant’s belief in the honesty of his actions was to be found in his cautioned statement.  It was said that he was there at pains to show that what he had done was, in his opinion, legal, and that, as he saw it, he took part in engineering a scheme that was designed to avoid tax not to evade it by way of fraud.

49.  It was, of course, for the judge to determine whether, as a finding of fact, he could be satisfied that the second applicant had acted dishonestly.  It was not suggested that he misapplied the two-stage test as to the issue of dishonesty in coming to his finding of fact: the test is defined in R v Ghosh [1982] 1 QB 1053.

50.  In coming to his finding of fact, the judge said the following (paras. 144 and 145):

“In my view, reasonable and honest people being fully conversant with all the material facts, namely, the repayment to the original buyer by the new buyer of the preliminary deposit together with the payment of an additional price, calculated per square foot, and followed by the concealing of the original agreements for sale so as to give an appearance of their only ever having been one sale, the result of which is the substantial saving of stamp duty for the original buyer and a smaller sum of stamp duty for the new buyer by not disclosing the payment of the additional price, will have no difficulty in concluding that the conduct by ordinary standards was dishonest.

In my view, the actions of concealing of agreements to avoid stamp duty are obviously dishonest by ordinary standards.  The suggestion the defendants, both admitted property speculators, very experienced in the property market, did not consider their actions had any implications for stamp duty or stamp duty never crossed their minds, bearing in mind that the amount of stamp duty to be saved was almost half a million dollars, is, with respect, an affront to common sense.”

51.  In our view, it was open to the judge to come to the finding of fact that he did, namely, that in all the circumstances the only reasonable inference to be drawn from the primary facts found proved was that the second applicant well knew that the scheme he was engineering was a dishonest scheme, one which, by an intended lack of disclosure, would evade a substantial stamp duty bill.

52.  On behalf of the second applicant, it was suggested that he would never have effectively confessed to engineering a scheme which he knew to be illegal.  That, however, was a matter for the judge.  He had the benefit of hearing all the evidence.  As the Reasons for Verdict show, the judge did give consideration to the contents of the second applicant’s cautioned statement.

53.  In respect of the issue of the second applicant’s dishonesty, it was further argued that there was no evidence that he appreciated that, in respect of the three apartments resold for a profit, that fact would not be reflected in the agreements entered into between the vendor and the secondary buyers.

54.  In his cautioned statement, the second applicant admitted that three apartments had been sold at a profit.  He admitted that the amount of the profit had been paid to himself or the first applicant.  It had not been paid to the vendor’s agent.  He admitted that the original agreements had then been torn up.  Why would the vendor state an enhanced price in the new agreements if it was not benefiting from that enhanced price?  On the findings of the judge, the nature of the scheme and the manner of its execution, could give rise to no inference other than that the second applicant must have appreciated that the secondary buyers themselves would benefit from the criminal arrangement, that benefit coming from a lesser payment of stamp duty.

Ground five: there was no sufficient evidence for the judge to conclude that all the conspirators had acted dishonestly

55.  Certain of the secondary buyers testified to the effect that they did not believe they had acted dishonestly.  The judge rejected this testimony.  He was satisfied that the secondary buyers were aware of the liability to pay stamp duty.  Even if they had not specifically discussed the issue it did not mean that, when they entered into the scheme, they were unaware of the fact that stamp duty would be saved, a saving for the second reseller, Lucky Wise Holdings, and a saving for them too.  In our view, it was a finding properly open to the judge.

Ground six: the judge failed to consider whether the offence was a single global conspiracy involving all the named conspirators or whether there had existed a series of smaller conspiracies in respect of each apartment

56.  The count of conspiracy to defraud alleged that the applicants, together with the vendor’s agent, a man named Nelson Cheng, and five other persons – they being the secondary purchasers and/or their agents – conspired together to defraud the Collector of Stamp Revenue by dishonestly, first, concealing the four initial agreements and, second, by understating the purchase price of the three apartments that were resold at a profit.

57.  On its face, the count alleged one conspiracy limited in time to a single day, the alleged agreement (which identified that conspiracy) being spelt out in specific terms.  Whether all those alleged to be members of that conspiracy were proved to be so, as opposed, for example, to being members only of some other distinct conspiracy, was a matter to be determined by having regard to the evidence.

58.  However, Ms Draycott submitted that the judge should have considered whether the conspiracy charge embraced one conspiracy only or several.  It was her submission that, if the judge had turned his attention to the issue, it would have been plain that there was no single common purpose binding all the alleged conspirators and therefore no single conspiracy.

59.  Ms Draycott’s point, as we understand it, was that there was no evidence that the secondary buyers and their agents knew of, or agreed to, anything more than the individual transactions in which they were involved.  However, as named conspirators, it was incumbent on the prosecution to prove a common agreement to defraud on the part of all of the persons named in the charge.

60.  But nothing has been put before us to demonstrate that the prosecution did not attempt to do exactly that, that is, to prove that the secondary buyers and their agents, by their manner of dealing with the applicants (who had a number of apartments for resale) and by going through the purchasing procedures they did, must have known and accepted that they were part of a scheme to cheat the revenue authorities that was greater than that encompassed by their individual transactions.

61.  The fact that, as a trial progresses, the evidence may become consistent with the existence of more than one conspiracy does not make the single conspiracy that has been charged bad in law.  In this regard, see R v Greenfield [1973] 3 All ER 1050 at 1054, per Lawton LJ:

“A charge which is not bad for duplicity when the trial starts does not become bad in law because evidence is led which is consistent with one or more of the accused being a member of a conspiracy other than the one charged.  Such evidence may make it impossible for the prosecution to establish the existence of the conspiracy charged.  R v Griffiths [1965] 2 All ER 448 was such a case.  At the end of the prosecution’s case the evidence may be as consistent with the accused, or some of them, having been members of the conspiracy which was not the one charged as with the one charged.  In such a situation the trial judge should rule that there is no case to answer.  But if at the end of the prosecution’s case there is evidence on which, if uncontradicted, a reasonably minded jury could convict the accused, or two or more of them, of the conspiracy charged despite evidence of the existence of another conspiracy, then the trial judge should let the case go to the jury.” [Our emphasis].

62.  As it was put by Brennan J in Gerakiteys v R 5 ALR 417, at 427, a judgment of the High Court of Australia:

“It is clear that an insufficiency of evidence to inculpate one alleged conspirator in a conspiracy does not entitle other conspirators to an acquittal, for the jury may find all or any of two or more alleged conspirators are guilty of a conspiracy to effect all or some of the improper purposes allege, provided those who are convicted had agreed to effect the same improper purposes.”  [Our emphasis].

63.  As to the level of involvement of the secondary buyers and their agents in the single conspiracy charge, the judge said the following (paras 93 and 94):

“I am satisfied so that I am sure that the only inference to draw is that the new buyers, by repaying the preliminary deposit to the original buyer together with payment of an additional price calculated per square foot and then entering into a provisional sale and purchase agreement with New World without mentioning the additional price, thereby giving an appearance of there only ever having been one sale, knew this was part of a scheme to avoid stamp duty both for themselves and the original buyer.

Having considered all the evidence, I am satisfied so that I am sure that the only inference to draw is that New World, the original buyer and the new buyers agreed to conceal the original agreement for sale and to understate the true selling price of the new sale so as to avoid stamp duty.”

64.  Importantly, the judge concluded:

“Even if it can be said that the new buyers were not part of the agreement, this does not preclude the existence of an agreement between the original buyer and New World to conceal the original agreement for sale so that the original buyer could save substantial stamp duty.”

65.  We accept that the judge did not deal directly with the issue of whether the single conspiracy charge embraced one conspiracy or more.  But we do not see that he was obliged to do so.  The identity of a conspiracy, as we have said, is to be found in what it is alleged the conspirators agreed.  In this regard, the terms of the conspiracy charged were clearly defined.  We do not see how, within those alleged terms, more than one conspiracy was embraced.

66.  In respect of the conspiracy charged, there was ample evidence, in our view, that the two applicants together with the vendor’s agent, Nelson Cheng, agreed to conceal the four initial agreements.  There was also ample evidence that, by arranging for the profit realised in the resale of three of the apartments to be paid privately to the applicants, they agreed to understate the true value at which those apartments had been resold.

67.  On that basis, it was open to the judge to have convicted the two applicants, as he did, of the single conspiracy charged whether or not he found that the secondary buyers and their agents had been members of that conspiracy.

68.  During the course of submissions, Ms Draycott placed considerable reliance on Gerakiteys v R (supra).  The facts of that case, however, were very different from the present one.  In that case, the charge of conspiracy to defraud alleged that over a three-year period Gerakiteys [a doctor] had conspired with a man called Harrison [an insurance agent] and “divers other persons” [who made false medical claims] to “cheat and defraud divers insurance companies”.  Deane J described the charge as being (page 431) –

“… so vague and imprecise that it is arguable that it refers to any one of a number of different alleged or conceivable conspiracies.  All of those conspiracies had a direct or indirect purpose of cheating and defrauding an insurance company or insurance companies.  That being so, the reference to purpose in the count offers little assistance in identifying the single conspiracy to which the count relates.”

69.  In the present case, however, as we have said, the charge was focused on a single day, the alleged terms of agreement being set out in specific terms.  There was nothing vague or imprecise about the charge.  It was not, on its face, open to criticism that it may refer to more than one conspiracy.  It was not bad for duplicity.

Conclusion

70.  For the reasons given, the second applicant's application for leave to appeal is dismissed.