HKSAR v. FUNG KING MAN, VIRGINIA

CACC 511/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 511 OF 2006

(ON APPEAL FROM DCCC NO. 41 OF 2006)

______________________

______________

__________________________________

REASONS FOR JUDGMENT

__________________________________

Hon Tang VP (giving the reasons for judgment of the Court):

1.  At all material times, the applicant was a District Councillor.  As such, she was entitled to be reimbursed for the rental for her office.  The applicant’s office as a District Councillor was situated at 1^st Floor, Hing Bank Building, 119 Wuhu Street, Hung Hom, Kowloon (“the Premises”).

2.  The application for reimbursement had to be supported by, inter alia, the relevant rental receipts.

3.  The applicant was convicted of four counts of furnishing false information contrary to section 19(1)(b) of the Theft Ordinance, Cap. 210.  They were the 2^nd to 5^th counts on the indictments.  The applicant was acquitted of the 1^st count of conspiracy.

4.  The charges cover four periods:

Count	From	To
2	13 September 1998	4 January 2000
3	12 December 1999	19 December 2001
4	31 March 2002	25 September 2002
5	8 September 2002	3 September 2004

5.  The trial was conducted in Chinese.  On the application of the applicant, we permitted the appeal to be conducted in English.

6.  Briefly stated, the prosecution’s case was that the applicant used 72 rental receipts purportedly signed by PW8, knowing that those rental receipts were false or misleading in a material particular, namely, that the applicant had paid the sums recorded on such receipts to PW8 as rental for the premises.  PW8 was the former wife of the applicant’s brother.

7.  Between May 1996 and May 1998, the applicant rented the Premises in her own name at the monthly rental of $7,200.

8.  Between 1 June 1998 and 31 December 2003, 4 tenancy agreements were entered into between the landlord (whose agent was Hang Seng Real Estate Management Limited (“the landlord”) and PW8.  The details of these tenancy agreements are as follows:

No	Period	Rent (HK$)
1	1 June 1998 – 19 May 2000	7,400
2	20 May 2000 – 19 May 2002	6,800
3	20 May 2002 – 31 December  2003	6,200
4	1 January 2003 – 31 August 2004	6,200

9.  At the same time, the applicant entered into four purported agreements with PW8 as follows:

No	Period	Rent (HK$)
1	1 June 1998 – 30 June 2000	1st year: 5,080
		2nd year: 5,800
2	1 January 2000 – 31 December 2001	1st year: 10,000
		2nd year: 12,000
3	1 January 2002 – 31 December 2003	9,000
4	1 January 2003 – 31 August 2004	9,000

10.  It was admitted that during the material time, the ceiling for the total expenses (including the rental expenses) that could be claimed from the District Council were:

“	Period	Ceiling for the total expenses
	Jan to Dec 98	$5,080 per month.
	Jan to Dec 99	$4,990 per month.
	Jan 00 to Nov 01	$10,000 per month.
	Dec 01	$17,000 per month.
	Jan 02 to Dec 03	$204,000 per annum.
	Jan 04 to Dec 04	$192,120 per annum.”

11.  The prosecution’s case was that the arrangement apparently made between PW8 and the applicant enabled her to make a monthly profit as follows:

12.  These gains were subsequently adjusted downward when other outgoings were taken into account.  The applicant was able to make monthly profits during the first two periods by “subletting” part of the premises to PW13 purportedly on behalf of PW8.  The rent received from PW13 together with the rent subsidy received from the District Council exceeded the rent payable to the landlord.  In the subsequent periods, the rent subsidy exceeded the rent payable to the landlord.

13.  According to PW8, she was asked to enter into the tenancy agreement in 1998 because the applicant told her that because the applicant was a member of a political party, the landlord was not willing to let the premises to her.  That allegation has been denied by the landlord.  Indeed, there is a letter dated 27 January 1998 from the landlord to the applicant offering her a new lease for 2 years commencing 20 May 1998 at the monthly rent of $7,400.

14.  The applicant’s counsel has summarized the evidence of PW8’s evidence, accepted by the learned District Judge  as follows:

“	(a)	In or about May 1998, the Appellant told PW8 that there could be problems for her to have her then existing tenancy at the Premises renewed as she was a member of the Democratic Party;
	(b)	The Appellant therefore requested PW8, who was the former wife of her younger brother, for help;
	(c)	Eventually, PW8 agreed to help, and agreed to and did sign the tenancy agreement with the Property Owner (‘the head-tenancy agreement’);
	(d)	After the signing of the head-tenancy agreement, PW8, on the face of it, sublet the Premises to the Appellant who alone negotiated with the agent of the Property Owner on the terms of both the head-tenancy and the sub-tenancy agreements, and PW8 did not participate at those negotiations at all.
	(e)	At the end, PW8 signed the sub-tenancy agreement;
	(f)	After the signing of the tenancy agreement(s), PW8 opened a new bank account with the United Chinese Bank Limited (中國聯合銀行), which to her understanding, was for the purpose of paying rent. PW8 left all the documentation relating to that bank account to the Appellant;
	(g)	About the time before or after the signing of the tenancy agreement(s), PW8 signed a number of blank sheets of paper as well as a number of standard rental receipt forms with particulars left in blank (presumably leaving them with the Appellant), though she could not remember when she had signed them or on how many occasions she had signed them, or how many such documents she had signed;
	(h)	The Appellant had informed PW8 that those rental receipts would enable the Appellant to apply for rental subsidies from the Government;
	(i)	Further, PW8 also faxed her specimen signature(s) to the Appellant so as to enable the Appellant to have chop(s) made. This would make it unnecessary for PW8 to meet with the Appellant whenever a document had to be signed by PW8;
	(j)	PW8 never paid any rent regarding the Premises to the Property Owner; nor had she ever received any rent regarding the Premises from anyone (particularly the Appellant);
	(k)	The 17 rental receipts (being the subject matter of Charge 2) were not signed by her; nor did she know why her name would appear on them; and
	(l)	In fact, during cross-examination, PW8 admitted that she had allowed the Appellant to handle the details relating to all matters pertaining to the renting of the Premises - hence she had not paid too much attention to all the details.”

15.  Mr Martin Lee, SC, who appeared for the applicant, submitted that the above findings of fact were “pretty correct”, but not entirely so, for example, the learned judge was mistaken when he said PW8 had not signed any of the 17 receipts, the subject of the 2^nd count.

16.  The thrust of Mr Lee’s submission was not directed to such errors.  His main submission was that insofar as the learned judge found that there were “虛假的分租協議”, which he translated as “sham sub-tenancy agreements”, the judge erred.  Mr Lee submitted that although the applicant had never paid any rent to PW8, it was sufficient (in the sense that it was not proved beyond reasonable doubt otherwise) if the applicant had paid the landlord and she was liable to pay or to account to PW8 for the difference between the rent stipulated to be payable to PW8 (“the stipulated rent”) and the rent payable to the landlord.

17.  Mr Lee referred us to Paintin and Nottingham Limited v Miller Gale and Winter [1971] NZLR 164, a decision of the Court of Appeal in New Zealand where the concept of sham was discussed.  There, Turner J adopted the observations of Diplock LJ, as he then was, in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802:

“

As regards the contention of the plaintiff that the transactions between himself, Auto-Finance, and the defendants were a ‘sham’, it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co v Maclure (1882) 21 Ch D 309 and Stoneleigh Finance Ltd v Philips [1965] 2 QB 537), that for acts or documents to be a ‘sham’, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.”

18.  We believe Mr Lee would accept that if the common intention of PW8 and the applicant was that the stipulated rent was not payable at all, the stipulated rent would be sham.

19.  PW8’s evidence was that she had never received any rent nor paid any.  She had no financial interest in the matter.  This is what she said under cross-examination:

「	問：	妳都講過，妳從中就冇獲益嘅？
	答：	冇獲益。」

20.  The applicant did not give evidence, but the case which was put to PW8 in cross-examination was not that the balance was payable to PW8.  It was suggested to her that PW8 had agreed that the applicant could use the balance for community service.  PW8 did not accept that so there was no evidence one way or the other.  But on her evidence, we are satisfied beyond reasonable doubt that apart from entering into the various tenancy agreements with the landlord, it was PW8 and the applicant’s common intention that the applicant would be responsible for the rent payable to the landlord and that the stipulated rent was not intended to be legally enforceable between them.  Again under cross-examination, PW8 said:

「	因為我係同佢簽過租約，我冇諗過處理囉。」T162E

And at T162O:

「	問：	總之唔使妳交租，總之事件妥當，妳就唔理呢啲租務嘅嘢喇？
	答：	係。」

21.  Mr Lee submitted that the learned judge had overlooked the following evidence of PW8:

“	(m)	PW8 understood (理解) her role (角色) to be that of a principal tenant (二房東) (See PW8’s evidence in chief at p. 107K - N; and under cross examination at p. 183G);
	(n)	The purpose (用途) of the rental receipts signed by PW8 in blank (簽空白的租單) was to enable the Appellant to claim rental reimbursement (租金津貼) (See evidence-in-chief at 135K - L and 137Q);
	(o)	PW8 was the tenant (承租人) with the obligation to pay rent (要負責交租), but she handed over her responsibility to the Appellant (交俾佢負責) (See cross-examination at p. 183N - O);
	(p)	So long as PW8 did not have to deal with rental matters (唔需要你處理租務問題), she would give full authority to the Appellant to deal with the matter for her (全權交俾佢去幫你搞、幫你處理) (See cross-examination at p.183L-M)
	(q)	As well as the evidence referred to in para. Error! Reference source not found. above.”

22.  However, we do not believe such evidence helped the applicant.  Mr Lee’s submission is that insofar as PW8 had entered into the tenancy agreement with the landlord, that tenancy agreement must have legal effect.  It is true that vis-à-vis the landlord, PW8 would be liable to pay rent, and that she assumed the role of principal tenant.  In chief, she said:

「	幫馮競文租個辦事處囉，即係角色應該係二房東囉，我理解。」

And in cross-examination T167:

「	問：	妳同馮競文嘅嗰個理解或者嗰個默契喺呢件事就係，只要妳唔使交 – 即係喺租務上要負責任何嘢，妳樂意幫佢忙去做呢個二房東。
	答：	呢個我同意。」

23.  But in context, it is clear that she had no interest in the tenancy at all.  Vis-à-vis the applicant, PW8 was not to profit from it, nor suffer any loss.

24.  The artificiality of the stipulated rent could be seen when the applicant entered into the new agreement with PW8 commencing 1 January 2000 at a monthly rent of $10,000 when her previous agreement with PW8 at the rent of $5,800 per month would not have expired until 30 June 2000.  The increased rent of $10,000 matched the increased rent subsidy which the applicant was able to claim.

25.  More importantly, the rental receipts were false in a material particular.

26.  Take charge 3 as an example.  There the rent receipt recorded receipt by PW8 of $10,000 a month from the applicant, from January 2000 to December 2001.  That was the stipulated rent for that period.  However, during that period, the applicant paid $7,400 per month between January and 19 May 2000, and $6,800 per month from 20 May 2000 to December 2001 to the landlord.  So if, on the evidence, the court was satisfied beyond reasonable doubt that PW8 and the applicant never intended that the stipulated rent be paid, then the receipts must on any view be regarded as false in a material particular.  That is so, even if, as Mr Lee contended, that the applicant should be regarded as having paid part of the stipulated rent directly to the landlord on behalf of PW8.  The effect of Mr Lee’s submission is that if between January 2000 and 19 May 2000, the applicant had paid $6,800 per month directly to the landlord, and only $3,200 directly to PW8, then a receipt by PW8 for the entire $10,000 could not be regarded as false in a material particular.  Even if so, we do not accept that if the applicant had paid $6,800 to the landlord, and owed $3,200 to PW8, assuming that $3,200 was payable, the receipt would not have been false in a material particular.  As Mr David Leung has pointed out, and it was an admitted fact, the applicant was only entitled to be reimbursed “以實報實銷及先墊後付的方式”.  In any event, the judge was of the view, and we agree, that the difference between the stipulated rent and the rent payable to the landlord was never payable.

27.  The first charge further illustrates our point.  There, the rent payable to the landlord was $7,400 whereas the stipulated rent was $5,000.  Mr Lee submitted that under the 1^st agreement between PW8 and the applicant, the entire premises had been sublet to the applicant.  The language of the tenancy agreement supports that view.  So if the stipulated rent was genuine PW8 would be out of pocket.  But on the evidence it was clear that was never the intention.  Moreover, the evidence showed that the applicant had purported to sublet part of the premises to PW13 on behalf of PW8.  That must have been on the basis that the applicant was not the sub-tenant of the entire premises.  In any event, what is important is that on the evidence, PW8 had no financial interest in the matter and was not responsible for the difference between $7,400 and $5,000.  In other words, even if the applicant could not find a sub-tenant, the applicant would be liable to pay the difference.  As it turned out, the applicant collected $5,000 rent from PW13 each month, and the receipts which she caused to be issued to herself were false in a material particular insofar as they purported to show that she had paid the full stimulated rent to PW8.  She paid $7,400 a month to the landlord and made a profit in the process.

28.  Mr Lee submitted that the applicant was PW8’s agent and as such she was liable to account to PW8 for any profit arising out of the sub-tenancy agreements.  The applicant, as was within her right, did not give evidence.  In the absence of any evidence from her, any suggestion that she was the agent of PW8 lacked factual foundation.  It was also inconsistent with the applicant’s case which was put to PW8 on cross-examination.  We see no basis upon which any court could come to the conclusion that the applicant was liable to account to PW8 at all.

29.  Mr Lee also submitted that since PW8 might well be a tainted witness, the judge ought to have evaluated her evidence on that basis.  That is because the sub-tenancy might have been

“	… the direct result of a conspiracy taken PW8 and the appellant - which would make PW8 a knowing (though reluctant) co-conspirator;”

30.  Mr Lee referred to R v Chu Ip-pui [1997] HKLRD 549 which is authority that whether a judge should give any warning to the jury or himself that it was dangerous to convict on the evidence of an accomplice, and if so, its strength and terms must depend on the content and manner of the witness’s evidence, the circumstances of the case and the issues raised.  Here PW8’s evidence that she was not nor meant to be paid the stipulated rent was not in issue.  That being the case, the fact that the judge had not given himself any apparent warning cannot affect the soundness of his decision.

Sentence

31.  The respondent was sentenced to imprisonment for 18 months in respect of each of the charges.  The sentences were ordered to be served concurrently.

32.  Mr Lee submitted that the learned judge acted contrary to well-established sentencing principles by not giving any discount on the starting point of 18 months, even though he seemed to think that there were strong mitigating factors.

33.  In the The Queen v Chan King-yee [1988] 2 HKLR 183, the court said:

“

11.

… It has frequently been stated in this Court that it is helpful, and the proper course, to start with an appropriate sentence without regard to the relevant mitigating factors and then indicate what discount, if any, is being made on account of those factors.” per Clough J.A at 185H.

34.  The judge not having followed this well-established practice, we were entitled to approach the question of sentence afresh.

35.  We agree with the judge that these offences were well planed and showed clear criminality on the part of the applicant.  The applicant had made a substantial profit (about $150,000).

36.  We also agree with the judge that the applicant had served the community for many years and a sentence of imprisonment of 18 months for the appellant was a very severe punishment.

37.  Mr Lee cited The Secretary for Justice v Lin Min Ying and Anor [2002] 2 HKLRD 823 for comparison.

38.  There the 1^st and 2^nd defendants, husband and wife, were convicted of 2 charges of furnishing false information, contrary to section 19(1)(b) of the Theft Ordinance, Cap. 210.  They were both sentenced to undertake 240 hours of community service.  The court dismissed the Secretary for Justice’s application for a review of sentence.  There the defendants entered into false tenancy agreements to hide the fact that they were the owners of the property in order to gain approximately $280,000 which was the difference between the higher private tenancy allowance and the house purchase allowance.  The court concluded:

“

30.

Having weighed the various factors to which we have already referred, we consider that whilst the sentence imposed on each respondent by this very experienced Judge was undoubtedly a merciful one, and that the respondents would have had no valid complaint if they had been sentenced to an immediate term of imprisonment, the interests of justice are not such as to require this Court to allow this application.”

39.  Lin Min Ying is not authority that an immediate custodial sentence was inappropriate.

40.  The applicant had already served over 8 months of her sentence, which was equivalent to about 13 months, given the one-third remission for good behaviour.  In the circumstances, we agreed with Mr David Leung’s submission, despite his primary position that the sentence was neither wrong in principle nor manifestly excessive, that justice would be served if we substitute a sentence which would result in her immediate release.

Conclusion

41.  For the above reasons, we refused leave to appeal against conviction.  We gave leave to appeal against sentence and ordered that the sentence be reduced so that the applicant should be released on the same day.