HKSAR v. YU WAI TUNG

CACC 271/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 271 OF 2002

(ON APPEAL FROM HCCC NO. 249 OF 2001)

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REASONS FOR JUDGMENT

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Hon Woo JA (giving the reasons for judgment of the Court):

1. On 17 May 2002, the applicant was convicted before Deputy High Court Judge E Toh and a jury on two charges of conspiracy to defraud and was sentenced to a total of three years' imprisonment for the two charges. He applies for leave to appeal against conviction, his application for leave to appeal against sentence having been dismissed on 21 January 2003 upon his filing a notice of abandonment.

2. At the conclusion of the hearing on 17 June 2003, we dismissed the application and announced that we would hand down our reasons later. The reasons appear below.

Grounds of appeal

3. In the perfected grounds of appeal against conviction prepared by Mr Ian Lloyd, for the applicant, two grounds of appeal are raised, namely,

(1) The verdicts of the jury are inconsistent and perverse.

(2) The trial judge misdirected the jury in relation to certain factual evidence.

The charges

4. Ground (1) is based on the fact that while the applicant at the trial faced three counts which were very similar, the jury found him not guilty on the first count but guilty on the second and third counts.

5. Each of the three counts was for a conspiracy to defraud, contrary to common law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200. The particulars of offence of the first count were that between 1 June 1997 and 31 August 1997, in Hong Kong, the applicant conspired with Li Yucheng, Li Runquan, Ho Wai-fun and other persons unknown, to defraud the Kwangtung Provincial Bank, the Bank of Communications and the Kincheng Bank Corporation ("the Banks") by dishonestly:

(a) causing Ultragrace Limited ("Ultragrace") to apply for letters of credit in favour of Keep Mount (Holdings) Limited ("Keep Mount");

(b) procuring the Banks to issue letters of credit in favour of Keep Mount;

(c) submitting false documents to the Banks purportedly evidencing genuine underlying commercial transactions between Ultragrace and Keep Mount; and

(d) causing the Banks to pay the proceeds of the letters of credit in the total sum of $30,985,000 Hong Kong currency to Keep Mount.

6. The second count was for the period between 1 October 1997 and 31 October 1998 during which the applicant conspired with Li Runquan and Ho Wai-fun and others named and other persons unknown, to defraud the Kwangtung Provincial Bank, the Bank of Communications and the Bank of China with similar particulars of offence as in the first count save that Ultragrace and Commercial Power Investment Limited ("Commercial Power") instead of Keep Mount, were involved in the letter of credit ("LC") transactions.

7. In the third count, the particulars of offence alleged that the time involved was between 1 June 1998 and 31 October 1998, and that the applicant conspired with Li Runquan and Ho Wai-fun, with named persons and other persons unknown, to defraud the Bank of Communications. The parties to the LC transactions involved under this count were Ultragrace and C & W Development Limited ("C&W").

8. Altogether, 22 LC transactions were involved, four transactions under count 1, 14 transactions under count 2 and four transactions under count 3. While the four LC transactions under count 1 involved proceeds of the LCs totalling $30,985,000, the 14 transactions under count 2 involved proceeds totalling $50,804,647, the four transactions under count 3 involved proceeds totalling $20,794,000.

Ground (1)

9. The basis of ground (1) is stated succinctly by Mr Lloyd as follows:

"The applicant was charged in the same indictment with three counts of Conspiracy to Defraud which counts were similarly phrased and except as to the amounts of money involved most of the dates, banks, companies and conspirators were over-lapping and common. Ultragrace, Li Runquan and Connie Ho [Wai-fun] were involved in all three counts. Nearly all of the prosecution's evidence was agreed with the exception of the evidence of a named conspirator Connie Ho (PW2). It is respectfully submitted that the prosecution's case against the applicant on all three counts stood or fell on the evidence of Connie Ho, an immunized witness."

10. Both Mr Lloyd and Mr Reading SC, for the respondent, agree that the applicable statement of the law is contained in HKSAR v Chan Shek Wai, CACC 472/2001 (2 August 2002, unreported), where the Court referred to the cases of R v Durante [1972] 56 Cr App R 708 at 714 and R v Hunt [1968] 52 Cr App R 580 and stated:

"39. So far as general principle is concerned, the burden of showing that verdicts are inconsistent falls squarely upon the applicant. Furthermore, not only must inconsistency be established but this must be shown to have been such as to call for interference by an appellate court."

11. In order to examine the merits of this ground of appeal, it is necessary to examine closely how well-founded is the submission of Mr Lloyd referred to above.

12. Mr Lloyd points out that the modus operandi of all the 22 LCs under the three counts was the same, ie, that an LC was applied for by a company in favour of an associated company based on a bogus underlying commercial transaction and the proceeds from the LC were refunded by the beneficiary of the LC to the LC applicant. He also stresses that the prosecution drew no distinction between all the 22 LC transactions. Based on these two matters, Mr Lloyd argues that the acquittal on count 1 is inconsistent with the conviction on both counts 2 and 3.

13. From the admitted facts agreed by both the prosecution and the defence pursuant to section 65C of the Criminal Procedure Ordinance, Cap 221, it can be seen that the applicant accepted that the underlying commercial transactions in respect of which the 22 LCs were opened by the banks concerned and the proceeds paid by them did not relate to any genuine underlying business transaction. The documents submitted by the related companies in support of the applications for the LCs and the draw-down of the proceeds of the LCs all contained false information. These admitted facts did not mean that the applicant at any time material to the LC transactions knew that the transactions were bogus and the documents involved contained false information. They only meant that the applicant admitted and accepted the falsehood at the trial, as borne out by the documents produced. Moreover, the admitted facts did not mean that the applicant participated in the conspiracy regarding these 22 LC transactions to defraud the banks. Those were the issues that the judge in her summing-up specifically left for the jury to decide.

14. As submitted by Mr Lloyd, and the judge also so directed the jury, Connie Ho Wai-fun and Li Runquan were the co-conspirators under the three counts and Connie Ho was the key witness whose evidence implicated the applicant on all the three counts. Connie Ho was a witness who had been granted immunity to give evidence and the judge specifically cautioned the jury:

"You must assess her evidence very cautiously."

15. It was in evidence that Li Runquan was the majority shareholder of both Keep Mount and Ultragrace. It was admitted by the applicant that he was working for Keep Mount and Ultragrace with the title of financial controller. Connie Ho was working under the applicant as the accounting officer of both Keep Mount and Ultragrace. However, it is important to note that in the admitted facts, the durations of the applicant's employment with Keep Mount and Ultragrace were as follows:

(a) Keep Mount, 18 October 1993 to 31 August 1997; and

(b) Ultragrace, 1 May 1997 to 31 December 2000.

16. On the other hand, Connie Ho worked for Keep Mount between 1993 and 1997, but from October 1997 she started to work for Ultragrace up to the year 2000. This shows that when the applicant started to work in Ultragrace on 1 May 1997, Connie Ho was still working in Keep Mount. It is also important to note that the period of time charged under count 1 is 1 June 1997 to 31 August 1997, when the applicant was working in Ultragrace whereas Connie Ho was still working in Keep Mount.

17. In all the four LC transactions charged under count 1, Ultragrace was the applicant and Keep Mount was the beneficiary of the LCs. The arrangement, according to the evidence, was that Connie Ho prepared all the false documentation for the payment of the proceeds of the LCs on behalf of Keep Mount. After Keep Mount received the proceeds, they would be refunded to Ultragrace and in respect of transaction 3 the proceeds were paid to two securities companies one of which was Tartan Securities with whom Keep Mount had an account and the defendant had also an account. One of the witnesses for the defence, Mr James Khoo, gave evidence that the shares kept in the defendant's account with Tartan Securities were held in trust for Keep Mount.

18. Regarding the false transactions under count 1, the judge told the jury (p 15N to p 16K of the record):

"Now, I come to the most important witness in this trial and that is the evidence of Connie Ho. As I have said, she is an immunity witness and so you must assess her evidence very cautiously. Now, she says that she worked for Keep Mount (Holdings) between 1993 to 1997 and she went to work for Ultragrace from October 1997 to the year 2000. She said she worked with the defendant [applicant] in Keep Mount and Ultragrace and her immediate boss was the defendant, who was the financial controller.

She said that in 1995 she started doing the accounts of Keep Mount (Holdings) and the LCs, the letters of credit, and she said the defendant gave her instructions regarding the letters of credit for Keep Mount (Holdings) and that the defendant would tell her who the beneficiary company and the amount of the letters of credit to be applied for. She says that Li Runquan was a director, both of Keep Mount (Holdings) and Ultragrace, and that he was a secretary for the San Shui Municipality in Mainland China, a powerful person, and that the defendant reported directly to Li Runquan and if she submitted documents, she would first submit the document to the defendant who will then submit it to Li Runquan.

She said that in both Keep Mount (Holdings) and Ultragrace, she made monthly reports; one list was for LCs in which Ultragrace was the beneficiary, and she made another list in which the letters of credit were opened by Ultragrace. She said she handed the list of letters of credit which Ultragrace applied for, to the defendant, but the list for letters of credit which favoured Ultragrace she did not hand to the defendant."

19. It can be seen, therefore, that what Connie Ho was talking about were the LC transactions in which Keep Mount was the applicant and not the beneficiary. On the other hand, count 1 relates to the four LC transactions in which Keep Mount was the beneficiary and Ultragrace was the applicant. The period of time referred to in count 1, being 1 June 1997 to 31 August 1997, was a period in which Connie Ho was not working in Ultragrace.

20. Apart from asking the jury to deal with Connie Ho's evidence very cautiously, the judge also told them to consider the case against the applicant on each count separately. She said at p 3E of the record:

"Now, although the defendant faces a total of three counts, you must consider the case against and for the accused on each count separately. That means, just because you find him guilty or not guilty of one count, it does not necessarily follow that he is guilty or not guilty of the other counts. You must reach separate verdicts on each count, having focused on each separately and having formed a separate position about each count."

21. Connie Ho's evidence was that the applicant signed the journal vouchers relating to the four transactions under count 1 but she admitted that these were made up only subsequently, long after the transactions and they were for Keep Mount's auditor. We will return to this matter later. While Connie Ho said the applicant signed these journal vouchers, the judge reminded the jury of the defence case as follows:

"The defence, on the other hand, says that Connie Ho had framed the defendant because she hated him over his actively pursuing the debt which was owed by her husband's company. She wanted to diminish Li Runquan's role out of loyalty to him and she wanted to point the finger at the defendant in order to get immunity from the ICAC, so she would go unpunished for her part in this case." (p 2Q)

"Also bear in mind what Mr Adams has said about the inferences that you can draw from Ho's evidence and from the documentary evidence, and whether Connie Ho was in fact, hiding things from the defendant and working behind his back in conjunction with Li Runquan." (p 21D)

22. Indeed, in the summing-up, the judge dealt with the evidence in respect of each of the 22 LC transactions. She first dealt with the four LC transactions under count 1. Under count 2, there were 14 transactions, and in transactions 5 to 13, totalling 9 transactions, Ultragrace was the applicant and Commercial Power was the beneficiary. In the remaining five transactions, transactions 14 to 18, the position was reversed in that Commercial Power was the applicant and Ultragrace the beneficiary. The judge summarised the evidence regarding each of the 14 transactions to the jury. Generally, Connie Ho's evidence was that sometimes the defendant told her to apply for the LC which resulted in Commercial Power receiving the proceeds and refunding them to Ultragrace. The applicant had signed or initialled on the bank receipt vouchers prepared by Connie Ho showing the full or partial refund from Commercial Power. In respect of transactions 14 to 18, it was Commercial Power who applied for the LC in favour of Ultragrace, and Ultragrace refunded the proceeds to Commercial Power. In most of these transactions, the defendant initialled on the bank payment voucher, evidencing the payment of the proceeds of the LCs by Ultragrace to Commercial Power.

23. In respect of count 3, the judge also summarised the evidence of Connie Ho relating to each of the four transactions, numbered 19 to 22, to the jury. In all these four LC transactions, Ultragrace applied for the LC and C&W was the beneficiary. In some of the cases, the general ledger transaction voucher, showing the refund from C&W, was initialled by the applicant.

24. Connie Ho's evidence was that when Ultragrace was short of funds, she would go to tell the applicant and the applicant would go and ask Li Runquan, and then the applicant would tell her to see which banks still had LC limit so that they could apply for LC from that bank. She said that that was the habit of doing things. This evidence appeared to relate to counts 2 and 3 only because count 1 related only to LCs applied for by Keep Mount, as opposed to Ultragrace, which had applied for 13 LCs (9 LCs under count 2 and 4 LCs under count 3) when at all the material times, she was working for Ultragrace. She could not have been instrumental in Ultragrace's application for the LCs under count 1, because at the time she was not working for Ultragrace. It is therefore clear that the jury was considering the case against the applicant separately on count 1, count 2 and count 3 respectively as they were told by the judge. They were discerning and might have arrived at the conclusion that the evidence of Connie Ho against the applicant on count 1 was not as strong as that against the applicant on counts 2 and 3. Or alternatively, they might have found a reasonable doubt in her evidence on count 1 against the applicant, because she was at the relevant time not working for Ultragrace which applied for the four LCs under count 1. The evidence reasonably justified either or both conclusions.

25. Mr Reading has very helpfully produced the List of Exhibits used at the trial relating to the four LC transactions under count 1. He draws our attention to the vouchers signed or initialled by the applicant relating to these LC transactions, which were described as "Journal Type" and which were dated on and after 15 November 1997. These documents came into existence long after the dates relevant to the four LC transactions under count 1. When Connie Ho was asked about these journal vouchers, she said (p 70N of the Transcript):

A.	That year, after we got the year-end report at the end of the final year, Mr Yu [the applicant] found that there was something wrong with the report and he wanted me to ask the auditor to cause a careful check because the result of both the sales and purchase entry in the report was zero. He told me to ask the auditor if we could supplement information for purchase and sales for accounting purchase [sic] and the auditor said that it would be okay if we could arrange the documents, and so this document was - the making of this document was supplemented.
Q.	So the purpose of this is to show the auditor that there was a purchase by Ultragrace of the goods mentioned ...
A.	Yes."

26. This is another valid and powerful distinction between the evidence on count 1 as compared with the evidence on counts 2 and 3. The journal vouchers relevant to count 1 signed by the applicant were documents aimed at the auditor for accounting purposes and came into existence long after the LC transactions. Regarding the 18 LC transactions under counts 2 and 3, the defendant's signature or initials appeared on the bank vouchers and ledger vouchers in the course of the transactions that showed (1) the receipt of the refund of the proceeds of the LC even when Ultragrace was the applicant (as opposed to the beneficiary) of the LC and (2) the payment of the proceeds of the LC by Ultragrace as refund to Commercial Power when Ultragrace was the LC beneficiary and Commercial Power was the LC applicant.

27. In our judgment, therefore, the applicant has not even started to make out a case that the verdicts of not guilty of count 1 but guilty of counts 2 and 3 are contradictory or inconsistent, as submitted by Mr Lloyd. In view of the evidence of Connie Ho as analysed above, we are satisfied that the two different verdicts can stand together and the jury were well justified to return such verdicts.

Ground (2)

28. Ground (2) complains that the judge misdirected the jury in relation to certain factual evidence. The basis was what the judge stated to the jury in the summing-up (at p 16D), as follows:

"... the defendant reported directly to Li Runquan and if she submitted documents, she would first submit the document to the defendant, he will then submit it to Li Runquan."

29. Mr Lloyd compares the judge's above statement with the evidence of Connie Ho at p 55F-H of the transcript of her testimony:

Q. Would you prepare any monthly documents for referral to Mr Yu [the applicant] and Mr Li [Runquan]?

A. Most of the documents would be submitted to Mr Yu first.

Q. For onward submission to Mr Li?

A. Yes.

Q. As far as any documents you would prepare every month, what sort of documents would they be?

A. Normally, month-end reports of the accounts of the company. " (Emphasis added)

30. Mr Lloyd contends that the above testimony of Connie Ho is at variance with the judge's said statement. He argues that the testimony is at least ambiguous that the applicant physically handed over the documents to Li Runquan, as the judge's statement in the summing-up would have lead the jury to believe. We disagree. Connie Ho's testimony clearly says that the documents were submitted to the applicant first for onward submission to Mr Li. The judge did not even use the term "hand over"; she only said that the applicant "will then submit it to Li Runquan".

31. There is no substance in ground (2).

Conclusion

32. For the reasons given above, the application for leave to appeal against conviction must be dismissed.