HKSAR v. CHU KAM YIU AND OTHERS

FACC No. 3 of 2002

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 3 OF 2002 (CRIMINAL)

(ON APPEAL FROM CACC NO. 182 OF 2001)

_____________________

_____________________

________________

J U D G M E N T

________________

Mr Justice Bokhary PJ :

1. I agree with the judgment of Mr Justice Silke NPJ and with what Mr Justice Chan PJ has added in concurrence therewith.

Mr Justice Chan PJ :

2. I agree with the judgment of Mr Justice Silke NPJ.

3. The respondents were charged with conspiring together to engage in bookmaking. Bookmaking is defined in s.2 of the Gambling Ordinance to mean the soliciting, receiving, negotiating or settling of a bet by way of trade or business. Although the particulars of the offence refer to receiving, negotiating and settling, the main contention in this appeal is on the receiving of bets since it is accepted that the negotiating and settling of bets here necessarily pre-supposes the receiving of such bets.

4. The word "receive" cannot be read in isolation and must be construed in the context of the provision. What is it that the person is receiving? For the purpose of s.2, a bet. A bet involves a wagering contract between two parties: each may either win or lose. See Hawkins J in Carlill v. The Carbolic Smoke Ball Company [1892] 2 QBD 484, 490. The essential elements of a bet consist of "an uncertain event, the possibility of loss, the holding of opposite views, an interest in winning or losing". See Lord Wilberforce in Seay v. Eastwood & another [1976] 3 All ER 153, 155g. Hence, in my view, to make a person a bookmaker under the Ordinance, it must first be proved that he is a person receiving a bet from another person, a punter, and accepting it as his own bet which results in a relationship between the two whereby they take opposite positions in respect of an uncertain event so that if one wins, the other loses.

5. If receiving a bet were the only element of bookmaking, many might find themselves easily regarded as bookmakers since people do sometimes bet among themselves on a friendly basis. That is clearly not the intention of the legislation. Hence, for the purpose of the Ordinance, it is also necessary to prove that the person alleged to be engaged in bookmaking is receiving bets by way of trade or business. What amounts to a trade or business depends on the facts of each case. An important factor is whether it involves the opportunity of making profit or the risk of incurring loss. Other factors include the set-up and the operation in question, the nature of the activities, the records kept and equipment used.

6. I agree with the Court of Appeal's conclusion that the evidence adduced before the trial judge falls short of proving beyond reasonable doubt that what the respondents had agreed to do was to receive, negotiate or settle bets by way of trade or business.

Mr Justice Silke NPJ :

Introduction

7. Three men - Chu Kam-yiu (D1); Chow Chi-wang, Addy (D2) and Hon Pui-tak (D3) appeared for trial in the District Court to face the following charges : as against all three, conspiracy to engage in bookmaking contrary to s.7(1)(a) of the Gambling Ordinance, Cap. 148 - "the Ordinance" - and ss159A(1) and 159C of the Crimes Ordinance, Cap. 200. The particulars, as amended, alleged that they, between 26 February 2000 and 21 June 2000, conspired together to engage in bookmaking by : (a) receiving bets on local horse racing; (b) negotiating bets with other bookmakers; (c) laying off bets they received to other bookmakers (including one called Ng Kit-lin) as well as the Hong Kong Jockey Club; (d) settling bets with people who placed bets with them; and (e) settling bets with other bookmakers (including Ng Kit-lin) as well as the Hong Kong Jockey Club to whom they had laid off bets.

8. Hon Pui-tak faced an individual charge of, being an owner, knowingly permitting premises to be used as a gambling establishment contrary to s.15(1)(a) of the Ordinance : this related to 21 June 2000 and the premises at Flat D, 7/F, Phase III, Harrison Court, 7 Man Wan Road, Homantin. At the conclusion of the trial before His Honour Judge Wong all were convicted of the charges laid against them.

9. They appealed. The Court of Appeal, having invited argument on the first of the four grounds of appeal which read :

"... Whether the bets were received by the 2nd defendant in the sense of accepting them as his own so that he would have a stake in it i.e. an interest in winning or losing, or the 2nd defendant was merely acting as a conduit pipe passing the bets on to the bookmakers for the callers".

adjourned to consider the issue without then being addressed on other grounds contained in the notice of appeal. The Court did not require those other grounds to be canvassed before them as they, on 18 January 2002, allowed the appeals concluding that

"As we said earlier, the 2nd defendant made no gain and there was no personal stake. There was no bet until the bookmaker accepted the bets".

And again :

"In our view, the proof that the 2nd defendant accepted bets in the course of trade or business or he was engaged in bookmaking activities is not beyond reasonable doubt."

10. On 26 February 2002 the prosecution obtained from the Court of Appeal, under s.32(2) of the Hong Kong Court of Final Appeal Ordinance, Cap. 484, a certificate which certified two points of law of great and general importance. They were :

"I. For the purpose of proving the relevant elements of 'bookmaking' as defined in s.2 of the Gambling Ordinance, Cap. 148 :-

i) where in relation to a charge of 'bookmaking' [contrary to s.7(1) of the Gambling Ordinance] or 'conspiracy to engage in bookmaking' [contrary to common law and s.7(1)(a) of the Gambling Ordinance, Cap. 148] it is alleged that the conduct of the defendant constitutes 'receiving' a bet, is it necessary for the prosecution to also prove that the defendant had not only physically received the bet, but had accepted the bet as his own, so that he had a stake in the outcome of the event in respect of which the bet was made?

ii) in relation to the element of 'by way of trade or business' is it necessary for the prosecution to prove, in regard to the person receiving the bet :-

(a) that the opportunity for gain or the risk of loss, arose immediately upon him physically receiving the bet from the punter?

(b) that his position in respect of the outcome of the event upon which the bet was made, was the opposite to the position of the punter?

II. Where it is alleged that the conduct of a person constitutes betting with a bookmaker [an offence contrary to s.8 of the Gambling Ordinance] on the outcome of an event, in circumstances where the person is in Hong Kong at the time that he makes the bet, whether or not the event is to occur in Hong Kong, is it necessary for the prosecution to prove that the bookmaker was also in Hong Kong at the time that the bet was made?"

11. On application by the Prosecution the Appeal Committee extended time and granted leave to appeal to the Court of Final Appeal on those points on 19 April 2002, being of the view that the matter merited consideration by this Court.

12. Leave is now sought as Mr John Reading SC, who with Mr Alex Lee, appeared for the appellant, put it, to abandon the second point in the light of the provisions of the Gambling Amendment Ordinance 2002, which amended s.8 of the Ordinance to make it an offence for anyone to bet with a bookmaker whether the bet is received within or outside Hong Kong. The second point has therefore ceased to be of great and general importance. That point was not pursued.

Background

13. Officers of the Independent Commission Against Corruption - "ICAC" - had Hon's flat at Harrison Court under surveillance from September 1999 until 21 June 2000 when they carried out a raid on it. They had seen Chu and Chow visiting those premises on race days on a number of occasions. The 21 June was a race day and the raid was carried out shortly after the third race. Chu and Chow threw pieces of paper out of the window of the flat. These pieces of paper - a racing booklet and five pieces of paper - were recovered and, at trial, both the prosecution and defence called experts who had considered them. Both the experts were of the view that the pieces of paper could be either records of bookmakers or records of punters : the prosecution expert thought them more likely to be records of bookmakers, while the defence expert thought them more likely to be punters' records. The trial judge accepted the records as being bookmakers. It was not contested that the pieces of paper did record bets. There was evidence the five pieces of paper had red and blue ink markings, discounts and wins and losses were calculated. Apart from the three men charged, two other men only, Kwai Chai and Tony, both of them long standing friends of Chow, were shown as bettors - "the outsiders". Hon's flat was searched and another racing booklet, further pieces of paper, also with numbers and names written in different coloured inks, and a calculator were found. There was no evidence that there was more than one telephone in the flat. A mini disc recorder containing a mini compact disc together with a Sony ear-piece and an Aiwa ear-piece were found in a bag in a bedroom of the flat. That disc had been used and reused and recorded over and had conversations on it. Four segments of audio recording were retrieved. There were many other unretrievable segments on the disc. The four retrieved were not in sequence. The trial judge relied on these segments, amongst other evidence, to come to his findings of guilt. The Court of Appeal thought that, reliance on the discs for the purpose of excluding Chow's defence of being a mere conduit pipe passing all bets received to bookmakers, would be dangerous.

14. Further there was found in Hon's bedroom three Hang Seng Bank transaction advice slips dated 27 January and 24 February 2000 and 16 June 2000. When Chow's office was searched a further two slips were found dated 8 and 15 June 2000. There was also found the manual for the mini disc recorder.

15. When Chu's home and office were searched two further pieces of paper were found. Chow in evidence said that one of them related to a race meeting on 13 May and that the character "gai" on it means that Chu asked him to place bets on his, Chow's, telebet account.

16. There was evidence that Chu had opened a telebet account with the Jockey Club on 15 June 2000 and Chow had had a similar account for some time.

17. Madam Ng Kit-lin, referred to in the particulars of the conspiracy charge, is a bookmaker and gave evidence under immunity. She described herself as a broker who receives bets from others and passed the bets to bookmakers on a commission basis. Hon was one of her customers. He introduced Chow to her. She said the Hang Seng Bank slips dated 27 January, 24 February and 16 June 2000 were for settlement of Hon's bets and the ones dated 8 and 15 June 2000 had been paid into her account, and that of her son, by Chow. Hon, she said, told her he asked Chow to make payment on his behalf. In her business she would note the name of the client, the number of the race he wanted to bet in, the number or numbers of the horse, the type of the bet and the amount.

18. From all the evidence it was clear that wagering on races was going on in Flat D. Chow, the only one of the three to give evidence, confirmed this. Without going into his evidence in detail it showed that during the period of the conspiracy he placed bets for himself and for others mainly through bookmakers. He received discounts from those bookmakers. He, at times, used his telebet account. He sometimes added his own bets to those he had received from others before placing them with a bookmaker. All three men, while together, bet from Hon's flat. Sometimes Chu's telebet account was used. Any discount Chow received was passed back to the person placing the bet with him. He sought to explain the various markings on the five pieces of paper recovered by the ICAC officers as being the recording of bets he placed with bookmakers either on his own behalf or on behalf of the outsiders. The outsiders had what he described as "good tips" as both studied the ratings of horses, the results of morning gallops and the form of the horses in a race. On occasions the bookmakers he dealt with would not accept the full amount of the wager so he reduced his betting sum crossing out the first amount and inserting the sum the bookmaker accepted. One bookmaker, Ah Wing, gave a better discount than Ah Ming, another with whom he dealt. He went into the details of the various figures appearing on the pieces of paper, the type of bet they represented and who was making the bet. Having written down the bets he was going to have he used the mini disc recorder when making his telephone calls to ensure he made no mistake. He denied that he was bookmaking. Quite simply : "the conduit pipe" defence. The evidence here was nothing like as strong as it was in the unreported R v. Tang Tak-ming (Magistracy Criminal Appeal No. 760 of 1988).

The issues

19. The Ordinance in its s.2 defines bookmaking as meaning "soliciting, receiving, negotiating or settling of a bet by way of trade or business ...". It defines gambling as including "gaming, betting and bookmaking". Generally under the Ordinance gambling is unlawful. There are authorised exceptions. Section 7 of the Ordinance, as it then stood, provided that :

"(1) Any person who -

(a) engages in bookmaking, whether on one occasion or more than one occasion;

(b) holds out in any manner that he solicits, receives, negotiates or settles bets by way of trade or business; or

(c) in any capacity assists, either directly or indirectly, another person in bookmaking

commits an offence ..."

20. On the evidence wagers were received, negotiated and settled within the narrow and literal sense of those words. Bets were telephoned in by the two friends and the respondents' own bets were decided by the three of them. In some instances negotiations took place between the bookmakers with whom the bets were being placed and Chow and, in turn, the bettor concerning the amount of the bet. Special discount, as opposed to the usual bookmakers discounts were given, by prior arrangement made between Chow and Kwai Chai. But was that a conspiracy to engage in bookmaking by the three respondents?

21. It is important to note that the respondents were not charged under s.8 of the Ordinance which then provided, simpliciter, that anyone who bets with a bookmaker commits an offence. As I have said, it now provides that that section covers a bet whether it is received within or outside Hong Kong. Nor were they charged with conspiracy with reference to any other provision of s.7(1). Nor were they charged with conspiracy with others, only with themselves.

22. Mr Reading places great emphasis on the word "receiving" in the definition of bookmaking and argues that this is what happened here. Once, he says, a bet is received then it is in the course of trade or business and the receiver is engaged in bookmaking. The evidence shows that bets were received, that bets were negotiated and bets were settled. Further, that bets were laid off. All these, though that last is not contained in the statutory definition of bookmaking, were clearly indicative of a bookmaking operation in progress.

23. To first deal with the laying off point. This is done to, in effect, insure the bookmaker who has taken a bet against too heavy a loss from his commitments on a particular horse or from a particular bettor. But, as the expert called at trial for the defence said, laying off is not done very often. Here all the bets received were passed on to either bookmakers or the Hong Kong Jockey Club. I do not consider that laying off played any part here.

24. Mr Reading goes on to suggest that, because the respondents, in particular Chow, themselves bet on the same bets of the outsiders and made a profit by so doing, this is indicative of the profit element in the business they were carrying on. (See Smith v. Anderson 15 Ch.D 247 per Jessel M.R. at p.258). This however presupposes that trade, and bookmaking is certainly that, and business was being carried out by the respondents. The mere fact that some of their own bets followed separately those of the outsiders and were winning ones is not, in my judgment, an indicator that they were bookmaking.

25. The real question here is what is a bet. For that we go back to basics. In Carlill v. The Carbolic Smoke Ball Company [1892] 2 QBD 484, Hawkins J at p.490 said this :

"The third question is whether the contract I have found to exist is a contract by way of gaming or wagering within the meaning of statute 8 & 9 Vict. e. 109, s.18, which renders such contracts null and void, and, therefore, not enforceable by action. I think it is not. It is not easy to define with precision what amounts to a wagering contract, nor the narrow line of demarcation which separates a wagering from an ordinary contract; but, according to my view, a wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties. It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event, and, therefore, remaining uncertain until that issue is known. If either of the parties may win but cannot lose, or may lose but cannot win, it is not a wagering contract." (emphasis supplied)

That general proposition has never been doubted though, as Lord Denning MR said of it in Tote Investors Ltd v. Smoker [1968] 1 QB 509 (CA) at p.516, it is not to be treated as a rigid definition or to be interpreted as a statute.

26. Mr Ching Y Wong SC, with him Mr Peter Chow and Miss Barbara Cheng, who appears for Chu and Chow, says the records and the evidence did not show the bets or wagers here to be bets in the way suggested by Mr Reading. They were betting instructions which were carried out by the respondents, again in particular Chow, and given by the outsiders : and indeed also by the respondents themselves in respect of some of their own bets. They did not have any interest other than the "sum or stake he will so win or lose".

27. None of them were shown to be employees or agents of a bookmaker. Had they been then the position would be different. In R v. Lam Shek Yu [1982] HKC 314 - a criminal appeal - the appellant had said in an admitted statement "I received bets on horses but I was not the boss" and he was proved to have been an employee of a bookmaker. Macdougall J, as he then was, thought little of a submission at trial that the appellant could not be convicted of engaging in bookmaking because he had admitted that he was only an employee. At p.318G the judge said :

"... it is abundantly clear to me that it is irrelevant whether the employer or his employee receives the bet or bets."

and again at I :

"An employee who receives a bet or bets on behalf of his employer who runs a bookmaking business receives it or them no less in the way of trade or business than does his employer. The words [of s.7(1)(a) of the Gambling Ordinance, Cap.148] relate to the purpose for which the bet or bets are received, and this is so irrespective of whose trade or business it is by way of which it or they are received".

28. The same reasoning would apply to the agent of a person who runs a bookmaking business but not, as Mr Ching Y Wong submits, to the agent of the punter which is all the respondents here, if anything, were.

29. In my judgment Mr Ching Y Wong, whose submissions were adopted by Mr David Boyton who appeared for the 3rd respondent Hon, has the right of it on the rather slim evidence as it stood here. There was no evidence of any business reward arising from the actions of the respondents relating to the wagers made. They were not shown to be agents of the bookmaker with whom they made bets. Their interest lay in whether their own bets either won or lost and, for the outsiders' bets, whether they would have to collect winnings from the bookmaker and pay them out to the outsiders or collect money from the outsiders to pay to the bookmakers. If Chow could not collect on losing bets from the outsiders then, as he had made the bet on their behalf, he would have to pay those losses to the bookmaker concerned. While the bet was physically received the respondents were not shown to have accepted that bet as their own, whether or not they followed the bet separately themselves.

30. I would answer the point of law set out in para.1 (i) of the question in the affirmative but with the caveat, necessary because of the way in which the question is framed, that "accepted the bet as his own" would not exclude an agent of or an employee of a bookmaker who receives a bet on his principal's, or his employer's, behalf.

31. I would answer the point of law set out in para.1 (ii) in the affirmative though the use of the word "immediately" does not, I consider, add anything to the main phrase of "by way of trade or business". If the bet is with a bookmaker then that bookmaker, once he accepts the bet, does have the opportunity for gain or the risk of loss on that bet as it then stands.

32. In the event I would dismiss the appeal and make an order nisi that costs of this appeal be to the respondents. If either party wishes to make representations on costs then they should make those in writing to be received by the Court within 14 days from the date of this judgment.

Mr Justice Nazareth NPJ :

33. I agree with the judgments of Mr Justice Chan PJ and Mr Justice Silke NPJ.

Lord Millett NPJ :

34. I agree with the judgments of Mr Justice Chan PJ and Mr Justice Silke NPJ.

Mr Justice Bokhary PJ :

35. The Court unanimously dismisses the appeal and deals with costs in the manner proposed by Mr Justice Silke NPJ in the final paragraph of his judgment.