HKSAR v. LO JOCK HUEN

CACC 91/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 91 OF 1999

(ON APPEAL FROM DCCC 771 OF 1998)

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J U D G M E N T

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Leong, J.A. (giving the judgment of the Court):

1. On 22nd January 1999, the applicant was convicted in the District Court before H. H. Judge Sweeney of one count of false accounting, contrary to s.19(1)(a) of the Theft Ordinance, Cap. 210 i.e. the 2nd charge in the charge sheet. In this charge the applicant was jointly charged with the 1st defendant Lam Choi-lan. The particulars of this charge state as follows:

"LAM Choi-lan and LO Jock-huen, on or about the 5th day of July 1996, in Hong Kong, together with LIANG Jin-wen and LUI Wai-hung, dishonestly with a view to gain for themselves or another or with intent to cause loss to another, falsified a document made or required for an accounting purpose, namely a commercial invoice of Erbal International Limited ('Erbal') numbered Inv-136/96 and dated the 5th day of July 1996, by making or concurring in the making of an entry thereon which was or may have been misleading, false or deceptive in a material particular in that it purported to show that goods to the value of $1,800,000 United States of America currency were sold by Erbal to CAC Brake Company Limited."

2. The applicant was also charged with conspiracy to defraud the Guangdong Development Bank but he was acquitted when the Judge found that there was no evidence from the bank and that the evidence against the applicant was only his involvement in the preparation of the letter of credit concerned in the 2nd charge.

3. The prosecution evidence against the applicant which was mainly based on the evidence of PW3 and the applicant's own confession is this:

4. Liang Jin-wen was the chairman of the Zhuhai China and Canton Autoparts Company Limited which operated as China and Canton Brake Company Limited (CAC) of which Liang was also general manager. Without authority from CAC, Liang applied for the issue of a letter of credit of the Guangdong Development Bank in the sum of US$1.8 million in favour of "Erbal Limited" pursuant to a purported contract between CAC and Erbal Limited to purchase one "disc brake pad production line". Liang Jin-wen had no authority to order such goods or sign contract with Erbal Limited. To facilitate the issue of this letter of credit, the applicant concurred in the creation of an invoice of Bene Manufacturing Company Limited of which he was a co-director, purporting to show that goods had been supplied to Erbal Limited whereas no goods had actually been supplied. This invoice bears the same date, covers the same goods and shipping details and the same letter of credit reference as in the "Erbal" invoice the subject matter of the 2nd charge. The letter of credit was subsequently issued pursuant to the submission of such documents and discounted through the Bank of America and Intermonetary Corporation. Out of the proceeds, Hk$394,230 was distributed to Bene Manufacturing Company Limited. The applicant admitted he received HK$620,000 as a result but this sum was later on distributed to other parties pursuant to a prior agreement.

5. The applicant himself received HK$42,000

6. The prosecution evidence was not challenged and neither did the applicant give evidence.

7. The Judge accepted the evidence and found the 2nd charge proved. He said this in his reasons for verdict:

"... The only possible inference I can draw from the combined evidence of PW3, D2's own confessions and the earlier Bene Manufacturing document giving disbursement instructions is that D2 knowingly concurred in the preparation of the Bene invoice as a supporting document for the Erbal Invoice in the 2nd count on the indictment. Thereby he made or concurred in the making of that Erbal account or invoice. He thereby played an active and dishonest role, along with D1, LIANG Jin-wen and LUI Wai-hung in the preparation of that Erbal invoice or account which he knew to be false and deceptive in a material particular in that it purported to show that goods to the value of US$1.8 million had been sold by Erbal to the CAC Brake Company Limited."

8. The Judge then went on to consider the questions of dishonesty, whether it was done with a view to gain for the applicant himself, or for others and whether the invoice was for accounting purposes and he came up with affirmative answers to all of them. That led him to convict the applicant.

9. Four grounds of appeal were submitted. Before us today, Mr. Beaumont for the applicant seeks leave to add a further ground challenging the validity of the charge. We have refused that application. Mr. Beaumont has at the last minute of this appeal abandoned the fourth ground. There are now three grounds of appeal only.

10. The first ground is the Judge was wrong in finding that the falsification was done for accounting purpose. Mr. Beaumont submits that the applicant does not challenge that he knew the invoice he prepared or permitted to be prepared was fictitious for which he received a reward, but relying on Attorney-General's Reference (No. 1 of 1980) [1981] 1 WLR 36 & R. v. Mallett [1978] 1WLR 820, he submits that the accounting purpose for which the falsification was done must involve the entity which may or will suffer as a result of the falsification. This party, in the present case is the Guangdong Development Bank which has to meet the demands of the banks which had discounted the letter of credit. In other words, there must be proof that the financial interest of the Guangdong Development Bank has been or may have been put at risk. It is submitted that since the Judge had not convicted the applicant of the conspiracy charge because there was no evidence of deception from the bank, as a matter of logic, equally the Judge should not have convicted the applicant on the 2nd charge. To convict him was irrational.

11. Mr. Lee for the government submits that the offence of false accounting does not necessarily involve an entity which may or will suffer as a result of the falsification. Mr. Lee submits that Attorney-General's Reference (No. 1 of 1980) did not decide this is a necessary element of the offence and the section itself does not require such proof.

12. The 2nd charge is laid under s.19(1)(a) of the Theft Ordinance, Cap. 210. S. 19 reads as follows:

"19. False accounting

(1) Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another -

(a) destroys, defaces, conceals or falsifies any account or any record or document made or required for any accounting purpose; or

(b) in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular,

he shall be guilty of an offence ...

(2) For the purposes of this section a person who makes or concurs in making an account, record or document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account, record or document, is to be treated as falsifying the account, record or document.

(3) ... "

13. The question for consideration is the meaning of the words "any account or record or document made or required for any accounting purpose."

14. In Attorney-General's Reference (No. 1 of 1980), Lord Lane C.J. said at p. 38:

"... it is to be observed that s.17(1)(a) [the equivalent of our s.19(1)(a)] in using the words 'made or required' indicates that there is a distinction to be drawn between a document made specifically for the purpose of account and one made for some other purpose but which is required for an accounting purpose. Thus, it is apparent that a document may fall within the ambit of the section, if it is made for some purpose other than an accounting purpose but is required for an accounting purpose as a subsidiary consideration."

15. In R. v. Mallett [1978] 1 WLR 820 Roskill L.J deals with s.17(1)(b) of the Theft Act 1968, the equivalent of our section 19(1)(b). This section has different wording which does not have the same words "made or required for any accounting purpose." This case is therefore of little assistance to us.

16. Thus, neither case has decided that these words have the meaning that the "accounting purpose" must be that of the party who will or may suffer as a result of the falsification.

17. In R. v. Scot-Simmonds [1994] Crim LR 933, another case referred to by Mr. Beaumont, the Court of Appeal decided that the wording in question is to have the meaning given to it in normal English usage. Another case referred by Mr. Beaumont is the case of Lee Cheung-wing v. R. [1992] Crim LR 440. This case decided whether the falsification in question in that case was with a view to gain. Therefore it is equally of little assistance to the applicant's argument.

18. Thus whether there is any evidence of being defrauded from the Guangdong Development Bank which eventually will be required to answer to the discounting banks is immaterial. It is sufficient as long as the "Erbal" invoice was made or required for any accounting purpose. In any case, the unchallenged evidence is that the bank did eventually pay the letter of credit. Thus, in our opinion, the acquittal of the applicant of the 1st charge has no bearing on the verdict of the 2nd charge.

19. The second and third grounds of appeal may be considered together. It is submitted by Mr. Beaumont that the applicant did not nor his staff, falsify the documents the contents of which were solely written to comply with the letter of credit. The bank was not misled into believing that there had been compliance. It is also submitted that the "Erbal" invoice was not prepared for the preparation of accounts of the Guangdong Development Bank or CAC but to ensure compliance with the terms of the letter of credit issued by the bank.

20. As said in Attorney-General's Reference (No. 1 of 1980), it is sufficient for the purpose of the section that a document is made for some purpose other than an accounting purpose but is required for an accounting purpose as a subsidiary consideration. The test as observed in that case is to ask the question "What do you need this for?" There was unchallenged evidence as to the procedure for the application of a letter of credit and the documents required therefor and the part played in this process by invoices. The Judge concluded that "there can be no more essential document in the preparation of accounts than an invoice, whether those accounts be of Guangdong Development Bank or of CAC Ltd." The Judge was entitled to look at the "Erbal" invoice in all the circumstances of the case and ask himself the question: "What do you need this for?" The answer must be that as he said "although it is made for the purpose of the letter of credit, it is required for the accounting purpose of the issuing bank, Guangdong Development Bank or CAC Ltd." The Judge was right to find that it was required for accounting purposes. The argument that it was made to comply with the letter of credit and that there was no change of figures or omission and that it was an actual invoice and therefore not a falsification has no substance. In any case, from the start of this application, Mr. Beaumont has conceded that the applicant had prepared this fictitious invoice which he knew was fictitious. The unchallenged evidence of PW2, the operation manager of the Bank of America is her bank would definitely not have issued the letter of credit if her bank knew that there were no underlying goods otherwise her bank would be involved in a fraud. The invoice was admitted to be false and that there were no underlying goods. It was made to induce the issue of the letter of credit. How that cannot be falsification is difficult to understand.

21. As the last ground which concerns the credibility of a witness who is an accomplice has been abandoned by Mr. Beaumont, there is no need for us to deal with it. For these reasons, the application for leave to appeal should be refused and we refuse the application.