HKSAR v. YIP WING YEE

DCCC 1010/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1010 OF 2015

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Reasons for Verdict

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1.  The defendant faces a remaining 9 charges of evasion of liability by deception, contrary to section 18B(1)(b) of Cap 210.

2.  I have determined that the defendant should be convicted of those remaining 9 charges.  I will give my reasons as follows.

3.  The defendant operated a scheme whereby she bought large quantities of items such as electrical goods, mobile phones and vouchers, at retail price, which she sold at heavily discounted prices to her friends and their contacts.  The defendant received money into her bank accounts, using this to purchase goods for the earliest adopters of the scheme.

4.  Inevitably, the economics of the scheme meant that the defendant ran out of money and was unable to purchase further goods that had been promised to the purchasers.  She instead promised refunds to those persons who had given money to her for the purchase of the discounted goods.  Eventually, the defendant supplied those persons with cheques to cover their refunds.  There was no money in the accounts on which the cheques were drawn, and the cheques accordingly bounced.

5.  The 9 charges represent nine separate victims to whom refunds were promised and cheques were issued.  None of the nine cheques in those 9 charges were honoured by the banks concerned.

6.  The defendant claims that the prosecution are unable to show that the cheques relate to an enforceable legal liability.  They say that if they are able to do so, that they cannot establish that the defendant acted dishonestly or with deception when she issued those cheques.

7.  The prosecution case on the 9 charges was established by the nine victims who were each issued with a refund cheque by the defendant.

8.  The first victim, PW1, was a work colleague of the defendant.  They both worked at Precision Textile in Kwun Tong.  In 2014, the defendant told PW1 that she knew a senior manager at Fortress who could obtain mobile phones at a discounted price.  That was an untrue statement. Initially, PW1 bought two mobile phones.  The phones came with a receipt issued by Fortress showing the phones were purchased at original sale prices.  PW1 later wanted to make further purchases for herself, her relatives, and also for her friends.  The friends participated in the scheme through a WhatsApp group. They were eventually called as witnesses in this case.  They were PWs2, 3, 4, 5, 7, 8, 9 and 10.  These were the other victims represented in this trial.

9.  Initially, all the orders were placed through PW1.  Initially, money was given to PW1 which was transferred to the defendant’s bank account, which was a DBS account.  Some items, such as mobile phones, could be bought at half price.  The defendant said it was a wholesale price.

10.  Later on, in November 2014, gift vouchers also became available.  Later in 2014, PW1’s husband became unhappy with PW1’s involvement.  From then on, PW1 did not deal on behalf of her friends with the defendant, and the other victims, the prosecution witnesses, contacted the defendant directly.

11.  The scheme carried on over the new year into 2015.  Between January 2014 and February 2015, PW1 paid $63,544 to the defendant, but received no products in return.  By May of 2015, the defendant agreed to make a refund of this sum to PW1.  Finally, on 26 June 2015, the defendant issued a cheque in the sum of the $63,544 and deposited it into PW1’s account.  The cheque was subsequently not honoured by the bank, due, as we find out, to absence of funds.  This cheque forms the substance of the offence in Charge 1.

12.  PW2 was another of the defendant’s customers introduced to her by PW1.  He started to place orders in July 2014.  The discount being offered was 40 per cent off the market price.  He originally ordered through PW1.  By November 2014, he was placing orders with the defendant directly.

13.  There came a time in March 2015 when the defendant no longer delivered any goods, and the delivery dates constantly went backwards.  He was told he could get a refund.  Over the period of time, various excuses were given as to why a refund was not being given at that stage, but eventually, the defendant agreed to make a full refund.  An appointment to meet was made with the defendant on 24 June, and other victims, but she did not turn up.  At that stage, the defendant, through WhatsApp, told PW2 that she herself had been cheated by others.

14.  On 26 June there were negotiations through WhatsApp.  The defendant agreed that she should return to PW2 by way of refund a sum of $2,943,765.50.  A cheque in that sum was issued by the defendant and paid into PW2’s bank account.  This cheque was subsequently not honoured by the bank.

15.  The other witnesses, who were PWs3 to 5 and 7 to 10, became involved through PW1 as did PW1 and 2.  They all eventually placed orders directly with the defendant, and they were all part of the WhatsApp group.  They all had orders that were not fulfilled, and agreed refunds with the defendant.  The defendant issued cheques to them, and all the cheques bounced.

16.  The details of those cheques are as follows:

PW3’s cheque, which is represented by Charge 3, $2,096,088;

PW4’s cheque, Charge 4, $616,097.50;

PW5, in Charge 5, $100,000;

PW7, in Charge 7, $58,000;

PW8, in Charge 8, $149,000;

PW9, in Charge 9, $44,000;

PW10, in Charge 10, $25,400.

17.  The issue of the cheques and depositing of the cheques to the accounts of the prosecution witnesses was not disputed.  The fact that the cheques were not honoured by the banks was not disputed.  It was also clearly shown on the prosecution evidence that at the time when the various cheques purporting to make the refund payments to the prosecution witnesses were issued, the defendant’s accounts did not have sufficient funds to satisfy those payments.  It was also the case that those accounts would never, ever have sufficient money to see the cheques honoured.

18.  In the defence case, the defendant gave evidence in her own defence.  At the time of giving evidence, she was 43, single, with a daughter aged 17.  The defendant is a person of clear record.  She did not dispute that the cheques that form the subject of the 9 charges were issued by her on 26 June 2015 and they all were dishonoured, they bounced, because of insufficient funds.

19.  In evidence she said that from a young age she was unhappy.  She was adopted and had a poor relationship with her father.  She was generally a lonely and unhappy person and found it difficult to make close friendships.  She joined Precision Textiles in May 1999 as an accounting clerk, later becoming the shipping clerk.  Sadly, the defendant’s stepmother suffered with cancer and died in 2012.  The defendant, from that time, became unhappy, and had few friends.

20.  In early 2014 she won the firm’s lucky draw, which enabled her to redeem a product or products from Fortress.  She redeemed two Samsung Note 3 phones.  She eventually offered to sell them to PW1 at a discount.  PW1 was a work colleague and friend.  Because PW1 suspected the phones were parallel goods, the defendant told her that she knew someone in Fortress who could get the phones cheaply.  The defendant acknowledges that this was a lie.  PW1 was very pleased with the transaction and wanted further discounted phones for her friends.  This improved the defendant’s relationship with PW1.  She was the defendant’s only friend.

21.  Eventually, the defendant agreed to sell PW1 more electrical items.  She thought that if she did not do so, their relationship would be in jeopardy.  Initially, PW1 ordered nine phones.  The defendant bought two phones at full price and sold them at a discounted price, making up the difference with the profit she had made on the earlier sale.  She refunded the money for the other seven phones.

22.  PW1 was dissatisfied and unhappy with the refusal to provide the extra seven phones.  Accordingly, to retain PW1’s friendship, the defendant decided to sell more phones to PW1 at a loss to herself.  In May 2014 she took orders from PW1 on the basis that the phones were not to be resold and the buyers were not allowed to make profits from them.

23.  Initially, the amounts deposited to her account were a few tens of thousands of dollars, but from July 2014, the amounts deposited increased substantially.  She said that the orders peaked in September 2014 and then later, in January 2015, due to the release of the iPhone 6.  The defendant said she never contemplated so many orders would be made.  She said everything went out of control.  She tried to stop the orders by such means as saying her friend in Fortress would leave and that orders would only be accepted for 500 or more items, and that the iPhone 6 was faulty.  None of this deterred the orders, and they escalated quickly.  In particular, PW2 ordered a lot of goods and PW3 and 5 placed bulk orders regularly.

24.  The defendant said she made up excuses such as late deliveries, and tried to get the buyers to accept refunds, but they refused to do so.  PW2 particularly on a number of occasions refused to accept refunds.  PW3 also refused refunds.  The defendant said she continued to make purchases of phones and electrical items and deliver them to customers up to April of 2015.  She said she had used up all her money making the purchases and providing refunds.  For that reason, after April 2015, no further deliveries could be made.  From then on, people who had placed orders became impatient for delivery and later, refunds.

25.  The defendant said she was threatened and harassed.  She was messaged and called many times.  The purchasers blamed PW1 and exerted pressure on her.  There were threats to report the matter to the police and to go to the defendant’s home to disturb her.

26.  The defendant said she needed to resolve the matter, and decided to meet PW2 and 4 on 24 June 2015.  She wanted to make the refunds, but over a long period of time.  However, when the defendant left home, she found that PW3 would also be present.  She found PW3 to be troublesome.  She had previously suggested hiring a private detective to investigate the defendant, so the defendant simply decided not to attend the meeting.  She eventually sent a message to PW2 and 4 saying she was going to commit suicide.  She in fact said she did make such an attempt, but failed.

27.  Obviously the purchasers were not satisfied, and on 25 June 2015, PW2 made over 50 calls to the defendant.  On 26 June the defendant was still being chased, and believed that she was left with no option but to write the cheques.  She had been told by PW6 that if she did not write the cheques, PW1 would commit suicide.  She wrote the cheques and deposited them into the PWs’ bank accounts.  She wrote the cheques according to the figures given to her in the WhatsApp messages by the witnesses.  She says she was confused when she wrote the cheques and made many mistakes.

28.  She said her reason for writing the cheques was to protect PW1.  She did not believe she was acting dishonestly.  The defendant said she had made refunds after 26 June 2015.  In fact, on 2 July 2015, there was a refund to one Candy realised by selling gold ornaments.

29.  The defendant said she did not profit from the transactions in any way and that from December to February 2015, she would have had the ability to make full refunds, but the buyers were too greedy, and refused refunds.

30.  In this case, the prosecution brings the case on these 9 charges against the defendant.  It is incumbent upon them to prove it.  The standard of proof is beyond reasonable doubt, the burden remaining on the prosecution at all times.

31.  The defendant is a person of clear record.  This is relevant to any consideration of her propensity to commit the offences with which she is charged, but also to consideration of any testimony given by her.

32.  Each of the 9 charges is brought under section 18B(1)(b) of Cap 210.  This requires the prosecution to prove the defendant, with intent to default in whole or in part on an existing liability, dishonestly induced the victim to wait for payment by deception.  In each charge, the operative deception is the false representation contained in each cheque.  That is, as good and valid order for the payment of the moneys described in it.

33.  The defence contend firstly that there was no legally enforceable existing liability to any of the prosecution witnesses to whom cheques were issued, and says in any event, the defendant was not dishonest, nor did she issue the cheques with any intent to make default.

34.  It should also be noted that by subsection 18B(2), liability means legally enforceable liability, and that by section 18B(1)(b), a person induced to take in payment a cheque or other security for money by way of conditional satisfaction of a pre-existing liability is to be treated not as being paid, but as being induced to wait for payment.  Furthermore, by the simple giving of a cheque, the drawer impliedly represents that the state of facts existing at the date of delivery of the cheque is such that in the ordinary course, the cheque will, on presentation for payment on or after the date specified on the cheque, be honoured.

35.  That can be seen in the case of R v Gilmartin [1983] QB 953.

36.  The defence case was put on the following basis:  that it was not disputed that the defendant issued the nine cheques that form the particulars of the 9 charges; that all the cheques were dishonoured; it was said despite this, there was no legally enforceable liability when the defendant issued the cheques; and the defendant was not dishonest, neither did she have the intention to make default on any payment, nor was there any deception.

37.  Insofar as (a) is concerned - that is, legally enforceable liability - this must mean a liability that was capable of being enforced, and that can be seen from consideration of that section by the court in the case of HKSAR v Ong Siu Sin, Kevin HCMA 734/2009.

38.  The defence contend the defendant was doing a favour to the buyers by selling the goods to them at a discount.  It was a gratuitous promise on which the defendant suffered large losses.  There was no consideration or benefit to the defendant, so no contractual relationship existed with the buyers.  Even though there was an agreement between the defendant and the buyers as to refunds, as there existed no valid cause of action against the defendant, then the defendant’s promise to pay refunds was not enforceable at law.

39.  In respect of the lack of dishonesty by the defendant, it was contended within the authority of the case of R v Ghoshthe defendant must be shown to be dishonest by the ordinary standards of reasonable and honest people, and it must also be shown that the defendant realised that what she was doing would be regarded as dishonest by those standards, and naturally, these issues must be resolved.

40.  As far as a resolution is concerned, it must be seen that a large part of the evidence was not in dispute.  This consisted of all the financial dealings of the parties, including the payments paid by the witnesses to the defendant; the cheques issued by the defendant to the witnesses; all the evidence contained in the defendant’s banking records, save the joint account with her daughter; but all the electronic communication between the witnesses and the defendant, consisting of vast amounts of WhatsApps and emails.

41.  There were some areas of dispute in relation to witnesses’ calculations of the amount the defendant owed to them.  For example, PW2 had represented the cost of some items as representing his profit element or resale rather than the actual costing of those items.  He had also included items for which a refund had been paid.  In total, PW2 could produce payments for about $2.2 million worth of goods, rather than the 2 point 9 million he claimed he was owed.

42.  PW3 had admitted inaccuracies in the calculations and having resold goods such as iPhones.  PW4 had also admitted making profits and there being resulting overcharge.  She had also failed to deduct goods already delivered to her.  However, as can be seen from the discussion in the case of HKSAR v Ong Siu Sin, these disputed areas do not affect the question of whether the amounts were legally enforceable.

43.  It is relevant to the extent of the liability, but section 18B does not impose upon the prosecution the duty to prove an exact monetary liability, but they must prove a liability exists.

44.  So far as the defendant’s evidence is concerned, the prosecution did not accept the defendant was simply acting out of a desire to help.  They say she was both dishonest and deceptive.  They say she was running a scheme deliberately targeted at her friends and their relatives and friends, with all the transactions being conducted through her own personal bank accounts by cash transfer, with the products delivered over a three-month period.  The products were being purchased by her from high street stores using EPS or cash.  They say losses were built in to the deception and they would ultimately be suffered by later orderers; that the defendant had issued the cheques as good and valid for paying refunds for goods that had not been delivered; that she always knew the cheques would not and could not be honoured; and that to issue cheques in such circumstances is plainly dishonest, both objectively, and the defendant clearly must have known it to be dishonest herself subjectively.

45.  The prosecution say the defendant had been dishonest from the outset and had used deception from the outset.  She clearly admitted she has lied to her friends about having a friend at Fortress who could provide her with discounted goods.  This enabled her to gain the trust of her victims, which enabled an always increasing flow of funds into her accounts.  In total, some $12 million had passed through her accounts, and of this, she spent significant amounts up to $1 million on gold, cosmetics and other luxury items, and this for someone who was employed basically as a secretary.

46.  The defendant disputed that she spent excessively on luxury items and that she had used the moneys from her customers to fund her purchases of luxury items.  She said she had used money from selling gold ornaments and items that she had purchased previously.  Naturally, this issue depended upon her credibility and reliability and affects whether the court would consider whether she has acted dishonestly and did require resolution.  However, I do note the charges that the defendant faces relate solely to the issuing of the cheques on 26 June and her state of mind when she did do so.

47.  Naturally, evidence of how the defendant came into a position to sign the cheques is relevant, and it is necessary for it to be established how the defendant came to accept liability to repay the various sums owed to the witnesses.  Nevertheless, it is not actually necessary for the prosecution to establish the defendant’s activities through 2014 were fraudulent.  In fact, they are only required to prove the operative facts that existed on 26 June 2014 when the cheques that were issued by the defendant were subsequently dishonoured.

48.  As far as the credibility of the defendant’s explanation is concerned, the facts surrounding the defendant’s creation and operation of this scheme are not disputed.  All the electronic communications with her customers, the receipts and expenditures in her account, and the issue of refunds and cheques is evident.

49.  What is not accepted by the prosecution is the defendant’s explanation for her initiation and continuation of the scheme.  In summary, the defendant says she did it to win PW1’s friendship and continued it to maintain that friendship, and then to help others.  It all simply got out of hand and she lost control.  She was unable to bring it to a close as the customers were so persistent.

50.  The prosecution say this explanation is simply not credible.  It is belied by the way the defendant encouraged PW1 to involve others in her scheme; that she initiated the scheme by falsehood, and maintained it by the same way. 

51.  It is clear the defendant commenced the sale of electronic items to PW1 by deception.  She admitted her claim to have a friend at Fortress who could obtain 40 per cent discount was untrue.  The defendant has also clearly been deceptive in her evidence she made no gains from this enterprise.  The defendant was able to secure from the witnesses large deposits of money into her bank accounts.  This swelled her accounts to a point where over $12 million passed through those accounts.  At least a million of this was transferred to an HSBC joint account she established with her daughter, and over $600,000 spent on luxury items during the period of the scheme’s operation.  Furthermore, the defendant’s attempt to explain these expenditures by saying she ran another scheme where she bought and sold handbags and gold is also untrue and not credible.

52.  When reaching my overall finding on the defendant’s credibility, I did bear in mind her clear record.  I found her to be a generally unreliable witness.  I find it is clear from the evidence that when she came to start this scheme, she saw its ability to make money, at least in the short term.  She was always aware of its dishonest nature and that it would inevitably fail and the losses would fall on the people she had encouraged to participate in it.  Her issuing of the cheques was to buy herself some time and put the creditors off.  She never had a realistic prospect of being able to meet her liabilities.  Her offer of refunds at earlier stages was done in the knowledge that they would largely be refused, as the customers were able to make such large profits on the transactions, and because also of the large difference between the price of the phones, as offered by her, and their actual cost.  That residual price difference would always mean that the customers would be unlikely to ask for refunds.

53.  It is clear from this that I generally reject the defendant’s evidence.

54.  As far as the question of whether there was any legally enforceable liability, “liability”, of course, means legally enforceable liability.  Again, from the case of HKSAR v Ong Siu Sin, Kevin, legally enforceable is to distinguish a liability from debts which could not be enforceable at law such as gaming debts or debts arising out of conduct such as drug trafficking.

55.  It is not necessary that the prosecution prove there was an intention to enter into legal relations or that there was a contract.  It is necessary the prosecution prove beyond reasonable doubt there was an enforceable liability.  That is, the liability was capable of being enforced.  But it is not necessary the prosecution prove whether a claim for debt would have succeeded in the civil court.

56.  The defendant evidenced that she was helping the buyers by doing them a favour; that she made no profit, and was performing a gratuitous favour.  It is said there was no consideration and no contractual relationship and no enforceable liability.

57.  The evidence actually shows that the cheques were issued as refunds.  This was a refund of moneys already paid to the defendant for the purchase of specific electronic items and vouchers and the like.  The cheques for the refunds would extinguish the agreement that the moneys given to the defendant would be used to make the purchases agreed. There was an agreement to purchase cut-price goods between the defendant and the witnesses.  The moneys deposited to her accounts was the consideration. The refunds contained in the cheques were agreed sums to cancel her liability to provide the goods ordered.  The fact that there is a dispute as to the precise sum in relation to certain of the witnesses, particularly 2, 3 and 4, does not affect the existence of such a liability.

58.  I find that a clearly evidenced legally enforceable liability existed between each of the witnesses/buyers and the defendant in respect of each of the charges and each of the cheques.

59.  The prosecution has established to a criminal standard in respect of each charge the cheques were issued to satisfy a pre‑existing legally enforceable liability that existed between the defendant and the relevant witness.

60.  The defendant’s actions created a legally enforceable liability, whatever her declared motivations might have been.  Did the defendant intend to default from that liability by deception and, accordingly, dishonestly?  The operative deception, simply the representation of the cheques, were a good and valid order for payment if presented on or at the date thereon.  The defendant issued the cheques for the specific purpose of refunding purchase moneys in order to cancel the agreement to purchase discounted goods.  By depositing the cheques, the defendant did represent that the cheques were good and valid payment.  That is the operative deception.

61.  When the defendant was questioned about her cheques, she gave the following answers:

The question was: “You knew you did not have sufficient funds to cover the cheques.”

The answer: “At the time I was unable to know if I had funds or not.”

Question: “You knew you had no funds.”

Answer: “Yes.”

Question: “You knew that they would all bounce.”

The answer is: “Yes.”

Clearly, the defendant issued the cheques knowing no funds would or could ever exist to cover them or meet the liabilities.

62.  That state of facts of mind is clearly and obviously dishonest by the standard of ordinary reasonable people.  It is also the case the defendant must have clearly realised that this was dishonest as well.  She was always aware the cheques would bounce and that no money would be forthcoming to pay them.

63.  I find the only inference that can be drawn from that set of facts is the defendant must have known that she was acting, herself, dishonestly.

64.  She says that her motivation was to take pressure off PW1.  However, that does not affect her awareness of using a dishonest method to make her creditors believe that payment has been made.

65.  I find it is an unassailable fact that when the defendant issued the cheques, each of those cheques set out in each charge, she was dishonest within the R v Ghosh formulation of that concept.

66.  That is, in effect, an end to this case, as all the elements are proved in respect of each of the charges in relation to each of the nine cheques.

67.  The defendant must, accordingly, be convicted then of each of those charges as set out in the indictment.

68.  Having said that, I also note that in relation to the scheme the defendant operated, I must find this is also fundamentally fraudulent and dishonest.  It clearly placed a risk of economic loss on each of the participants, and that loss was eventually capitalised and found its way into the alleged refunds which the cheques were designed to meet.

69.  My final statement is the defendant is convicted on each of the 9 charges she faces on the indictment, the case being proved beyond reasonable doubt on each charge.