HKSAR v. LAU MING CHU

CACC 225/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. CACC 225 OF 2004

(On Appeal From District Court Criminal Case No. 175 of 2004)

Date of Hearing : 9 September 2004

J U D G M E N T

Hon Cheung JA (giving judgment of the court) :

Leave to appeal against conviction

1.  The applicant was convicted by H H Judge Line in the District Court of two charges of ‘an agent using a false document with intent to deceive her principal’, contrary to Section 9(3) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201.  She was sentenced to 6 months’ imprisonment suspended for 1 year in respect of each of the charges.  She now applies for leave to appeal against conviction. 

2.  The applicant’s husband was also charged with two other charges, namely ‘aiding, abetting, counselling and procuring an agent using a false document with intent to deceive her principal’.  He was acquitted of the two charges.

Particulars of the charge

3.  The particulars of the first charge (this was the first charge in the Charge Sheet) are as follows :

                ‘LAU Ming-chu, on or about the 21^st day of June 1996, in Hong Kong, being an agent, namely an employee of the Chinese University of Hong Kong, with intent to deceive her principal, used a document, namely, an application for Private Tenancy Allowance in relation to the leased accommodation at House 39, 26^th Street, Hong Lok Yuen, Tai Po, New Territories (“the leased property”) in respect of which the Chinese University of Hong Kong was interested and which contained a statement which was false or erroneous or defective in a material particular, namely that the leased property was not owned by herself and/or her spouse and that neither she, her spouse nor any of her spouse’s families had a financial interest in the leased property, and which to her knowledge was intended to mislead the Chinese University of Hong Kong.’

4.  In respect of the second charge (which was the third charge in the Charge Sheet), apart from the date of the offence, the particulars are identical.  The date in this charge was 22 June 1998.

Facts

5.  Apart from calling one prosecution witness, the prosecution’s case was based on admitted facts.  Neither the applicant nor her husband gave evidence or called any witness to give evidence on their behalf.

6.  The evidence revealed that the applicant was a medical doctor and was employed as a lecturer by the Chinese University of Hong Kong (‘CUHK’) in the Department of Community and Family Medicine.  As part of her employment benefits, she was entitled to a Private Tenancy Allowance which enabled her to meet rental expenses on her leased accommodation.  This allowance would run as long as she remained employ with CUHK.  Alternatively, she could apply for a Home Purchase Allowance, which would last for ten years.  In 1996, the amount under the Private Tenancy Allowance was more than the Home Purchase Allowance.

7.  One of the conditions attached to the Private Tenancy Allowance was as follows :

‘A member of staff residing in accommodation owned by himself, his spouse and/or a relation of either himself or his spouse, or in which he, his spouse or any of his or spouses’s relations has a financial interest shall not be granted a Private Tenancy Allowance.  ‘Relations’ here include (a) parents, (b) brothers, sisters, and their spouses, and (c) children and their spouses.’

8.  The applicant’s husband was also a medical doctor and was a full time employee of the Hospital Authority.

9.  In 1995, a property known as House No. 39, 26^th Street, Hong Lok Yuen, Tai Po, New Territories (‘the Property’) was offered for sale by the owner.  The applicant’s husband made enquiries with the agent handling the sale and viewed the property on a number of occasions.  On one or two of such occasions, he was accompanied by the applicant. 

10.  On 8 February 1996, the husband signed a provisional sale and purchase agreement (‘the provisional agreement’) to purchase the property.  The purchaser in the provisional agreement was described as ‘Lam Dicky (i.e. the husband) for and on behalf of Pacific Focus Development Limited (“Pacific Focus”)’. 

11.  The purchase price was HK$11,800,000.00 which was to be paid in the following manner :

(1)       HK$600,000.00 upon the signing of the provisional agreement (‘the 1^st deposit’).

(2)       HK$580,000.00 upon the signing of a formal sale and purchase agreement which was to be signed on 9 March 1996 (‘the 2^nd deposit’). 

(3)       HK$1,180,000.00 payable on or before 2 April 1996 (‘the 3^rd deposit’).

(4)       HK$9,440,000.00 payable as the balance of the purchase price upon completion of the sale on or before 7 June 1996.

12.  On the same day the husband paid the 1^st deposit of HK$600,000.00 to the vendor.  The payment was made by way of a cheque drawn on his account with the Hang Seng Bank. 

13.  Pacific Focus was a company incorporated in Hong Kong on 2 January 1996.  It was wound up in about June 1999.  There were two shares issued.  One share was held by Mr. Miu Kwok-lau (‘Mr. Miu’).  Mr. Miu was the maternal uncle of the husband.  The other shareholder was initially the husband’s sister-in-law.  In March 1996, her share was transferred to Ms. Ho Siu Mui (‘Ms. Ho’).  Ms. Ho was a friend of the applicant and the husband.  The two directors of Pacific Focus were Mr. Miu and Ms. Ho respectively. 

14.  On 9 March 1996, Pacific Focus signed the formal sale and purchase agreement.  On the same day, the husband paid the 2^nd deposit of HK$580,000.00 by way of a cashier order to the vendor of the property.  The husband purchased a cashier order by drawing on funds in his Hang Seng Bank account.

15.  In February 1996, the applicant applied for a staff loan from CUHK.  On 25 March 1996, the loan was granted and the sum of HK$1,230,000.00 was paid by CUHK into a joint account of the applicant and her husband (‘the AssetVantage account’).  On the same day, the applicant purchased a cashier order made payable to her husband for the same sum.  The cashier order together with a cheque of HK$2,500.00 were deposited into the husband’s Hang Seng Bank account on 26 March 1996.

16.  On 27 March 1996, the husband paid the 3^rd deposit of HK$1,180,000.00 to his solicitor.  This was done by way of a cheque drawn from his Hang Seng Bank account. 

17.  On 6 June 1996 a sum of HK$1,207,555.00 was transferred from the AssetVantage account of the applicant and her husband to the solicitor in charge of the conveyancing as part of the balance of the purchase price of the property.  

18.  The remaining balance of the purchase price was financed by a loan granted by Hang Seng Credit Limited in favour of Pacific Focus as the borrower.  The loan advanced to Pacific Focus was HK$8,260,000.00 secured on the mortgage of the property.  The husband and Mr. Miu acted as the guarantorsof this loan.  The property was assigned to Pacific Focus on 7 June 1996. 

19.  On 6 June 1996, a sum of HK$5,176.70 was also transferred from the AssetVantage account into the account of the solicitor for settling the apportionment of accounts between the vendor and Pacific Focus in respect of the purchase of the property.  Agency fees in the sum of HK$118,000.00 were paid by the husband who signed a cheque drawn on a current account of the applicant and her husband (‘the Joint Current Account’).

20.  On 21June 1996 CUHK received an application for Private Tenancy Allowance from the applicant in respect of the property.  The period of the lease was said to be from 1 July 1996 to 30 June 1998 at a monthly rent of HK$45,000.00 together with rates and management fees.  The landlord was described as Pacific Focus.  The applicant also sent to CUHK a tenancy agreement dated 12 June 1996 between herself, her husband and Pacific Focus. 

21.  In this application, the applicant made the following declaration :

‘(c)    that the leased accommodation is not owned by myself, my spouse and/or a relation of either myself or my spouse; and that neither I, my spouse, nor any of our relations has a financial interest in it.  (“Relations” here include parents; brothers, sisters and their spouses; and children and their spouses); and

(e)    that I have no direct or indirect financial interest in the flat so rented.’

This is the subject matter of the first charge.

22.  CUHK approved the applicant’s request for Private Tenancy Allowance with effect from 1 July 1996 for a period of two years.  The allowances were paid to the applicant on a monthly basis for the following periods :

23.  Commencing from July 1996, Pacific Focus made monthly repayments of the mortgage loan.  The initial monthly repayment was about HK$75,000.00.  By July 1998, the monthly repayment was about HK$80,000.00. 

24.  Each month $45,000 was transferred by way of auto-pay from the AssetVantage Account to Pacific Focus’s account.  In addition, the agreed facts also showed that the husband had issued cheques drawn from the AssetVantage account or the Joint Current Account.  These cheques were deposited into his Hang Seng Bank account from which funds were then paid to Pacific Focus.  The sums were about $30,000 per month.  There were occasions when larger sums were paid to Pacific Focus.  Pacific Focus used the money received to meet mortgage payments.

25.  In June 1998, the applicant applied for a second Private Tenancy Allowance.  The applicant made a similar declaration to the first one.  This is the subject matter of the second charge. 

26.  The applicant had voluntarily disclosed in this application that her husband had previously received a Housing Loan Interest Subsidy from the Hospital Authority.  In July 1998, CUHK informed her that in such case she was not eligible for the allowance.  CUHK, however, suggested that she could apply for the Home Purchase Allowance.

27.  On 21 July 1998, the applicant and her husband signed a formal agreement to purchase the property from Pacific Focus.  The purchase price was HK$11,980,000.00.  According to a statement of account prepared by the solicitor in charge of the sale of this property the deposit received by Pacific Focus was HK$1,198,000.00; the applicant and her husband as purchasers had paid part of the purchase price in the sum of HK$2,396,000.00 to Pacific Focus directly; the redemption money to Hang Seng Credit Limited was HK$8,040,559.20; and the balance of the purchase price payable to Pacific Focus was HK$333,705.80. 

28.  By a receipt dated 15 August 1998, Pacific Focus acknowledged receipt of HK$2,396,000.00 from the applicant and her husband as being part of the balance of the purchase price which was payable by them for the completion of the purchase of the property. 

29.  The applicant and her husband obtained a mortgage loan from Bank of China to finance the purchase from Pacific Focus.  Proceeds from the mortgage loan were used to discharge Pacific Focus’s outstanding mortgage loan with Hang Seng Credit Limited.

30.  The balance of the purchase price in the sum of $333,705.80 was paid to Pacific Focus by the solicitor on 18 August 1998.  On 31^st August 1998, Mr. Miu received HK$360,000.00 by a circuitous route from Pacific Focus.  On the same date, Mr. Miu issued two cheques in the sums of HK$150,000.00 and HK$208,600.00 to the applicant and her husband respectively.  The total amount was $358,600.00. 

31.  On 24 August 1998, the applicant applied to CUHK for allowance under the Home Finance Scheme.  That application was approved. 

32.  The applicant and her husband were later charged with the offences following an investigation that commenced as a result of an anonymous complaint received by the ICAC against the applicant in February 1998.

Essential elements of the offence

33.  In order to establish its case, it was essential for the prosecution to show that the applicant and her husband had a financial interest in the property, that the applicant knew about this and deliberately made a false statement when she applied for the Private Tenancy Allowance, and that the applicant acted with the intention of deceiving CUHK.  The judge found that the applicant and her husband did have a financial interest in the property and that she knew about this.  The false statement was made to deceive CUHK in order to obtain the allowance.

34.  The complaint of the applicant (this is the combined effect of the first and second grounds of appeal) is that as the applicant did not face joint charges with her husband, the case against her had to be considered separately from that of the husband.  The applicant says that the judge had failed to do so. 

35.  It was submitted by her counsel, Mr. Cheng Huan S.C., who appeared together with Mr. Pow and Mr. Hui, that the involvement of the applicant was extremely limited.  Prior to the application for the first Private Tenancy Allowance, she had only accompanied her husband to view the property once or twice and she applied for a loan from CUHK.  That was all that she had done up to that stage.  

36.  It was argued that after the property was acquired, an auto-pay was arranged to pay the monthly rental of $45,000.00 to Pacific Focus from the couple’s AssetVantageaccount.  There was no evidence who arranged this payment.  On 14 July 1997 the applicant issued a cheque to Pacific Focus but there was no evidence as to the purpose of this payment. 

37.  Her subsequent involvement was the second application for Private Tenancy Allowance in 1998 and the purchase of the property from Pacific Focus. 

38.  It was argued that although funds for the purchase of property came from the couple’s joint accounts, it was the husband who was instrumental in acquiring this property and responsible for the payment of funds both in terms of the purchase and the subsequent payment of money to Pacific Focus which used the money to make the mortgage repayment.

Evidence in support of conviction

39.  In our view the finding that the applicant and her husband had a financial interest in the property and her knowledge about this was clearly supported by evidence.

Knowledge of joint funds being used

40.  It is important that one consider all the evidence in this case.  The applicant and her husband are highly qualified professionals.  The husband had entered into an agreement to buy a high value property of over $11 million.  Both the applicant and the husband had inspected the property and the applicant had actually obtained a loan in March 1996 from CUHK of over $1.2 million, which was used a few days later by the husband to pay for the 3^rd deposit payment.  By then the husband had already paid the 1^st and 2^nd deposits.  Considering the time-frame, the loan was clearly obtained from CUHK (and intended to be used) as part payment of the purchase price of the property.  The loan from the CUHK was paid into the AssetVantage account of the couple.  As can be seen from the bank statements of this account, the monthly salary of the applicant from CUHK was also paid into this account.  Is it believable that the loan was transferred from this account to the husband’s account without the applicant’s knowledge or inquiry as to its purpose? 

41.  Three months later, another $1.2 million was paid to the solicitor in charge of the conveyance from the funds of the couple’s Joint Current Account.  By then a total deposit of HK$2,360,000 had already been paid.  Adding this latest payment, the total sum paid was HK$3,567,000.  While the funds for the payment of the 1^st and 2^nd deposits in the sum of $1,180,000.00 came from Hang Seng Bank account of the husband, in the light of this background, is it really believable that the applicant had no idea that a total sum of $3,560,000 (being money belonging to her and her husband) was used to acquire the property?

42.  There was criticism that the judge had erred in treating as “undisputed fact” that 30% of the purchase price of the property was paid by various deposits made by the applicant and her husband.  It was argued that the admission was merely that in respect of the 30%, some funds came from the husband’s own account and some came from the couple’s joint accounts.

43.  While the couple’s joint accounts might be operated by either of them individually and the evidence showed that the transfer of funds from the couple’s joint accounts was effected with the sole signature of the husband, the judge was clearly correct when he said the payment was made by the applicant and her husband.  In the context of this case, the payment was plainly made by both of them.  This case does not call for a discussion on the legal status of a joint account or the legal relationship of joint account holders with the bank.

44.  After the property was acquired, apart from the payment of monthly rental of $45,000.00, the husband was also paying a monthly sum of over $30,000.00 to the account of Pacific Focus.  Again, is it believable that the applicant had no idea that regular payments had been paid out from the husband’s account or that she would not even ask what this payment was for?

45.  The irresistible inference from all these evidence is that the applicant had full knowledge that funds belonging to her and her husband were being used to acquire the property.

46.  Furthermore, the evidence of the solicitor’s clerk in charge of the conveyance was that she had telephone conversations with the applicant and informed her of the progress of the acquisition.  This evidence further strengthens the inference that can readily be drawn about the applicant’s knowledge.  In our view the judge had not erred at all.

Financial interest

47.  The fact that the property was conveyed to Pacific Focus, a limited company, whose shareholders and directors were not the applicant and the husband, would not mean that they had no financial interest in the property.  This depends on the circumstances of the case.

48.  This is a case where the applicant and her husband provided about $3,567,000.00 as part of the purchase price for the acquisition of the property.  The balance of the purchase price was by way of a mortgage loan.  The husband stood as one of the guarantors for the mortgage loan.  After the property was assigned to Pacific Focus, monthly sums were paid by the husband either in cash (the majority) or by way of transfer from his account to Pacific Focus.  The company then used this sum together with the rent of $45,000.00 (which it received from the applicant and her husband) to pay for the mortgage repayments.  All these are clearly matters of evidence upon which an inference can be drawn that the applicant and her husband had financial interest in the property.  Pacific Focus was merely used as a vehicle to acquire the property so that it might let the property to the applicant and her husband and a Private Tenancy Allowance could be claimed by the applicant from CUHK. 

49.  It was unbelievable that the applicant and her husband intended to make a gift to Pacific Focus and to retain no interest in the property.  In our view, the prosecution has indeed adduced sufficient evidence from which an inference of guilt can be drawn.

50.  Further one should not simply focus on the acquisition of the property.  What happened afterwards in 1998 was equally relevant in deciding whether the applicant and her husband in fact had a financial interest in the property.

51.  The applicant and the husband bought the property from Pacific Focus for $11,980,000.00.  The bulk of this purchase price in the sum of $8,040,559.20 had to be used by Pacific Focus to redeem the property from Hang Seng Credit Ltd.  Pacific Focus was said to have received from the applicant and her husband a deposit of $1,198,000.00 and the balance of the purchase price of $2,396,000.00, making a total of $3,594,000.00 from the sale of this property to them.  This receipt of money was by way of an acknowledgement by Pacific Focus on paper.  Proceeding on the basis that the applicant and her husband had indeed made these payments, then there clearly must have been some special arrangement between them and Pacific Focus.  In effect, the applicant and her husband, apart from benefiting Pacific Focus by providing it with funds for the initial acquisition of the property and with mortgage repayments, continued to benefit Pacific Focus two years later by actually paying it another $3,594,000.00 when they acquired the property in 1998 from Pacific Focus.

52.  This would have been an unusual arrangement.  There may be an innocent explanation for it, but the applicant chose not to explain why she and her husband should benefit Pacific Focus in such a manner.  The applicant is again entitled to her right of silence but the arrangement between the applicant and her husband on the one hand and Pacific Focus on the other cried out for explanation. 

53.  In our view the idea that Pacific Focus was intended to be the beneficiary of the propertywas simply incapable of belief.  It was extraordinary for someone to go to such length to benefit another person.  The irresistible inference to be drawn is that Pacific Focus was interposed by the applicant and her husband to hide the true nature of the property : namely, that they were the beneficial owners and had a financial interest in the property. 

54.  If the payment of the sum of $3,594,000.00 had not actually taken place and was merely an acknowledgement by Pacific Focus on paper, this would further strengthen the prosecution’s case that the applicant and her husband acquired and retained a financial interest in the property.

55.  That Pacific Focus later returned the balance of the purchase price of$333,705.80 to the applicant and her husband was readily discernible from the evidence.  This provides further support to the prosecution’s case that the applicant and her husband had a financial interest in the property.  Why else should Pacific Focus, the vendor of the property, return part of the purchase price to them as purchasers?

56.  Once it is established that the applicant and her husband had a financial interest in the property and the applicant had the full knowledge of this then, in the absence of an explanation from the applicant, the false statements made by her in the two application forms could only mean that she did so with the intention of deceiving CUHK for the purpose of obtaining the Private Tenancy Allowance.

57.  This being the case, the alternative case in Ground 6 of the grounds of appeal (i.e. only the husband had a financial interest) does not call for discussion.

58.  The evidence of the solicitor’s clerk concerning her dealings with the applicant clearly strengthens the prosecution’s case against the applicant.  The judge was not in error as suggested by Ground 7 of the grounds of appeal.

Resulting Trust

59.  It is argued that the judge had wrongly relied on the presumption of resulting trust in convicting the applicant  (Ground 3 of the grounds of appeal).  The argument is that in a criminal case the prosecution has to prove the guilt of the applicantbeyond reasonable doubt and cannot rely on presumptions : see Scott v. Baker [1969] 1 QB 659, Roy Dillion v. R [1982] AC 484 and R v. Chan Yuk Wing [1997] 3 HKC 60.

60.  A resulting trust occurs in favour of persons who provide the consideration for the transfer of property to another.  The presumption can be rebutted if the transfer is intended as a gift to the recipient.  This principle is well-known.  Lord Diplock in Pettitt v. Pettitt [1970] AC 777 at 823 observed that,

‘A presumption of fact is no more than a consensus of judicial opinion disclosed by reported cases as to the most likely inference of fact to be drawn in the absence of any evidence to the contrary’.

61.  The judge had indeed referred to resulting trust in his Reasons for Verdict.  But we do not agree that his finding of guilt against the applicant was purely based on a presumption of resulting trust.

62.  A fair reading of his reasons clearly shows that the judge based his decision on findings drawn from the evidence of this case and not simply on a presumption.  This can be seen from the following passages :

‘17.      ...... a resulting trust arises when property is paid for, in all or in part, by one party but conveyed into the name of another unless there is evidence or a presumption that a gift was intended.  The history of what occurred here in relation to this property showed me for sure that no gift was intended.  The evidence pointed irresistibly to its being part payment of the purchase price.  The idea that these two professional people were making a gift of three and a half million dollars or so to the company or its shareholders, a distant relative and friend, is unworthy of belief.  I do not say it is impossible for them to have had such an intention, but it would need evidence, and cogent evidence, to persuade a court to find that it was so.  There was none.  Likewise the idea that the sum represented the repayment of loans, either to the company or its shareholders, was not to be countenanced.  Again it would take evidence, and cogent evidence, to establish otherwise.’

‘18.      The context of the payments the defendants made, their discharging of the associated expenses of the solicitor and the property agent, the payment of the apportioned rates and management fees, their inspection of the property and residence there, the second defendant’s negotiation of the mortgage, and the flow of funds when they purchased the property from the company in 1998 all combined to demonstrate for sure that the funds from their accounts was part payment of the purchase price and nothing else.  They provided the funds in the character of purchasers.’

63.  At paragraph 20, the judge further said this :-

‘I was thus sure that there was no intention in either of the defendants to make a gift of their contribution toward the purchase price of the property to Pacific Focus.  I was thus sure that the resulting trust arose.’

64.  Considering the earlier two passages and the context in which this passage was said, the judge plainly did not base his decision on a mere assumption.

65.  This being the case there is no need to deal with the further arguments in Ground 4 (i.e. the judge relied on hypothetical issues to buttress his reliance on resulting trust) and Ground 5 (i.e. the judge erred in finding the applicant had a financial interest in the property and a false statement was made by the applicant).

Conclusion

66.  One is saddened to find that the applicant, a highly qualified professional who has contributed so much towards the community through her work in the medical field, now carries with her the stigma of a criminal conviction.  However, the evidence clearly established her guilt on the two charges.  Accordingly her application is dismissed.