R. v. LAW SHEUNG PING

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 256 OF 1994

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J U D G M E N T

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1. This is an appeal against conviction by the appellant. He was charged with and convicted of two counts of false accounting, contrary to s.19(a) of the Theft Ordinance Cap.210.

2. The appellant was a building surveyor with the Buildings and Lands Department. He was entitled to and did obtain private tenancy allowance since 1984. On 22nd May 1987 he submitted an application for such allowance regarding a flat in Baquio Villa. In that application, he declared that he had no financial interest in the flat. The flat was at that time registered in the name of PW1 who had agreed to sell to the 2nd defendant.

3. The Crown's case was that this declaration was false because in a trust instrument dated 26th June 1987 and executed between the appellant and the 2nd defendant, it was stated that the appellant was the beneficial owner of the flat and the 2nd defendant was the trustee thereof. This trust instrument was executed on the same day as the assignment from PW1 to the 2nd defendant. It also said that the appellant had paid HK$250,000 towards the purchase price and agreed to continue to pay installment payments towards the price. The appellant acted as guarantor for the 2nd defendant in the mortgage of the flat by the 2nd defendant to a finance company. He paid the rent and topped up the payment in order to pay for the installments. The Crown alleged that therefore the appellant had, as at the date of submission of his application, i.e. 22nd May 1987, a financial interest in the flat, and that he was dishonest in submitting the application with a view to gain from the government the private tenancy allowance. In a similar application submitted in 1990, the appellant repeated the same false declaration.

4. The appellant gave evidence before the learned magistrate and offered his explanation. He said that at the beginning, it was the 2nd defendant who wanted to buy a flat in Baquio Villa and he introduced his friend PW1 to sell the flat in question to the 2nd defendant at $1.3 million. The 2nd defendant paid $10,000 as deposit and $125,000 as part payment. The 2nd defendant agreed to let the flat to him and so he submitted the application for the allowance. It was at a later stage that the 2nd defendant agreed to sell the flat to the appellant, and the appellant would pay $167,000 and complete the sale in about 2 to 3 months' time. The appellant did pay $167,000 odd. According to him, the trust instrument was signed as some sort of security. So, at the time of submission of his application, he had no interest in the flat. After that, he rented the flat from the 2nd defendant. Subsequently he was unable to purchase it from the 2nd defendant because of financial difficulty and also his impending divorce. He did not buy the flat as agreed and the tenancy was renewed. It was in September 1991 that he applied under the home finance scheme. He decided to buy the flat as previously agreed. There was an assignment from the 2nd defendant to him. He said the purchase price was then increased to about $2.35 million. He said that he was not dishonest in respect of the two declarations which were the subject matters of these two counts.

5. The learned magistrate in his oral judgment and his Statement of Finding said that central to the issues in these charges was the status or terms and effect of the trust instrument dated 26th June 1987. He said that it truthfully and accurately reflected the facts stated therein; that it related to events prior to 22nd May 1987, that is, the date of the appellant's application, and that it showed that the appellant was the owner of the equity in the flat in question. He took the view that the court need not be concerned with the further arrangements in value between the appellant and the 2nd defendant after 22nd May 1987. The learned magistrate also considered the appellant's evidence but did not accept his explanation. He also found the appellant to be dishonest.

6. With respect, I do not think this is the proper approach. I think the two main issues in this case are first whether the appellant had a financial interest in the flat in question as at 22nd May 1987. If he had, his declaration in the application must be false. The second main issue is whether he was dishonest as at that date. There is no difficulty regarding the element with a view to gain. In deciding whether the appellant had a financial interest in the flat as at 22nd May 1987, the court must look at all the evidence including the trust instrument. This instrument together with the assignment from PW1 to the 2nd defendant, the assignment from the 2nd defendant to the appellant, and the relevant memorials are of course very important or even crucial. However, one must not overlook the other evidence including the documentary evidence and the appellant's oral testimony. The learned magistrate had placed great emphasis on the trust instrument. While he was certainly correct to do so, the approach he had adopted seems to suggest that he might not have given sufficient consideration to the other pieces of evidence, particularly some of the documentary evidence which might be considered as consistent with the appellant's testimony.

7. The trust instrument was dated 26th June 1987, that is five weeks after the appellant's application submitted on 22nd May 1987. The learned magistrate correctly said that the trust instrument referred to events prior to the execution thereof. However, it can be argued that it referred to events prior to 22nd May or events subsequent to that date but before the execution of the trust instrument, or both. It referred, for example, to the payment of $250,000 said to have been made by the appellant towards the purchase price of the flat. But it is clear from the conveyancing documents relating to the sale of the flat from PW1 to the 2nd defendant that prior to 22nd May 1987, only two sums, that is, $10,000 and $125,000, were paid towards the purchase price. So obviously some other payment(s) must have been made after 22nd May 1987 but before the execution of the trust instrument and the assignment from PW1 to the 2nd defendant.

8. With regard to the $10,000 and $125,000, the evidence shows that these two sums were paid by the 2nd defendant's cheques, one directly to PW1 and the other to his solicitors, Winston Chu and Co. and then to the PW1 using the solicitors' cheque. These documents appear on pages 988 and 992. The Crown submitted that the two cheques only showed that the 2nd defendant had made the payments but not who provided the money. That, of course, is strictly speaking correct. But the 2nd defendant's bank account was also produced at pages 990 and 993. These documents show that the two sums, $10,000 and $125,000, came from his personal account and during that relevant period there was no large sum of money paid into his account which was in fact overdrawn.

9. That state of affair, of course, is not unequivocal. It can be argued that the 2nd defendant might have received money provided by the appellant in cash or through another account. However, the fact remains that these two sums representing the initial deposit and part payment for the purchase of the flat appear to have come from the 2nd defendant and his personal account and there is nothing on the evidence before me to show that these two sums came from anyone else, or anywhere else other than his personal account. This, I must say, is something which should be borne in mind in deciding whether the appellant had provided the money and hence had an interest in the flat. The fact that the initial deposit and the first part payment of the purchase price appear, on the face of it, to have come from the 2nd defendant before 22nd May 1987, and the fact that another part payment, either $167,000 as alleged by the appellant or the balance of $250,000 less whatever part payments as shown in the trust instrument, was paid after 22nd May 1987 may arguably be consistent with the appellant's evidence that initially it was the 2nd defendant who intended to purchase the flat and to let it to him and it was after the 22nd May that they agreed that the 2nd defendant was to sell it to the appellant. All these are certainly relevant in the assessment of the appellant's evidence. The learned magistrate, with respect, might not have given sufficient consideration to these.

10. The learned magistrate had apparently also taken the view that the court was concerned only with the situation as at 22nd May 1987 and not the further arrangements between the 2nd defendant and the appellant after that date. It is correct that the crucial date was 22nd May, but with respect, the further arrangements are also relevant to throw light on what the true position was as at 22nd May as well as on the presence or absence of dishonesty on the part of appellant. These further arrangements cannot be ignored.

11. Counsel for the appellant referred me to the rental receipts issued by the 2nd defendant to the appellant and argued that they showed the genuine relationship between the 2nd defendant and the appellant as that of landlord and tenant during the material time. However, with respect to counsel, I think such rental receipts are neither here nor there. They were required to support the continuous payment of the allowance. They were to be issued in any event whether the 2nd defendant and the appellant were genuine landlord and tenant.

12. Then counsel relied on the property tax returns filed by the 2nd defendant relating to the rental income received by him from the appellant. Again, this is not unequivocal. The tax returns were addressed and sent to the flat which was occupied by the appellant. There was nothing to show who paid the income tax. Although these are something which the court should take into consideration, I think, in the circumstances, they can only be regarded as neutral.

13. What I think is more important is the increase in the purchase price alleged to have been paid by the appellant when the flat was assigned by the 2nd defendant to him in 1991. The 1991 assignment stated that it was executed in pursuance of the trust instrument and the consideration was nil, but the appellant said that he had paid $2.3 million odd for it. The Crown submitted that there was nothing to show this was indeed paid by the appellant. However, I have gone through carefully the documents, particularly the relevant conveyancing file which was produced. The documents do show that the 2nd defendant was paid by the solicitors for the appellant in the transaction, $210,000 in January 1991. This appears on pages 1002 and 1003. He was also paid $1.13 million in about the same period and that appears on pages 1005 and 1006. The appellant had also, through his solicitors, paid $856,000 to discharge the existing mortgage on the property before the assignment to him. There is a receipt relating to that on page 1009. There is also a loan from the Po Sang Bank for $2 million to the appellant and that appears on page 857. These documents were all issued through the solicitors and tended to show that these payments were indeed made. In other words, it seems from these documents that the appellant had paid or arranged to be paid over $2 million and certainly much more than $1.3 million for the assignment of the flat to him in 1991.

14. While these documents are again not unequivocal, they are, if accepted, consistent with the appellant's evidence that he had paid $2.3 something million for the assignment of the flat to him in 1991 pursuant to the agreement he had with the 2nd defendant in June 1987 after the submission of his application. If the appellant had indeed purchased the flat from PW1 at $1.3 million using the 2nd defendant's name and was indeed the beneficial owner of the flat, why should he pay more to have it assigned back to him in 1991? In other words, why should he pay a higher price to buy a flat of which he was already the beneficial owner? So these documents and the possibility, I put it no higher than that, of the appellant paying $2.3 something million to get the assignment would, in my view, be something which should also be taken into consideration in deciding whether the appellant was the beneficial owner of the flat as at 22nd May 1987 and/or whether he was dishonest. These further arrangements cannot be regarded as irrelevant and cannot be overlooked.

15. One thing which I think should also be borne in mind is that the 2nd defendant was jointly charged with the appellant in respect of one of the charges. The 2nd defendant was also a civil servant and had obtained tenancy allowance. He should be well aware of the procedure and regulations. If the appellant had, prior to 22nd May 1987, made use of the 2nd defendant's name to purchase a flat and had provided the money to the 2nd defendant to pay the deposit and the first part payment and executed the trust instrument, this would mean that the 2nd defendant was also part of the whole scheme and was aiding and abetting the appellant. However, for some reason, he was acquitted.

16. Another matter which should also be taken into consideration is the terms of the assignment from the 2nd defendant to the appellant to 1991. It recited the trust instrument executed in 1987. The assignment led to the discovery of the trust instrument and subsequently to the present prosecution. If the appellant was indeed dishonest and hiding the true position using the trust instrument which was not registered earlier, one would ask : why should he disclose the trust instrument in the assignment? He could easily omit the trust instrument and simply say in the assignment that he purchased the flat from the 2nd defendant at a certain price. There is no need in the assignment to refer to the trust instrument. It may be for the purpose of saving stamp duty, I do not know. On the other hand it may also throw light on whether the appellant was dishonest. Whichever way, this is, in my view, a matter which is also relevant.

17. The 2nd count relates to the declaration which the appellant submitted in January 1990 and that was the time when he came to be aware of the revised Civil Services Regulation regarding the inclusion of trust in the meaning of financial interest. It seems that he had a conversation with Mr Kan of the Civil Services Branch. That there was such a conversation was not disputed but the contents thereof were certainly not accepted. The appellant said that he had informed Mr Kan about his trust instrument. I think in such circumstances, apart from the points which I have touched upon earlier, the conversation and what was said would also be relevant in considering dishonesty on his part.

18. At the end of the day, it seems that while the learned magistrate had correctly placed much emphasis on the trust instrument, he might not have given sufficient consideration to the other documentary evidence and the appellant's evidence. The Crown's evidence was certainly quite strong and cast great suspicion on the conduct of the appellant and the 2nd defendant. It might well be the case that a lot more had happened in fact, but there is no clear evidence on that. I am concerned with the two charges before me, the false declarations in the application submitted on 22nd May 1987 and the subsequent application submitted in 1990. For the reasons given above, and bearing in mind all the evidence, particularly the documentary evidence to which I have referred, I do feel a lurking doubt as to whether the convictions are safe and satisfactory. In these circumstances, I would give the benefit of that doubt to the appellant. I would therefore allow the appeal. The convictions are quashed and the sentences set aside.