HKSAR v. LEUNG KAM WA

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1997, No.15
(Criminal)

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J U D G M E N T

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Stuart-Moore, J.A. (giving the judgment of the Court):

1. On 28th November 1996, this Applicant was convicted in the District Court, following a trial before Deputy Judge Day, on three counts of false accounting. The judge ordered that three other offences relating to alleged thefts should be stayed and, on a further charge of theft, the Applicant was acquitted. The Applicant now seeks leave to appeal against conviction on the three false accounting charges which were laid under s.19(1)(a) of the Theft Ordinance, Cap.210. The Particulars of each charge were in similar terms. It will suffice to deal with the first of these charges (count 5) in full, which reads:

"Leung Kam-wa, on a date unknown between the 1st and the 30th day of September 1993, in Hong Kong, dishonestly and with a view to gain for himself 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 Alto Products number 0336/93 and dated 14th September 1993, by making or concurring in the making of entries thereon which was misleading, false or deceptive in a material particular, namely it purported to show that goods in the value of $46,904.40 United States currency were sold by Alto Products to Kin Son Electronic (USA) Corp."

2. The 2nd charge (count 6), between the same dates, related to invoice 0345/93 dated 21st September 1993 for goods valued at US$47,574.

3. The 3rd charge (count 7), between 1st September 1993 and 30th October 1993, related to invoice 0371/93 dated 11th October 1993 for goods valued at US$61,710.

4. The prosecution's case was that at all material times the Applicant was the partner and manager of Art-tech Electronic Manufactory (ATEM), a subsidiary of Mutual Well Limited (MWL) owing 50% of ATEM shares. Mr. Lau Kam-hung (PW1) and Mr. Ooi Iu-aik (PW3) were the major shareholders of MWL and a company called Alto Products (Alto). They each owned 25% of ATEM. The Applicant was fully responsible for all the day-to-day operations and management of ATEM and was authorized to sign cheques in respect of all bank accounts of ATEM.

5. Alto provided banking facilities to ATEM for selling electronic products to Kin Son Electronic (USA) Corp. (Kin Son) based in U.S.A. by way of 'Document Against Payment' and paid ATEM upon seeing Alto invoices to Kin Son prepared by ATEM.

6. Between the months of September and October 1993, the Applicant told Simon Ng Man-kit (PW11), the shipping manager at ATEM, that ATEM was in need of money and that he had agreed with Mr. Lam Chak-fai (PW2), the proprietor of Kin Son, to sell calculators to Kin Son at inflated prices. Subsequently, on the instruction of the Applicant, PW11 inflated the 3 Alto invoices referred to in counts 5, 6 and 7.

7. In the fifth count, the actual cost of the goods was US$10,062. In the sixth charge, the actual cost was US$29,520 and, on the seventh charge, the actual cost US $11,868. The three inflated invoices were signed by PW1 who was not aware of and did not consent to the inflation. Alto forwarded these invoices to the bank on behalf of ATEM and received the money and then paid ATEM the money. Lam (PW2) discovered the inflated price only after receiving the consignments concerned. When asked by Lam about the inflation over the phone, the Applicant admitted that it was his idea to overstate the figures and said he would fix the matter later but he failed to do so. As a result, ATEM gained approximately HK$816,958 causing Alto to lose the same amount of money. Alto had to refund this amount to the bank.

8. When interviewed under caution, the Applicant declined to answer questions as was his perfect right.

9. That is how the prosecution put its allegation against this Applicant. It was quite a straightforward allegation and depended very heavily upon the credibility of the evidence given by the witnesses whose activities also touched upon these false invoices and, in particular PW1, PW11 and PW2 for the prosecution, and of course the Applicant himself when he gave his account from the witness box.

10. As to PW1, the judge set out in his Reasons for Verdict the effect of the evidence given by that witness, which is to be found at page 2 in the Reasons. The judge said:

"........ Lau Kam-hung (PW1) a businessman of many years. This case involves a number of companies and he told me about the control of some of them. He has run Alto jointly with Mr. Ooi (PW3) since 1977. They employ 12 and have (an annual) turnover of $120,000,000 - $140,000,000. The authorized signatory for Atem was any one out of the defendant Lau or Ooi. Art-Tech China Ltd. made calculators for Atem. The defendant ran Atem, and (PW1) Mr. Lau did not know who its customers were or how the defendant operated the business. The company was established in 1989 and liquidated in 1994.

(PW1's) evidence as to the individual charges was limited as he had little to do with the running of Atem. He was too busy with his other concerns and had trusted the defendant to run the business but, by May 1994, PW1 suspected improprieties with Atem and when the defendant went to USA to press for payment from a buyer - Kin Son Electronic ("Kin Son"), PW1 visited the offices of Atem and removed Atem's accounts to his own office to study. Atem was wound up and the ICAC called in thereafter.

..... It appeared from the documents that Alto had sold the goods to Kin Son but this apparently was a device to secure credit for Atem, the real sellers. Alto had access to credit which Atem did not. Upon Alto presenting appropriate documents to their bank evidencing the shipment of goods and their price, the bank would credit Alto with the invoiced amount and would thereafter itself collect payment from the customer's bank (a system apparently known as 'document against payment (or DP). Alto in each case credited Atem's account when it received the money from the bank (apart from one payment of $163,000 to Art-tech China Ltd.) Invoice 0336/93 was the only one paid by Kin Son. In the other two cases Kin Son did not pay and Alto had to reimburse the bank the amount of the invoices plus costs. Alto has not recovered the money or the calculators. The prosecution's allegation was that the amount in the three invoices were improperly inflated above the actual prices thereby enabling Atem to recover those inflated prices from Alto, but that was not something PW1, with his limited knowledge of Atem's business, could tell me about."

11. The judge then went on to deal with cross-examination of that witness, who was apparently asked many questions.

12. The evidence of PW11, a summary of which is to be found at page 14 in the Reasons for Verdict, is covered in this way:

"He had been the shipping manager at Atem taking his instructions from the defendant. He gave his evidence under an immunity from prosecution. .....

..... In each case he gave instructions to a typist to prepare the documents or false invoices in these figures. He told me that he did this on instructions from the defendant. Atem was in financial difficulties and the defendant said he had spoken to Kin Son - the purchaser - who had agreed that the prices in these invoices be inflated and more goods be supplied later to account for the difference in price. The defendant left him to work out the exact figures, saying that in respect of P24 he needed about US$46,000, for P25 he needed US$47,000 and for P26 he needed about US$61,000."

13. In his Reasons, the judge summarized PW2's evidence as follows:

"The second witness was Lam Chak-fai,, the owner of Kin Son. His company imports electronic goods to the USA. He had known the defendant for about 9 years and they had done business together since 1991. He recalled invoice 0336/93. He had arranged to buy 7,740 calculators from the defendant having been told by him that he had a large quantity to sell. There was no written contract as the arrangement was made, as usual, by phone. He knew the model, 0144, and the price was agreed with the defendant at US$1.30 per unit. When he was shown exhibit P24 (the invoice) he explained that the pencilled alterations were made by one of his colleagues when the wrong price (namely US$6.06) - was discovered.

He told me that he usually received the goods before the paperwork - the bank sent him the documents later - and when he received the goods he contacted Atem and got them to fax the documents to him. The faxed copy of invoice 0336/93 had the correct price whereas the original he later received from the bank had the inflated price.

Similarly with invoices, 0345/93 and 0371/93, when notified that the goods were ready for collection he phoned Atem to ask for a fax of the invoice to enable him to clear the goods through customs. The original invoices later received showed inflated prices. He was able to produce copies of two of the faxes (exhibits P122 and P123) - the originals being with the customs agents in America. He could not remember who he spoke to at Atem when he asked for the faxes.

The first two shipments arrived in early October and he received the original invoices from his bank about three weeks later. The third shipment arrived in late November and he had the invoice from the bank a week after that. He was also able to produce older invoices (exhibits P27, 28, 29, and 30) relating to other shipments which confirmed his evidence of what the actual price of the goods was.

After he received the first two invoices from his bank he phoned the defendant about the increased prices, being surprised, he said, that they were so high. The defendant told him not to pay until the price was corrected. Mr. Lam said he was given to understand the defendant was short of money and that he would correct the prices with the bank before payment was made. He phoned the defendant a number of times about the prices telling him not to inflate the prices on the third shipment.

When he received the papers for the third shipment (P26) he said he was very angry as the prices were very much higher than normal, and he made numerous calls telling the defendant he would only pay after the prices were corrected. The defendant said he had already notified the bank and an amended invoice would be sent for payment.

Mr. Lam paid US$46,904.40 on the 11th February, 1994 - the amount in invoice 0336/93 - in settlement of the actual costs of the goods delivered under the three invoices after adjustments for commission he was owed by Atem in respect of business he had put their way and for a rebate in respect of damaged goods.

At no time did he agree to the defendant inflating the prices and would not have agreed had he been asked.

He denied that, apart from possibly on his first order with Atem, he had ever paid in advance for orders from them. This was important as the defence were putting their case in part in respect of charges 5-7, on the basis of advance payments for orders which would be met later."

14. The judge gave very close scrutiny to the case as it had been presented to him. The Reasons for Verdict demonstrate a careful and balanced approach. At page 17 in the Reasons for Verdict, he had this to say of the witnesses whose evidence had been so crucial:

"I had to look at the prosecution evidence in this case very carefully. The defence was suggesting that Mr. Lau (PW1) and Mr. Ooi (PW3) had grievances against the defendant because of the money he had lost. The defence suggested that Mr. Lam (PW2) of Kin Son had colluded with Mr. Lau and with Mr. Ng. They suggested that the clerks, Ms. Mok and Ms. Yeung, were lying and, of course, Mr. Ng (PW11) was giving evidence under an immunity.

Mr. Lau was an impressive witness. He gave his evidence in a straightforward, sure way. I accepted that, despite the money he and Mr. had invested in Atem, that company was of minor importance to him. He left the running of it to the defendant, only becoming involved when he suspected the defendant was misappropriating money. I do not believe he has made his evidence up as the defence suggest."

15. The judge went on to deal with the way in which that witness had dealt with other suggestions made by the defence and, in particular, he had no hesitation in accepting Mr. Lau as an honest and reliable witness.

16. In the course also of dealing with this part of the case, he dealt with Mr. Lam of Kin Son who had denied being party to inflating prices and quantities in exhibits P24, 25, and 26 to which earlier reference was made, and the judge said,

".... I believed him. I accepted his explanation that the earlier invoices P125 and 127-130 were in fact paid in arrears despite the dates on the documents. His reactions to allegations of dishonesty and fabrication of documents were undeniably genuine. His immediate response to a question put in cross-examination about exhibit P26 was 'You are saying I am an idiot, that I would take delivery on seeing such an invoice' was typical of this man's refreshingly simple, direct manner in court. I accepted from him that his dealings were with the defendant and that he was surprised when he saw the inflated figures on invoices P24 and P25 and telephoned the defendant, telling him not to inflate invoice P26. These were three separate, complete orders and he was not a party to any scheme to pay in advance or inflate numbers."

17. The judge also accepted the evidence of the accounting clerks, Ms. Mok and Ms. Yeung, who were plainly honest and reliable witnesses in the face of allegations from the Applicant that they were liars.

18. As to the Applicant himself, whose evidence was summarized in the Reasons at pages 16 and 17, the judge went on to say at page 21:

"I considered the defendant's evidence carefully and for a number of reasons came to the conclusion that he was not a truthful witness. His evidence in chief in relation to charges 5-7 was, at times, confusing."

19. He went on then to give examples where the Applicant had demonstrated from his own evidence the falsity of what he was saying. Many of his allegations in the witness box had never been put to the witnesses despite the thoroughness of counsel's cross-examination on other topics, and then the judge went on to say:

"I was firmly of the view that the defendant was not to be relied on. I was satisfied that much of his evidence had been made up from the outset and more was made up as he went along.

20. With these findings, it would have been extraordinary if the judge had reached any other conclusion than the one recorded.

21. The Applicant invites us to consider a number of grounds of appeal and, in brief, what they come to is this:

(1) that the original judge was already suspicious of the evidence he gave during the trial.

(2) The DP (document against payment) was extremely important in the case, but the Applicant says he did not fully understand it.

(3) The verdict was reached in the absence of some documents, namely "master information", which was very important to the case.

(4) The tainted witness (PW11) gave contradictory evidence.

(5) The process where the client Kin Son got the goods was dubious.

(6) The arrival time of the goods collection document given by PW2 does not square up with information given by the two bank employees, and he says that during the trial, two documents were unexpectedly submitted and a further statement was taken from PW2 just before PW2 gave evidence, which he regards as being unfair.

22. We find that there is no substance in any of the matters that he has raised in these grounds. The trial judge gave a full and fair appraisal of the evidence. The trial itself was properly conducted and the judge had a full grasp of all the issues including the matters to which reference is made in these written grounds of appeal. There is not the slightest hint on the part of the judge of bias or judgment that was pre-determined and counsel, it seems, acted conscientiously throughout.

23. During the course of the hearing today, the Applicant has raised a number of evidential points, all of which were canvassed at the trial. In particular, he relies on the absence of some documents which, it was accepted during the trial, had disappeared for one reason or another. He believes that those documents might have affected the outcome of the trial if they had been found. These form part of what the judge in his Reasons for Verdict called "loose ends" and at pages 24 and 25 of his Reasons, he indicated in some detail why he considered their absence to be "unfortunate but not sinister".

24. The Applicant also told us about the commercial arrangement that really existed between him and Mr. Lau (PW1). Again at pages 21-23 in the Reasons, the judge demonstrates that this issue was something he fully understood. The Applicant's evidence was not "confusing" in the sense that the judge had been unable to understand it. It was confusing because the Applicant's story was found not to be true and, in parts, he himself gave contradictory evidence that made no logical sense.

25. As a final resort, the Applicant has sought to lay blame on his counsel alleging a failure to put questions relation to Exh.P125. That matter was canvassed in the court below and is accurately summarized by the judge at page 20 of his Reasons..

26. The Applicant has indicated that he appreciates that we are not here to re-try issues that were decided in the court below where those findings were based upon an assessment of witnesses who we have not seen or heard. Despite this, he has sought to re-open factual matters that bore little or no relevance to the questions we have had to address. We have found nothing that would cause us to interfere with these verdicts which appear from the Reasons given by the judge to be based upon overwhelming evidence of guilt.

27. The Applicant has raised a large number of matters that are wholly without substance. Accordingly, leave to appeal is refused and this application is dismissed. It was without the slightest merit and we shall order loss of time, namely that three months of the period that he has spent in custody shall not be reckoned as part of the two year term of imprisonment he is serving for these offences.