HKSAR v. SHEK FU WING

CACC 51/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

criminal APPEAL NO. 51 OF 2004

(ON APPEAL FROM dccc 440 of 2003)

____________________

____________________

______________________

J U D G M E N T

______________________

Stuart-Moore, VP (giving the judgment of the Court):

1.  The applicant (D1 at trial) was convicted on 29 January 2004 of conspiracy to defraud (charge 1) following a trial in the District Court before Deputy Judge Dufton.  He now seeks leave to appeal against his conviction.

2.  The applicant was one of six defendants named in the charge sheet.  He was convicted of the conspiracy along with D2 to D6, albeit D3 pleaded guilty at the outset of the trial and gave evidence for the prosecution.  The prosecution did not proceed with a second charge of promoting a pyramid selling scheme. 

3.  In the course of his forty-three-page Reasons for Verdict, the judge set out in considerable detail the alleged scheme which in summary is described in the particulars of the charge against all the defendants, namely, that between August 2000 and January 2001 they:

“… conspired together and with other persons unknown, to defraud such person who might be induced to pay money (the payers) for the plans operated by Welldone (2000) Limited, Bright Concepts Trading Limited, or Excellent Future International Limited, by dishonestly :-
	(i)	falsely representing to those payers that if they paid specified amounts of money for the plans and/or recruiting other persons to join the plans, they would be paid specified sums of money indefinitely;
	(ii)	falsely representing to those payers that Welldone (2000) Limited, Bright Concepts Trading Limited, or Excellent Future International Limited were involved in genuine business;
	(iii)	inducing, causing or allowing such payers to pay money to Welldone (2000) Limited, Bright Concepts Trading Limited or Excellent Future International Limited, knowing that Welldone (2000) Limited, Bright Concepts Trading Limited, or Excellent Future International Limited could not meet the payments due to all payers as represented to those payers;
	(iv)	failing to pay all payers the monies owed to them under the plans; and
	(v)	appropriating part of the monies so paid to Welldone (2000) Limited, Bright Concepts Trading Limited, or Excellent Future International Limited.”

4.  The applicant’s original grounds of appeal complain, firstly, that there was no evidence to support the judge’s finding that he had knowledge of the conspiracy to defraud or that he had agreed to participate in the conspiracy.  Secondly, the applicant contended that the judge wrongly concluded that because D2 and D3 represented to the participants that he was a cousin of a fictitious person referred to as ‘Mr Ling’, he (the applicant) must have agreed to play that role.  Thirdly, the applicant submitted that because he had been introduced to PW1 late at night, it did not follow, as the judge had found, that he must have been deeply involved in the conspiracy.

5.  More recently, in a lengthier written submission, dated 11 January 2005, the applicant has expanded on these grounds and added further grounds.  Dealing at the moment with his original grounds, he suggested in regard to the first that there was no evidence from which a conspiracy, in the absence of direct evidence about its existence, could be inferred.  As to the second ground, he contended that there was no suggestion that he had acknowledged his role of ‘Mr Ling’s’ cousin when he was introduced to PW1.  He also suggested that as his main work in the office at that time was concerned with entering customers’ particulars into the computer, he rarely encountered the customers (or participants) himself and that in any event it was quite usual for him to work until late at night.

6.  The allegation was, in essence, as the judge described it, a “money planting scheme, which required participants to make cash investments in various plans in return for which they were promised handsome rewards as the plans grew”.

7.  D2 and D3 had worked at Pro Mail Investment and Distribution Company (“Pro Mail”) and in the year 2000 set up Welldone 2000 Limited (“Welldone 2000”) to operate the scheme in Tsim Sha Tsui.  In doing so, they copied the methods adopted by Pro Mail.  They also recruited Madam Chiang Yee-yung (PW1) who D2 and D3 had met at Pro Mail.  Her value to Welldone 2000 was that she could recruit many other participants (also referred to as ‘down-liners’).  D2 persuaded PW1 and others to join the “investment” plans offered by Welldone 2000 by fabricating the existence of two wealthy bosses, Messrs ‘Ling’ and ‘Kanichi’ in order to boost its financial standing.

8.  The growth of the plans depended on the number of participants which the existing participants could recruit.  These plans, however, were bound to fail as the promised rewards far exceeded the income received from them as there was no investment of the income from the plans and there was no other income received by the companies which had been set up solely for the purposes of operating the fraud.

9.  During October 2000, Welldone 2000 moved to new premises at Tung Ying Building in Tsim Sha Tsui and Bright Concepts Trading Limited (“Bright Concepts”) and Excellent Future International Limited (“Excellent Future”) were also set up.  PW1, in order to keep her mind at ease about the reasons for the move, was told by D2 that ‘Mr Ling’ had been caught in a sex trap and was being blackmailed as the result of which control of the ‘business’ would be handed over to the applicant.  This, again, was a false story. 

10.  The applicant and D2 became directors of Bright Concepts on or about 3 November 2000 and it was at about this time that the applicant allegedly adopted the role of the cousin of the fictitious ‘Mr Ling’.  He worked daily at the new offices thereafter and the scheme continued in the same way as before.  The applicant was arrested at those premises on 10 January 2001 and was subsequently interviewed on five occasions.

11.  The defence case, in overall terms, was that there was no conspiracy to defraud anyone.  D2 was the only defendant to give evidence at trial for the defence but the applicant’s case was essentially presented along the same lines as he had expressed in his interviews, namely that he was simply an employee who had not been made aware of the false story being told by others to the effect that he was the cousin of a ‘Mr Ling’.  The judge did not, as alleged by the applicant in an additional ground of appeal, say that “the records of interview should have been confirmed by (him) under oath”.  On the contrary, the judge expressly stated that he drew no adverse inference from the applicant’s decision to remain silent.

12.  When assessing the evidence, the judge was satisfied that the so-called “plans” being operated by the various companies amounted to a fraud.  As the judge stated:

“47.  In my view joining these plans prejudices the participants’ rights.  Whilst some participants may make a profit the later ones to join the plans will lose.  It is only a question of time when that will occur.”  (Appeal bundle p. 47)

13.  In coming to this conclusion, the judge had the benefit of the evidence given by the Treasury Accountant (PW38) who had stated that it was clear these investment plans would ultimately lose money.  As an example, ‘Plan D’ required a contribution of $9,600 which would, it was said, produce rewards totalling $150,000.  With no other income coming into the company apart from the contributions to the plans, there was no way in which such large sums could be paid to all participants.

14.  Later, the judge continued by saying:

“50.  In addition the fabrication of Mr Ling and Mr Kanichi to boost the company so as to obtain investment in the plans also shows the fraudulent nature of the business.  A company running a legitimate business would not require the making of such elaborate false stories as to ownership of the company.”  (Appeal bundle pp. 47-48)

15.  The judge described the setting up of Welldone 2000 in the following terms:

“	53.	Whilst working at Pro Mail a decision was made to copy the plans and set up Welldone 2000.  D3 testified that in around March 2000 D2 suggested the idea of copying the plans of Pro Mail.  Initially D3 did not agree because there was not enough money.  Subsequently the funding problem was solved when D2 invited D5 to join the partnership.  D2, D3 and D5 each contributed around $100,000.  Welldone 2000 operated from the 7/Floor Bowa House… .
	54.	D3 testified that whilst at Pro Mail D2 and D3 met PW1.  PW1 was essential to the success of Welldone 2000 because she had many down-liners in Pro Mail and therefore if she were recruited many people would follow her and invest in the plans.  There then followed an intricate web of deceit to persuade PW1 to leave Pro Mail and join Welldone 2000 and thereafter to ensure she remained with the company”  (Appeal bundle p. 48)

16.  The evidence against the applicant was, of course, separately assessed from the other defendants at trial.  The judge observed that the applicant and D2 were the registered directors of Bright Concepts and that the applicant had signed on behalf of the company as the tenant of the new offices where, in due course, he was arrested.  The applicant was not only acquainted with D2 prior to the operation of this fraudulent venture, he also knew D3 because all three had worked together at Winterthur Insurance.  D3, when giving evidence for the prosecution said that D2 had told him to explain to PW1 the reason for the move to a new address.  It was then that the elaborate story concerning D4 blackmailing the fictitious ‘Mr Ling’ was given to PW1 in consequence of which it was said that ‘Mr Ling’ had handed over the company to his cousin.  This person, as the judge commented: “happened to be D1 … D1 thereafter was continuously involved in the operation of the business … attending the office daily”. 

17.  Turning to the applicant’s interviews, the judge’s summary was as follows:

“… D1 in the various records of interview says he did not cheat anyone; explains about the proposal to set up a recycling business with D2; that he lent the offices at Tung Ying and the bank accounts of Bright Concepts to D3; that he was only a salaried employee of Welldone 2000; that he did not know or had ever heard of the name LING Chong-lung (Mr Ling); and that he had not been introduced to PW1 as Mr Ling’s cousin.”  (Appeal bundle p. 72)

18.  The judge noted that D2 stated in evidence at trial that he and the applicant, having decided to set up a recycling business, had rented the new premises.  In this context, D3 had said that he had wanted to move the offices of Welldone 2000 and the applicant and D2 lent him the offices at Tung Ying Building.  It was then that the applicant became a staff member of that company.  On an analysis of parts of the evidence given by D2, the judge found that D2’s assertions in favour of the applicant amounted to an attempt “to exculpate his friend D1”.

19.  More specifically, the judge rejected D2’s account that the applicant had known nothing about the stories told to PW1 about the applicant being the cousin of ‘Mr Ling’.  The judge was mindful of the fact that PW1’s unchallenged evidence had been that: “she was introduced to the applicant by D2 and D3 as the male junior cousin of ‘Mr Ling’.  Although PW1 could not remember exactly when this took place, she testified that the applicant was present at that time, sat together with her, D2 and D3”.

20.  The judge went on to reject the applicant’s account, given in his interview, in which he denied ever having been introduced to PW1 as the cousin of ‘Mr Ling’, noting also that it was “inherently improbable” that if the applicant’s role in Welldone 2000 was that of a member of staff alone, “a meeting would take place at 11:00 p.m. to introduce him to PW1”.  In addition, in this regard, the judge was able to take into account the evidence of PW2, PW3, PW5 and PW8 who had all been participants in the investment plans.  All of them were introduced to the applicant as the “boss” or “one of the bosses” and a staff member, PW10, testified that in the applicant’s presence, D6 introduced the applicant as “one of the bosses”.  None of this evidence was disputed in cross-examination. 

21.  The applicant, in a fresh ground of appeal, has suggested that PW2, PW3, PW5, PW8 and PW10 gave hearsay evidence.  This is plainly not so.  The words of the co-conspirators, used in the course of the conspiracy, were admissible in themselves to prove the existence of the conspiracy.  So far as the applicant’s knowledge is concerned as to what they were saying, PW8 and PW10 were witnesses who were personally introduced to the applicant with words describing him as one of the “bosses” of the business although it is true, as the applicant pointed out, that there were other staff members called by the prosecution who were unclear whether the applicant was one of the bosses or a mere member of staff. 

22.  In conclusion, the judge was satisfied that the only inference to be drawn was that the applicant had agreed to act the part of the “cousin of Mr Ling” knowing full well that ‘Mr Ling’ did not exist and that “this was falsely represented to PW1 and other participants so that they would participate in the plans, plans which D1 (the applicant) knew to be fraudulent”.  This process of reasoning did not overlook defence counsel’s submission at trial that no evidence had been put before the court of the applicant receiving substantial sums of money from the company accounts unlike other defendants.  More to the point, the applicant was not only a director of Bright Concepts but was continuously involved in the operation of the business with a knowledge, as he admitted in his interviews, of its general nature.  Finally, the judge found that the role played by the applicant was one which was “essential to the continuing operation of the fraudulent business”.

23.  There is no basis for interfering with the findings of the judge.  These were reached in a sensible and balanced way after a careful consideration of the evidence.

24.  The application is, therefore, dismissed.