HKSAR v. CHAU KAR HO BERNARD

DCCC1166/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1166 OF 2013

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Reasons for Verdict

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1.  The defendant faces 5 charges. Each charge is for the offence of fraud, contrary to section 16A of the Theft Ordinance. He pleads not guilty to all charges.

2.  The prosecution and the defence have agreed certain facts pursuant to section 65C of the Criminal Procedure Ordinance (Exhibit P103).  All the documentary exhibits produced by either side are admitted into evidence without objection from the opposite party.  The prosecution calls 7 witnesses to testify in Court.  They include Mr. Calvin Chau (PW1), Mr. Quinton Chau Kar Hon (PW2), Miss Vanessa Chau Wing Yee (PW3), Mr. Lam Wai Hang (PW4), Miss Cheung Hoi Ying (PW5), Mr. Norry Li Cho Chuen (PW6) and Mr. Kent Lee Hor Keung (PW7).  Having considered the evidence adduced at the end of the prosecution case, with learned counsel for the defendant making no submissions to the contrary, I find that the defendant has a case to answer in respect of all charges.  Having been advised of his rights by his own counsel, the defendant elects to give evidence.  He does not call any witness.

The directions

3.  I direct myself that, in respect of each of the 5 charges, the burden is on the prosecution to prove each and every element of the offence against the defendant beyond reasonable doubt.  Although the defendant has testified in his own defence, it does not mean that he has the burden to prove what he has testified is true or may be true.  In fact, he needs not prove anything.  However, since the defendant has testified, I must take into account what he has said when I am considering the issues of fact that I have to determine.  From the testimony of the defendant, which I shall summarize in due course, it is clear that if what he has testified is true or may be true, he must be acquitted of all charges.  On the other hand, even if his testimony is completely rejected, it does not mean that any of the charges has been proved.  I must still determine, after considering the whole of the evidence, whether or not the prosecution has proved each charge against the defendant beyond reasonable doubt.  I note that the prosecution has not asked me to use, nor shall I use, the defendant’s lies, if I find any, as evidence to prove his guilt.

4.  There are 5 charges against the defendant.  I direct myself that I must consider the case against and for the defendant on each charge separately.  Even if I find the defendant guilty or not guilty in respect of one charge, it does not mean that the same verdict must be returned in respect of all or any of the other charges.  Each charge must be separately considered and determined according to the evidence.

5.  In addition, I bear in mind that the defendant is a 49 years old man with a clear criminal record.  Of course, a clear record by itself is not a defence to any criminal charge, but it is evidence that the defendant is a man of good character.  I must take this piece of evidence into account because it works in favour of the defendant in two ways.  Firstly, it is less likely for him to commit any of the alleged offences.  Secondly, it is more likely for him to give credible evidence.

6.  Furthermore, when I am making findings of facts, I note that I am entitled to infer existence of other facts from facts.  However, the primary facts upon which I may draw any inference of facts must be either facts admitted by the defendant or facts found to have been proved beyond reasonable doubt.  I also note that no inference of facts can be drawn against the defendant unless that inference is the only reasonable and irresistible inference arising from the facts admitted or proved.  On the other hand, even if pieces of facts each on its own will not be sufficient to support any inference of facts to be drawn, they may be taken together to form a body of facts upon which a proper inference of facts may be drawn.  It is because circumstantial evidence works cumulatively, in geometrical progression, eliminating other possibilities[1].

Background

7.  The following facts are either admitted or not controversial.

Tsun Ling Limited (“Tsun Ling”)

8.  Tsun Ling Limited (“Tsun Ling”) was a company set up by PW1 and PW2 on 3 March 2004 in commemoration of their grandfather.  It has no business operation, but has been used to hold two properties situated at No. 1 Robinson Road, Hong Kong.  The Chau family residence originally occupied that location.  After it had been pulled down and redeveloped, the Chau family owns various parts of the building built thereon including the two properties held by Tsun Ling.  These two properties are Suite V on 25/F (Suite V) and Suite W on 26/F (Suite W).  There is an ancestral hall inside Suite V.

9.  Suite V had been used and occupied by the younger sister of PW1’s grandfather until she passed away in 2013.  Hence, she was occupying Suite V in 2012 when the alleged offences occurred. Suite W has all along been let out, and the rentals generated have been paid into the company account of Tsun Ling for the use of the company.

10.  According to a valuation report dated 20 June 2011 (Exhibit P13), the market value of Suite V at that time was estimated to be HK$52,100,000; and that of Suite W was HK$52,300,000.  The total value of the two properties was therefore estimated to be HK$104,400,000.

Mortgages of the Tsun Ling properties prior to June 2012

11.  Suite V had never been mortgaged.

12.  Suite W had been mortgaged twice.  On 1 August 2005, it was mortgaged to DBS Bank (Hong Kong) Limited.  On 28 June 2007, it was mortgaged to Bank of China (Hong Kong) Limited with the mortgage to DBS discharged at the same time.  In June 2012, the mortgage to Bank of China was also discharged.

13.  When these two mortgages were entered into, Tsun Ling had 6 shareholders.  They were: (1) PW1 holding 20% shares; (2) Mr. Cedric Chau holding 20% shares; (3) PW2 holding 10% shares; (4) PW3 holding 10% shares; (5) Golcar International Limited holding 20% shares, and (6) Total Pro Solution Co. Ltd. holding 20% shares.

14.  Golcar International Limited was a company owned by the defendant.  Total Pro Solution Co. Ltd. was a company owned by Madam Christina Ko Mun Wah.

15.  At the time of these two mortgages, the directors of Tsun Ling were PW1, PW2, the defendant and Christina Ko.  PW1 was also the chairman and the secretary of the company.  In both mortgages, Tsun Ling was the only borrower, and the loans were deposited into the company bank account of Tsun Ling.

16.  PW1, Cedric Chau, PW2, PW3, and the defendant have the same grandparents and are therefore of the same generation within the Chau family.  They belong to 3 different family units.  PW1 and Cedric Chau are brothers from one unit, PW2 and PW3 are brother and sister from another unit, while the defendant is from one other unit.  They are therefore cousins of one another on the paternal side.  All of them except Cedric Chau are and at all material times were living in different floors of the same building at No. 1 Robinson Road.  Cedric Chau has all along been out of Hong Kong.  According to the defendant’s evidence, Christina Ko is also his elder cousin on the father side.

Changes in the shareholdings and directorship of Tsun Ling

17.  Since 24 November 2011, the number of shareholders in Tsun Ling has been reduced to 5.  They are PW1 (30% shares), Cedric Chau (30% shares), PW2 (10% shares), PW3 (10% shares), and Kanford Rich Limited (20% shares). 

18.  It is apparent that the shareholdings of PW1 and Cedric Chau in Tsun Ling have each been increased by 10% to 30%.  The change was brought about by Christina Ko selling to them the 20% shares held by Total Pro Solution Co. Ltd. at $4 million.

19.  It is also apparent that Golcar International Limited is no longer a shareholder in Tsun Ling.  Its 20% shares in Tsun Ling have now been held by Kanford Rich Limited (“Kanford”) which was incorporated in British Virgin Island on 9 October 2009.  The defendant is and was at all material times its only director and only shareholder.   In other words, he has the complete control of the 20% Tsun Ling shares held by Kanford.

20.  Since 2010, Tsun Ling has only 3 directors, i.e. PW1, PW2 and the defendant.  It appears that each of the 3 units in the Chau family mentioned above provides one member to act as a director of Tsun Ling.  PW1 remains its chairman and secretary. 

21.  Tsun Ling has only one common seal (Exhibit P1) and one company chop (Exhibit P2). They are and at all material times were kept by PW1.

The 5 mortgages that formed the subject matter of the 5 charges

22.  Between June 2012 and October 2012, a total of 5 mortgages (“Mortgages 1 to 5) were registered in the Land Registry and the Companies Registry against Suites V and W.

23.  Mortgage 1 was dated 5 June 2012 against Suite V to secure a loan of $6 million. Mortgage 2 was dated 28 June 2012 against Suite W to secure a loan of $4 million.  Mortgage 3 was dated 24 July 2012 against Suite V to secure a loan of $2 million.  These 3 mortgages were executed in favour of Golden Fields Finance Limited (“Golden Fields”) which was a licensed moneylender.  PW4 acted on behalf of Golden Fields.

24.  Mortgage 4 was dated 8 August 2012 against Suite V to secure a loan of $2 million. Mortgage 5 was dated 8 October 2012 against Suite W to secure a loan of $3 million.  They were executed in favour of Kingsway Finance Limited (“Kingsway”) which was also a licensed moneylender.  PW5 acted on behalf of Kingsway.

25.  All mortgage contracts were prepared by PW7 who was working at all material times in Messrs. S. W. Tai & Co., Solicitors, as a conveyancing clerk upon the instructions of PW4 of Golden Fields or PW5 of Kingsway (as the case may be). 

26.  In each of these 5 mortgage contracts, Tsun Ling was named as the mortgagor and the first borrower of the loan, while the defendant was named as the second borrower.  Each mortgage contract was signed by the defendant in two capacities.  Firstly, he signed as the authorized person acting for and on behalf of Tsun Ling, and he signed his name within what purported to be the company chop of Tsun Ling that had been stamped onto the contract.  The common seal of Tsun Ling was also affixed onto each contract next to each of the signatures made by the defendant for and on behalf of Tsun Ling.  Secondly, he signed in his personal capacity as the second borrower of the loan. He signed each mortgage contract in the office of Messrs. S. W. Tai & Co.

27.  It was stated in each of the contracts for Mortgages 1, 2 and 5 that the mortgage was used to secure a loan up to a maximum of $10 million, i.e. for a sum larger than the actual loan itself.  Under cross-examination, each of PW4 and PW5 has given some explanation for the marking up the loan amount in these mortgage contracts.  It is not necessary to repeat their explanation because this is not a matter of significance as far as this trial is concerned.  For Mortgages 3 and 4, each of them was used to secure a loan up to a maximum of $2 million which was equivalent to the actual loan advanced.

28.  For each mortgage, the defendant had also signed on the following documents in respect of each mortgage loans application and its ancillary documents in favour of the lender (i.e. Golden Fields or Kingsway as the case may be) as the authorized person of Tsun Ling , and/or in his own personal capacity as each document might require:

(1) the mortgage loan application form submitted by Tsun Ling to Golden Fields;

(2) the mortgage loan application form submitted by the defendant to Golden Fields;

(3) the mortgage loan application form submitted by Tsun Ling as the borrower and the defendant as the co-borrower jointly to Kingsway;

(4) the loan agreement made between Tsun Ling and the defendant jointly with the lender;

(5) the repayment schedule signed by Tsun Ling and the defendant jointly in favour of the lender;

(6) the authorization letter for distribution of the loan money signed by Tsun Ling and the defendant jointly in favour of the lender;

(7) the authorization letters signed by Tsun Ling in favour of the lender for collection of rent, and for sale or disposal of the mortgaged property in case of default in repayment;

(8) the declarations made by Tsun Ling and the defendant jointly in favour of the lender;

(9) the receipt of relevant documents signed by Tsun Ling and the defendant jointly in favour of the lender.

29.  These documents were prepared by PW4 on behalf of Golden Fields or by PW5 on behalf of Kingsway (as the case may be) in their respective offices with the respective signature columns for Tsun Ling and the defendant left blank for signatures to be made in the solicitors’ office shortly before the related mortgaged contract was signed.  PW4 and PW5 had also signed on these documents and the related mortgage contracts on behalf of Golden Fields and Kingsway (as the case may be).

30.  According to each loan agreement and its repayment schedule, the related loan was to be repaid by 12 monthly instalments with a prohibition against early repayment[2].  The interest rate for each loan was 2.6% per month (or 31.2% per annum).  The sums to be paid in the 1^st to the 11^th instalments were solely for payment of interest, while the 12^th instalment was for payment of interest as well as repayment of the capital in one lump sum.  Hence, if each of these 5 loans was repaid by 12 monthly instalments, the total amount of interest payable by Tsun Ling and the defendant would be $5,304,000.  If each loan was repaid immediately after the minimum contractual loan period had expired (i.e. 6 months after receipt of money for Mortgages 1 to 4, and 1 month after receipt of money for Mortgage 5), the total sum of interest payable would still be $2,262,000.

31.  For each of Mortgages 1, 3, 4 and 5, a document purported to be the minutes of the meeting held by the board of directors of Tsun Ling during which Tsun Ling had resolved to mortgage one of its properties in favour of the lender to secure repayment of the loan from the lender to Tsun Ling and the defendant, and to authorize the defendant to act on its behalf to seal and sign the relevant mortgage contract and loan documents, was provided to PW7 for preparation of the relevant mortgage contract.  Each of these 4 minutes was purportedly signed by PW1, PW2 and the defendant as the directors of Tsun Ling on the first page of the minutes, and by PW1 as the chairman of the board of directors at the end of the second page of the minutes.  Whether or not there were similar minutes for Mortgage 2 is a matter to be dealt with later.

32.  After the defendant had signed all 5 loan agreements and their ancillary documents as well as the 5 mortgage contracts in his dual capacity for Tsun Ling and for himself, he obtained a total sum of $17,000,000 being loans advanced by Golden Fields and Kingsway.  Major share of the money was deposited by cheques into the defendant’s personal HSBC bank account, while the remaining share was paid to persons and companies according to the respective loan distribution letters.  Such persons and companies fell into two groups according to the defendant’s evidence: (1) financial consultants who received 5% of the loan for Mortgages 1 to 4 and 5.5% of the loan for Mortgage 5 as commissions; (2) the solicitors Messrs. S. W. Tai & Co.

33.  In respect of Mortgage 1, the defendant received $5,690,000, the financial consultants received $300,000 (with Leung Lai Kok receiving $240,000 and Master Ways Consultants Limited receiving $60,000), and the solicitors received $10,000.

34.  In respect of Mortgage 2, the defendant received $3,790,000, the financial consultants received $200,000 (with Leung Lai Kok receiving $160,000 and Master Ways Consultants Limited receiving $40,000), and the solicitors received $10,000.

35.  In respect of Mortgage 3, the defendant received $1,895,000, the financial consultants received $100,000 (with Leung Lai Kok receiving $80,000 and Master Ways Consultants Limited receiving $20,000), and the solicitors received $5,000.

36.  In respect of Mortgage 4, the defendant personally received $1,888,000, the financial consultants received $100,000 (with Li Cho Kuen receiving $80,000 and Master Ways Consultants Limited receiving $20,000), and the solicitors received $12,000.

37.  In respect of Mortgage 5, the defendant received $2,825,000, the financial consultants Easy Access Corporation Ltd. received $165,000, and the solicitors received $10,000.

38.  In summary, out of the total sum of $17,000,000, the defendant personally received a total of $16,088,000, the various financial consultants received $865,000, and the solicitors’ firm received $47,000. 

Falsities of the mortgage loan applications and relating documents

39.  From the Admitted Facts (Exhibit P103), and/or the undisputed oral testimony of PW1, PW2 and PW3, and/or the undisputed evidence from the forensic scientist, the following facts have been proved beyond reasonable doubt: -

(1) At the time or before any of the loans was advanced by Golden Fields or Kingsway (as the case may be) to Tsun Ling as the mortgagor as well as the first borrower and to the defendant as second borrower, PW1, PW2 and PW3, be he/she acting as the director, or the chairman, or the secretary or the shareholder of Tsun Ling (as the case may be), did not know and had never agreed that Tsun Ling would borrow any sum of money from Golden Fields or Kingsway, or to mortgage Suite V or Suite W to secure repayment by itself or by the defendant of any of the loans. None of the loans or any part thereof purportedly borrowed in the name of Tsun Ling had ever been paid into the bank account of Tsun Ling, and Tsun Ling had not had the use of any part of the money. PW1, PW2 and PW3 were not aware of the existence of Mortgages 1 to 5 until PW1 was alerted by the auditor of Tsun Ling around October 2012 when he made a report to the police.

(2) The 4 documents purported to be the originals of the minutes of the meetings of the board of directors of Tsun Ling held on different occasions which had been used as proofs that the defendant had been authorized by Tsun Ling to borrow money and enter into Mortgages 1, 3, 4 and 5 on its behalf were false and forged in that:

(a) the director’s meeting referred to in each of these 4 purported minutes had never been held, nor had any of these purported minutes been passed around for the other two directors of Tsun Ling (i.e. PW1 or PW2) to sign;

(b) none of the resolutions stated in each of these 4 purported minutes had ever been made by the board of directors of Tsun Ling, i.e. the directors of Tsun Ling had not resolved that Tsun Ling would borrow money as the 1^st borrower with the defendant as the 2^nd borrower and would mortgage Suite V or Suite W (as the case may be) for that purpose, or that the defendant was authorized by Tsun Ling to affix the common seal of Tsun Ling and sign all relevant or ancillary documents on behalf of Tsun Ling;

(c) PW1 and PW2 had not signed on any of these 4 purported minutes. All signatures appearing in these minutes purported to be signed by PW1 and PW2 as the director or the chairman of the board of directors of Tsun Ling were forged signatures even though their appearance resembled the genuine signatures of PW1 and PW2;

(d) Copies of these 4 purported minutes had been shown to PW1 and PW2 during police investigation and marked respectively as CC5(1)&(2), CC6(1)&(2), CC7(1)&(2) and CC8(1)&(2) in their witness statements. I am informed orally by prosecuting counsel without disagreement from defence counsel that these copies were seized from the offices of Golden Fields and Kingsway, and they are supposed to be corresponding copies of the original minutes Exhibits P18&19, P50&51, P66&67 and P82&83 which were seized from the solicitors’ office. These copies are produced collectively as Exhibit D1 at the request of the defence. It is clear that CC7(1)&(2) was not an exact copy of Exhibit P66&67, and CC8(1)&(2) was not an exact copy of Exhibit P82&83. This is a matter which I shall deal with later. Suffice to say that all these copy minutes were also false in the same way as stated in (a), (b) and (c) according to the evidence of PW1 and PW2.

(3) The common seal and the company chop of Tsun Ling affixed onto the 5 contracts for Mortgages 1 to 5 were not made by or from the genuine common seal and the genuine company chop of Tsun Ling. Tsun Ling had not authorized any person to affix the common seal or put down the company chop onto any of these mortgage contracts.

The Charges

40.  On the basis of these facts, it is clear beyond any doubt that false minutes of meetings of the board of directors of Tsun Ling, and/or false common seal as well as false company chop purported to be of Tsun Ling had been used to enter into the 5 loan agreements and the related 5 mortgage contracts.  There is also no doubt whatsoever that the defendant had signed on all relevant documents not only in his personal capacity but also as the person authorized by Tsun Ling to act on its behalf, and that he was fully aware that he was acting in these dual capacities.  However, in actual fact, the defendant had never had the authority of Tsun Ling for him to do what he had purported to do on its behalf.  Yet, the defendant obtained the benefit and the use of these 5 loans in the total sum of $17,000,000, even though he paid parts of the money (i.e. $912,000) to persons who helped him obtain the loans.

41.  Against such factual background, the prosecution alleges that the defendant had obtained these 5 loans by fraud.  In a nutshell, it says that each loan was obtained by the defendant after he had by deceit with intent to defraud induced PW4 or PW5 (as the case may be) to approve the mortgage taken out by him and to make payment to him. 

42.  In respect of each of Charges 1, 3, 4 and 5, the deceit alleged by the prosecution to have been practiced by the defendant was that he had dishonestly produced or caused to produce false minutes of meetings, false common seal and false company chop of Tsun Ling, and by falsely representing that he was the authorized person to take out a mortgage on Suite V or Suite W (as the case may be).  In respect of Charge 2, the deceit alleged was similar except that it was not alleged that the defendant had produced or caused to produce false minutes of meeting.

The issues

43.  In his written closing submissions, learned counsel for the defendant has made it clear that the defence does not dispute that the documents purported to be minutes of the meetings of the board of directors of Tsun Ling were false, and that false common seal and false company chop of Tsun Ling had been used on all relevant documents.  The defendant’s case is simply that he was in fact the victim of a fraud practiced upon him by his financial consultants, with or without the help of PW4 to PW7, and that at all material times he was acting under the honest belief that he had been authorized by Tsun Ling to mortgage the two properties so that he could obtain the 5 mortgage loans.

44.  In light of the nature of the defence case, it is not surprising that learned defence counsel has stated in paragraph 13 of his written submissions that the crucial issues are whether it is proved to the required standard that the defendant knew of the falsity of the relevant minutes, the relevant common seal and the relevant company chop, and whether he knew that he did not in fact have the authorization to take out the mortgages in question, and whether he had the intention to defraud the lending companies in approving the relevant mortgages.  I agree these are the core issues in this trial.

45.  I further note that while learned counsel for the defendant has also stated in paragraph 12 of his written submissions that the fact that “the defendant had represented to the finance companies that he was authorized person to take out the mortgages, and that indeed such mortgages had been approved is not in issue”, he has also stated in paragraph 31 of his written submissions that “PW4 to PW7 had good reasons to deceive the defendant because they stood to gain considerably from the commissions that the defendant agreed to pay or from the interest on the loan”.  He elaborated this point further in his oral submissions.  The defence has therefore also raised the issue whether or not PW4 and/or PW5 had been induced by the alleged deceit of the defendant. 

The evidence

PW1

46.  PW1 testifies that on each of the two earlier occasions in 2005 and 2007 when Tsun Ling mortgaged Suite W, the directors of Tsun Ling had made a resolution authorizing the mortgage, and the resolution had been circulated to the shareholders for confirmation and acknowledgment so that every shareholder including the defendant was made aware of the mortgage application. 

47.  PW1 confirms that prior to notification by the auditor of Tsun Ling in October 2012, he had no knowledge of any of Mortgages 1 to 5.  He further testifies that between June and October 2012, the defendant had never contacted him about any of these mortgages, or mentioned to him that such mortgages or any one of them would be up and coming or had been entered into. 

48.  PW1 further testifies that he had never lent the common seal (Exhibit P1) or the company chop (Exhibit P2) of Tsun Ling to the defendant or anybody else for use.  He also confirms that other than Exhibit P1 and P2, Tsun Ling did not have another set of common seal and company chop.

49.  According to PW1, he did not have a lot of communication with the defendant because the defendant spent most of his time in the Mainland, but they were just one phone call away if they needed to communicate with one another.

50.  Under cross-examination, PW1 testifies that Suite W was mortgaged in 2005 to borrow money firstly to pay for the major maintenance project to be carried out in respect of the whole building, and secondly to help out Christina Ko.  He cannot recall if the amount lent to Christina Ko was $1 million.  He recalls that Christina Ko did not repay the money to the bank directly, and she repaid Tsun Ling by different sums of money paid at irregular interval.   He did not know if Christina Ko had difficulties in repaying the debt.  He agrees that Christina Ko had sold her 20% shares in Tsun Ling at $4 million to him and his younger brother Cedric, but he cannot recall the time of sale.  The mortgage was later transferred to Bank of China in 2007 because of better interest rate. 

51.  In response to defence counsel’s question, PW1 agrees that there were occasions when it had been typed onto the minutes that the meeting had been held at the registered office of Tsun Ling on a certain date by its board of directors, there was in fact no such meeting, and that the minutes was merely passed around for the various directors to sign at different locations.  

52.  Defence counsel puts to PW1 that one day in early January or February 2012, the defendant met PW1 and PW2 in Jockey Club.  PW1 says that he cannot remember but agrees there was such a possibility that they met each other.  Defence counsel further puts to PW1 that the defendant had mentioned to PW1 and PW2 during the meeting about using his 20% shares in Tsun Ling to obtain a loan.  PW1 says he cannot remember such an incident but agrees that it was possible.  Under Re-examination, PW1 says that if this event did happen, he would not have agreed to the defendant’s proposal.

53.  In so far as renting out of Suite W in 2007, PW1 testifies that no meeting had been held for the shareholders of Tsun Ling for them to decide whether they would agree to rent out the premises

PW2

54.  PW2 testifies that he was aware of the early mortgage history of Suite W, but before October 2012, the defendant had not told him anything about mortgaging the properties of Tsun Ling to support the 5 applications for mortgage loans for the total sum of $17 million with Tsun Ling as the first and the defendant as the second borrower. 

55.  PW2 also testifies that he knew that Tsun Ling had only one set of common seal and company chop which were kept by PW1.

56.  Under cross-examination, PW2 agrees that $1 million obtained in the earlier mortgage of Suite W were lent to Christina Ko.  He knows Christina Ko sold her shares to PW1 and Cedric Chau, but he has no idea whether she did so to pay off her debts.

57.  PW2 agrees that Suite W had been let out in 2007 at $48,000 a month.  He says that it was PW1 who decided the amount of rent.  On the question whether PW1 decided everything for Tsun Ling, PW2 points out that PW1 is the major shareholder and he pays respect to him.  He agrees that PW1 was the leader of their generation, but PW2 disagrees that he and other cousins will not argue with PW1 for whatever said by PW1.

PW3

58.  PW3 testifies that when Suite W was mortgaged in 2007, she was made aware of the application.  However, the defendant had not told her anything about the 5 mortgage loan applications in question, and that she was only informed of such matters by PW2 when PW2 made a report to the police with PW1. She says that she expected to be informed of such applications because her interest would be affected.  The defendant could communicate with her over the phone, though they seldom communicated or dealt with each other.  They could also communicate through the father of the defendant but she had not been told by the defendant or anyone of the loans, and nobody had ever sought her consent or approval to such loans or mortgages.

59.  Under cross-examination, PW3 says that she did not remember if she had been consulted before Suite W was rented out in 2007.

PW4

60.  PW4 is the general manager of Golden Fields and holds 20% of its shares.  If he approved a client’s application for mortgage loan, he would refer him to solicitors’ office for signing the mortgage documents.  At the material times, Golden Fields was engaging the service of S. W. Tai & Co.  He knew the solicitor Mr. Tai and the conveyancing clerk PW7 who was responsible for handling the mortgage loan contracts for Golden Fields.  PW4 was in charge of Mortgages 1 to 3 on behalf of Golden Fields.

61.  PW4 testifies that it was PW6 who first contacted him about these mortgage loans. PW6 was an intermediary who had introduced business to Golden Fields prior to this occasion.  PW6 gave him the address of Suite V and provided him with the valuation report of the property (Exhibit P13), as well as the personal particulars of the defendant including his identity card number and bank statements.  In the initial contact, PW6 told PW4 that the defendant was asking for a loan of $6 million. 

62.  PW4 further testifies that he learned from the valuation report that Suite V was owned by Tsun Ling.  He therefore instructed S. W. Tai & Co. to conduct a company search to find out who were in the company because he had to obtain the consent of the directors and shareholders of Tsun Ling before he could approve the loan.  He came to know that the defendant was one of the 3 directors.  He had also conducted a search in the Land Registry and confirmed that the property belonged to Tsun Ling.

63.  According to PW4, from the information he had obtained, he understood that this was a case where a 20% shareholder of a company asking for a $6 million loan on the strength of a company property that was worth over $50 million.  He was prepared to approve the mortgage loan if the directors and shareholders of Tsun Ling agreed to the transaction.  He therefore told PW6 that he required a minutes of a meeting of Tsun Ling by which Tsun Ling would indicate its approval to the mortgage loan.  He expected PW6 to inform the defendant of this requirement.  PW4 then instructed S. W. Tai & Co. to prepare the necessary minutes.  To his knowledge, S. W. Tai & Co. had prepared the minutes.  He expected S. W. Tai & Co. to pass the minutes to PW6 who would then pass the minutes onto the defendant and his company Tsun Ling for completion.

64.  It is the evidence of PW4 that, before the deal was completed or before the mortgage application was executed, he expected there was an authentic duly signed minutes of Tsun Ling.  Had he known that the minutes were false in the sense that no meeting of the company had taken place, or that the signatures on the minutes were false, or had he known that the defendant was not properly authorized by Tsun Ling to make the mortgage loan application, or that Tsun Ling did not even know of the mortgage loan application, he would not have approved it.

65.  PW4 further testifies that he never met the defendant prior to 5 June 2012 when all documents relating to the first mortgage loan application were signed in the solicitors’ office.  On that day, he brought along all the documents he had prepared in his office to the solicitors’ office, and the mortgage contract was prepared by the solicitors.

66.  PW4 recalls that in the solicitors’ office, at the time when the documents relating to the first mortgage loan were signed, in addition to the defendant and himself, the other persons present included PW6, PW7 as well as one or two other persons who had not been introduced to him.  He thought the defendant brought along these other persons.

67.  According to the evidence of PW4, once he arrived at the solicitors’ office, he saw amongst other documents the original of the required minutes of meeting on the part of Tsun Ling (Exhibit P18 & P19).  When he saw the minutes, it had already been signed.  He denies that a copy of the minutes had been faxed to his office subsequently, and he did not have a copy of the document.  He is shown Exhibit D1 and he agrees that the minutes marked CC5(1)&(2) were similar to Exhibit P18&P19, but he maintains that he did not have a copy of the minutes.  The defendant, PW6 or PW7 had not said anything to him about the minutes, and PW4 maintains that he was acting under the belief that the minutes were a genuine document.

68.  PW4 testifies that, for the documents he had prepared in his office, he saw defendant signing on all of them in his personal capacity and within the company chop of Tsun Ling as its authorized person acting on its behalf. Before signing, he had explained the important provisions in the loan agreement (Exhibit P25) to the defendant, and let the defendant read the other documents.  PW4 maintains that he did so only on the basis that the defendant had the full authority from Tsun Ling to execute the mortgage.  PW4 testifies that the defendant had signed the Declaration (Exhibit P29) in his dual capacities.  PW4 explained that Item 6 of the Declaration meant that the defendant had undertaken that all the information and documents he had provided to Golden Fields were genuine, or else Golden Fields might sue him.  PW4 maintains that he honestly believed at that time that the defendant was properly authorized by Tsun Ling to act on its behalf.  PW4 cannot recall who chopped on the documents that required the Tsun Ling signatures.  PW4 maintains that had he known that the chop used was not the genuine company chop of Tsun Ling, he would not have approved the mortgage loan. 

69.  PW4 further testifies that after the defendant had signed the documents he had prepared, he also witnessed the defendant signing the mortgage contract (Exhibit P14) which was prepared by the solicitors, and the defendant put down 3 signatures there.  He did not remember who put the common seal or the company chop of Tsun Ling onto the mortgage contract.

70.  As to the distribution of the loan money as stated in the distribution letter (Exhibit P27), PW4 testifies that he prepared the letter according to the information given to him by PW6, and the defendant never raised his objection when he signed the letter to signify his approval.  It was stated in the letter that part of the monies were paid to Master Ways Consultant Limited as consultant fees and to Leung Lai Lok as instructed by Mr. Chau.  PW4 says that he came to know PW6 through Master Ways, but PW6 did not work for Master Ways. PW4 agrees that PW6 was not distributed any sum according to this letter even though he introduced the business to Golden Fields, but PW4 did not know whether the money would be passed to PW6 by Leung Lai Kok.

71.  PW4 agrees that his company charged interest at 2.6% per month on the loan which was higher than the normal bank loan.  He agrees that his company charged more interest because the borrower had to turn to finance companies as he could not obtain the loan from a proper bank.

72.  As far as the second and the third mortgage loans were concerned, PW4 testifies that the defendant also applied for it through PW6.  He maintains that he approved the loan because he was under the belief that the defendant was properly authorized by Tsun Ling to act on its behalf, and that he would not approve the loans if he knew that the common seal and company chop used were false.  These two mortgage loans were completed in the same way as the first one.

73.  In so far as the Tsun Ling minutes for the second mortgage loan was concerned, when it was put to him by prosecuting counsel that there was no such minutes so that he could not have seen one, PW4 testifies that he has no recollection that there were no minutes.  He says he was relying on PW7 to have all documents properly prepared.  He maintains that PW7 had not mentioned to him that the minutes were not available at that time.  He says that if he knew that there were no minutes, he would not approve the loan, but if he was promised that the minutes would be available afterwards, he would allow the loan application to go through.

74.  PW4 testifies that he would not accept the defendant mortgaging his shares in Tsun Ling, and that he would only accept mortgage of property, and that was the reason why Tsun Ling had to be made a party before he would approve the defendant’s application for a mortgage loan.

75.  Under cross-examination, PW4 agrees that Golden Fields and S. W. Tai & Co. had very close relationship at the material times since S. W. Tai & Co. handled all mortgages for his company, but the two companies has less frequent business relationship recently.  As to whether Golden Fields and Kingsway had a close relationship, PW4 says he knew Kingsway, but the two companies had no business relationship, though they were willing to share information relating to a client’s creditworthiness.

76.  PW4 further agrees that on the 3 occasions when he attended the office of S. W. Tai & Co. to sign documents, those meetings were fairly short lasting for about 15 minutes only, and everything was done very quickly.  He agrees that this sort of meetings was very common to him, and that there was no particular reason for him to remember these meetings and their details.  PW4 however maintains, both under cross-examination and during re-examination, that on each occasion, he witnessed the defendant signing on the documents he had brought along from his office to the meeting. 

77.  PW4 agrees under cross-examination that he was relying on the solicitors to make sure that all documentation for each mortgage was in order.  He agrees that he was relying on the solicitors to ensure that the minutes of the meeting of board of directors of Tsun Ling relating to Mortgage 2 was produced, and if the document was missing, he would rely on the solicitors to follow up.

78.  PW4 says that he has no idea whether the intermediaries who introduced business to his company had any criminal record.  He maintains that if he had known any intermediary had a criminal conviction of fraud, he would not have dealt with him. 

PW5

79.  PW5 was Kingsway’s manager at the material times.  She was in charge of Mortgages 4 and 5.  She no longer works for Kingsway.  She left at the end of April 2013.

80.  PW5 testifies that if she had known that Tsun Ling was unaware of and did not approve any of the two mortgage loan applications, that the requisite minutes of the meeting of board of directors of Tsun Ling were false, that the signatures on the minutes were forged, or that the defendant was not authorized to act on its behalf, she would have rejected the applications right away. Likewise, had she known that the common seal or the company chop were false, she would not have proceeded with the execution of the documents.  However, at the material times, she honestly believed that the minutes, the common seal and the company chop of Tsun Ling were genuine.

81.  According to the evidence of PW5, she was first contacted by a Mr. Ng of Master Ways Consultants Ltd. over the phone about these loan applications.  Mr. Ng was an intermediary introducing business to Kingsway.  Mr. Ng told her that a client wanted to borrow several millions and told her of the address of the property to be mortgaged.  Later, Mr. Ng told her to contact PW6 who was another intermediary but did not work for Master Ways.  After she had contacted PW6, PW6 sent her an email with an attachment providing her with a valuation report and the background information.  PW5 came to know that the property was owned by Tsun Ling, and she instructed S. W. Tai & Co. to conduct the relevant company search and land search.  From the information obtained, PW5 became aware that the defendant was one of the 3 directors of Tsun Ling holding 20% shares of the company.  She also made enquiries orally with Golden Fields to verify the background of Tsun Ling and the defendant because the two companies engaged the service of the same solicitors.

82.  As far as the minutes of the meeting of the board of directors of Tsun Ling in support of the mortgage loan application that led to Mortgage 4 were concerned, PW5 testifies that a copy of the minutes was faxed to her by PW6 on 8 August 2012, which was one day before the drawdown of the loan.  She identifies that copy to be Exhibit P104 (which is equivalent to the copy marked CC7(1)&(2) in Exhibit D1).  A line of words “08-AUG-2012 14:41 FROM S. W. TAI & CO.” was printed (apparently by fax machine) on the top of the page.   PW5 agrees that the blank space on this copy minutes for filling in the date when the meeting of the board of directors was held had not been filled in but it had already been signed.  PW5 maintains that this copy was faxed to her by PW6 because PW6 notified her to collect the fax.  As to why the copy minutes were faxed to her even though the date of the meeting had not been filled in, PW5 testifies that it was because she had been demanding for the minutes, and the reply was that the minutes were in the process of being prepared as some of the directors were not in Hong Kong, but the minutes would be sent back by courier after the minutes had been signed.  When PW5 received the fax, her boss was next to her and approved the loan application.

83.  PW5 further testifies that she went to the solicitors’ office on the day after she had received the faxed minutes, i.e. 9 August 2012.  Before she went there, she had prepared all relevant documents relating to the loan in her office including filling in the mortgage loan application form (Exhibit P71) with the information provided to her by PW6.  The date on the application form was “9 August 2012” which was affixed by her in the morning of that day before she left her office.

84.  PW5 goes on to testify that when she arrived at the solicitors’ office, she saw the minutes (Exhibit P66&P67) amongst a bundle of documents in the hand of the law firm staff.  In the minutes, the date of the directors’ meeting was filled in as “7 August 2012”, but at that time, she had not paid attention whether this date had been filled in.  She did not recall whether the staff of the law firm had shown her the minutes, but she did recall that the staff had told her that the minutes were available, and that all the documents were ready and she could proceed with signing of the documents.  PW5 confirms that she was acting under the belief that the minutes were genuine, and that if she had known that the minutes were false, she would not have approved the mortgage loan.

85.  PW5 testifies that she had explained to the defendant contents of the documents she had prepared in her office including the loan agreement (Exhibit P72) and the declaration (Exhibit P76), and the defendant did not raise any question.  She saw the defendant signing and chopping on the documents.  Regarding the chop used by the defendant, PW5 testifies that when she entered the room in the solicitors’ office, the chop was already placed on a table somewhere near the defendant. PW5 confirms that had she known that the company chop used was not the genuine Tsun Ling chop, she would have rejected the loan application right away.

86.  According to PW5, after the defendant had signed the documents she had prepared in her office, she did not witness the defendant signing the documents prepared by the solicitors because she had left the room to photocopy the documents for the defendant.  She therefore did not witness the defendant signing on the mortgage contract.

87.  PW5 recalls that when she went into the room of the solicitors’ office, there were a lot of people inside.  PW6 was one of them.

88.  As far as Mortgage 5 was concerned, PW5 testifies that it was PW6 who contacted her about the loan application.  Similar to the last transaction, she prepared the required documents in her office and the defendant signed and chopped the documents.  She was not present when the defendant signed the documents prepared by the solicitors.

89.  As far as the necessary Tsun Ling minutes for Mortgage 5 was concerned, PW5 testifies that she does not remember whether she received a copy of the related minutes of the Tsun Ling directors’ meeting one day before the execution of the mortgage.  PW5 is shown the original minutes (Exhibits P82&P83) in which the date of directors’ meeting was filled in as “7 October 2012”.  She says that she just had a fleeting glance of this document in the solicitors’ office.  Prosecuting counsel points out to PW5 that the defendant was named as the chairman of Tsun Ling but the signature in the chairman column at the end of the minutes appeared to that of PW1.  PW5 says that she did not notice such matters at that time.  She was told by the solicitors’ clerk that the documents were in order.  She confirms that if she had known that the minutes were faked, she would not have allowed the mortgage.

90.  PW5 recalls that when documents relating to Mortgage 5 were signed, the persons present included PW6 and several others, one of them was by the name of David, and there were other people coming in and going out of the room.

91.  Under cross-examination, PW5 confirms that she was relying on the solicitors to check all the documents.  PW5 agrees that basically, she would check the documents of her company had been signed. 

92.  When learned counsel for the defendant suggests to PW5 that she did not really look at the minutes for Mortgage 4 and that she had not checked it carefully, PW5 testifies that she had checked the signatures on the minutes against the signatures kept with the Companies Registry.  She said that she checked the signatures in the solicitors’ firm when she was shown a document which seemed to her to be the annual return of Tsun Ling, and found the signatures matched. When she is asked whether she can remember clearly doing this checking or whether it was only her standard procedure, PW5 maintains that she did do the checking on that occasion because before she received the faxed minutes, she had been told that one of the directors of Tsun Ling was overseas and his signature was missing, she therefore checked the signatures specifically.

93.  On the issue whether the meeting during which documents relating to Mortgage 4 were signed was short, PW5 testifies that the meeting last for about half an hour, including the time when she had left the room to make photocopying.  She says that for signing the documents she herself prepared, it took a little over 10 minutes.  Learned counsel for the defendant puts to PW5 that the defendant had not chopped on any of the documents, but PW5 disagrees.  She is challenged as to how she could remember so clearly.  PW5 explains that she can remember because the chop used by the defendant was of a special shape.  She says ordinary company chops have a handle, but the chop used on that occasion was in the form of a box.  She confirmed during re-examination that the genuine Tsun Ling chop (Exhibit P2) was definitely not the one used by the defendant which was a box-shaped chop. 

94.  PW5 agrees that prior to 9 August 2012 when documents relating to Mortgage 4 were signed, she had never met the defendant, and she only dealt with PW6, and all communication regarding the loan applications was through PW6.

95.  On the relationship between Kingsway and Golden Fields, PW5 testifies that the two companies were neighbours on the upstairs and downstairs of a building, but they were independent companies carrying on business on their own.

PW6

96.  PW6 is a financial agent who set up a company called Right Money International Limited in 2008 together with his partner Mr. Leung Lai Lok to provide consultancy service to clients who were in need of money, and to refer his clients to finance institutions to borrow money.  He would charge a certain percentage of the loan obtained as his commissions, and the percentage for each case differed, and his company usually charged between 2 to 3%.  His company was not a licenced moneylender.

97.  According to the evidence of PW6, he was well aware of the requirement that if a property of a company was to be mortgaged to obtain a loan, the consent of the company was required, and its directors had to pass a resolution to authorize the borrower to act on its behalf, and the signed minutes of the meeting of the board of directors of the company for that purpose was required.  He agrees that when he was introducing the defendant to finance companies, he knew that such minutes from Tsun Ling was required, and the minutes had to be genuine.

98.  As far as his dealing with the defendant was concerned, PW6 testifies that around May 2012, a financial agent or intermediary by the name of Fei Ming who worked for Sun Ho Finance Company told him that a client wanted to borrow money and asked him for help.  Fei Ming told him that the client was referred by another intermediary called David Lok.  PW6 did not know if David Lok worked for any finance company but he would not ask.  He arranged to meet David Lok in Sun Hung Kai Centre, Wanchai.  Before the meeting, he spoke over the phone with David Lok asking him about the amount of loan to be borrowed and the address of the property to be mortgaged.  At that time, David Lok told him that the amount to be borrowed was several million to around 10 million dollars, but he cannot remember.  David Lok also mentioned the address of the property.  PW6 carried out some search and came to know that the property was held by a company.

99.  PW6 further testifies that in the meeting with David Lok, 2 to 3 other persons were also present.  One of them was called Peter Tseung, and he did not know the names of the others.  During the meeting, they mainly discussed about the interest rate and the amount of the loan to be borrowed.  In the meeting, he came to know that the borrower was the defendant, and hence minutes of the meeting of the directors of the owner company were required for its consent to apply for the mortgage loan.

100.  After the meeting, PW6 conducted a land search in respect of the property.  He met David Lok and Peter Tseung again.  They told him that the defendant needed the money to invest in gold mine business, and PW6 told them he had already contacted one or two finance companies which were willing to provide the loan. They then bargained on the interest rate, consultancy fees and lawyer’s fees which were eventually all agreed.  PW6 says he cannot recall if the amount of consultancy fees but they were 2 to 3% of the loan amount which was to be shared among him, David Lok, Peter Tseung, and Master Ways Consultants Ltd. which referred PW6 to approach Golden Fields and Kingsway.  After all these had been agreed, David Lok and Peter Tseung submitted documents such as the defendant’s residential address proof to PW6, and PW6 approached PW4 of Golden Fields as he was told by Master Ways.  PW6 agrees that he had already had some dealings with Golden Fields prior to this occasion.  He managed to persuade Golden Fields to lend the money.

101.  PW6 further testifies that about one week prior to documents relating to Mortgage 1 were signed in the solicitors’ office on 5 June 2012, i.e. either by the end of May or early June 2012, he met the defendant in a coffee shop downstairs the solicitors’ office.  Other persons present included David Lok, Peter Tseung and one other whom he does not remember.  In that meeting, matters like drawdown date were discussed, but it was mainly for him to meet the client.  He says that in this meeting, they had not talked about the required minutes from the Tsun Ling directors because he had already told David Lok and Peter Tseung that such a document was required.  In this meeting, David Lok, Peter Tseung and PW6 already knew that S. W. Tai & Co. would be involved in the execution of the mortgage documents. According to PW6, he had dealings before this occasion with S. W. Tai & Co., and he knew the conveyancing clerk PW7 and the solicitor Mr. Tai.

102.  PW6 continues to testify that he went to the solicitors’ office on 5 June 2012 when the first mortgage loan was drawn down.  He does not remember clearly but there were 3 to 4 persons in the solicitors’ office with David Lok, Peter Tseung and one lady definitely there.  He has no idea who brought the lady there because when he arrived, they were already there, but the defendant and PW4 had not yet arrived.  Later, PW4 arrived and all persons including PW7 sat inside the conference room of the solicitors’ office, while he remained outside the conference room.  Later, when he entered the room, he saw the defendant signing on the documents prepared by PW4.  For that reason, he did not see who used the company chop on the documents.  Prior to this occasion, he had not told the defendant to bring along the Tsun Ling company chop, but he had told David Lok and Peter Tseung that when documents were to be signed, Golden Fields would require the defendant to bring along the common seal and the company chop of Tsun Ling, and his updated residential proof as well.  After he saw the defendant signing on the documents of Golden Fields, he left the conference room to make photocopy of the documents.  As a result, he was not present when the defendant signed the documents prepared by the solicitors.  He did not see the common seal and the company chop being applied to the documents.   He was certain that common seal and company chop had been brought to the solicitors’ office but he did not know who took them there.

103.  As far as the required minutes of the meeting of the board of directors of Tsun Ling was concerned, PW6 testifies that 2 or 3 days after he had met the defendant, but before 5 June 2012, the minutes had already been sent to Golden Fields who said that the loan could be drawn down if the solicitors said that the documents were in order.  PW6 says he had received a copy of the minutes from David Lok several days before the loan was drawn down.  He knew that the required minutes were prepared by the solicitors with spaces for date and signatures left blank, and that the minutes would be passed onto the defendant through the agents, and the defendant would arrange for the prepared minutes to be confirmed and executed. 

104.  PW6 maintains that he had nothing to do with the preparation of the minutes, and that he did not know that the minutes used to obtain Mortgage 1 was a false document.  He had also nothing to do with the common seal or the company chop that had been used on the documents, and he had no knowledge of their falsities.

105.  PW6 agrees that in respect of Mortgage 1, his side (i.e. he and Leung Lai Kok) received $120,000, while David Lok and Peter Tseung also received $120,000.

106.  For Mortgage 2, PW6 testifies that David Lok approached him for this loan, and what had happened in relation to the first loan repeated.  However, on this occasion, he did not receive a copy of the required minutes before the loan was drawn down on 28 June 2012.  He asked David Lok to contact the solicitors, and he himself discussed with Golden Fields on the terms of the loan.  He did not recall whether or not he was present in the solicitors’ office when documents relating to Mortgage 2 were executed.  He recalls that he was only present for such documents signing on one or two occasions.  He did not know that the minutes for Mortgage 2 were missing.  After the loan was advanced to the defendant on 28 June 2012, nobody informed him that the minutes for Mortgage 2 were missing. PW6 denies he had anything to do with the production of the false common seal or false company chop.  PW6 agrees that out of this transaction, his side received $160,000, with half of it would go to David Lok and Peter Tseung, and Master Ways earned $40,000. 

107.  For Mortgage 3, PW6 testifies that it was also David Lok who contacted him for the loan.  He made arrangement as before.  Out of this transaction, his side received $80,000, half of it went to David Lok and Peter Tseung, and Master Ways received $20,000.  He denies he was involved in producing the false minutes of the meeting of the Tsun Ling board of directors, the false common seal or the false company chop that had been used to obtain Mortgage 3.  He had not seen a copy of the required minutes, nor was a copy circulated to him, prior to the loan drawn down date of 24 July 2012.  He did not recall whether or not he had attended the solicitors’ office on that occasion.

108.  In so far as Mortgage 4 was concerned, PW6 testifies that he had to do more work than Mortgage 2 and 3 because he had to approach Kingsway, and he had to provide all necessary documents to PW5.  As to the required the minutes of the board of directors’ meeting, PW6 testifies that he believed that the minutes were sent to the solicitors, and that he did not receive a copy of them before the loan was drawn down.  He attended the solicitors’ office on this occasion when documents relating to Mortgage 4 were signed because this was the first time Kingsway was involved.  In the solicitors’ office, he did not see the minutes though he expected that the minutes were there.  He saw the defendant signing on the Kingsway documents and the documents prepared by the solicitors.  He did not pay attention and he could not remember who chopped the documents.  He recalls that when he arrived at the solicitors’ office, the seal and the chop were already on the table.  He did not know who brought them there. 

109.  For Mortgage 5, PW6 testifies that David Lok called him again for this loan.  He then contacted PW5 who discussed with her boss and approved the loan.  The whole process then repeated.  He attended the solicitors’ office when documents were signed. He expected the required minutes were available because Kingsway required the minutes.  He denies he was involved in the production of false minutes, false common seal or false company chop of Tsun Ling. Through Easy Access Corporation Ltd. which was another company owned by him, PW6 received $165,000, but he paid cash rebate to Master Ways, David Lok and Peter Tseung.

110.  Under cross-examination, PW6 agrees that when he first met the defendant, it was not in a coffee shop downstairs the solicitors’ office but in a coffee shop in Sun Hung Kai Centre.  He agrees that it was a very brief meeting during which David Lok and Peter Tseung were also present.  He agreed that when he first met the defendant, he already knew that the defendant was asking for a single loan of 12 million to 14 million dollars.  He agrees that it was the lending companies especially Golden Fields who wanted to have the loan to be divided into 3 or 4 different loans.  It is put to PW6 that as far as the 5^th mortgage loan was concerned, it was in fact Kingsway proposing to lend money to the defendant, but PW6 says he did not remember such a matter.  It is also put to PW6 that he was present in the solicitors’ office on every occasion when documents relating to the 5 mortgage loans were signed, PW6 says that he was absent on one or two occasions since he only arrived at the solicitors’ office subsequently.  He agrees that he was in the solicitors’ office at some stage in these 5 occasions.

111.  PW6 agrees that he has a criminal record.  He agrees that he was convicted of the offence of conspiracy to defraud in 2006 and was sentenced to 4 years’ imprisonment.  He maintains that his partner Leung Lai Kok does not have any criminal record.

PW7

112.  PW7 had worked in the legal field for 20 odd years mostly as a conveyancing clerk. He had worked as a conveyancing clerk in S. W. Tai & Co. for about 4 years since 2009.  He was responsible for drafting all required minutes of meetings to be executed by the directors of Tsun Ling to signify their approval to the 5 mortgage loan applications in question.  He also prepared the related mortgage documents.  He left S. W. Tai & Co. in about 2013 to work for another firm of solicitors.

113.  PW7 agrees that he was fully aware that if the property to be mortgaged belonged to a company, minutes of the board of directors of that company proving the company’s consent to the mortgage loan application was required, and if a person was representing the company to act on its behalf, the minutes should also prove that this person was duly authorized by the company.  He also agrees that he would require genuine minutes with authentic signatures of the directors, and the person purported to act for the company was duly authorized by the company.  On the issue whether he would not proceed with the mortgage application if no such minutes were available, PW7 says that he would inform the bank or the finance company that such minutes were not available and ask if the client would still proceed with the mortgage loan application because there was a possibility that the minutes were to be provided retrospectively.

114.  PW7 agrees that he represented Golden Fields and Kingsway.  He agrees that he had to make sure that the requisite minutes of the meetings of Tsun Ling board of directors were properly executed and that genuine common seal and company chop of Tsun Ling were available before he should go along with the mortgage application.

115.  PW7 agrees that he knew PW6 prior to handling the mortgages in question, and Golden Fields and Kingsway were his old clients.  On the other hand, he did not know David Lok or Peter Tseung.  On the 5 occasions when documents relating to Mortgages 1 to 5 were signed, he did not know whether or not David Lok or Peter Tseung was present in any one of them since a lot of people came over to his office.  He also did not remember if PW6 was present on all 5 occasions.

116.  Regarding Mortgage 1, PW7 testifies that it was Golden Fields who contacted him about this intending mortgage application.  He conducted a company search and came to know that the defendant was one of the 3 directors of Tsun Ling who was the owner of the property to be mortgaged, and that Tsun Ling had other shareholders in addition to the defendant.

117.  PW7 testifies that he was responsible for drafting the minutes of meetings to be completed by the directors of Tsun Ling, and that he would draft the minutes irrespective whether he was asked by the finance company to do so since he knew that such minutes were required for the mortgage application.  In his drafting, he was just copying from the precedents he had used before.  After he had prepared the minutes, he would inform the finance company.  He did not know how that was done, but someone would collect the draft minutes.  He expected the draft minutes would be sent to Tsun Ling and the defendant for execution, and sent back to him before signing of the mortgage documents. 

118.  Regarding the minutes for Mortgage 1 (Exhibit P18 & P19), PW7 testifies that he did not remember who sent it back to him.  He did not remember when he received the document.  He could have received it on the same day when the mortgage documents were signed on 5 June 2012, but it must be prior to the signing of the documents.  When he received the minutes, all signatures had already been put down, but the date of the meeting of the board of directors was blank.  He says he only requested signatures to be put down on the minutes.  PW7 admits that the date “4 June 2012” appearing on the minutes as the date when the directors of Tsun Ling held a meeting was in fact put down by him although he had not asked anyone if such a meeting had been held; and if so, the date of the meeting.  He says he put down the date according to the mortgage documents.

119.  In the meeting for signing documents relating to Mortgage 1, he recalls the defendant and PW4 were present.  He does not recall if PW6 was there.  He recalls the common seal and company chop had been placed on the table.  He has no idea who brought them there because he only entered the room after PW4 had signed documents with the defendant.  He said after he had explained the documents he had prepared to the defendant, he was told by someone whom he cannot remember that the common seal and the company chop were on the table, and he just went on to affix the seal and chop.  He thought those were genuine common seal and the company chop of Tsun Ling.  He testifies that the defendant saw him affixing the common seal and the company chop and the defendant had not stopped him from doing so, but signed the documents in his presence.  He did not pay attention on who took away the seal and chop afterwards.  He confirms that he had received the original minutes for Mortgage 1 which were kept in his office but subsequently seized by the police.  He testifies that he never suspects that the signatures on the minutes were not genuine, and that as far as he was concerned, once he received the minutes, everything was in order, and he would advise the finance company to go ahead with the mortgage.

120.  Regarding the following 4 mortgage loan applications, PW7 agrees that it was just a repetition of the process used in the first mortgage loan application. 

121.  As far as Mortgage 2 was concerned, PW7 agrees that minutes of Tsun Ling directors’ meeting were required.  He testifies that he had prepared fresh draft minutes to be completed by Tsun Ling and the defendant, but he had not received the minutes back.  He says that on 28 June 2012 before the mortgage documents were signed, he told PW4 that he had not yet received the minutes, but PW4 said it was alright if the minutes could be submitted later.  He then related that requirement to the defendant, and the defendant promised or indicated that the signed minutes would be submitted to him at a later stage. The defendant did not give any reason to explain why the minutes were not available.  PW7 admits he had not followed up this matter because he forgot it altogether.  The defendant had also not mentioned anything about the missing minutes as well.

122.  On the occasion when documents relating to Mortgage 2 were executed, PW7 recalls that the common seal and the company chop were also already on the table by the time he saw them.  He used them in the presence of the defendant.  He remembers the shape of the company chop which was rectangular in shape like a box.  When PW7 is shown Exhibit P2 which is the genuine Tsun Ling company chop, PW7 confirms that the chop used on all 5 occasions when mortgage documents were signed was not this one, and that chop was one without a handle.

123.  Regarding Mortgage 3, he also prepared a fresh draft minutes, and he had received the minutes back after the minutes were sent out.  PW7 does not recall on which date he received the minutes back, but it was before the signing of the mortgage documents.  He admits that it was him who put down the date “23 July 2012” onto the minutes (Exhibit P50 & P51) as the date when the directors of Tsun Ling held their meeting.  It is pointed out to PW7 that the space left blank in the second page of the minutes (i.e. Exhibit P51) had not been filled in to state who was authorized by Tsun Ling to affix the common seal and sign documents on its behalf, PW7 testifies that he should be the one who was responsible for tying in the name of the defendant there.  He admits that he had not done so due to oversight, but he genuinely believed that the defendant was properly authorized by Tsun Ling to act on its behalf.

124.  Regarding Mortgage 4, PW7 agrees that Kingsway was involved on this occasion, but he just repeated the same exercise.  Again he had prepared fresh draft minutes, passed them on and he eventually received the minutes back.  He agrees that Exhibit P66&P67 were the original minutes in the final form.  He believed all the signatures of the three persons described there to be genuine and he had typed in the name of the defendant as the person authorized by Tsun Ling to act on its behalf.  On this occasion, he also out of his own mind filled in the date of the board meeting as “7 August 2012” after he had received back the document. 

125.  PW7 is shown a copy of the minutes marked CC7(1)&(2) in Exhibit D1 (or Exhibit P104), and his attention is drawn to the line of words “08-AUG-2012 14:41 FROM S. W. TAI & CO.” apparently printed by fax machine on the top of the document.  He testifies that this copy of the minutes was sent by him to Kingsway probably at the request of Kingsway.  He says that he sent out the faxed copy after he had received back the original minutes (Exhibit P66&P67) in which the date of the board of directors’ meeting, the name of the chairman of the meeting, and the name of the person authorized by Tsun Ling to act on its behalf had not yet been typed in, but as far as he was concerned, he believed that the signatures on the minutes were genuine and that the directors’ meeting must therefore have taken place.  So, he typed in the information subsequently. 

126.  Prosecuting counsel also puts to PW7 that the mortgage contract (Exhibit P62) was in fact executed on 9 August 2012, and PW7 admits that he might have made a mistake because he did not necessarily put down the date on the same day when the document was executed.  PW7 confirms that signing and chopping of documents took place in the same way as before. 

127.  Regarding Mortgage 5, PW7 testifies that when he prepared the fresh draft minutes which he eventually received back in its original form (i.e. Exhibits P82&P83), he had typed onto the draft the name of the defendant to be the chairman of the meeting held by the board of directors of Tsun Ling.  He said this was a mistake made by him due to oversight.  He also says that when he received the document back, he did not realize the mistake.  PW7 testifies that he was not sure if he had faxed a copy of this document to Kingsway, but he would do so if Kingsway had made the request.

128.  Learned counsel for the prosecution then draws PW7’s attention to the copy minutes marked CC8(1)&(2) in Exhibit D1 in which the name of the defendant was also typed in as the chairman of the board of directors’ meeting.  Counsel points out to PW7 that the signatures purported to be made by PW1 and the defendant in the original minutes (Exhibits P82&P83) were obviously different from the signatures purported to be made by PW1 and the defendant in the copy minutes (CC8(1)&(2) in Exhibit D1), and PW7 agrees.  PW7 agrees that he might or might not have faxed CC8(1)&(2) in Exhibit D1 to Kingsway, and that he did not know why this document CC8(1)&(2) existed.  When PW7 is asked to explain the difference in signatures, his reply is that he could not remember.

129.  Learned counsel for the prosecution further points out to PW7 that although he has testified that he had faxed a copy of the original minutes before some details were filled in to Kingsway, a comparison of the original minutes (Exhibit P66&P67) and the copy minutes (Exhibit P104 or CC7(1)&(2) in Exhibit D1) that he said he had faxed to Kingsway revealed that the signatures on the two documents purportedly made by PW1 and the defendant were different.  When prosecuting counsel asks PW7 to explain why the two documents were different, PW7’s reply is that he could not remember.  PW7 however agrees that whatever that he had faxed to Kingsway, he was acting under the belief that the documents were genuine and that he told Kingsway accordingly.

130.  Prosecuting counsel then asks PW7 whether he played any part in the creation of these two sets of false minutes for Mortgages 4 and 5 and gives PW7 a warning against self incrimination.  PW7 then firstly says he will not answer counsel’s question, and then he says he denies counsel’s suggestion.  He maintains that he did not play any part in the creation of the false minutes in relation to Mortgages 1, 3, 4 and 5.  He agrees that he had informed his clients the finance companies that the minutes were genuine with authentic signatures.

131.  Under cross-examination, PW7 maintains that he obtained the registered office address of Tsun Ling and the residential address of the defendant from the annual return of Tsun Ling, and he put down these addresses into all 5 mortgage contracts.  Learned counsel for the defendant points out to PW7 that what he had put down in all mortgage contracts that the registered office of Tsun Ling was in Caltex House in Wanchai when according to the Annual Return of Tsun Ling (Exhibit D2), Tsun Ling had moved its registered office to CNT Tower, Wanchai before any of the mortgage contracts was executed.  Likewise, the residential address of the defendant as put down by PW7 in all 5 mortgage contracts was not the address shown in the Annual Return.  PW7 explained that it might well be for the sake of convenience of work that he just copied the registered address of Tsun Ling from the title deeds of the properties and he did not check.  He also says he did not pay attention to the defendant’s address.  He agrees that he just wanted to get the work done and he was not concerned whether the details were accurate or not.

132.  Regarding the missing minutes for Mortgage 2, PW7 says that he had asked PW4 whether he would proceed with the mortgage because he had not yet received the minutes, and PW4 agreed to continue with the mortgage application.  PW7 agrees that he did not receive written confirmation from Golden Fields that it was willing to proceed with the mortgage application in the absence of the minutes, and that he himself had not made a note of the conversation he had with PW4.  He also admits that he had not obtained the permission of his principal solicitor Mr. Tai to go ahead with the application.  He also had not made a note to follow up with the missing minutes because he just put the matter aside and forgot it. It is put to PW7 that he had never asked the defendant to provide the missing minutes later, and the defendant had never promised to do so.  PW7 replies that he is not clear but he should have asked, but he agrees that he cannot remember whether he had asked the defendant, and he cannot remember if the defendant had promised to provide the minutes for Mortgage 2 at a later stage.

133.  For the minutes he had received, PW7 agrees that he was not concerned whether the board of directors of Tsun Ling had actually held a meeting, or whether the meeting was held at its registered office or somewhere else.  He agrees that it was a common procedure for minutes to be passed around for directors to sign even though they were at different locations.  He testifies that his concern was only that the date of the meeting should not be later than the date of the mortgage.  He denies that he was creating false documents by making up the dates of the meetings in the minutes.

134.  Regarding the number of minutes he had received, PW7 agreed that for each mortgage loan application, he received only one original copy of the minutes.  It is put to PW7 that someone must have altered the minutes after they had arrived at the solicitors’ office because the original minutes for Mortgage 4 (Exhibit P66&P67) and the original minutes for Mortgage 5 (Exhibits P82&P83) were different from their purported respective copies (i.e. CC7(1)&(2) and CC8(1)&(2) in Exhibit D1).  PW7’s reply is that he was not sure and he had no idea.

The Defendant

135.  The defendant is now 49 years old.  He received education up to Form 2 in Hong Kong.  He then went to England to further his studies and obtained his degree of MSc (Management Science) in 1989, and he was also a Master in the field of business administration.  He has another BSc in Mathematics and management studies, and some qualification from Chartered Institute of Marketing.  He returned to Hong Kong in 1993.  He is a businessman by occupation.  His main business is in import and export trading.  He set up his company called TNJ International Limited in 1998.  At the beginning, he dealt with import into the China market, but recently, he is mostly engaged in the construction material export trade to the Middle East.

136.  The defendant testifies that he also has two other businesses.  Firstly, he has two gold mines in the Mainland.  One gold mine is in Kwai Chau which he acquired in 2011, and he is a 20% share owner.  The other gold mine is in Sze Chuen which was acquired by him in early 2012 and was wholly owned by him.  Hence, he had to travel to China regularly to oversee their operation.  Also, because of his export trade, he had to go to the Mainland to procure materials.  He therefore spent his time mostly in the Mainland.  Secondly, he had another company called Ken Wide Property Management Services Limited in 2012.  Originally, he held 33% share of this company, but he sold his shares in 2013.  The annual turnover of Ken Wide was about $40 to $50 million.

137.  As to whether his family was fairly wealthy, the defendant testifies that his ancestors had passed on some ancestral property to them.  His father owned and occupied Suites S on 21^st, 22^nd and 23^rd Floor on 1 Robinson Road.  The recent valuation of this 3-level triplex was $220 million.  When he was in Hong Kong, he would live there.  He is also a director of Tsun Ling, and he holds 20% shares through Kanford.

138.  The defendant testifies that a mortgage was taken out on Suite W by Tsun Ling in 2005 with DBS.  Part of the amount borrowed, i.e. $500,000 was lent to Christina Ko.

139.  The defendant testifies that he had never had any meeting in the registered address of Tsun Ling with other shareholders.  On occasions when minutes, annual report and audit report were to be signed, PW1 would prepare the documents and pass them on to him, PW2, PW3 and Christina Ko to sign, and they would sign at their respective residences in No. 1 Robinson Road.  When the defendant was on business trip out of Hong Kong, the documents would be passed to the defendant’s father, and the defendant would sign them upon his return to Hong Kong and pass them back to PW1.

140.  The defendant testifies that Suite W was rented out for $48,000 in 2007 according to what PW2 had told him.  There was no meeting held to discuss this.  PW1 was the person who made all the decisions as far as Tsun Ling was concerned because he was the eldest son of the eldest branch of the family.

141.  The defendant confirms that the mortgage taken out in 2005 was re-mortgaged to Bank of China in 2007.  He remembered that the mortgage was for two loans.  For the $1 million loan, it was used to redeem the mortgage from DBS, and for the other $1.7 million loan, $1 million was lent to Christina Ko, but Christina Ko had to use half of the amount to repay the half a million loan she had with Tsun Ling previously.  Therefore, since 2007, Christina owed $1 million to Tsun Ling. The defendant does not remember there was a payment re-schedule for Christina, but she had to pay monthly interest on the $1 million loan.  PW1 had once told the defendant and PW2 that Christina Ko was in fact asking for a loan of $4 million, but he did not want to lend her that sum because she was not of the surname Chau.  Later, PW1 and Cedric Chau paid $4 million to Christina Ko and bought her 20% shares in Tsun Ling.

142.  A few months after PW1 and Cedric Chau had purchased the shares of Christina Ko, PW1 sent an email to the defendant saying that he was interested in buying the shares of the defendant at the same price, i.e. $4 million.  At that time, the defendant considered his 20% shares should be worth more than $4 million, so he did not give a direct response to PW1.  On 1 June 2011, PW2 told him that he (PW2) and PW3 wanted to buy his 20% shares.  Hence, the defendant obtained an independent valuation report dated 20 June 2011 (Exhibit P13) on the value of Suites V and W.  The value of Suite V was assessed at $52,100,000; and that of Suite W at $52,300,000.  However, PW2 and PW3 did not offer the purchasing price to him, and they did not discuss further to buy his shares.

143.  As to the relationship he had with Peter Tseung and David Lok, the defendant testifies that he came to know Peter Tseung before 2008 through the introduction of some bankers. Peter Tseung also knew the father of the defendant.  He also knew PW1 through certain association.  The defendant remembered that he had at one stage taken Peter Tseung to Suite V to look at his ancestral living room, and Peter Tseung had attended some of their family meetings. 

144.  As to the professional background of Peter Tseung, the defendant says he knew that Peter Tseung had worked in Citibank and Hang Seng Bank before, and he worked in the branches in Hong Kong and Shenzhen, and in the approving department in the Headquarters as well.  He says Peter Tseung was very professional because he was very familiar with the procedures and documents required for commercial loans with the banks.  Apart from banks, Peter Tseung was also familiar with a lot of finance companies who were dealing with banks in respect of bridging loans.    The defendant says that shortly after he had come to know Peter Tseung, Peter Tseung had successfully applied for him a credit limit of $40 million from the Bank of East Asia, and the amount was increased over time, and his quota was raised to $50 million in 2012.  The defendant knows that Peter Tseung lives in Shatin somewhere near the Hong Kong Sports Institution.  The wife of Peter Tseung was one of the principal officers of the Recreation Department who was involved in managing the Hong Kong Sports Institution, hence they have quarters in Shatin.  The defendant believes Peter Tseung is a honest, reliable and respectable man.

145.  As to David Lok, the defendant testifies that Peter Tseung and David Lok could be considered to have partner relationship, because David Lok acted as property broker and had assisted a lot of eminent families and celebrities in trading property in their names as well as in arranging mortgage loans.  So, sometimes he would co-operate with Peter Tseung in doing some bank loans and short term bridging loans as a consultant.  The defendant first met David Lok about one or two years after he had met Peter Tseung.  He said David Lok had a lot of friends in the trade.  He trusted David Lok.

146.  The defendant further testifies that in addition to his trade credit quota, he had also obtained a small-medium-enterprise loan (SME loan) of the government from Bank of East Asia.  In 2009, the SME loan was $6 million (which was included in the $40 million trade credit quota).  This loan amount was increased over time.  Up to 2010, the SME loan was in the sum of $12 million.  The defendant had to repay the SME loan which was due on 21 May 2012.  He wished to pay off the loan.  Also, in early 2012, he had more cement orders from Middle East, so he wanted to raise his SME loan amount.  Hence, he asked Peter Tseung for advice. At that time, Peter Tseung advised him to arrange for short term bridging loan from outside to pay off the $12 million which would be due in May, and after that, he would apply for a larger loan from Bank of East Asia and the Government, and then repay the short term bridging loan, and then to negotiate with Bank of East Asia for a larger credit limit.  Peter Tseung said normally banks like clients to do it in such a way. 

147.  Regarding what kind of institution that the defendant should go to for obtaining this type of money, the defendant testifies that Peter Tseung told him to leave it to him, and that he would plan how to get this short term bridging loan.  At that time, Peter Tseung asked him, apart from his father’s triplex which had already been used as security or collateral with Bank of East Asia to secure his trade credit quota, whether there was any other property which could be used as security.  The defendant told Peter Tseung that Tsun Ling was holding Suites V and W valued roughly at $105 million, and he was holding 20% shares of Tsun Ling which would be roughly worth $20 million at the then market price. Peter Tseung asked him to consider how these 20% shares could be used.

148.  The defendant further testifies that he therefore arranged to meet PW1 and PW2 at Jockey Club.  He told PW1 and PW2 that according to his valuation report, Suites V and W had a value of $105 million, and that it would be very difficult for them to buy the shares of each other.  He also told them that the turnover of his trading company was growing bigger and bigger, and he would like them to consider allowing him to use his shares in Tsun Ling to obtain a bridging loan.  PW1 and PW2 did not refuse his request, nor did they ask him what he wanted to do.  They only asked him whether the business in the Middle East was high risk or not.  They then switched to other casual topics.

149.  Regarding the further development after Peter Tseung had told him to leave the arrangement of bridging loans to him, the defendant testifies that in March or April 2012, he pressed Peter Tseung for a response.  Peter Tseung asked him to make the valuation report of Suites V and W as well as the basic information of Tsun Ling available to David Lok.  The basic information of Tsun Ling included some of the annual reports he had put down his signatures.  The defendant had also asked PW1 for a monthly statement in relation to the mortgage loan with Bank of China.  Peter Tseung also instructed the defendant to provide the most updated audit report.  The defendant says that it so happened at that time that the report was circulated to him for him to sign on the report.  Peter Tseung asked him to pass the documents to David Lok because David Lok would be in Hong Kong more frequently, and Peter Tseung and David Lok were discussing with several lenders respectively.  The defendant gave the documents to David Lok.  After that, Peter Tseung said he and David Lok had some accounting partners or lawyer friends who were working out how to arrange the bridging loan.  He said that it might involve the defendant’s shares in Tsun Ling as well as the properties of Tsun Ling.  The defendant told them to work out the scheme as soon as possible.

150.  The defendant further testifies that in April or May 2012, Peter Tseung told him that he was discussing with 2 or 3 moneylenders on the interest rate and the commission.  In May when it was very close to the due date of his SME loan, Peter Tseung told the defendant that David Lok had found a suitable lender, and he mentioned the name of Norry Lee (PW6), and that the discussion was almost done.  Later, Peter Tseung told the defendant that David Lok had arranged to have a meeting with his accountant friend, and asked the defendant to join them at the café outside Sun Hung Kai or Chinachem Building in North Wanchai because the representative of the lender (PW6) wanted to see him in person.

151.  According to the defendant, he met Peter Tseung, David Lok, an accountant friend of them, and PW6.  The defendant had a drink and left.  Then the defendant was told they would make arrangement to meet him at another place to inform him of the result of the discussion.  At that time, PW6 said he had already talked with the lender and a loan of $12 to $14 million could be granted to him.

152.  Later in the evening of the same day, the defendant met Peter Tseung and David Lok in Island East (Taikoo Fong).  Peter Tseung said that the lender on PW6’s side had approved the loan of $12 to $14 million, and the interest rate would be 2 point something percent per month, and the commission for the intermediaries would be 4 to 5% of the loan amount that would be paid to PW6 and his partner as well as Peter Tseung and David Lok.  Peter Tseung also told him that he and PW6 had agreed on the plan to get him the bridging loan.  The plan was that Tsun Ling and the defendant as a shareholder of Tsun Ling would be used as co-borrowers of the loan.  That amounted to the fact that Tsun Ling would agree to use its two properties as collateral and not only Tsun Ling but also the defendant would borrow the money so as to show to the lender that the defendant was borrowing an amount within the value of the shares in the company.  The defendant felt that the plan sounded rather complicated and quite a lot of documents would be required, but they got only 10 days before the SME loan became due.  Hence, Peter Tseung advised the defendant not to explain the matter to PW1 for fear that he would do it in a clumsy way.  Instead, Peter Tseung, David Lok, their lawyer partner and accountant partner would as a professional team approach PW1 directly to explain to him the plan.  Besides, there might be a lot of documents to follow up and the defendant might be flying out of Hong Kong.  The defendant said that he considered what Peter Tseung had said sensible.  He therefore gave the mobile phone numbers of PW1 and PW2 to Peter Tseung and David Lok for them to talk to them.  The defendant had also told Peter Tseung that if PW1 could be persuaded, PW2 and PW3 would also be persuaded because they would listen to him (PW1). 

153.  After that, David Lok told the defendant that for the $12 million from PW6, it probably had to be split up into 2 or 3 instalments when payments were made to him, but it would not be more than a month.  The defendant then asked them to pass such a message to PW1.

154.  Then, around end of May, Peter Tseung told the defendant that PW1 and PW2 had basically agreed to the plan, and they needed to sign the contract with the lender in solicitors’ office in June.  Peter Tseung told him that the solicitors’ firm would draft the minutes.  He asked the defendant to put down his signature first, and he would pass the minutes to PW1 and PW2 for them to sign.  He was further told that the first batch of the loan was $6 million.

155.  The defendant further testifies that Peter Tseung and David Lok fixed 5 June 2012 as the date when he should attend the office of S. W. Tai & Co.  Peter Tseung told him that PW1 and PW2 had signed the minutes, and that they would go over to the solicitors’ office to look at the documents, and if the documents were in order, they would ask the defendant to attend the solicitors’ office to sign the documents.

156.  According to the defendant, on 5 June 2012, he attended S. W. Tai & Co. and he went alone.  When he arrived at the reception, David Lok met him and took him into a room where he saw a lot of persons.  He remembered that he saw PW6, Peter Tseung, David Lok, their accounting partner, as well as one or two other persons whom he did not know, one of them was a female.  He had not brought any document, or common seal or company chop of any company to the meeting. 

157.  The defendant testifies that in that meeting, Peter Tseung took the initiative to tell him two matters.  First, he assured him that the requisite documents from Tsun Ling including the minutes signed by PW1 and PW2 had been prepared and sent to the solicitors beforehand.  He believed what Peter Tseung had told him. Second, Peter Tseung also assured him that he had already looked at the documents that the defendant was required to sign, and that the documents were reflecting the details and the terms of the loan that had been negotiated, so that the defendant could be rested assured to put down his signature. In this meeting, the defendant had not seen any minutes of meeting. 

158.  After that, according to the defendant, PW6 went outside and took PW4 of Golden Fields into the room.  PW4 took out some loan agreement documents of Golden Fields, saying that these were basic documents regarding the loan and all the documents had been checked by the defendant’s consultants.  The defendant remembers that it was the lady who affixed the chop for him, and he put down his signatures.  As far as this lady was concerned, the defendant says this lady was not introduced to him, but she was also not very familiar with the other people, and hence at that time, he guessed that she was probably one of the staff of PW1’s property management company sent over by PW1.  After that, PW4 took out another document and briefly explained the contents of the document to be signed.  Then the lady affixed the chop and he put down his signatures.  After signing the documents required by PW4, PW4 went out.  The whole process took about 5 to 10 minutes.  Then, PW7 came in with a lot of documents.  The defendant came to know that PW7 was responsible for the mortgage documents.  Then PW7 briefly told him that the documents he was required to sign were basic mortgage documents.  PW7 showed him the document briefly and then affixed the steel common seal which was put on the table. Then, someone (and the defendant believed to be the lady again) affixed the company chop, and the defendant signed the documents.  The defendant had not read the documents carefully because there were a lot of information and Peter Tseung had assured him that he had already read the documents.  This part of the meeting lasted for about 10 minutes.  After that, the defendant had to sign documents in relation to sharing of money.  On this occasion, he did go through the document to ensure the percentage of commission to be paid out.  PW6 was present explaining to him that he had to pay certain fees including the fees for solicitors and the intermediaries.  Then, Peter Tseung told the defendant that he might leave first and that they would prepare a set of documents for PW1.  Then, David Lok told the defendant to wait for them in the café downstairs.  Later, the defendant met David Lok in the café, and they deposited the cheque for this loan.

159.  On the 4 subsequent occasions the defendant went to the solicitors’ office, what happened were similar to the first occasion.

160.  For the second mortgage, the defendant testifies that he remembers that he had signed minutes for that.  He signed the minutes mostly in Island East, and Peter Tseung told him that the next $4 million had been approved and the defendant was told to put down his signature in the minutes first.  For the subsequent mortgages, the defendant had also signed the minutes.  Every time it was like that.

161.  Concerning the missing minutes for Mortgage 2, the defendant maintained that he had never said in the meeting that he had forgotten to bring the minutes, nor had he said to anybody that he promised to bring up the minutes later.

162.  Regarding the amount he had borrowed was $17 million and not $12 million, the defendant explained that after he had obtained 3 loans (i.e. $6 million, $4 million and $2 million) totalling $12 million from Golden Fields, he was told that a similar type of finance company had granted him $2 million to make up the loan to $14 million.  The defendant said it was OK because he also needed some leeway.  About one month later, the defendant was told that Kingsway had already earmarked another $3 million and asked if he was interested in borrowing this sum of money as well.  The defendant did some calculation and found it was still within the scope of his shares (which was $20 million).  So, he decided to take this $3 million as well.

163.  Regarding the reason why he did not approach the bank for the bridging loan, the defendant explained that it was Peter Tseung who advised him to take up the loan with a bridging loan company first, and he would use the loan to be obtained from the Bank of East Asia to repay this loan because he was at that time qualified to apply for a larger SME loan.  Peter Tseung also told him that it would take a very long time to apply for a bridging loan from banks, and the defendant says he was also aware of that.

164.  The defendant agrees that he realized that the interest rate and the commission charged for these loans were very high, but the original decision was that it was a short term bridging loan for a few months only and that he could afford the interest rate at two-point something percent. He also found the 5% intermediaries’ consultant fees reasonable in the trade because he remembered that they had introduced one institution in that trade which charged 8%.  The defendant said that he did not pay attention to the fact that some commissions were paid to personal names instead of company names.

165.  The defendant maintained that in any of the meetings, he did not bring any document, company chop or seal.  For the minutes that he signed, when he signed, there was only his name, as to the others they were left blank, and at that time, he truly believed that, for the minutes submitted to the solicitors, they were minutes properly signed, and subsequently he did not see so-called signed minutes again.  At all time, he trusted Peter Tseung and David Lok.  As to PW6, he was not very familiar with him, and he only saw him on one or two occasions at that time apart from the occasions when the agreements were signed during which he was present all the time.

Evaluation of the evidence

166.  I have no doubt whatsoever that each of PW1, PW2 and PW3 is a truthful and reliable witness.  Their evidence has not really been challenged.  I accept their evidence in their entireties.

167.  From the evidence of PW1 to PW3 as well as the Admitted Facts, there is no doubt whatsoever that the defendant had never been authorized by Tsun Ling to apply for any of the mortgage loans whether for the benefit of Tsun Ling or for the benefit of himself, or to execute any documents in respect of or ancillary to any mortgage loan agreement or mortgage contract.  However, false minutes of meetings of the board of directors of Tsun Ling had been provided to Golden Fields and Kingsway in respect of 4 of the 5 mortgage loan applications, and false common seal and false company chop of Tsun Ling had been used on all documents that required the common seal and the company chop of Tsun Ling to be affixed.  There is therefore no doubt whatsoever that some person or persons had produced or caused to produce these false minutes, the false common seal, and the false company chop of Tsun Ling (“the false articles”) with the intention of clothing the defendant with an appearance of authority from Tsun Ling to act on its behalf, and that he/she or they must also have the intention that the defendant would use these false articles to apply for and obtain the mortgage loans, and used the false common seal and the false company chop to execute all documents required for the purpose of obtaining the loans.

168.  As to who had produced or caused to produce these false articles, the prosecution evidence does not provide any direct proof.  However, the only reasonable and irresistible inference from the prosecution evidence is that such a person or persons knew full well that the directors of Tsun Ling other than the defendant had never agreed to mortgage any of the Tsun Ling properties to enable the defendant to obtain any of the mortgage loans, but wanted these mortgage loans to be advanced to the defendant, and hence he/she or they resorted to forgery of the false articles in order to create the false representation that Tsun Ling had so agreed and had authorized the defendant to act on its behalf. 

169.  It can be said at this stage that the defendant’s evidence will not prevent such an inference from arising.  His evidence is simply that he was not involved in any way in the production of these false articles and he was not aware of their falsities.  Furthermore, when the defendant says that he was deceived into thinking that he was authorized by Tsun Ling to take out these 5 mortgage loans, he is saying that he was in reality a victim of the fraud.  In fact, when learned counsel for the defendant submits in paragraph 31 of his written closing submissions that PW4 and PW5, together with others, had good reasons to deceive the defendant, counsel is saying as far as that the defendant was not only a victim, but he was in fact the only victim of the fraud.  Applying the rationale of counsel’s submission, I think Peter Tseung and David Lok should also be included in the list of possible culprits since they had also had good reason to deceive the defendant. 

170.  Defence counsel’s submission is based on the premises that all these people stood to gain considerably if the defendant managed to obtain the 5 mortgage loans.  The undisputed evidence has shown that these people had obtained substantial benefits after the defendant obtained the 5 mortgage loans.  The financial consultants (i.e. Peter Tseung, David Lok, PW6 who owned Easy Access Corporation Ltd. and partnered with Leung Lai Kok, Master Ways Consultants Ltd and Li Cho Kuen) received a total of $865,000, the solicitors’ firm received $47,000, and Golden Fields and Kingsway received interest at the rate of 31.2% per annum of the loan amount. 

171.  It will be convenient for me to deal with first of all whether PW4 of Golden Fields and/or PW5 of Kingsway had or might have deceived the defendant.  If the prosecution cannot disprove this possibility, it must follow that it will not be able to prove beyond reasonable doubt any of the charges since PW4 or PW5 (as the case may be) was alleged to have been induced by the alleged deceit of the defendant into approving the mortgages and advancing loans to the defendant.

172.  I shall deal with the evidence of PW4 first.  I have taken into account everything that defence counsel has said about his evidence.  I do not find his evidence inherently improbable or inherently incredible.  Nor do I find his evidence in material conflict with any other evidence.  There are just a few points I wish to mention specifically.

173.  First, PW4 maintains that he had never received a copy of the minutes relating to the first mortgage loan (Exhibit P18&P19), but his evidence is apparently contradicted by the existence of a copy of a similar minutes marked CC5(1)&(2) in Exhibit D1.  I have been told that copies of the minutes marked as CC5 to CC8 in Exhibit D1 were seized from the respective finance companies.

174.  I do not consider this is a matter of any significance.  PW4 might be mistaken in his recollection when he says that he did not have a copy of the minutes. Furthermore, whether or not PW4 had a copy of the minutes in my view was irrelevant. It was because it is not disputed and has been proved beyond doubt that the minutes (Exhibits P18&P19) were given to PW7 who was instructed by PW4 to prepare the mortgage documents.  There cannot be any doubt that PW4 required this minutes before he would execute Mortgage 1 and advance money to the defendant pursuant to the mortgage contract.

175.  Second, learned counsel for the prosecution puts to PW4 that there were no minutes of the meeting of the board of directors of Tsun Ling for Mortgage 2, and PW4 could not therefore have seen the minutes.  However, PW4 maintains that he has no recollection that there were no minutes for the second mortgage loan.

176.  In my view, learned counsel for the prosecution may not be correct when he said that there were no minutes for the second mortgage loan.  The fact that the police could not find the minutes, either in the original form or as a copy, does not necessarily mean that there had never been such a minutes.  It could simply be a case that the minutes had been lost or could not be found.  In any event, even if the minutes for Mortgage 2 had never been in existence, it was a matter of little significance because everyone involved in this loan application including the defendant was well aware that such minutes were required.  It also does not affect the credibility of PW4.  It might well be that PW7 had not informed PW4 that there were no minutes for Mortgage 2.  Even if he had, PW4 could have failed to recall it, especially when he had proceeded to complete the mortgage application, he must have been under the belief that there was no problem relating to the minutes.  In my view, PW4 simply has no reason to lie.  It is because PW4 has also testified that if he had been so informed but the defendant had promised to provide the minutes subsequently, he would have proceeded with the mortgage.  There is nothing incredible in this piece of evidence, bearing in mind that by that time, Golden Fields and the defendant had already had business transaction once in the form of Mortgage 1. As to whether PW7 informed PW2 that the minutes for the second mortgage loan were missing, I shall deal with this issue again later. But for reasons that I shall give in due course, I do not find the evidence of PW7 damages the credibility or reliability of PW4’s evidence.

177.  Learned counsel for the defendant points out that PW4 has testified that he would not have dealt with any agent if he had known the agent had criminal conviction for fraud.  The evidence has of course proved beyond reasonable doubt that PW4 had dealt with PW6, and that PW6 in fact had a criminal conviction for conspiracy to defraud.  However, there is no evidence that PW4 was aware of his criminal conviction.  Not only PW6 was not an employee of Golden Fields, there was also no positive duty on PW4 to ascertain if PW6 had any criminal record before he dealt with him.  When PW4 was unaware of PW6’s conviction, I see nothing contradictory in PW4’s evidence that he dealt with PW6.  Hence, this is not a point that damages PW4’s evidence.

178.  PW4 has also testified that he was told by PW6 that the defendant was asking for a loan of $6 million when PW6 made the initial contact with him.  He does not say and it has not been put to him that PW4 was aware that the defendant was in fact asking for a single loan of 12 to 14 million dollars, but he suggested splitting it into several loans.  On the other hand, the defendant testifies that David Lok told him that the lender secured by PW6 would split the loan into 2 or 3 instalments.  Although PW6 has also confirmed that on the first occasion when the defendant was asking for a loan, he had already stated that he wanted 12 to 14 million dollars, I do not see the credibility or reliability of PW4’s evidence has been affected.  It can simply be a case that David Lok or PW6 did not inform PW4 of the requirement of the defendant, especially they or either of them might perceive that a finance company that had no dealing with the defendant before might not agree to grant him a loan as large as 12 to 14 million dollars in one lump sum.

179.  I shall now turn to the evidence of PW5.  Likewise, I have taken into account everything defence counsel has said about her evidence.  I wish to mention a few points.

180.  First, PW5 has testified that she received the copy requisite minutes for Mortgage 4 (Exhibit P104) on 8 August 2012.  The blank space for filling in the date of the meeting held by the board of directors of Tsun Ling had not been filled in.  However, it appeared on the original minutes (Exhibit P66) that the date was filled in as “7 August 2012”.  She has therefore been asked to explain if the directors of Tsun Ling had hold their meeting on 7 August 2012 and signed the minutes, then when she received the copy minutes on 8 August 2012, the date of the board meetings should have already been filled in, but as it turned out, the copy minutes she had received had the date of the meeting left blank.  In my view, this is not a ground that cast doubt on the credibility of PW5 or the reliability of her evidence.  It is because it is clear from the evidence of PW7 that the date of the meeting was filled in by him after he had received the original minutes, and he filled in the date without ascertaining whether the board of directors of Tsun Ling had hold a meeting, and if so, when the meeting was held.  On his evidence, PW7 admits that he just filled in the original minutes any date so long as that date was earlier than the date when the mortgage contract was signed, and he might even date the minutes after the mortgage contract had been signed.

181.  Second, defence counsel has made the point that PW5 had chosen to proceed with the loan and relied on an apparently incomplete and undated minutes.  However, I cannot deduce anything sinister from here about PW5’s evidence.  PW5 was not relying on this copy minutes as the only document to proceed with the loan application.  Instead, she was relying on PW7 to ensure that all documents were in order.  Her evidence is that when she attended the solicitors’ office to sign documents, she asked PW7 whether the minutes were available, and she was told that the documents were in order.

182.  Third, PW5 has testified that it was PW6 who faxed her the copy minutes (Exhibit P104) on 8 August 2012.  She maintains that it was PW6 who faxed to her the document because PW6 told her to collect the fax.  On the other hand, PW7 says he faxed the document to PW5.  I do not think there is necessarily any conflict between their evidence.  It is clear from the line of words printed on the top of the copy minutes (Exhibit P104) that the fax was sent by S. W. Tai & Co. which corroborates with the evidence of PW7, but PW6 could also at the same time notify PW5 that the fax was on the way, so that PW5 was made to believe that the fax was sent by PW6.  In any event, as to who sent this copy minutes to PW5, it is not a matter of any significance.

183.  Fourth, I am very impressed by PW5 as she has demonstrated that she can give evidence with meticulous details.  She is able to testify that the loan documents and mortgage contract for Mortgage 4 were in fact signed on 9 August 2012 when the mortgage contract itself was dated 8 August 2012.  Her evidence is plainly credible because the related mortgage loan application form (Exhibit P71) was stamped with the date of 9 August 2012, which PW5 has testified that the date was stamped by her in her office before she went to the solicitors’ office. This piece of evidence is also consistent with her evidence that she received via fax the related copy minutes (Exhibit P104) one day before the drawdown of the loan, and the date printed on top of the document showed that it was faxed to PW5 on 8 August 2012.  The evidence given by PW5 is therefore corroborated by the documentary evidence.  It is the evidence not only of PW5 but also that of PW7 as well as the defendant that it was only after the defendant had signed on the documents prepared by PW5 that he signed on the mortgage contract prepared by PW7.  It must follow that PW5 must be correct in her evidence that the mortgage contract for Mortgage 4 was signed on 9 August 2012. 

184.  Furthermore, PW5 is able to say that the genuine Tsun Ling company chop (Exhibit P2) was not the one used in chopping the loan documents prepared by her because the genuine chop had a handle while the one she saw was rectangular and in a box shape.  It is clear that PW5 had only two occasions to look at the chop used in execution of the loan documents, and yet she is able to recall the particular shape of that chop which of course has now been proven to be a false Tsun Ling company chop.  I am impressed by the ability of PW5 in the way she could observe details and remember them.  Hence, I am of the view that when she testifies that she saw the defendant affixing chop onto the loan documents she had prepared, I attach considerable weight to her evidence even though the defendant testifies to the contrary that it was a lady whom he believed to be sent by PW1 affixed the false company chop onto the documents. PW5’s evidence does not display any inherent improbability or incredibility, nor do I find her evidence in material conflict with any other evidence.

185.  I do not find any part of PW4 or PW5’s evidence worrying me.  Furthermore, I am firmly of the view that the submission made by defence counsel that PW4 and/or PW5 had played or might play a part in deceiving the defendant groundless. According to the evidence of the defendant, his case must be that he had been deceived into thinking that he was duly authorized by Tsun Ling to take out each of these 5 mortgage loans.  However, if PW4 or PW5 were aware that the defendant had or might have no authority from Tsun Ling to take out any of the mortgage loans and yet he or she still approved the mortgage and advance money to the defendant, it would just mean that he or she was advancing a loan to the defendant knowing that its repayment was not secured by any mortgage.  PW4 and PW5 must know that Tsun Ling would not be bound by any loan agreement or mortgage contract entered into by the defendant on its behalf when the defendant did not have the authority from Tsun Ling.  Defence counsel’s submission that PW4 or PW5 had good reasons to deceive the defendant because of the substantial amount of interest that could be earned.  But if greed for money was the reason that caused PW4 and/or PW5 to deceive the defendant, I see no reason why he or she would not have used a better method to earn more money, by telling the defendant that he or she was aware that the defendant had not been authorized by Tsun Ling to take out the mortgage loan, but Golden Fields or Kingsway (as the case may be) was willing to grant him unsecured loan but at a higher interest rate.  I see no sense at all that they would have resorted to crime when using this simple but lawful method could have enabled them to earn even more, especially if greed for money was what motivated them according to learned counsel for the defendant. In my view, the submission that PW4 and/or PW5 had played or might play a part in deceiving the defendant is simply ludicrous and inherently implausible.  I have no doubt that defence counsel is just making a shot in the dark as evidenced by the fact that he has never put to either PW4 or PW5 that they had played any part in deceiving the defendant.

186.  I now turn to the evidence of the financial agent PW6.

187.  Learned counsel for the defendant has submitted that PW6 is a dishonest and incredible witness.  However, although learned counsel has put forward that submission, it does not seem that he is able to point out the evidence that supports his contention.

188.  It is true that PW6 has testified that he had not told the defendant that minutes of meeting of the board of directors of Tsun Ling were required for applying mortgage loan because he did not contact the defendant directly but only via David Lok and Peter Tseung.  But PW6 has also testified that he knew that the minutes were essential and there was simply no reason why he would not tell David Lok or Peter Tseung to ask the defendant to complete the draft minutes prepared by PW7.  In any event, it is not disputed that the defendant was well aware of the necessity of the minutes. 

189.  I note that there are some differences between the evidence given by PW6 and that of other prosecution witnesses.  For instance, PW6 testifies that it was PW4 who proposed to split up the single loan of 12 million to 14 million dollars asked for by the defendant into 3 to 4 different loans, but there is no such evidence from PW4.  Even if PW6 was not telling the truth to the defendant via Peter Tseung or David Lok, it might not be due to anything criminal or dishonest.  He might just want to make it easier for finance companies to grant loans to the defendant.  PW6 has also testified that he had not received a copy of the requisite minutes for Mortgage 4, but it is the evidence of PW5 that PW6 had faxed a copy of the minutes to her.  Again, even if what PW6 has said is untrue, it is only a small discrepancy in evidence that does not point to his involvement in any criminal or dishonest activities.  He might simply forget that he has informed PW5 to collect the fax minutes. 

190.  I find that the discrepancies between PW6’s evidence and that of other prosecution witnesses do not indicate that PW6 is a dishonest and incredible witness.  This submission of learned counsel for the defendant is simply based on the premises that “the commission he receives from each mortgage application gives him every incentive to deceive the defendant”.  In fact, in his examination of PW6, learned counsel for the prosecution has questioned why PW6 was entitled to charge 2 to 3 percentage of the loan amount as his commissions in light of the kind and the amount of work he had put in, and queried why people would engage his service if they could go to the bank to ask for a loan at a much lower interest rate and without the need to pay him commissions. Counsel has also queried why PW6 could continue to receive the same large sums of commissions for making just a phone call or two for the mortgage loan applications made subsequent to the first one.  I do not know whether or not learned prosecuting counsel is insinuating that financial agents like PW6 were assisting loan sharks to get business, or would perform all kind of acts including unlawful ones to ensure that their clients would get the loans and hence they would get the commissions.  In my view, the fact of the matter is financial agents like PW6 do exist in Hong Kong, and their business is a lawful one unless it is done in an unlawful way.  It is also beyond argument that there are people who are willing to engage the service of these financial agents so as to borrow money from finance companies instead of going to the banks even though they have to pay a much larger sum for interest in addition to payment of commissions.  There is certainly evidence from the defendant that he finds the commissions charged by PW6 reasonable.  Furthermore, there is no evidence that the percentage of interest charged by the finance companies secured by PW6 to lend money to the defendant was so exorbitant that PW6 would go to the extent of committing criminal offences to enable the defendant to obtain the loans so as to obtain benefit in the form of commissions.  Hence, I do not think the nature of PW6’s work and/or the amount of commissions he had charged against the defendant will automatically render him to be a witness not worthy of belief.

191.  In my view, the evidence is surely insufficient for me to make a finding that PW6 is a dishonest and incredible witness.  However, I do agree that the amount of commissions earned by PW6 could well be an incentive for him to take part in criminal acts to ensure that Golden Fields and Kingsway would grant the mortgage loans to the defendant.  In fact, it is clear that Peter Tseung and David Lok are people within the same category as PW6.  I am prepared to assume that they had produced or caused to produce the false minutes, false common seal and false company chop of Tsun Ling, or they had knowledge of the falsities of these articles but still allowed them to be used for the purpose of enabling the defendant to obtain loans from Golden Fields and Kingsway. Since I have already rejected the contention that PW4 and PW5 had played or might play any part in deceiving the defendant, it must follow that their criminal acts must be aiming at Golden Fields and Kingsway, and the remaining issue is simply whether they were also deceiving the defendant so as to make him an innocent agent to enable the defendant to obtain the loans and hence their substantial benefits to be paid to them by the defendant.  Put it in another way, was the defendant a knowing and participating party to the fraud against Golden Fields and/or Kingsway?  If the prosecution is unable to prove beyond reasonable doubt that he was such a party, then the possibility that he was a victim of the fraud in addition to Golden Fields and Kingsway cannot be ruled out.  In that event, although he was not the only victim, he is still entitled to be acquitted of all charges.

192.  I shall now turn to the evidence of PW7.

193.  It is clear from the evidence that PW7 had made a lot of mistakes when he was preparing the mortgage contracts for signatures of Golden Fields, Kingsway and the defendant:

(1) the address of the registered office of Tsun Ling and the address of the defendant put down by PW7 in each of the mortgage contracts were not the correct registered address of Tsun Ling or the correct residential address of the defendant. His initial evidence that he obtained the addresses from the annual return of Tsun Ling (Exhibit D2) must be untrue because these two addresses as shown in the annual report were completely different. It is clear that PW7 was just copying the registered address of Tsun Ling from the title deeds and he just put down the address of the property that was to be mortgaged under a particular mortgage contract to be the address of the defendant. It is clear that he just put down the addresses to suit his convenience without ensuring their accuracy.

(2) the date appearing on each minutes in support of the related mortgage loan application as the date when the board of directors of Tsun Ling had hold a meeting to resolve to apply for the mortgage loan and to authorize the defendant to act on it behalf was just a creation by PW7 and he did not bother to find out whether the meeting had been held, and if so when the meeting was held.

(3) the blank space meant to be filled in to identify the person whom had been authorized by Tsun Ling to affix the common seal and to sign documents for the mortgage on its behalf in the minutes for Mortgage 3 (Exhibit P50&P51) had not been filled in. PW7 admits that he should be responsible for typing in the name of the defendant, but he had not done so due to oversight.

(4) the date stated in the mortgage contract (Exhibit P62) for Mortgage 4 was filled in as 8 August 2012 when the evidence of PW5 proved beyond reasonable doubt that the mortgage contract was only executed on 9 August 2012. PW7 admits in his evidence that he might make a mistake as he did not date the document on the same day when the document was executed, and he might date it just before registration.

(5) the name of a different client had been left in one of the mortgage contracts.

194.  All mistakes in the documents he had prepared clearly indicated that PW7 was not a competent conveyancing clerk.  He has in fact admitted in his evidence that he just wanted work to be done and he did not pay attention to details.  Having said that, I do not think such mistakes are necessarily indicative that he was involved in any criminal or dishonest activities.  Learned counsel for the defendant submits that PW7 “fabricated” the date of the meeting of the board of directors of Tsun Ling in the minutes.  I think, to be fair to PW7, saying that he had fabricated the date might be too strong a comment.  The fact that he did not ask whether a board meeting had been held, and if so when the meeting was held but simply filled in any date that was earlier than the date of execution of the mortgage loan documents as the date of meeting might not be criminal in nature.  It is because PW7 might well be under the belief that, as he has testified, once all the required signatures appeared in the minutes, the minutes were genuine and the board of directors had actually resolved to agree to the contents of the minutes.  Hence, filling in the date of the meeting was not important at all since he thought all directors had agreed.  There is also evidence from PW1 and the defendant that minutes could have been passed around for the directors to sign so that there was in actual fact no board of directors’ meeting. 

195.  However, I find that the evidence of PW7 very unsatisfactory in two areas.

196.  The first area is that, according to PW7, when the documents for Mortgage 2 were about to be executed, he had informed PW4 that the requisite minutes were not available, and he had asked PW4 whether he would proceed with the mortgage application.  He further testifies that PW4 agreed to proceed with the mortgage loan application when the defendant had indicated or promised that he would provide the requisite minutes later.  However, his evidence is not supported by PW4, nor is his evidence supported by the defendant.  In addition, it was simply inherently incredible, given the importance of the requisite minutes to the whole mortgage loan application and the possible liabilities that could be attached to the handling solicitors, that he as an experienced conveyancing clerk of 20 odd years experience did not even have a single written record evidencing that he had obtained the approval of PW4 to proceed with the mortgage.  He has also done nothing to follow up the alleged promise made by the defendant to provide the missing minutes.  His explanation was he had simply forgotten the matter.  It might well be that he had truly forgotten the matter because it was just against common sense that he would leave out the minutes.  But it might also be that he had not checked if the documents including the requisite minutes were in order but simply advised his client PW4 to proceed with the mortgage.  PW7 might not be dishonest or doing something criminal, but I will certainly attach no weight to his evidence when his evidence conflicts with other witnesses.  I will not find his evidence damages the evidence of PW4 when he (PW4) said that he has no recollection that he had been informed that the minutes for Mortgage 2 were missing.  Furthermore, I find that it is extremely dangerous for me to rely upon his evidence to find that the defendant had, during the meeting when documents relating to Mortgage 2 were signed, promised that he would provide the missing minutes at a later stage.

197.  The second area is that the original minutes used to support the application for Mortgage 4 (Exhibit P66&P67) were different from the copy minutes sent to Kingsway (Exhibit P104 or CC7(1)&(2) in Exhibit D1), and the original minutes used to support the application for Mortgage 5 (Exhibit P82&P83) were different from its purported copies (CC8(1)&(2) in Exhibit D1).  For each set of minutes, the differences were that the signatures purported to be made by PW1 and by the defendant in the original document were different from those appearing in the copy.  PW7 simply cannot offer any explanation.

198.  Learned counsel for the defendant submitted that PW7 is a dishonest and incredible witness.  He or someone in his company must have been involved in forging documents, and that if he had been an honest solicitors’ clerk, he would not have allowed mortgage documents to be executed by the defendant on behalf of Tsun Ling without the requisite minutes authorizing the defendant to do so.  I do not think I have sufficient evidence to find PW7 to have committed any crime, but I am firmly of the view that PW7 is not a satisfactory witness.  I find that I cannot rely on any part of his evidence unless such part of his evidence is corroborated by credible evidence from other sources.  I agree that he might have the incentive to deceive the defendant in light of the amount of legal fees that S. W. Tai & Co. had received, and I shall also prepared to assume that he had produced or caused to produce the false minutes, false common seal and false company chop of Tsun Ling, or he had knowledge of the falsities of these articles but still allowed them to be used for the purpose of enabling the defendant to obtain loans from Golden Fields and Kingsway.  Of course, the question remains whether the defendant was a knowing and participating party in the fraud against Golden Fields and/or Kingsway.

199.  I now turn to the evidence of the defendant.

200.  In considering the defendant’s evidence, I bear in mind that he has no burden of proof, and that he is a man of clear record, and how these factors work in his favour.

201.  It is an admitted fact that when the defendant was arrested on 8 November 2012, he elected to remain silent under caution.  I direct myself that no adverse inference can be drawn against the defendant since he was merely exercising his statutory right. 

202.  In his cross-examination of the defendant and final submissions, learned counsel for the prosecution submits that the defendant’s evidence is incredible.  One of the reasons relied upon is that the defendant had not revealed his “victim defence” to the police, his father, and any of his cousins (i.e. PW1, PW2 or PW3). I note the defendant’s explanation that according to his legal advice, he had a right to remain silent against the police.  He has testified that he had told his father he was a victim of fraud though he had not disclosed identity of Peter Tseung and his group.  He also says that he had no chance to explain to PW1 and PW2 because they were threatening to sue him in a civil case, and though on one occasion he had come across PW2, PW2 only told him to speak to PW1, but PW1 refused to talk.  I am of the view that irrespective whether the defendant is telling the truth on these matters, I should not and will not draw any adverse inference against him from the mere fact that he had not told any of these persons the defence in detail or at all which he raises for the first time only when he testifies in Court.  I find it dangerous to do so because it may infringe upon his right to remain silent.  I shall also ignore those parts of the evidence given by the defendant under this line of cross-examination.

203.  In considering the defendant’s evidence, I agree that the fact that the defendant signed on the requisite minutes for the mortgage loan applications without actually attending any meeting held by the board of directors’ of Tsun Ling cannot by itself support any adverse finding against the defendant.  It is common ground in the evidence of PW1 and that of the defendant that this practice had been used in Tsun Ling before.

204.  In his cross-examination of the defendant, learned counsel for the prosecution has established that for each of the loans obtained by the defendant, the money had been dissipated within very short period of time, and the point has been made that there was no evidence that the defendant had used these money to pay off his SME loan which was the very purpose according to his evidence why he had to borrow money from the finance companies.  Under cross-examination, the defendant was unable to inform the court for what purpose the loan money had been used.  Learned counsel for the defendant submits that even if the money did not go directly to the SME loan, the loan had been paid off, and the evidence only suggested that funds were mixed up in the different accounts of the defendant.  I agree that I shall not draw adverse inference against the defendant even if he could not explain where the money had gone to.  The only document he is given when he is under cross-examination is the bank statements of his HSBC account (Exhibit P105), and he is not assisted by any other document. 

205.  However, in considering the evidence, I have to view against the background that no matter what kind of wealth the defendant has described himself to have enjoyed at the material times (and he says he was worth $300 million in 2012), the fact of the matter was he could not move around his money from his various businesses to obtain the money he needed, and that he had to borrow from Golden Fields and Kingsway, and when the offences were discovered, he could only repay the 5 mortgage loans through the help of his father and his friend both of whom had to mortgage their properties for that purpose, a matter that the defendant admits under cross-examination.

206.  In his closing submissions, learned counsel for the defendant has made a number of points to say that it is unlikely that the defendant had committed any of the offences charged: -

(1) Counsel submits that the total amount borrowed by the defendant had at no time exceeded the value of the defendant’s shares in Tsun Ling and that this was significant because it shows that the defendant was working in the genuine belief that he was just using his own shares, and not seeking to take more than he could. However, this submission has neglected the reality that the defendant’s shares could not be mortgaged to raise money. PW4 has given evidence that he would not accept mortgage of shares. In fact, it is obvious that until the company is wounded up and its assets are distributed to the shareholders, the shareholder has no right to the property which belongs wholly and squarely to the company. The defendant was well aware that holding 20% shares gave him no right to mortgage any of the properties of Tsun Ling, or else he would not ask PW1 and PW2 to allow him to use his shares to raise money, and he would not state in his own evidence (the veracity of which is to be determined) that he asked Peter Tseung and the others to persuade PW1 to allow him to borrow money by mortgaging the properties of Tsun Ling. It is clear beyond reasonable doubt that unless PW1, PW2 and/or PW3 agreed to allow him to raise mortgage loan through a mortgage of the Tsun Ling properties, his shares could be said to be worthless as far as using them as security for borrowing money was concerned.

(2) Counsel submits that Mortgages 1 to 5 were bound to be registered at the Land Registry, and hence whoever perpetrated the fraud must have known the offence would come to light sooner or later, and the defendant was probably aware that these mortgages would be discovered soon when the auditing of the company was conducted, and that it would be very foolish for him to enter into this scenario. While I recognize the force of counsel’s submission, I am of the view that it does not amount to a reasonable doubt if it can be otherwise proved that the defendant was a knowing and participating party in the fraud. If the defendant had to obtain money via mortgage loans, it was inevitable that the mortgages would be registered and be discovered. That was a risk that he had to run. It was just a question of how he would manage the risk if he really played a part in the fraud. One answer comes to mind immediately is that he would seek to explain that he had been deceived into believing that he had been duly authorized by Tsun Ling, and this is exactly his present defence. Secondly, bearing in mind the defendant’s evidence that he intended to use the loan from finance companies on a short term basis, and if what he had intended had come true, it was possible that he could have paid off the loans and discharged the mortgages before discovery. It is not necessary for me to speculate and I will not do so. What I wish to say is that counsel’s submission does not persuade me that the inevitable discovery of these mortgages after they had been registered in the Land Registry will by itself amount to a reasonable doubt on the defendant’s criminal liabilities if his liabilities can be established by the evidence. Of course, at this stage, I am just talking about possibility, and I have not yet come to any conclusion whether the defendant had perpetrated the fraud.

(3) Counsel submits that if the defendant were involved in forging the signatures on the minutes, it would not be a matter of concern whether the signatures on the minutes looked like the signatures of other directors PW1 and PW2. He submits that nobody else knew what the directors’ signatures looked like. Hence he submitted the only reason for the forged signatures was to deceive the defendant. He points out that to the untrained eyes, there was nothing on the face of the minutes to indicate that the signatures purported to be those of PW1 and PW2 were forged signatures. I do not agree with this submission. Whoever involved in the fraud in my view could not exclude the possibilities that someone might check the authenticity of the signatures on the minutes. There is clear evidence from PW5 that she had checked the signatures on the requisite minutes for Mortgage 4 against a document which seemed to her to be the annual return of Tsun Ling. She found the signatures matching, no doubt because the forged signatures resembled the genuine signatures to the untrained eyes. But if the signatures were so obviously different, I am sure PW5 would not proceed with the mortgage application, and those perpetrating the fraud had to ensure that the false minutes they had produced could be used to achieve its illegal purpose. In addition, they had to ensure that their fraud would not be easily detected by just a simple comparison of signatures. In addition to people from finance companies, other people like a conveyancing clerk might also do so, and whoever submitting the minutes to the conveyancing clerk could not tell in advance that the conveyancing clerk would never check. For these reasons, I am of the view that there was every necessity to forge the signatures of other directors on the minutes even if the defendant was not the target of the fraud. Besides, another possible reason for forging the signatures, if the defendant had played a part in the fraud, was to enable him to say, once the fraud was discovered, that he was a victim of the fraud. Of course, at this stage, I am again just talking about possibility as I mention before.

(4) Although it is common ground in the evidence that the meeting at the solicitors’ office for each mortgage loan was brief and that the defendant might not have read the documents in detail or the documents might not have been fully explained to him, there was no doubt whatsoever that the defendant was well aware of the essential terms of the documents like he was signing loan agreements and mortgage contracts in his dual capacities and that he knew that he was representing Tsun Ling when he signed the documents. The fact that the meetings were brief has no significance.

207.  Having dealt with some of the points raised by learned counsel on both sides, I now analyze the defendant’s evidence.  Having considered the defendant’s evidence carefully, I am of the view that his evidence is inherently implausible and incredible.  My reasons are as follows:

(1) The defendant has testified that he had not approached PW1 to discuss about raising the bridging loans from finance companies. He says the reason was that after Peter Tseung had explained to him the plan that had been agreed with PW6, he found the plan sounded rather complicated, so he agreed to the suggestion of Peter Tseung that Peter Tseung, David Lok and their lawyer partner and accountant partner would approach PW1 as a professional team to explain the plan so as to avoid the defendant explaining it clumsily. It was said that at that time the due date for repayment of the SME loan was imminent. However, it is plain and obvious that there was nothing complicated in the plan proposed by Peter Tseung. It was just a simple mortgage loan transaction with Tsun Ling and the defendant named as co-borrowers and repayment of the loan was to be secured by a mortgage of one of the Tsun Ling properties. The only message that needed to be conveyed to PW1 was that the defendant was asking for a favour from his cousins PW1, PW2 and PW3 to agree to mortgage the Tsun Ling properties to enable him to raise money, and that the defendant would be responsible for repaying the loan and interest, and if in default, the 20% shares held by the defendant in Tsun Ling could be used to cover the losses since his shares in theory had a value equivalent to 20% of the combined estimated value of Suites V and W which was over $100 million. The procedure to be carried out could also be explained in simple terms. The message to be conveyed to PW1 was simply that solicitors would prepare all the required documents including the requisite minutes of the meeting of the board of directors of Tsun Ling, and what PW1 and PW2 were required to do were just to sign the minutes at the spaces indicated. There was no complication at all. Bearing in mind that the defendant had the experience of using his father’s property to secure his trade credit quota and the experience of Tsun Ling mortgaging property partly for the sake of helping Christina Ko, I find that his evidence that he found the plan explained to him by Peter Tseung sounded rather complicated does not have a ring of truth. In any event, even if it were true that the plan was complicated and only professional team comprising people like Peter Tseung could explain clearly and persuasively to PW1, there was simply no reason why the defendant should not be present in the discussion. After all, he was asking for a favour from his cousins, and he should be present to make it known that he was making a sincere request for help and to express his appreciation if their help was forthcoming. It must be noted that in this loan plan, everybody involved would get some benefit, with some of them getting substantial benefits, but the most important stakeholders i.e. PW1, PW2 and PW3 would get nothing at all. If PW1 agreed to the plan to mortgage the Tsun Ling property to help the defendant, he could only be motivated by the family bondage. The defendant undoubtedly understood his relationship with PW1 was the only factor that would persuade PW1 to help, and there was simply no reason why he would not have made himself present in this meeting, using his personal relationship as the persuading tool, and leaving the explanation of the details of the plan to his team of professionals if he could only explain the loan plan clumsily. In more crude terms, he should have been present to beg for help. To say the least, he should have been present to give his verbal promise that he would repay the loan and interest and explain why he would have no difficulties in fulfilling his promise so as to ease the mind of PW1. In my view, the defendant’s evidence that it was the decision of him and Peter Tseung that he should not discuss with PW1 about the loan plan, or that he would not approach PW1 with his team of professionals during the discussion was inherently incredible. It is just a deliberate attempt to impress this court that he did not know that PW1 had never been approached about these mortgage loans.

(2) Although PW1 could not recall whether the defendant had asked him during one encounter in Jockey Club if he could use his 20% shares in Tsun Ling to obtain a loan, he did not rule out this possibility, and the defendant testifies that this event did occur. I find that such an event had occurred. On the other hand, it is clear from the evidence of PW1 and that of the defendant that neither PW1 nor PW2 had agreed to the defendant’s suggestion or request that he could use his 20% shares in Tsun Ling to obtain any loan. The interpretation that was most favourable to the defendant is simply that PW1 or PW2 had not expressed their objection to his proposal or request, but PW1 and PW2 were certainly not interested in discussing with the defendant on this topic as they just changed their conversation topic. The defendant knew clearly of their apathetic attitude towards his request or proposal. When he could not obtain the consent of PW1 but Peter Tseung and the others managed to do so, there was simply no reason why the defendant would not have asked Peter Tseung how he could have managed to achieve it. To say the least, there was no reason why he did not have the curiosity to know. The fact that the defendant according to his evidence had never asked Peter Tseung how he managed to persuade PW1 is inherently incredible.

(3) The defendant’s evidence that he had been advised that he should not pay off the SME loan by raising money from the bank but by raising short term bridging loans from finance companies so that he would get better reputation and credit rating with Bank of East Asia, and then he would be able to get a larger SME loan from the bank, and then he could use the bank loan to pay off the bridging loan is so devoid of common sense that it is simply inherently incredible. If a bank was not willing to increase the defendant’s SME loan because he had to borrow money from the bank to pay off the SME loan, it would defy common sense to say that the bank would have agreed to increase his SME loan if he borrowed money from finance companies to discharge the loan. In both instances, the positions of the defendant were identical, i.e. he did not have the money to repay the loan and he had to resort to borrowing. The only difference was that when he borrowed from finance companies, he had to pay more interest which in effect increased his indebtedness. How would the bank under those circumstances give him a larger amount of loan? How could this be the advice from an experienced professional in banking business like Peter Tseung as the defendant alleged him to be?

(4) On the issue of increasing his credit rating with the bank, if it were true that the defendant had been under the genuine belief that PW1 and the others had really agreed to allow him to borrow money by mortgaging the Tsun Ling properties, there was simply no reason why the defendant would not have approached PW1, PW2 and/or PW3 and asked them to help him out by using Tsun Ling and Tsun Ling alone to raise the mortgage loan, and then Tsun Ling would lend him the money on a private basis to discharge the SME loan, upon the condition that he would be personally responsible for discharging the mortgage loan and interest as well as redeeming the mortgaged property. After all, such a scheme would not put Tsun Ling in any worse position since it had already agreed to take out the mortgage loans with Golden Fields and Kingsway, but the defendant would have substantial benefit in the sense that at least on papers, he was not indebted to any finance companies or banks but he was able to discharge the SME loan. Furthermore, it is common ground in evidence that Tsun Ling had helped out one of its directors Christina Ko before by Tsun Ling alone taking up the mortgage loan without naming Christina Ko as the co-borrower, and Tsun Ling advanced the money to Christina Ko only upon the basis that she would repay the loan and discharged the interest on the $1 million she had borrowed. The defendant was well aware that Tsun Ling had helped out Christina Ko in this manner before. There is simply no reason why he would not ask, or attempt to ask for a similar favour from PW1 and the others, at least after Mortgage 1 had been executed, because by then he must have had no doubt whatsoever that PW1 and the others did accommodate him and help him. On the other hand, if it was a fraudulent scheme to enable the defendant to obtain money from Golden Fields and Kingsway, I can understand why Tsun Ling could not be named as the only borrower but the defendant had to be added in as a co-borrower on the mortgage loan application. It is because to do it otherwise, the finance companies would only pay, and the solicitors would have a duty to ensure that the loan would only be paid, to the named borrower Tsun Ling but not the defendant which was not the intention of the defendant and the others helping him.

(5) If it were true that the defendant had been under the genuine belief that PW1 and the others had really agreed to allow him to borrow money by mortgaging the Tsun Ling properties, there was simply no reason why the defendant would borrow, or continue to borrow after Mortgage 1, from finance companies thereby incurring interest at the rate of 31.2% per annum, instead of approaching the bank for the loans, where his liabilities for interest would be substantially lowered. Counsel for the prosecution suggests in cross-examination that the mortgage interest rate in 2012 was Prime rate (4%) minus 2.5%. There is no evidence to that effect, but this court must be able to take judicial notice that the mortgage interest rate could not be anything above 10% per annum for the past 5 years. It meant that the defendant would save a lot of money if he approached the bank for the loans, and PW1, PW2 and/or PW3 would have no reason to disagree if they really agreed to allow the defendant to borrow from finance companies. The defendant is a well educated man with years of experience in import and export trade and doing businesses in the mainland and with people in the Middle East. It was simply incredible that he would not have resorted to this scheme but borrowed or continued to borrow from the finance companies at the interest rate of 31.2% per annum plus payment of large sum of commissions to the intermediaries if he really believed that PW1, PW2 and/or PW3 had agreed to allow him to obtain mortgage loans on the strength of the Tsun Ling properties. According to my calculation, the minimum amount of interest he had to pay was $2,262,000 if he managed to discharge each loan once its minimum contractual loan period had expired, but the interest payable by him would be up to $5,304,000 if each loan was discharged in 12 months’ time according to its repayment schedule, and his liabilities would be even more if he could not discharge the loans in time. There was simply no plausible explanation why he would not have approached banks to obtain the loan but continued going to the finance companies if he genuinely believed that his cousins had agreed to mortgage the Tsun Ling properties to obtain the mortgage loans.

(6) The evidence of PW1, PW2 and PW3, which are not disputed by the defendant, have established beyond reasonable doubt that prior to the discovery of the 5 mortgages by the auditor of Tsun Ling, the defendant had not mentioned anything about any of these 5 mortgages to any one of them. If the defendant were really acting under the belief that PW1, PW2 and PW3 had agreed to allow him to borrow money by mortgaging the Tsun Ling properties, it was simply inherently incredible that he would not even say “thank you” to any one of PW1, PW2 and PW3. Learned counsel for the defence seeks to argue that the defendant did explain why he did not say “thank you”. It is submitted that the defendant believed that he was only using his own 20% shares in Tsun Ling and he seldom contacted the other directors. The other directors have also confirmed that the defendant was frequently out of Hong Kong and they had little contact with one another. However, in my view, it is inherently improbable that he would not express his thanks to PW1, PW2 and PW3. As I have already explained, the defendant knew full well that his shares could not be used to raise loans, but if his evidence is correct, the help extended to him by his cousins enabled him to obtain loans in the massive sum of $17 million, and his cousins had not a single cent as reward while his intermediaries obtained a benefit in excess of $800,000. Under these circumstances, given the relative relationship he has with PW1, PW2 and PW3, his education background and his occupation as a businessman, it is just beyond belief that he would not even have the simple courtesy to express his thanks to any of his cousins, but the effect of his non-action coincidentally had the effect of enabling those practising a fraud on him to be in a position to practise on him further fraud, which also coincidentally made it possible for him to obtain further loans from finance companies. On the issue that the defendant was always out of Hong Kong, I do not think that in 2012, a businessman like the defendant who had to travel out of Hong Kong frequently would not have a mobile phone that would enable him to contact people within or outside Hong Kong, no matter he himself was inside or outside Hong Kong. There is no doubt that he has the phone numbers of PW1 and PW2 as he has testified that he had provided the numbers to Peter Tseung and David Lok for them to speak to PW1 and PW2. There is also evidence from the defendant that PW1 had sent email to him asking to buy his shares. Hence, they could communicate via email. It is simply incredible that he did not even bother to make one phone call, or leave one voice mail, or send one email, to express his thanks to any one of his cousins each time after he had obtained a loan, and there were 5 such occasions. The defendant further seeks to explain that he seldom communicated with his cousins, however, as he admitted under cross-examination, he was at the material times on speaking terms with PW1 and the other cousins, and there was no reason at all that he would not have spent a few seconds to say “thank you” orally or to leave a message of gratitude to anyone of them. His lack of communication with PW1 or any of the cousins after he had obtained each loan was simply inherently incredible on the reasons that he has explained.

(7) Assuming that the defendant was the type of persons who would not say thanks to others even though others had provided him with massive help, the more fundamental question is those perpetrating the fraud on him, as he claimed, must have known full well that once the defendant communicated with any of his cousins about any of these mortgage loans, their crime would be exposed, so they had to feel rest assured that the defendant would not communicate with any of his cousins at all. According to the defendant’s evidence, if it were true, Peter Tseung had to be one of the persons deceiving him because it was Peter Tseung who told him that he would approach PW1 to discuss with him the loan plan when in fact he had never done so, and it was also Peter Tseung who told him that PW1 had given his consent when there was none, and Peter Tseung also told him that he had checked documents before signing and assured him that the documents were in order so that the defendant did not even have to check them, including whether the minutes were actually signed by PW1 and PW2. However, the defendant admits under cross-examination that he had never told Peter Tseung that he would not contact his cousin at any time. When Peter Tseung had never had the assurance of the defendant that he would not contact PW1 or any other cousins, Peter Tseung and those acting together with him would just be running the risk that their crime would be exposed. This is not a case where Peter Tseung and others had deceived the defendant on one single occasion and then disappeared immediately without trace. This is a case where the same exercise had been repeated on 4 further occasions during a period of 4 months. Any one sentence about any of these 5 mortgage loans before or after each one of these loans were entered given by the defendant to PW1 or any other cousin would have ended up with the arrest of Peter Tseung and the others. Surely, Peter Tseung and the others would not have run that risk unless they were absolutely certain that the defendant would never contact PW1 and the other cousins, notwithstanding the fact that they were relatives, that they were living just upstairs and downstairs of the same building, and that the cousins had been providing substantial help to the defendant. The only way that Peter Tseung and the others could be so certain that the defendant would never talk with any of them about any of the mortgages was that they knew that the defendant was on their side. The only reasonable and irresistible inference is that the defendant is a knowing and participating party to the crime.

(8) The evidence of PW5 has proved beyond doubt that the chop used in the execution of the loan documents and mortgage contracts had a different shape to the genuine Tsun Ling chop. According to the evidence of PW5, there was marked difference in the shapes of the two chops, i.e. the one used in the solicitors’ office was rectangular with the shape of a box while the genuine Tsun Ling company chop had a handle. She had only seen the false company chop on two occasions. The defendant was a director of Tsun Ling. It was just reasonable for any person to expect or at least to suspect that the defendant knew the shape of the genuine company chop of Tsun Ling. If the defendant was the targeted victim of the fraud, those preparing the false chop would be running a great risk to have his crime exposed by preparing a false chop without knowing the shape of the genuine Tsun Ling chop. They knew that the false company chop would be used by the defendant or in his presence in the execution of the loan documents. They would not have proceeded to do so unless they were certain that the defendant would not expose their crime, and the only way that they could be so certain was that the defendant was a knowing and participating party of the crime.

208.  Having heard and considered the evidence of the defendant, I find that his evidence is full of inherent implausibility and incredibility.  Despite the fact that he is a man of clear record, I find that he is not a witness of truth.  I reject his evidence.

209.  I remind myself that the burden is on the prosecution to prove its case beyond reasonable doubt.  I have no doubt whatsoever that each of PW1, PW2, PW3, PW4 and PW5 is a truthful and reliable witness.  I accept their evidence in their entireties.

210.  From the evidence of PW4, I have no doubt whatsoever that in respect of each of Mortgages 1, 2 and 3, he was acting under the belief that the defendant had been duly authorized by Tsun Ling to act on its behalf to enter into each mortgage loan and mortgage its properties to secure its repayment.  He was acting under the belief that the minutes produced to support the loan application for Mortgages 1 and 3 were genuine minutes of the board of directors of Tsun Ling and that the common seal and the company chop used on all the loan documents and mortgage contracts were genuine.  As far as Mortgage 2 is concerned, I have no doubt that PW4 was acting under the belief that the minutes were available at the time when Mortgage 2 was executed, although the minutes might have never existed or it could never be found.  I have no doubt whatsoever that PW4 had been induced to approve Mortgages 1, 2 and 3 and advanced the respective loans of money to the defendant, resulting in prejudice to Golden Fields.      I also find that the registration of Mortgages 1 to 3 in the Land Registry resulted in prejudice or substantial risk of prejudice to Tsun Ling because these mortgages once registered in the Land Registry would stand or would appear to stand as encumbrances to the title of Tsun Ling to Suites V and W, and Tsun Ling has to take the trouble and/or incur the expenses to have the registration of these mortgages removed.

211.  From the evidence of PW5, I have no doubt whatsoever that in respect of each of Mortgages 4 and 5, she was acting under the belief that the defendant had been duly authorized by Tsun Ling to act on its behalf to enter into each mortgage loan and mortgage its properties to secure its repayment.  She was acting under the belief that the minutes produced to support the loan application for Mortgages 4 and 5 were genuine minutes of the board of directors of Tsun Ling and that the common seal and the company chop used on all the loan documents and mortgage contracts were genuine.  I have no doubt whatsoever that PW5 had been induced to approve Mortgages 4 and 5 and advanced the respective loans of money to the defendant, resulting in prejudice to Kingsway.  As explained before, I also find that the registration of Mortgages 4 and 5 in the Land Registry resulted in prejudice or substantial risk of prejudice to Tsun Ling.

212.  From the fact that the defendant was willing to enter into these 5 mortgage loans to obtain a total of $17 million, even though he had to pay out $865,000 to his financial consultants and $47,000 legal fees, and incur liabilities to repay not only the capital but also interest at least in the sum of $2,262,000 (if all the loans were repaid within the respective minimum loan period), or up to $5,304,000 (if each loan was repaid in 12 months after the loan was obtained), or even more (if each loan was not repaid in 12 months), it is clear beyond reasonable doubt that he was hard pressed to obtain the money at the material times. 

213.  It is also clear beyond reasonable doubt that the defendant had personally approached PW1 and PW2 to seek their consent or propose to them that they would allow him to use his 20% shares in Tsun Ling to raise money but he was well aware that their consent was not forthcoming.  It is also clear beyond any doubt that the defendant mortgaged the two properties of Tsun Ling and obtained from Golden Fields and Kingsway loans in the total sum of $17 million when he purported to act on behalf of Tsun Ling to take out the mortgage loans.  It is therefore clear beyond reasonable doubt that he was the person who needed to obtain the authority of Tsun Ling to enter into these mortgages.  The defendant was well aware that he failed to obtain such authority from PW1 previously during the meeting in Jockey Club.

214.  From the fact that the defendant had not mentioned anything about any of these 5 mortgages to any of his cousins at any time before, during or after each of these mortgages had been executed in the 4 months period when there was no explanation or no plausible explanation why he would not have done so as explained before, the only reasonable and irresistible inference is that the defendant was a participant in the criminal acts to clothe him with the authority to act on behalf of Tsun Ling to take out these mortgage loans.  I find the only reasonable and irresistible inference is that the defendant is a knowing and participating party in the fraud.

215.  I find that it has been proved beyond reasonable doubt that, in respect of each of the 5 mortgage loan applications, the defendant falsely represented that he was authorized by Tsun Ting to take out the mortgage when he was well aware that he had not been so authorized.  I find that it has been proved beyond reasonable doubt that, on each occasion when each mortgage loan was obtained and the relevant loan documents and mortgage contract were executed, the defendant was well aware that the minutes produced and the common seal and the company chop used were false and were not from Tsun Ling.  Although there is no direct evidence that the defendant had produced any of these false articles, and only PW5 has testified that she had seen the defendant chopping on the Kingsway documents, this is a matter of no significance even though the defendant did not produce the false articles or chop the documents personally. It is because there is no doubt whatsoever that the defendant had been masqueraded as a person duly authorized by Tsun Ling by the false minutes, and that he had signed within the false Tsun Ling company chop as the authorized person of Tsun Ling, and he allowed the false Tsun Ling common seal to be affixed onto the loan agreements and mortgage contracts when he was well aware that these articles were false.  The only reasonable and irresistible inference is that he was acting in concert with the person or persons who produced or caused to produce the false articles, and the evidence proved beyond reasonable doubt that he had used these false articles to obtain each of the 5 loans.

216.  I have no doubt whatsoever that the defendant was acting dishonestly in accordance with the Ghosh test.  As explained earlier, the fact that the defendant was holding 20% shares in Tsun Ling and that the amount of 5 mortgage loans did not exceed 20% of the estimated market value of Suites V and W was not a point in favour of the defendant.  From the fact that he asked PW1 and PW2 if he could use his shares to raise loans, I find it has been proved beyond reasonable doubt that the defendant was well aware that holding 20% shares gave him no right to mortgage any of the properties of Tsun Ling.  However, the defendant mortgaged the property of Tsun Ling to obtain 5 loans amounting to $17 million through the use of false minutes, false common seal and false company chop, knowing that they were false.  His action was undoubtedly dishonest by the ordinary standards of honest and reasonable people, and the defendant knew that what he had done was dishonest by those standards.  I therefore find that it has been proved beyond reasonable that the defendant had been acting dishonestly.  On the same basis, I find that it has been proved beyond reasonable doubt that he was acting with intent to defraud.

217.  I consider each charge separately.  From these facts, in respect of each charge, I find that it has been proved beyond reasonable doubt that the defendant had by deceit with intent to defraud induced PW4 or PW5 (as the case may be) to approve the mortgage taken out by the defendant purportedly on behalf of Tsun Lun and to make payment of the related loan to him.  I find that each and every element of the offence particularized in each charge has been proved.  I therefore convict the defendant of Charges 1 to 5.

218.  It is not necessary for me to find whether or not I accept or reject the evidence of PW6 and/or PW7, or whether they were acting together with the defendant.  No matter how I rule, it will make no difference to the criminal liabilities of the defendant as I am satisfied beyond reasonable doubt that the defendant is guilty of each and every charge.

[1] DPP v Kilbourne [1973] AC 279; The Queen v To Luen-shun [1995] 1 HKCLR 318.

[2] Clause 5 of the related loan agreements (i.e. Exhibit P25, P40 & P72) for Mortgages 1, 2 and 4, and Clause 6 of the related  loan agreement (Exhibit P57) for Mortgage 3 all stated that the loan could not be settled in full within 6 months upon receipt of the money.  Clause 8 of the related loan agreement (Exhibit P87) for Mortgage 5 stated that the borrower had to give 30 working days prior notice in writing before it could make early loan settlement.