R. v. CHEUNG HUNG NGAI

IN THE COURT OF APPEAL

1995, No. 666
(Criminal)

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J U D G M E N T

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Bokhary, J.A.:

1. On August 22 last year, this applicant, a businessman in his late 40s, was convicted by Deputy Judge Duggan in the District Court on the one charge which he faced, which was of false accounting back in 1992. And on September 25 last year, he was sentenced to three years' imprisonment. He seeks leave to appeal against his conviction and sentence. We are at the moment dealing with conviction.

2. Shortly stated, the background to the case is as follows. The applicant and a Chinese company were engaged in a joint venture for the manufacture of footwear. That was done in a factory in Dongguan. And the factory was operated by a joint venture company. The applicant owned 51% of the shares in the joint venture company, while the remaining 49% was owned by the Chinese joint venture partner.

3. In September 1992, the applicant purchased a quantity of machinery. That machinery went to the joint venture company at its factory.

4. The applicant had purchased the machinery for HK$1,392,380. But the Chinese joint venture partner paid over HK$2 million in respect of that machinery.

5. Why did it pay so much?

6. According to the Chinese joint venture partner, it did so because the applicant had duped it into doing so.

7. This is the effect of the account which the Chinese joint venture partner gave of its dealings with the applicant. Their arrangement was for him to buy machinery for the factory. He would pay 51% of the price since he owned 51% of the joint venture company; and it would pay 49% of the price since it owned 49% of the joint venture company. He represented to it that the machinery costs US$587,800. So they paid 49% of that amount, which came to over HK$2 million.

8. If all that is true, then the case against the applicant makes sense. The false accounting laid to his charge was the making of a false invoice to him for US$587,800 from the supplier of the machinery, a Hong Kong company.

9. Turning to defence case, the applicant said that he had purchased the machinery on his own account and on-sold it at a profit as his Chinese joint venture partner was aware. And as for the false invoice (produced as Exhibit P4) he denied giving any instructions for its preparation or indeed of seeing it until the Independent Commission Against Corruption seized it under a search warrant.

10. The invoice, as we said, had been found. And there was evidence that it was prepared on the applicant's instructions. The judge was satisfied beyond reasonable doubt that the applicant had indeed duped the Chinese joint venture partner and that the preparation of false invoice was carried out as part of the scheme and on the applicant's instructions.

11. Now, a former employee came forward to say (as the 5th witness for the prosecution) that he received instructions from the applicant for the preparation of an invoice such as Exhibit P4 said the following things.

12. He received instructions from the applicant. He himself then passed those instructions on to another person (who gave evidence as the 6th witness for the prosecution). Eventually, that other person came back with Exhibit P4.

13. When he came to give evidence, the 6th witness for the prosecution denied having seen Exhibit P4 although he said that he did on instructions prepare an invoice rather like it : being one, it seems, from what appears to be the Taiwanese parent of the Hong Kong company shown as the supplier in Exhibit P4.

14. If the judge was entitled as he did to take the view that the 5th prosecution witness was reliable on all material matters, then the relevant facts would be made out on behalf of the prosecution. The judge did take that view.

15. A great number of points have been taken by Mr Macrae for the applicant with a view to questioning the judge's findings of fact including those which he made in regard to the credibility of the 5th prosecution witness. The points were well developed. But they were all "jury" points. And the judge was quite entitled to find as he did, notwithstanding that those points could be made.

16. Next, it was argued by Mr Macrae that even if the applicant had represented that the machinery purchased for $1.3 million had been purchased for over $4 million, so that the Chinese joint venture partner would pay 49% of over $4 million rather than of $1.3 million, the applicant was nevertheless not dishonest.

17. As to how that can be said, the argument seems essentially to be this. Even though the applicant made money like that and the Chinese joint venture partner parted with money like that, nevertheless the Chinese joint venture partner would recoup its investment and make the profits which the applicant had "guaranteed" that it would make. It is a rather strange submission for a number of reasons. It involves the proposition that it was part of the joint venture contract that the position would be misrepresented by one party to the other. It is also strange for this reason. Just because somebody has been "guaranteed" a minimum, it does not mean that you can deprive him of anything he may actually make over and above that minimum.

18. The case was really a very plain one. It became a little bit more complicated because a lot of names were used and a lot of labels were used. We have cut through all of that. For example, we have not described the applicant as anything other than the applicant. We have not bothered to mention the name under which he traded.

19. There were points that could be made; and they have made with great skill by Mr Macrae. But there was an overwhelming case in which the judge clearly came to the right conclusion. Leave to appeal against conviction is refused.

[Submissions on Sentence]

20. It is urged on the applicant's behalf that the punishment imposed on him is manifestly excessive when one takes into account all the circumstances which includes the fact that he has lost his stake in the joint venture out of which the charge for which he was punished arose. The facts and figures in this regard are vague in the extreme.

21. Doing the best we can, all we can say is that the applicant does seem to have lost his investment. Of precisely what value it was, we do not know. But we will assume it to be substantial. The question is whether, even assuming that, this sentence is one which is manifestly excessive. In our judgment, quite simply, it is not.

22. The sentencing judge did not make any detailed findings as to what financial loss the applicant had suffered. That would have been impossible for him to do on such material as he had, even as it is impossible for us to do it on such material as we have. He does seem to have taken into account that in all probability the applicant did suffer substantially in some such way. But even taking that into account, he was of the opinion that three years was the appropriate sentence. And in our judgment that sentence is within the appropriate range. So leave to appeal against sentence is also refused.