R. v. NG SAI KWONG and Another

IN THE COURT OF APPEAL

1995, No.701
(Criminal)

--------------------

-------------------

----------------------

J U D G M E N T

-----------------------

Liu, J.A.:

1. Eight participated in the acquisition and resale of a property called Koway Plaza in Chaiwan Road. Of the eight, two held double shares. These two major shareholders each contributed $2m and the rest of the capital was contributed by the other shareholders, including the appellant. For the purpose of this scheme, Yika Development Ltd. (Yika) was incorporated. It was the appellant who put together this venture and invited the other shareholders to join it. He was the prime mover and entrusted by the other shareholders to have it brought to fruition. The appellant took the shareholders to the solicitors, Messrs J Fang & Co. with the view to setting up Yika.

2. The appellant faced a great many charges before Deputy Judge Mckee in the District Court. He was convicted of the 4th, 5th and 6th charges and the conspiracy charge, the 9th charge. All these charges concerned the recovery of vacant possession from sitting tenants with the inducement of compensation. Koway Plaza was intended to be resold with vacant possession. The conspiracy 9th charge involved the appellant and Madam Ho through the vehicle of her company, Flying Circle Investment Ltd. (Flying Circle), in the matter of removal compensation to the Wah Fai Supermarket.

3. $4.84m was allocated by Yika for ousting all the sitting tenants before the resale. Of the $4.84m, $2m was earmarked for Wah Fai Supermarket in the 9th conspiracy charge. Of the remaining $2.84m, three cheques in the sums of $170,000, $250,000, and $300,000 (totalling $720,000) formed the subject matters of the 4th, 5th and 6th charges. In essence, what was alleged against the appellant was that these three cheques for $720,000 were procured from the said solicitors, Messrs J Fang & Co., for purposes other than that of paying removal compensation to sitting tenants. These are theft charges in which the appellant was alleged to have stolen the right to payment of the amount of these three cheques drawn by the said solicitors on Chase Manhattan Bank from client's account of Yika. These three cheques were issued by the said solicitors to Madam Lee Wai-lin who was sent by the appellant for their collection. From the cheque for $170,000, Madam Lee issued a cheque for $97,500 to Yika. The judge concluded that there was no evidence that these sums (with the exception of the cheque for $97,500 payable to Yika) "acquired and at the disposal of (the appellant were) in some way meant to be used in the Koway Plaza transaction". He found that "(the appellant) intended that he could use the funds after encashment of the cheques as he wished", and he convicted the appellant of having dishonestly appropriated these cheques in the theft charges.

4. As for the 9th conspiracy charge, of the $2m only $1,180,000 was in fact paid as removal compensation to Wah Fai Supermarket. The appellant and Madam Ko were found guilty of having conspired to defraud the shareholders and directors of Yika of the balance of $820,000 by dishonestly misrepresenting that the said sum had been paid to Wah Fai Supermarket.

5. The appellant was sentenced to 2 years' imprisonment for each of the 4th, 5th and 6th charges, all sentences to run concurrently. For the 9th charge, the appellant was sentenced to a year's imprisonment and Madam Ko to 9 months' imprisonment. The appellant's one year's sentence was ordered to run consecutively with his sentences in the 4th, 5th and 6th charges. The total term to be served by the appellant was therefore three years.

6. Madam Ko has abandoned her application for leave to appeal against conviction in the 9th conspiracy charge. She has served her term. The appellant appeals against his convictions on questions of law. He also seeks leave to appeal against his sentences.

7. The appellant complains that the Crown failed to establish that he or his agent Madam Lee had no authority from Yika to procure the said cheques (Ground 4A(i)), that the said cheques were so obtained falsely and dishonestly from the said solicitors (Ground 4A(ii)), that the obtaining of the said cheques was not otherwise approved by Yika (Ground 4B), that the documentary evidence was no sufficient proof of such approval by Yika (Ground 4C) and that there was deception and inducement of the said solicitors on the part of the appellant in the issuance of the said cheques (Ground 4D). It is further submitted that the legend "being commission and service charges" endorsed on the payment vouchers of the said solicitors was erroneously held by the judge to be meaningless (Ground 4E).

8. As for the 9th conspiracy charge, the appellant relies on the assertion that vacation of Wah Fai Supermarket was to be secured by the appellant on a maximum budget of $2m with liberty for the appellant to retain any portion of that sum unused for the purpose (Ground 4F). This has been described as the package deal. The appellant also relies on the lack of knowledge of Madam Ko that less than $2m had in fact been paid to Wah Fai Supermarket (the new Ground). Hence, so it is contended, Madam Ko could not be a co-conspirator, with the result that the 9th conspiracy charge must fail. Finally, it is submitted that in all the circumstances, his convictions are unsafe and unsatisfactory (Ground 6).

9. Considering first the 4th, 5th and 6th theft charges: theft is dishonest appropriation of property belonging to another with the intention of permanently depriving it and stealing has to be construed in the same context. The modus operandi such as deception or false inducement may be evidence of dishonest intention but it is not an essential ingredient in the crime of theft. There is no substance in Grounds 4A(ii) and 4D.

10. The account clerk of the said solicitors, Mr Yeung Win-yin (PW13), took instructions from the appellant and, with the consensus of the other shareholders, communicated thereafter with him in the affairs of Yika. He "had the feeling that (the appellant) was in (a) position to sign this sort of receipt on (the) basis (he) was instructed (the appellant) was representative of the company". But whether the appellant was regarded by the solicitors and their clerk as having the authority to have the three cheques in question issued cannot be material. The crux of the matters was whether the appellant knew that he had no right to the sums in these three cheques but proceeded, nevertheless, to steal them by procuring their issuance and delivery to Madam Lee.

11. Of the cheque for $170,000, Madam Lee issued the cheque for $97,500 to Yika. On the instructions of the appellant, Madam Lee retained the balance in her account. As for the other cheque for $250,000, Madam Lee withdrew $200,000 and she also withdrew $250,000 out of the amount of $300,000 on yet another cheque. Therefore, Madam Lee gave a cheque of $97,500 to Yika and kept in her account $72,500. She also retained $50,000 and $50,000 respectively from the two other cheques after having handed over $200,000 and $250,000 to the appellant in cash. The judge found that the appellant "could use the funds after encashment of the cheques as he wished" and that the appellant was guilty as charged in the 4th, 5th and 6th charges.

12. No evidence was adduced to show that the appellant had acted without Yika's authority by sending Madam Lee to collect these three cheques from the said solicitors. There was also no evidence led on the appellant's intention at all, letting alone his intention to use any part of these sums on the said cheques for purposes other than removal compensation. Further, no evidence was given that the issuance of these said three cheques had not been approved by Yika. On the solicitors' payment voucher for these three cheques, the legend "commission and service charges" was equally consistent with the use of the amounts of these said cheques for removal compensation. The $4.84m was held by the said solicitors for the purpose of paying such compensation.

13. One of the major shareholders, Mr Chan Yik-king (PW1) was unclear "if ($2.84m) included cost of negotiation". He explained that "how that matter was to be effected (was) not our concern" and that "(the appellant) was to see the matter through but how (the appellant) was to go about it was solely his own responsibility". Mr Chan Yik-king seemed to favour the making of an accurate report to Yika of claimed extra expenses. He agreed that if removal compensation and expenses exceeded $2.84m, the appellant "would be personally liable for the excess". However, Mr Chan maintained that the appellant was only authorised to incur and to pay for actual expenditure, "sut poh sut siu (only actual expenditure as reported allowable)".

14. Another shareholder, Mr Yung Siu-yin (PW14) told the court that "(he did not) know the position if (the $4.84m) had (not) been (all paid) to the tenants)". He was "not sure if all ($2.84m was to be paid) to tenants or disbursement". Although he would be inclined to think that it would be improper if the whole sum had not all gone to the tenants, he anticipated that the amount of $4.84m was to be "paid to tenants and incidental expenses". He also took the view that the appellant was to be responsible for any amount over and above $4.84m although he could not remember whether the subject matter had in fact been discussed.

15. Another shareholder, Mr Chow Sze-kee (PW21) who was declared hostile, did not testify that the appellant was unauthorised in procuring these said three cheques from the said solicitors.

16. The Deputy Judge observed that the shareholders who had given evidence, seemed to be reluctant to make a full disclosure to the court. In their confused evidence, what stood out was that no one came forward with the accusation that the appellant had not been authorised in obtaining through Madam Lee these said three cheques or that his instructions for the issuance of these three said cheques and his application of the amounts thereon in whatever way he did had not been approved by Yika. In fact, a Yika company chop impression was put on each of the payment vouchers of the said solicitors for these three said cheques. No evidence was adduced at the trial that the application of the Yika company chop was unauthorised.

17. Clearly, for these cheques the evidence fell far short of establishing dishonest appropriation. What is equally disturbing is that in the light of the state of the evidence of the shareholders who had taken the stand, we are left with a lurking doubt in the appellant's convictions in the 4th, 5th and 6th charges. We find the appellant's convictions in these charges unsafe and unsatisfactory. It is quite unnecessary to deal separately with the various grounds of appeal. The convictions of the appellant in these theft charges must be quashed and his sentences set aside.

18. Next we turn to the 9th conspiracy charge. By a Chinese Loan Agreement dated 1 October 1992, Yika requested Madam Ko's Flying Circle to pay on its behalf $2m to Wah Fai Supermarket as removal compensation, and agreed to repay Flying Circle the same amount of $2m on or before the 31 December 1992. In that Loan Agreement, Flying Circle undertook to pay the removal compensation to Wah Fai Supermarket on or before the 11 October 1992 and thereby incurred legal liability to meet such removal compensation. Flying Circle was incorporated in 1990. There was no evidence as to why Madam Ko should allow herself to be involved, although there was some mention of gambling debts. Madam Ko had no connection with Mr Sze of Wah Fai Supermarket and there was no direct evidence that Madam Ko ever came to know that Wah Fai had in fact received less than $2m by way of removal compensation.

19. On 6 October 1992, by a Deed of Surrender of even date between the former owner, Quick Motion Company Ltd., and Wah Fai Supermarket Ltd., the removal compensation agreed to be paid by Yika was merely $1,180,000. On 8 October 1992 when Madam Ko visited Messrs. Terry Yeung & Lai with the view to arranging for a loan, she sought only $1,180,000 after she had informed them that Wah Fai's removal compensation was $2m. A loan of $1,180,000 was obtained. At the request of Mr Terry Yeung, both Madam Ko and the appellant through Flying Cycle and Yika confirmed in writing to Messrs Terry Yeung & Lai that $820,000 had been paid to Wah Fai Supermarket with the outstanding $1,180,000 due for settlement on 10 October 1992. In a Client's Account voucher of Messrs Terry Yeung & Lai bearing the date of 9 March 1993, $2m was withheld from the payment released to Yika. The $2m so withheld was stated to be payable to Flying Circle. On 15 March 1993, on behalf of Flying Circle, Messrs Terry Yeung & Lai demanded repayment of $2m from Yika. Flying Circle was repaid $2m but had never accounted for the said $820,000. On these series of events, it was open to the Deputy Judge to find that Madam Ko was fully aware of only $1,180,000 having been paid to Wah Fai Supermarket, that Madam Ko and the appellant misrepresented to Yika that $820,000 had been paid to Wah Fai Supermarket and that their representation was untrue. There was sufficient evidence for the Deputy Judge to return his verdict that the appellant and Madam Ko conspired to defraud the shareholders and directors of Yika of $820,000 by dishonest and false representation in the charge period between 1 October 1992 to 31 March 1993.

20. It is contended by Mr Mullick for the appellant that there had in fact been an arrangement for the appellant to retain whatever was the surplus after all the removal expenses for the recovery of vacant possession from Wah Fai Supermarket had been met. This is what I have called "the package deal" in which $2m was allegedly given to the appellant for looking after all the expenses and any unused fund for paying removal compensation would go into his pocket.

21. On the alleged package deal, the evidence of the shareholders who had testified before the Deputy Judge was vague and prevaricating. No clear picture emerged. Mr Chan Yik-king (PW1) did say at one time that he "had heard something like ... (the appellant was given the) task of compensation (and) should balance be less than $2m, he could keep it". But Mr Chan hastened to add that he was not "clear if other shareholders heard something like that or not". During his evidence, time and again, he denied that there existed a package deal, leaving everything to the appellant. He was emphatic that the appellant had to be in "good faith" and he must not claim for any expenditure which was not "allowable actual payments as reported". Mr Chan further elaborated that no one in the company was allowed to accept benefit and that Yika would not agree to the appellant being the "ultimate receiver". He was not even clear if the sum $2.84m for removal compensation of the three tenants other than Wah Fai Supermarket would include the cost of negotiation. He was equally adamant that the whole $4.84m was only for compensation.

22. Mr Yung Siu-yin (PW14) was another shareholder, and he was not sure if there was any package deal. He had no knowledge whether the appellant could pocket any of the "negotiation expenses" personally and he said that it did not "occur to the shareholders" that any one could benefit "beneficially". He acknowledged that there could be other expenses in the attempts to recover vacant possession from the sitting tenants, but he was of the view that it would be improper if all the $4.84m did not go to the tenants. He could not recall if the appellant was to be responsible for any excess over $4.84m.

23. Mr Ng Sik-pui (PW16) joined Yika sometime in November 1992 after Wah Fai Supermarket had been paid to vacate. He understood that the "company had arranged (for the appellant) to take up matter of removal" and that the appellant constantly made reports to the shareholders at meetings. He was not sure if the appellant could receive "any of ($4.84m) personally" although he agreed if the property had been resold for more than $4,400 per sq. foot, he would not have minded if "the rest (would go) to (the appellant)".

24. Another shareholder, Mr Chow Sze-kee (PW21) was declared hostile. His wife Madam Yau Sau-lin had received a substantial sum from Coin Bell International Ltd. He maintained that "this $4.84m ... it was a packet of compensation given to (the appellant) to make the arrangement .... to arrange (for the tenants') removal". He understood the appellant to be responsible for "compensation more than $4.84m ... if less (the appellant) could keep it as his profits".

25. Mr Ngun Chung-hing (PW19), another shareholder, was also called by the prosecution. He told the court that he understood the appellant to have "large discretion" to negotiate with tenants. Mr Yung (PW14) had told him about a package deal for the appellant but he was not quite sure if in fact there existed such a package deal. It was a matter of indifference to him. He had no knowledge if the appellant was to shoulder any excess over the amount. He was not sure if the $2.84m had all to go to the tenants as compensation and he had no idea whether the unused balance should go back to Yika.

26. Mr Cheng Ngok-fui (PW15) understood that the appellant was not allowed to retain or deduct a portion from the $4.84m. He was not sure if negotiation expenses could be properly incurred on top of the actual compensation payable.

27. The appellant gave and called no evidence on the alleged package deal. Could the existence of such a deal sensibly be said to receive any support from the prevaricating and confused evidence of the shareholders who testified? If there had in fact been such a package deal, one would have expected evidence on it from these shareholders to be unambiguous and all one way. The Deputy Judge described Mr Chan Yik-king (PW1) as a witness who was not "entirely forthright" with the court or with ICAC. Worse still, the Deputy Judge concluded that the shareholders who had testified were reluctant to give a full account. Moreover, if there had been a package deal, is there any sensible reason why Madam Ko and the appellant would have had to be as devious as they were in their communication with solicitors and Yika? The judge was right in rejecting the alleged package deal whereby the appellant might legitimately benefit from any of the money allocated by Yika for removal compensation to Wah Fai Supermarket. The appeal against the conspiracy conviction is therefore dismissed.