HKSAR v. LUI LAI MEI AND ANOTHER

HCMA 90/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO 90 OF 2014

(ON APPEAL FROM KCCC 1831 OF 2013)

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J U D G M E N T

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1.  Both your appeals against conviction and sentence are dismissed.  I shall now give some reasons why. 

2.  This is an appeal by both appellants against their convictions and sentences. 

3.  They were both convicted after trial of seven counts of an agent using a document with intent to deceive a principal, contrary to section 9(3) and 12(1) of the Prevention of Bribery Ordinance.

4.  The Magistrate imposed concurrent sentences of 6 months’ imprisonment on the first three charges and concurrent sentences of 12 months’ imprisonment on charges 4 to 7.  He ordered the sentences to run consecutively as between the two groups.

5.  He also made a restitution order against the 2nd appellant pursuant to section 12(1) of the Prevention of Bribery Ordinance in the sum of $166,300.

6.  The case for the prosecution alleged that the appellants had acted together to deceive their employer, KFE Hong Kong Company Limited on two occasions between November of 2010 and May of 2011.

7.  In both incidents -- this was the prosecution case -- the appellants asked KFE’s telephone maintenance contractor to issue false and misleading documents with a view to deceiving KFE.  The contractor was Mr Chan Sui-kan who has been referred to throughout as Kan.  He was PW10. 

8.  It was the prosecution’s case that he acceded to the appellants’ request and issued invoices and receipts purportedly showing that his company, Daily Communications Company, referred to as DCC, firstly sold three sets of computers to KFE at a price of HK$23,100 in June of 2010 and secondly, procured and installed a new telephone system for KFE and performed some related jobs for them for a total remuneration of HK$161,800 in March 2011.

9.  In evidence, Kan said that he never supplied any computers to KFE and that he never received any payment for doing so.  He said that he issued the invoice and receipt because the 1st appellant had told him that the document for the purchase of the computers had been lost.

10.  As to the second incident, Kan testified that the 1st appellant had, in February of 2011, asked for his quotation for the reinstallation of KFE’s telephone system in a relocation exercise.  He said he reinstalled their telephone system in a new location and he said he was paid HK$18,600 for doing so, in cash.

11.  He said the job did not involve the procurement of a new telephone system but nonetheless, at the request of the appellants, he supplied the 2nd appellant with blank letterheads of DCC for the preparation of a quotation and invoice regarding the transaction.

12.  When he saw the quotation and invoice in respect of this matter, he saw that the amount had been significantly inflated to $168,000 and non existent items were included in the paperwork, items one and nine.

13.  He said that he asked the appellants about it but was told that the documents were not meant to be used in Hong Kong.  Nonetheless, he went along and acceded to their request by signing and chopping the quotation and invoice and he issued two receipts to the 2nd appellant.

14.  Kan was the key prosecution witness and he gave evidence under an immunity.

15.  The appellants gave evidence and their case was that -- and I will take this from paragraph 19 of the Statement of Findings -- was that all the relevant documents and supporting accounting records relevant to the seven charges were genuine, accurate and true.  That those documents reflected what had been agreed between the two appellants on behalf of KFE and Kan; the items had been supplied and settled by cash payment.  The two transactions were approved by a gentleman called Mr Harada who was the managing director of KFE and they did not use any false documents to deceive KFE.

16.  The written submission of counsel, which is at page 47 of the appeal bundle, made clear that that was the defence.  And I quote from that: 

“The defence is that all the relevant documents and supporting accounting records relevant to the seven charges are accurate and true. They reflect what actually happened.”

17.  In the presentation of this appeal, one is bound to say that that defence case has altered because rather than emphasising that the work was done and carried out, it is now said that the important thing was that the appellants believed that to have been the case.

18.  But leaving that aside, it is obvious the issue was one of credibility.  If Kan was found, after a consideration of all of the evidence, to be an honest witness, then the convictions would follow.  If there is any doubt about that, the verdicts would have been ones of acquittal.

19.  The trial took place before Mr Ko Wai Hung and I have had the benefit of reading his Statement of Findings.  I would like to pay him the compliment of saying that I judge it to have been very competently done.  It demonstrated that he was alive to the issues, he was on top of the facts and he resolved the problems before him with, I thought, demonstrable logic and common sense.

20.  He had the advantage, over something like 10 days, of sitting and listening to the witnesses, especially Kan.  Of course, that was a considerable advantage in a case such as this.

21.  In looking in the round at the general merits, the respondents make this point, that it was argued that the motive of Kan to invent a false case against the appellants, was to avoid prosecution.  Yet, if the defence was correct, no offence was committed.  It gives rise to the consideration that if the defence is right, Kan potentially falsely involved himself as a possible accomplice in what went on and therefore needed immunity when there was absolutely no need for him to have done so.

22.  That was met in argument before me by Mr Percy, counsel for both of the appellants, by the argument that Kan may have believed that he had committed an offence like theft, because he had inflated the price of the work, and because he did that, he therefore decided to invent this false story against the appellants. 

23.  I judge that argument to have an air of desperation.  I find it to be unconvincing.

24.  It is also the case that the respondent has pointed to the contemporaneous documentation.  They say it supports Kan.  In particular, they draw attention to two receipt books which were produced by Kan. 

25.  In respect of three receipts, because there was one for the first incident, two for the second incident, what the receipt books show is that the receipts run in order, date order.  But that the three questioned receipts alone stand out, because they defy the date order.  They have completely the wrong dates in the sense that they are dramatically out of sequence.

26.  If one looks at the receipt dated the 24th of June 2010 in respect of the $23,100, in respect to the claim for computers, the receipt preceding that was dated the 2nd of November and the dozen or so receipts prior to that run from September up to November sequentially.  And after that one then going, in effect, backwards to the 24th of June comes the 12th of November and again, receipts running on through the book in sequential date order.

27.  Why would Mr Kan choose to do that, if the defence is right?  That is the question I asked Mr Percy and I am bound to say, I did not have any satisfactory answer to the inquiry.

28.  Mr Lui, on behalf of the respondent, says that it supports Kan because Kan’s evidence was that the approach was in November of 2010, and these documents were not created back in the summer, back in June, which is what they should appear sequentially if the documents tell the true story as defence alleged. 

29.  Not only that, there was a voucher -- it is at page 186 of the appeal bundle, and there was evidence from a member of staff of KFE, referred to as Michelle, concerning the system and how such a document was generated inside KFE.  This is the voucher that triggered the payment in respect of the computers.

30.  The important thing about it is, is that that evidence demonstrated, and I believe without challenge, that that occurred on the 8th of November 2010.  Yet, when the 1st appellant came to give evidence, she explained her signature on the document as occurring in July 2010.

31.  As the Magistrate found in his Statement of Findings, that simply could not have been the case.  There was never any suggestion that this was the type of case where the members of staff had joined in some conspiracy with the contractor, Kan, in order to falsely implicate the appellants.

32.  Next, the respondent placed weight on the evidence of another contractor called Mr Lee.  He was PW7.  The Magistrate was impressed by him as a witness, judged him to be truthful and obviously gave weight to his evidence, to the effect that he helped Kan in doing the work of reinstalling the telephone system and that there was no question of installing any new system.  So in other words, there was a witness supporting Mr Kan and directly contradicting what was said to be the defence, namely that the documents reflected what actually happened.

33.  This is a rehearing and I am bound to consider the new way in which the matter is now put before me.  It raises considerations which the Magistrate did not engage, for obvious reasons, as the way the defence was put did not engage it. The issue becomes how could the appellants, in a relatively small office, have been ignorant of the fact that they had paid for goods and services which were never delivered?  One could say it would be extraordinary if they failed to notice, for instance, that they had not received a whole new telephone system.

34.  Mr Percy makes the point that the quotation does not make it clear whether you receive a new handset in that totally new system.  Be that as it  may, looking at the quotation, which is at page 189 of the appeal bundle, one sees, for instance, a new Panasonic door phone unit.  Obviously that is going to be by the door that comes in from the outside to the office and it is obviously going to be one of those things where you press the button and speak into and you can speak through the telephone system.  One just has to imagine the appellants walking in and out every day and ask whether, despite their involvement in the acquisition of such a new system, why, nothing new ever appeared there.

35.  I have set out what might be considered the bull points for the respondent in relation to there being support for Mr Kan.  Given those considerations, I judge the case against the appellants to have been a formidable one.

36.  So I will turn to the grounds of appeal which, attack that case.  There are four substantive grounds of appeal which can be summarised, and I take this from the respondent’s written submissions.  They allege that the Magistrate erred in failing to: (a) consider the credibility and reliability of Kan; (b) consider the inherent improbabilities of Kan’s evidence; (c) identify and properly consider the lies which Kan had admitted telling; and (d), consider whether the appellants’ accounts in defence may reasonably be true before rejecting them in their entirety.

37.  It was the fact that Kan gave four video recorded interviews to the ICAC and in the first interview, he lied.  He gave an account designed, dishonestly, to get him out of being involved in any trouble concerning the false documentation. 

38.  The Magistrate was well aware of that, as appears from the Statement of Findings. 

39.  Thereafter the story changed in the second, third and fourth video recorded interviews.  It was said in argument by Mr Percy, and put in writing by him at paragraph 50 of his written submissions, that Kan had said in the third video recorded interview that he had performed all of those tasks set out in the quotation for the new telephone system.  However, that turned out not to be the evidence. That had been said in the first interview, not the third.

40.  In the written submissions of the appellants, there are set out details of differences between video recorded interview and evidence.  It starts at paragraph 5(a) through to (e).  They relate to lies though in the first video recorded interview.

41.  Obviously it would have been of much greater significance if lies could be demonstrated between the second, third and fourth video recorded interviews and the evidence of Kan, but those matters at (a) to (e) did not do so.

42.  That left two points that were argued about the assessment of the credibility of Kan which are set out at points (f) and (g); (g) was not pursued orally in this appeal,  although Mr Percy relied on his written submissions generally.  In fact, those two matters are relatively minor matters and they are perfectly adequately answered, in my judgment, by what the respondent wrote in their written submissions at paragraphs 34, 35 and 36.

43.  It is quite clear from the Statement of Findings that the Magistrate was alive to the issue of credibility and reliability of Kan and to the lies that were demonstrated in the first video recorded interview.  The complaint in the Grounds of Appeal, that he failed properly to take into account those matters which pointed to unreliability is simply not justified.

44.  And this ran over into another ground that was advanced, that the Magistrate did not sufficiently set out all the different lies.  There was no need to, in the circumstances, because Kan had admitted lying to save his own skin in the first interview.

45.  The Magistrate knew he was a man who had then turned to a dishonest account to try to better his position -- he knew that.  As a competent, professional Tribunal, he would have had in mind that men in Kan’s position look after their own interests, and he was aware of that when dealing with this accomplice. 

46.  It was complained also the Magistrate failed to consider the inherent probabilities. In the vanguard of this claim was the point that why would a businessman give away his blank letterhead?  The claim is that it was inherently unlikely or improbable. 

47.  But then I look at the Statement of Findings, and there the very point is addressed by the Magistrate.  It is not right to say he did not consider it.  At page 84 of the appeal bundle is this: 

“He might be foolish in doing so, he might not be cautious enough, but I accepted his explanation that he was willing to do so simply because he trusted D1 and did not think of any legal consequences at the time.”

48.  There were further matters under this general heading of failing to consider the inherent probabilities relied upon and they appear in the written submissions of the appellants, if not directly spoken to in the appeal.  I make no complaints about that.  It is in writing before me.  I can see it and consider it, but I hope it does justify the way I deal with it by just referring to the writing that responds to it which appears at paragraph 41 to 47 of the respondent’s written submissions.  In my judgment, what is there meets the points made by the appellants.

49.  I am not going to go through each and every one of them because I have pointed to the writing and very much, these points were left in writing rather than spoken to orally.  But I will take one example.  It was said by the appellants, “Where is the documentation to show that Kan received only 18,600 in respect of the computers?”

50.  One then looks at the Magistrate dealing with that at paragraph 103 and 104 of his Statement of Findings, and as the respondent asserted, it would have been unreasonable for Kan to insist on issuing a receipt for $18,600 to KFE when he knew full well that the appellants would not have wanted a genuine receipt on file.

51.  I am satisfied that the Magistrate gave proper consideration to the points that had been made against Kan.

52.  The appellants’ written submissions suggested that the Magistrate made no reference to the admitted lies and intention to mislead when evaluating Kan as a witness of truth.  One only has to look at paragraphs 100 and 101 of the Statement of Findings to see that the allegation is unfounded.

53.  Paragraph (d) of the Grounds of Appeal suggested that the Magistrate reached his conclusion that neither of the defendants were honest witnesses without first considering whether their accounts may reasonably be true.

54.  I simply do not understand how an obviously competent professional Tribunal such as this, on top of the facts, alive to the issues could possibly have failed to have done so.  It was central to the whole case.  If he had looked at all the evidence and thought what the appellants had said to him may have been true, he would have acquitted them.  The idea that he was blind to that, I find to be quite unrealistic.

55.  The idea that a Statement of Findings requires some incantation to the effect that before assessing everyone’s credibility, the writer asked himself whether the story they told may reasonably be true, only has to be stated to be seen to be untenable. 

56.  Accordingly, I find there to be nothing in the Grounds of Appeal that would make me doubt the propriety or the correctness of the convictions.  I fully understand why the evidence made the Magistrate sure of guilt on all seven charges in respect of each appellant and even without the benefit of seeing and hearing the witnesses live, I agree with his view.  Those major points I rehearsed earlier in this judgment were significant in coming to that view.

57.  So I will turn to sentence.  This was a breach of trust.  The Secretary for Justice v Andrew Marc Dank (CAAR 7 of 2007) the Court of Appeal spoke of a special degree of trust where local employees are trusted with the running of a company whose senior supervision is overseas much of the time. 

58.  That was the situation here.  This was a Japanese owned company and Mr Harada visited infrequently, trusting the appellants to do their jobs honestly and diligently.  The 1st appellant was the general manager and the 2nd appellant was the supervisor of the accounting personnel in the administration and accounts department of KFE and as such, it was he, the 2nd appellant, who was entrusted with the duty of looking after the petty cash box from which the relevant payments came.

59.  As such as a breach of trust of case where the amounts are not insignificant but under $250,000, imprisonment up to 2 years is to be expected because the courts follow the case of Barrick, which is an English case, as refined by our local cases here.  I am not going to set out all the details of those and make everyone listen to them now because they are accurately set out in the respondent’s written submissions.

60.  For the first three offences, I judge that the 6 months that the Magistrate imposed to have been justified and 12 months for the second set of offences likewise, I judge to be justified.  Even though they adopted the same technique, they were separate matters and I can see no reasonable complaint that they should not have been made consecutive because the totality of 18 months for a fraud of this nature, with that serious breach of trust, I judge to be proper punishment.

61.  That leaves me to consider the restitution order that was made pursuant to section 12 of the Prevention of Bribery Ordinance.  I am bound to say, I have had difficulty in following the appellants’ objections to the order and as I understand it part of the attack, at least, is limited to the amount concerning the payment in respect of the computers.

62.  The evidence was that some computers had arrived and been put into use though people did not seem to notice much difference, in either January or February of 2010.  That was when they were supplied.  And in November 2010, on the Magistrate’s findings there was the approach to create the false documents to pretend that the computers were delivered in June of 2010.  Those false documents created in November of 2010, triggered the payment of $23,100 to the second appellant, who took it out of petty cash. 

63.  Section 12 creates a mandatory obligation to make a restitution order for the amount and value of any advantage received or such part thereof as the court may specify.  It is designed to stop people benefiting from their crime.  The crime here was the creation of the false documents and that triggered the payment. The payment was an ascertained amount and payment is an advantage, as defined under the Ordinance.

64.  It was never suggested that the second appellant, with that money, then went and looked out the suppliers of the computers that arrived some nine, 10 or 11 months earlier.  I can see no reason to make any deduction, neither did the Magistrate, in making him pay back what he took out.

65.  The final point made in respect of the restitution order was no order was made against the 1st defendant and she might have been liable to such an order.  I am not at this stage minded to seek to meet that by making such an order against her, although I probably have power to.  All I say about it is that if she was lucky, it does not mean that the 2nd defendant’s order is amenable to attack.  In my judgment, there is nothing wrong with the order as it stands. 

66.  Accordingly, for the reasons I have given, the appeals against conviction and sentence in respect of each appellant is dismissed.

(Discussion between Court and Counsel)

67.  This is an addendum to the extempore judgment I have just delivered.  Mr Lui points out that I was wrong to say that it was January or February that computers were delivered and the evidence was May or June.  It was in January or February that an employee had started complaining about the quality of her computer.

68.  I regret the error, but in fact, it makes no difference to the point I was making because the date of delivery of the computers still anti‑dated, if it was in May, the date of the quotation for them, which was the 15th of June.

69.  And as regards the evidence of the witness Tim who said it was June, the Statement of Findings merely relates it was on some day in June.  It does not specify when. Indeed, the receipt was dated the 24th of June, towards the end of the month.

70.  The point is, the quotation coming after the delivery.