HKSAR v. AU WA PO AND ANOTHER

CACC575/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 575 OF 1998

(ON APPEAL FROM DCCC 772 OF 1998)

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J U D G M E N T

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Chan, CJHC delivering the judgment of the court :

1. The two applicants were convicted after trial before Judge Kwan in the District Court of a joint count of false accounting, contrary to s.19(1)(b) of the Theft Ordinance, Cap.210. The 2nd applicant was also convicted of a second count of false accounting, contrary to s.19(1)(a) of that Ordinance. The 1st applicant was sentenced to 3 1/2 years' imprisonment on the first count. The 2nd applicant was sentenced to 9 months' imprisonment on each of the two counts, both sentences to run consecutively, making a total of 18 months. The 2nd applicant applies for leave to appeal against conviction and the 1st applicant seeks leave to appeal against sentence.

The charges

2. In respect of the first count, it is alleged that the two applicants, on 16 June 1997, in furnishing information for the negotiation of a letter of credit numbered B-01-P-02508 issued by the Yien Yieh Commercial Bank (Yien Yieh Commercial), dishonestly and with a view to gain for themselves or another or with intent to cause loss to another, produced to Kwangtung Provincial Bank (Kwangtung Provincial) an invoice of Hisun Trading Limited (Hisun) No.HSN971037 dated 17 June 1997, an official cargo receipt and an inspection certificate issued by ACME Cassette Manufacturing Limited (ACME Cassette) dated 11 and 6 June 1997 respectively which to their knowledge were misleading, false or deceptive. In respect of the second count, it is alleged that the 2nd applicant, on 16 June 1997, dishonestly and with a view to gain for himself and another or with intent to cause loss to another, falsified the Hisun invoice.

The prosecution case

3. Mr Chan Ping Che (PW1) was the managing director of ACME Cassette. In May 1997, he was approached by his friend, a Mr Tsang who said that he could obtain a supply of plastic materials at a reasonable price. PW1 was asked to apply to a bank for the issue of a letter of credit for the payment of the purchase price and was told that the supplier was to be Hisun. Mr Tsang provided him with details of the purchase, including the quantity of materials, i.e. 2,150 metric tons of general purpose polystyrene; the purchase price of US$1.505 million and the term that payment was to be made 90 days after the cargo had been received. PW1 then caused the letter of credit in question to be issued by Yien Yieh Commercial on 4 June 1997. As it turned out, the name of the applicant in the letter of credit was mistakenly stated to be ACME Magnetic Tapes Limited which was a sister company.

4. Meanwhile, in about May 1997, Mr Law Chi Sun (PW4) who was the proprietor of Hisun, was approached by a Mr Soloman Chan and was told that there was a company which had no letter of credit facility with its bank but wanted to discount a letter of credit. PW4 was asked to lend the name of Hisun for the purpose of the letter of credit and in return, Hisun would receive a commission of 1% of the purchase price stated in the letter of credit. PW4 admitted that although Hisun was to be named as the supplier of the goods to ACME Cassette, he had no idea of the details of the sale and where the goods would come from. There were meetings where this matter of discounting a letter of credit was discussed. These meetings were attended by PW4, the two applicants and Mr Solomon Chan. PW4 said that he was given some documents which apparently included the letter of credit in question by Mr Soloman Chan and the 1st applicant. He in turn handed them to the 2nd applicant and gave him instructions to "handle the matter".

5. Mr Wong Ngan Ket (PW3) who was the Purchasing Manager of Hisun was the only person in the company, apart from PW4 who could give instruction to Kwangtung Provincial to handle the company's account. He said that the 2nd applicant handed him a set of letter of credit issued by Yien Yieh Commercial and asked him to prepare the necessary documents which he did according to the company's usual procedure. The letter of credit contained detailed information of the purchase. It also set out the documents which were to be presented to the bank in order to obtain payment, including the invoice, packing list, cargo receipt and inspection certificate. From such information, PW3 prepared an invoice and a packing list. He also prepared a collection order form and certain bank drafts which were required for presentation to the bank. He said that it was the 2nd applicant who handed him the cargo receipt and inspection certificate. Having prepared the necessary documents, he handed them to the 2nd applicant.

6. Kwangtung Provincial later received from a staff of Hisun the letter of credit accompanied by the required documents. The bank then presented these documents through another bank to Yien Yieh Commercial for payment. The staff of Yien Yieh Commercial discovered some discrepancies in the documents and informed PW1. It was discovered that the cargo receipt and inspection certificate were false documents in that they were not signed by PW1; the chop appearing on these documents were not that of ACME Cassette and that no goods were in fact received or examined as stated and certified in these two documents.

The 2nd applicant's defence

7. The 2nd applicant testified in court that he was asked by PW4 to attend the meetings held with Mr Soloman Chan and the 1st applicant. At these meetings, it was agreed that Hisun would receive 1% commission for discounting the letter of credit for a company called Summers. He said that he was told by Mr Soloman Chan and the 1st applicant that there was a genuine supply of goods from a seller to a buyer, that the buyer was a company called Summers and that ACME Cassette was the applicant of the letter of credit on behalf of Summers. The 2nd applicant said he was only following PW4's instruction and proceeded with the discounting procedure. He said that it was not for him or Hisun to check whether the goods had been delivered but for Summers and ACME Cassette to sort this out. He said he had no reason to suspect that anything was wrong and that the cargo receipt and inspection certificate were not genuine. He admitted that he had given instructions to PW3 for the preparation of the invoice, packing list and other documents required for the presentation of the letter of credit.

The 1st two grounds of appeal

8. The first two grounds of appeal which attack the adequacy and quality of the prosecution evidence can be dealt with together. In his first ground of appeal, counsel for the 2nd applicant argues that the trial judge was wrong to hold that there was a case to answer at the end of the prosecution case. In respect of the first count, counsel submits that there was no admissible evidence that the 2nd applicant had produced the three documents in question to Kwangtung Provincial, that he knew that these documents were false, misleading or deceptive and that he was dishonest or had sought to gain or cause loss. In respect of the second count, counsel submits that there was no admissible evidence that it was the 2nd applicant who falsified the Hisun invoice and that he was dishonest or intended to cause gain or loss. Counsel argues that as a matter of law, if there was no case to answer at the close of the prosecution case, the judge should have acquitted the 2nd applicant and that the ultimate conviction of the 2nd applicant cannot be saved by the fact that the evidence which he gave constituted a case for him to answer. Counsel also challenges the judge's finding on the authorship of the three documents which, he submits, was not supported by the evidence. In his 2nd ground of appeal, counsel argues that of the eight prosecution witnesses, only PW3 and PW4 could have implicated the 2nd applicant. However, PW3's evidence was largely the response to a series of leading and improper questions. Even then, the evidence of these two witnesses was not sufficient to support a case against the 2nd applicant. Both PW3 and PW4 were accomplices and should have been either given immunity from the prosecution or at least warned of their right against self-incrimination. Neither of these took place and this would cast serious doubts on the forensic consciousness of the judge and counsel involved. In view of this unsatisfactory state of the prosecution's evidence, the judge should have held that there was no case to answer for the 2nd applicant in respect of both counts.

9. It is not disputed that there was no genuine sale of plastic materials from Hisun to ACME Cassette. What happened was, as those persons who were involved in the transaction described, a "discounting transaction". It is clear that the invoice, packing list, cargo receipt and inspection certificate were all false documents in that they did not reflect the true facts. If they had not been discovered, Yien Yieh Commercial would have paid US$1.505 million to Kwangtung Provincial which would have in turn paid the balance of the money into a bank account designated by the 1st applicant and then transferred overseas and Hisun would have obtained 1% commission. It is the prosecution case that the 2nd applicant knew that there was no genuine sale transaction as that described in the letter of credit but had dishonestly caused PW3 to prepare a false invoice and dishonestly caused it together with the false cargo receipt and inspection certificate to be presented to Kwangtung Provincial so that payment could be obtained under the letter of credit. It is also clear that the two applicants were not the only persons involved in this fraudulent transaction.

10. PW4 said that he had at least two meetings with the 1st applicant and Mr. Soloman Chan in the presence of the 2nd applicant and there were discussions as to what the arrangement would be. It must be clear to those who attended these meetings that there was to be no genuine sale of plastic materials from Hisun to ACME Cassette, that no goods would be delivered by Hisun to ACME Cassette, that Hisun's name was to be used as the supplier under the letter of credit and that it would process the letter of credit transaction as if it were the supplier. If PW4's evidence was to be believed, it was open to a judge or jury to find that the 2nd applicant knew the real nature of the whole arrangement, that he knew that there was no genuine sale of goods from Hisun to ACME Cassette, that there was no question of ACME Cassette receiving any goods from Hisun or having inspected those goods. Similarly if PW3's evidence was to be believed, it was open to a judge or jury to find that when the 2nd applicant handed the letter of credit to PW3 to prepare the necessary documentation, the 2nd applicant knew that any invoice which purported to say that there was a sale of plastic materials from Hisun to ACME Cassette would be a false document. Hence even though the false invoice was not physically prepared by him, it was he who with the knowledge of the true facts had caused this false document to be prepared. Whether PW3 knew what was really happening was of no significance to the case against the 2nd applicant. The prosecution's case was that PW3 was an innocent agent. It was also open to a judge or jury to find that the 2nd applicant also knew that any cargo receipt or inspection certificate which purported to say that there was a delivery of goods from Hisun to ACME Cassette and that ACME Cassette had inspected the goods and was satisfied with their condition must be false documents. Yet with such knowledge, the 2nd applicant, according to PW3, also handed the cargo receipt and inspection certificate to him to process. According to PW3, after he had processed the documents, he handed the false invoice, packing list, cargo receipt and inspection certificate together with the collection order form and bank drafts to the 2nd applicant. It is not disputed that Kwangtung Provincial had received these documents in order to present them to Yien Yieh Commercial for payment. If the 2nd applicant was instructed by PW4 to handle the matter and he had obtained these documents from PW3, the reasonable inference was that it was he who had caused these documents to be produced to the bank. Whether it was a clerk or some other staff who had physically taken the documents to the bank over the counter does not matter. This person would simply be an innocent agent if he did not know what was happening.

11. As to the quality of PW3's evidence, it can be noticed that during his evidence, there was no objection to the prosecution asking leading questions of the witness. There was also no suggestion that PW3 knew of the meetings and the discussions among PW4, the 1st applicant, Mr. Soloman Chan and the 2nd applicant. It was not put to that witness that he was an accomplice of PW4 or the 2nd applicant. The fact that evidence is given as a result of leading questions to which there is no objection does not render such evidence inadmissible. It is for the court to attach such weight to his evidence as it thinks fit. As to PW4, it might be that he was also involved in the transaction and hence he could be regarded as an accomplice. But his evidence that the 2nd applicant was present at the meetings and followed his instruction was hardly challenged. It is again a matter of what weight the court could attach to such evidence.

12. Having considered the prosecution evidence, particularly that of PW3 and PW4, if their evidence was to be believed, there was clearly a case to answer for the 2nd applicant in respect of both counts. Whether PW3 and PW4 were also involved does not affect the conclusion that the 2nd applicant had played a part in this fraudulent transaction. The trial judge was right to reject his submission of no case to answer at the close of the prosecution case.

The 3rd ground of appeal

13. In his third ground of appeal, counsel submits that the trial judge had given the wrong direction with regard to the 2nd applicant's previous good character. The trial judge said at page 14 of the reasons for Verdict :

"I was informed that D2 had a clear record. I reminded myself that D2's good character helps him in two ways. First it is to be taken into account in his favour when I assess what weight to give to what he had said in the witness-box. Second, his good character would make it more unlikely than otherwise that he would commit the crime alleged."

14. Counsel submits that what the judge said in the first part of the above passage was to confuse weight with credibility. He relies on the English cases of Vye [1993] 1 WLR 471, Berrada (1990) 91 Cr App R 131 and Sweet-Escott (1971) 55 Cr App R 316. He argues that the judge had mistakenly thought that an accused's previous good character would be relevant to the weight to be attached to his evidence when according to previous English authorities, this goes to the credibility of the accused when he gives evidence in court.

15. The trial judge's handling of this issue followed almost verbatim what was said by Bokhary JA. in R v Lee Kam Yuen [1995] 1 HKCLR 264 at 266. The issue of good character and how a judge should direct himself or a jury on this issue was again discussed by the Court of Final Appeal in Tang Siu Man v. HKSAR [1998] 1 HKLRD 350. Litton PJ. with whom the majority of the other judges agreed said at p. 356:

"The Vye principles are as follows (see Aziz at 51-D): '(1) A direction as to the relevance of his good character to a defendant's credibility is to be given where he has testified or made pre-trial answers or statements. (2) A direction as to the relevance of his good character to the likelihood of his having committed the offence charged is to be given, whether or not he has testified, or made pre-trial answers or statements. (3) Where defendant A of good character is jointly tried with defendant B of bad character, (1) and (2) still apply.' A direction in accordance with para. (1) above is the 'credibility' direction, and that in accordance with para. (2) is the 'propensity' direction; and where appropriate these directions would generally be along the following lines (see the judgment of the Court of Appeal in R. v. Lee Kam Yuen)."

16. It can be seen that the Court of Final Appeal approved the direction which was formulated in R v Lee Kam Yuen. Even if this direction were different from what the English authorities say, the trial judge was bound to follow R v Lee Kam Yuen andTang Siu Man v HKSAR. But we do not think that they are different. When the court is considering the credibility of a particular witness or the accused, it is in effect trying to assess whether to believe or disbelieve his evidence, either in whole or in part. That is another way of saying that the court is considering whether to give any weight to the evidence given by the witness or accused and if so how much weight is to be given. This exercise is nothing other than an assessment or evaluation of the evidence of the witness or accused. Whether this exercise is described as relating to the weight of the evidence or the credibility of the witness or accused amounts to the same thing. The relevant direction is merely suggesting to the court or jury how to make use of the evidence of the witness or accused. As Litton PJ. in the Tang Siu Man case said at p. 357 J :

"[The Vye directions] are not directions of law which a jury is bound to follow... However entrenched these rules might be... they can amount to nothing more than an indication of the way the jury might properly make use of the evidence."

17. We do not accept that the trial judge was in any way in error by following a direction given by the Court of Appeal which was approved by the Court of Final Appeal. This ground of appeal fails.

The 4th and 6th grounds of appeal

18. In these two grounds of appeal, counsel complains about the judge's finding on the issue of mens rea. They can be dealt with together. In his fourth ground of appeal, counsel submits that the trial judge was wrong to convict the 2nd applicant on the basis of his indifference, negligence or recklessness. The charges require proof of dishonesty and knowledge of the falsity of the documents in question. However when making findings on the 2nd applicant's state of mind, the trial judge had used phrases such as: casual attitude, would have known, should have noticed, must have known, did not appear to wonder why, did not care. In the sixth ground of appeal, counsel submits that when dealing with the issue of dishonesty, the trial judge was wrong to stress that the 2nd applicant should have noticed certain irregularity or impropriety. It is said that the judge had reversed the onus of proof.

19. With respect, counsel's submission shows a misunderstanding of the judge's Reasons for Verdict. The judge first of all set out the evidence of the prosecution against the 2nd applicant. She then summarised the 2nd applicant's case. In a separate section, she analysed the 2nd applicant's case and assessed his evidence point by point. She set out the reasons why she rejected the 2nd applicant's evidence. It can be seen that it was in her analysis and evaluation that the trial judge had used those phrases to which counsel referred. Those phrases were used mostly in relation to the 2nd applicant's knowledge of the proposed arrangement which was discussed during the meetings and his knowledge of the operation and requirements of a letter of credit. It is clear that the judge was trying to demonstrate that the 2nd applicant's evidence cannot be accepted in the light of the rest of the evidence before the court.

20. In respect of the first count, the mens rea consists of (1) knowledge of the falsity of the documents, i.e. knowledge of the true facts and knowledge that the documents did not reflect the true facts; (2) a view to gain or an intent to cause loss; and (3) dishonesty. In respect of the second count, the mens rea consists of (1) knowledge of the true facts and knowledge that the invoice to be prepared would not reflect the true facts; (2) a view to gain or an intent to cause loss; and (3) dishonesty. Having conducted an analysis and evaluation of the evidence, the judge did at pages 16 and 17 make a finding on the 2nd applicant's state of mind in relation to the first count. Similarly, at pages 19 and 20, she made a finding in relation to the second count. The judge later dealt with the issue of dishonesty.

21. We take the view that the judge had made the correct findings on the key issues of the two counts. On the evidence before her, she was entitled to make those findings. We do not think there is any substance in these two grounds of appeal.

The 5th ground of appeal

22. In his fifth ground of appeal, counsel criticises the judge for concluding that the 2nd applicant must have or would have known the law and practice of local letters of credit because of his prior experience gained from working in two banks. It is pointed out that the 2nd applicant was merely an ordinary clerk and not an officer in the bills department in a bank and had received no serious training in respect of banking law and practice. Counsel submits that the judge's conclusion was based on the wrong facts.

23. In our view, the issue is not whether the 2nd applicant was a clerk or an officer, whether he had worked in or for the bills department, or whether he had any training on banking law and practice or not. The question is whether the 2nd applicant had any knowledge of how letters of credits are operated. He had himself clearly admitted in evidence that he knew and was able to give an explanation on this issue. The judge was merely illustrating the point that the 2nd applicant had such experience and knowledge. We do not see any substance in this ground.

The 7th ground of appeal

24. In the seventh ground of appeal, counsel submits that the trial judge erred on the question of whether the 2nd applicant had acted dishonestly. It is argued that although the judge had referred to the correct principles, her findings of dishonesty cannot be supported.

25. In her Reasons for Verdict, the judge referred to the principles laid down in Ghosh [1982] QB 1053 on the issue of dishonesty. She analysed the evidence and adopted a two stage approach, both in relation to the first and second count. It is quite clear that according to PW4, the 2nd applicant was present during the meetings in which the 1st applicant and Mr. Soloman Chan discussed the whole transaction with PW4. He must be aware that there was no genuine sale transaction between Hisun and ACME Cassette and that there would be no delivery of goods by Hisun to ACME Cassette. With such knowledge, he handled the letters of credit and gave instructions to PW3 to prepare an invoice or packing list which could not possibly have reflected the true position. He also handled the cargo receipt or inspection certificate which to his knowledge were false. Any reasonable man with the knowledge of the 2nd applicant would have considered that the handling and preparation of these documents would be dishonest. In the circumstances of this case, the 2nd applicant would also have known that any reasonable man would consider that as dishonest. There is therefore evidence to support the trial judge's finding of dishonesty in respect of the two counts.

The 8th ground of appeal

26. In respect of the eighth ground of appeal, counsel submits that the judge was wrong in finding that the only reasonable inference to draw in relation to the second count was that the false contract number must have been supplied by the 2nd applicant. He argues that upon a review of all the evidence, that inference was not one that no reasonable man could fail to draw. We do not think that it is important who supplied the false contract number. It was the 2nd applicant who handed the letter of credit to PW3 to enable the latter to prepare a false invoice or an invoice which the 2nd applicant knew could not possibly reflect the true facts. The important point is that the invoice was to be a false document. PW3, having received the letter of credit from the 2nd applicant and been asked to process the transaction, would prepare an invoice in accordance with terms of the letter of credit. As the judge said, if there was no genuine sale, there was no contract number and one had to be made up and given to the invoice. We do not think it matters whether it was the 2nd applicant or PW3 or the clerk who supplied the false contract number. In any event, it could be said that if it was the 2nd applicant who had asked PW3 to make up a false invoice, which in the normal case, would have a contract number, it was the 2nd applicant who had indirectly asked that a contract number which was false to be given to the invoice.

The 9th ground of appeal

27. In his last ground of appeal, counsel submits that the convictions are against the evidence and are unsafe and unsatisfactory bearing in mind all the criticisms which he had levied on the Reasons for Verdict. We do not see any merits in the other grounds of appeal. We take the view that the trial judge had carefully dealt with the evidence, assessed the 2nd applicant's evidence and had come to a conclusion which was open to her. There is ample evidence for the judge to be satisfied beyond reasonable doubt that the 2nd applicant was guilty of the two offences. We do not think that the convictions are in any way unsafe or unsatisfactory.

The sentence of the 1st applicant

28. As regards the 1st applicant's application for leave to appeal against sentence, his counsel accepts at the outset that his 3 1/2 year sentence is within the range of the usual sentences for this type of offence. Counsel's complaint is that there is no justification for the great disparity between the sentence imposed on the 1st applicant and those on the 2nd applicant.

29. It must be noted that although the 1st applicant was convicted of only one count and the 2nd applicant of two counts, there was in fact one fraudulent transaction in which both applicants participated but played different parts. So while the 1st applicant got 3 1/2 years for only one count and the 2nd applicant got a total of 18 months for two counts, in effect, they were sentenced to these terms for their respective parts in the transaction.

30. When sentencing the 1st applicant, the trial judge took into account a number of factors, namely, that the 1st applicant knew that there was no genuine sale of goods underlining the letter of credit; that the picture painted by the false documents was completely different from the real situation as the 1st applicant understood it; that the 1st applicant was not the mastermind but was heavily involved and an integral part of the scheme and that if the transaction had been successful, the balance of US$1.505 million would have been deposited in the bank account designated by the 1st applicant and then transferred to the United States. Counsel does not dispute that these factors ought to have been taken into account by the judge. However, he submits that when the trial judge sentenced the 2nd applicant to only 18 months imprisonment, he also took into account a number of factors. But most if not all of these factors are equally applicable to the 1st applicant's case. It is pointed out that the 1st applicant feels as much grievance as the 2nd applicant because others involved were not prosecuted. Both the 1st and 2nd applicant knew that there was no genuine sale of goods transaction. Both were not the mastermind but were integral parts of the scheme. Both applicants would be aware that the picture painted by the documents was completely different from the real situation. While there is no evidence to show that the 2nd applicant would have received any direct personal advantage, there was a 1% commission to be payable to his company. On the other hand, although the balance of US$1.505 million was to be transferred to a bank account designated by the 1st applicant, there was evidence which suggested that the 1st applicant was merely getting a commission. If, counsel submits, the 2nd applicant could be given a much lighter sentence because of these factors, so should the 1st applicant. At least, there should not be such a great disparity in the two sentences.

31. The basis for counsel's submission is this. Where an offender has received a sentence which is not open to criticism when considered in isolation, but is significantly more severe than has been imposed on his accomplice, and there is no reason for the differentiation, the appellate court may reduce the sentence, but only if the disparity is serious. He submits that the test is: would right thinking members of the public, with full knowledge of the relevant facts and circumstances, learning of the two sentences consider that something had gone wrong with the administration of justice? Counsel relies on what Lawton LJ. said in R. v. Fawcett, 5 Cr App R (S) 158. He submits that there is indeed a significant difference between the sentences imposed on the two applicants and that there is no reason for the differentiation. Even if there is any real difference in the respective culpability of the two applicants, the difference in sentences exaggerates that difference. The disparity between the two sentences is, it is submitted, serious enough to require the appellate court's interference.

32. The main basis of counsel's argument is that there is no real differentiation between the two applicants' cases. With respect, we do not think this is correct. The evidence shows that it was the 1st applicant and Mr. Soloman Chan who first approached PW4 and suggested the fraudulent transaction to him. On the other hand, in the case of the 2nd applicant, there was no evidence that he was acting otherwise than following the instructions of PW4. In other words, while the 1st applicant played the part of one of the instigators, the 2nd applicant only played the part of a person carrying out what had been agreed by his employer. This, in our view, is a significant difference between the roles played by the two applicants. Further, while the evidence shows that there is no direct and personal benefit to the 2nd applicant in this transaction and that only his company would stand to gain a 1% commission, there is clear evidence that the 1st applicant would receive some commission out of the fraudulent transaction, although it is not clear how much he would benefit from it. The fact that he had designated an account into which the balance of the US$1.505 million after the deduction of commission was to be paid and that the money would subsequently be transferred to an account in the United States also shows that he was very much involved in the whole scheme. This is in contrast to the role played by the 2nd applicant.

33. Because of these significant differences, it is clear that the main basis for counsel's submission cannot stand. He has failed, as it were, the test in Fawcett. We take the view that while there is admittedly a great difference between the sentences imposed on the two applicants, there is justification for the difference. The respective degrees of their culpability are significantly different. While the sentences imposed on the 2nd applicant may appear to be on the low side as compared with that imposed on the 1st applicant, we do not think that this court should interfere with that imposed on the 1st applicant which is, standing on its own, neither manifestly excessive or wrong in principle. Disparity being the only ground of appeal, this application must fail.

Conclusion

34. For the reasons given above, we dismiss the 2nd applicant's application for leave to appeal against conviction and the 1st applicant's application for leave to appeal against sentence.