CACC361/2004 HKSAR v. TSE CHING NG AND OTHERS - LawHero
CACC361/2004
上訴法庭（刑事）Ma CJHC, Stuart-Moore VP and Woo VP5/9/2005
CACC361/2004
由此
A A
CACC 361/2004
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF APPEAL
D D
CRIMINAL APPEAL NO. 361 OF 2004
E (ON APPEAL FROM HCCC NO. 260 OF 2003) E
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F F
BETWEEN
G HKSAR Respondent G
and
H H
TSE CHING NG 謝靜吾 (D1) 1st Applicant
I CHENG KIN PING 鄭建平 (D3) 2nd Applicant I
J
LAM WAH LAM, MALINDA 林華琳 (D4) 3rd Applicant J
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K K
Before : Hon Ma CJHC, Stuart-Moore VP and Woo VP in Court
L L
Date of Hearing : 25 August 2005
M Date of Judgment : 6 September 2005 M
N
----------------------- N
JUDGMENT
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O O
P Hon Woo VP (giving the judgment of the Court): P
Q Q
Introduction
R R
1. The applicants, together with another person, Mr Zhong Guosong,
S faced trial in the Court of First Instance before Pang J and a jury on three S
counts of conspiracy. The 1st applicant was the 1st defendant, Mr Zhong
T T
was the 2nd defendant, the 2nd applicant was the 3rd defendant and the
U U
V V
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A A
3rd applicant was the 4th defendant at the trial. The applicants will
B B
conveniently be referred to as D1, D3 and D4 respectively, while
C Mr Zhong as D2. C
D D
2. All the four defendants were charged with Count 1, a conspiracy
E to defraud, contrary to Common Law. The particulars of offence were E
that between 1 January 1997 and 20 November 1998, the four defendants
F F
conspired together to defraud the Bank of Communications Hong Kong
G Branch, the Bank of China (Hong Kong) Branch, the National Commercial G
Bank Limited, Hong Kong Branch by dishonestly causing Nan Lung Travel
H H
& Express (Hong Kong) Limited (“Nan Lung”) and Hong Kong Textiles
I Exchange Limited (“HKTEL”) to apply for and utilise credit facilities from I
the banks in the form of letters of credit (“LCs”), causing to be submitted
J J
false documents to the banks purportedly evidencing genuine underlying
K commercial transactions between Nan Lung and HKTEL or Sunpride K
International Limited (“SIL”), causing to procure the issue by the banks of
L L
LCs in favour of HKTEL or SIL, and causing the bank to release funds to
M HKTEL or SIL under the LCs. M
N N
3. D3 and D4 also faced two other counts, Counts 2 and 3.
O
Count 2 was a conspiracy to procure entries in certain records in a bank by O
deception, and Count 3 was a conspiracy to deal with property, knowing or
P P
having reasonable grounds to believe that the property represented the
Q proceeds of an indictable offence. Count 2 related to the false Q
documentation submitted to the banks under the LCs in the conspiracy in
R R
Count 1 as genuine documents, so as to cause HKTEL to be paid the
S proceeds of the LCs. Count 3 related to D3 and D4’s dealing with the S
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A A
proceeds of the LCs received by HKTEL and SIL, which had been obtained
B B
by the conspiracies in Count 1 and Count 2.
C C
4. Towards the close of the prosecution’s case, the prosecution
D D
considered that Counts 2 and 3 were bad, because D3 and D4, the only two
E persons charged with the conspiracies in Counts 2 and 3, were husband and E
wife, and could not be guilty as co-conspirators by virtue of
F F
section 159B(2)(a) of the Crime Ordinance, Cap 200. The judge directed
G the jury to return verdicts of not guilty in respect of these two counts. The G
trial proceeded thenceforth on Count 1 only.
H H
5. In respect of this remaining Count 1, the jury unanimously found
I I
D2 not guilty, but by 6 to 1, they found D1, D3 and D4 guilty as charged.
J J
6. The judge adopted a starting point of 5 years’ imprisonment for
K K
the offence, and sentenced D1 to 4 years’ imprisonment. He imposed on
L each of D3 and D4 a sentence of 4½ years’ imprisonment. L
M M
7. D1 now seeks leave to appeal against both conviction and
N
sentence, whilst D3 and D4 have abandoned their applications regarding N
sentence and only seek leave to appeal against conviction.
O O
The involved companies
P P
Q 8. A number of companies were involved in the LCs transactions. Q
R 9. Nan Lung was a company incorporated under the laws of Hong R
Kong and was a partly owned subsidiary of China Southern Airlines prior
S S
to 1999. At the time material to the conspiracy in Count 1, the major
T T
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interest in Nan Lung was owned by Taiwanese investors. At the material
B B
time, D1 was a director and general manager and D2 was the deputy
C general manager of Nan Lung. C
D D
10. Nan Lung was acting as the ticketing office for China Southern
E Airlines, promoting and selling airtickets. The ticket sales had an annual E
turnover of over $200 million for Nan Lung. Nan Lung had never
F F
conducted any business other than that relating to airtickets.
G G
11. HKTEL was a company incorporated under the laws of Hong
H Kong, and D3 and D4 were the directors and joint shareholders. H
I I
12. D3 and D4 were also the only directors and principal
J shareholders of Wah Shing Travel Service Limited (“WST”). They were J
the directors of SIL, another company incorporated under the laws of Hong
K K
Kong. They also owned the entirety of the interest in Forward
L Development Company (“FDC”), a firm established in Hong Kong. L
M M
13. Prior to the commencement of the trial on 2 July 2004, D3 and
N
D4 had both been made bankrupt. HKTEL was wound up on 21 August N
2000.
O O
The prosecution’s case
P P
Q 14. The prosecution’s case was that the conspiracy to defraud the Q
banks involved a total of 9 LCs. Details of these LCs and matters related
R R
to them were set out in the Admitted Facts agreed by the parties pursuant to
S section 65C of the Criminal Procedure Ordinance, Cap 221. The first S
7 LCs were opened with one or the other of the banks on the application of
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A A
Nan Lung in favour of HKTEL each for a sum either of roughly
B B
$3.9 million (US$0.5 million) or roughly $7.8 million (US$1 million),
C purportedly for the purchase of textiles goods or garments by Nan Lung C
from HKTEL. In respect of each of these 7 LC transactions, it was D1
D D
and D2 who signed the cargo receipt documents, and the related invoices
E and packing lists were signed in some cases by D3 and in others by D4. E
The 8th LC was opened on the application of Nan Lung in favour of SIL,
F F
with the cargo receipt signed by D1 and D2 and the invoice signed by D4.
G The 9th LC was opened by the bank on the application of HKTEL in favour G
of Nan Lung, with the cargo receipt signed by D4 and the packing list
H H
signed by D1 and D2.
I I
15. The following are also significant admitted facts. The total
J J
value of the 8 LCs opened by Nan Lung came to almost HK$44 million.
K From the proceeds of these LCs, WST received not less than K
HK$9.6 million, FDC received not less than HK$6 million, D3 received
L L
not less than $3.9 million. In relation to the first 7 LCs, HKTEL issued
M sales invoices totalling almost HK$36 million. None of these invoices M
was entered into the sales ledger of HKTEL for the relevant financial years.
N N
In relation to the 9th LC, no entry was made in any purchase ledger of
O HKTEL for the financial year 1997/1998. O
P P
16. Another admitted fact was that the total amount remaining
Q unpaid by HKTEL to Nan Lung in respect of the first 8 LCs came to Q
$29.39 million. This indebtedness arose from the fact that the LCs were
R R
vehicles by which loans were effectually made by Nan Lung to HKTEL.
S S
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A A
17. Since HKTEL had not repaid the LC proceeds to Nan Lung, Nan
B B
Lung had defaulted in repaying the banks on the first few LCs. After
C pressure exerted by D1 on D3 and D4, D3 and D4 persuaded D1 to take out C
the 8th LC in the name of SIL. The proceeds of the 8th LC were paid by
D D
HKTEL to Nan Lung to repay the banks for the first few LCs. The 9 th LC
E was also a device to reduce the indebtedness of Nan Lung to the banks E
under the earlier LCs.
F F
G 18. It was an admitted fact that part of the proceeds from the 9th LC, G
applied for by HKTEL, was used to repay Nan Lung in respect of the
H H
amount outstanding for the first LC. $3 million used by HKTEL for the
I partial repayment to Nan Lung for the 2nd LC was substantially from the I
proceeds of the 7th LC. $7.8 million used by HKTEL for the repayment to
J J
Nan Lung for the 2nd LC and the 3rd LC came from the proceeds of the 8th
K LC. K
L 19. Admitted were also two written agreements: one was made on L
M
26 March 1997 by D1 and D2 on behalf of Nan Lung and D3 and D4 on M
behalf of HKTEL, and the other agreement was undated and signed by D3
N N
and D4 of the one part and D1 and D2 on behalf of Nan Lung of the other
O
part. In his summing-up to the jury, the judge described these two written O
agreements as follows:
P P
“Both agreements bear the signatures of the 1 st and 2nd defendants.
However, there are no company chops appearing on those
Q documents. The gist of both agreements is that Nan Lung will Q
provide funds for the normal course of business of Hong Kong
R Textile and Sunpride International. The two agreements were never R
presented to China Southern Airlines’ management for approval.”
(Appeal Bundle p 16)
S S
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A A
20. It appeared from the two written agreements that Nan Lung
B B
agreed to enter into LC and trust receipt arrangements for $10 million to
C raise funds to be provided to D3 and D4 for the promotion of their textile or C
piecegoods business. In return, Nan Lung would get 2% of the LC
D D
amount and 5% bonus shares, but how the bonus shares were to be given
E was unspecified. Consequently, Nan Lung applied for and obtained the E
opening of the first 7 LCs with all the proceeds given to HKTEL.
F F
G 21. There was evidence from representatives of the banks that D1 G
and D2 of Nan Lung approached them for banking facilities to open LCs.
H H
They were told that Nan Lung wished to branch out into the fashion
I business. Nan Lung required LC facilities to purchase goods for sale in I
the Mainland in the fashion sector. The Bank of Communications
J J
prepared a credit analysis report on Nan Lung for the purpose of deciding
K whether to grant Nan Lung the facilities required. In that report it was K
stated that Nan Lung
L L
“… is expanding its business and is planning to assist its associated
M companies in the issuing of letters of credit for goods purchased, to M
engage in general trade and to bring in supplies for Southern
Airlines, … ”
N N
“It is understood from the client that the line of the documentary
O bills will mainly be used for bringing in supplies for Southern O
Airlines and for the issuing of letters of credit for associated
companies, so as to receive handling charges.”
P P
22. D1 or D2 had mentioned to the bankers that there was to be
Q Q
trading between Nan Lung and HKTEL. D1 never told them that the LCs
R applied for were actually loans, nor did he tell them that he was only R
interested in obtaining loans to finance HKTEL. The critical omission
S S
was that there were never going to be any goods even though the LC
T documents would assume their existence. The bankers said that if they T
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A A
had known that there were no underlying commercial transactions without
B B
any goods ever involved, no facility would have been granted. This
C absence of goods (even though the documents would speak of their C
existence) was the crux of the deceit.
D D
E The defence case E
F 23. Only D2 gave evidence before the judge. D1, D3 and D4 did F
not. These defendants merely put the prosecution to proof, and as from
G G
the large amount of materials admitted in the Admitted Facts, allowing the
H inference to be drawn that there were no underlying transactions (and H
goods) for the LCs, it seemed that their defence was that either there was
I I
no conspiracy between them or they were not dishonest in dealing with the
J banks. J
K K
24. The record of the cautioned interviews of D1 and that of D2 were
L produced at the trial. D1 admitted in the interview that it was a way of L
re-routing money. He admitted that there were no goods or underlying
M M
transactions under the LCs and he believed that the whole scheme was to
N lend money to HKTEL. N
O O
25. There was evidence that D1 had said that he had no experience in
P
LC matters. He considered that D3 and D4 were people of high social P
standing and trusted them. There were references in the evidence to D1
Q Q
believing D3 to be associated with the Tung Wah Group and D4 with Po
R Leung Kuk. He was unaware of the LC procedures and just trusted D3 R
and D4 to enter into the transactions with the banks in order to raise loans
S S
for HKTEL.
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A A
26. In the record of D2’s interview as well as D2’s testimony, he said
B B
he was only the deputy to D1 and played a very limited role in the whole
C incident. He had no knowledge of LC matters and acted under the C
instructions of D1. He signed the two written agreements and the LC
D D
documents because he was told by D1 to do so. D1 had also told him that
E the whole thing had been approved by the Chairman of the Board, E
Mr Wong, who represented the Taiwan interest in Nan Lung.
F F
G 27. D3 and D4 did not give evidence. In cross-examination of PW1, G
the supervisor of Nan Lung’s Accounts Department, it was put by their
H H
counsel that the dealings between Nan Lung and HKTEL were open and
I not concealed in Nan Lung’s books. It seemed also to be D3 and D4’s I
case that in HKTEL’s books, there was no record of any sale and purchase
J J
transactions between HKTEL and Nan Lung, but the proceeds of the LCs
K were reflected as loans from Nan Lung on Nan Lung’s current account with K
HKTEL. It seemed that their case was that the openness of the
L L
transactions in HKTEL’s company books could have raised a doubt as to
M whether they had the dishonest intent required to be proved. M
N N
The grounds of appeal against conviction
O O
28. On behalf of D1, Mr Graham Harris raised four grounds of
P appeal against convictions. Three of these grounds are discrete and can P
conveniently be dealt with first, while the remaining ground can be dealt
Q Q
together with the first ground of appeal against conviction raised by
R Mr Lawrence Lok SC on behalf of D3 and D4. R
S S
D1’s grounds 1 and 2
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A A
29. These two grounds relate to Counts 2 and 3. It is contended that
B B
as Counts 2 and 3 against D3 and D4 were wrong in law, given the way in
C which the case was opened and proceeded with, the joinder of these two C
defective counts prejudiced the fair trial of D1 upon Count 1. When the
D D
defects of Counts 2 and 3 became apparent towards the close of the
E prosecution case, the judge directed the jury to find D3 and D4 not guilty of E
these two counts. It is contended that in the interests of justice the judge
F F
should have discharged the jury and the remaining Count 1 be retried by a
G different jury, particularly so given the apparent confusion and concern G
expressed by the jury when directed to return the not guilty verdicts.
H H
I 30. Mr Harris submits that Counts 2 and 3 were effectively I
withdrawn just one day before the prosecution closed its case after the trial
J J
had proceeded for 17 days. Hitherto the prosecution had been conducting
K the trial and leading evidence on all three counts, adducing evidence on the K
basis that there had been a “hidden agenda” on the part of D3 and D4,
L L
which might have accorded D1 a defence under section 159B(1) of the
M Crimes Ordinance, that D1, D2 and Nan Lung were intended victims of the M
conspiracy and therefore not guilty as co-conspirators. Under this “hidden
N N
agenda”, evidence had been adduced to show that the funds obtained from
O the LCs were utilised by D3 and D4 for their own purposes. On the other O
hand, Nan Lung and D1 bore the financial risks associated with the funds
P P
obtained by the LCs and D1 shouldered a secondary liability to repay under
Q his personal guarantees given to the banks. Had the case proceeded down Q
this route, the jury would have had presented to them a scenario in which
R R
they would be entitled to conclude that D1 and D2 were intended victims of
S the scheme. When Counts 2 and 3 were gone, the evidence thus far S
adduced simply became “lumped “ together with that on Count 1. It is
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contended that the two separate conspiracies were thus merged into one and
B B
the distinction between the role of D1 and that of D3 and D4 was gone,
C taking with it, inevitably, the section 159B(1) defence. The jury was left C
to concentrate on Count 1 in respect of which the spotlight was on the
D D
banks, being the only victims of the conspiracy remaining to be dealt with.
E It is submitted that this drastic change in the prosecution case and in the E
focus of the jury resulted in irrefutable damage to D1’s defence. Not only
F F
was the culpability of D1 magnified with the change of focus, but also the
G defence of intended victim faded away. D1’s trial was thus greatly G
prejudiced. By taking away the proper context in which Nan Lung and
H H
D1 could have been seen as victims, the effect on the issue of dishonesty on
I D1’s part is said to be devastating. Such damage was not cured by any I
proper direction given by the judge.
J J
K 31. The factual background of the second ground raised by Mr Harris K
was that after the judge had directed the jury to return verdicts of not guilty
L L
on Counts 2 and 3 as against D3 and D4, the jury posed a question in
M writing to the court: M
“As a group of reasonable citizens, we would like to know more
N N
information and why the verdicts come to the conclusion of not
guilty for the 2nd and 3rd count. Thank you.” (Appeal Bundle p
O 332) O
P 32. After discussion with counsel, the judge decided not to give a P
direct answer to the question, save to say that it was a direction in law and
Q Q
the jury was bound to follow the judge’s direction. It is contended by
R Mr Harris that this answer could only muddle the jury’s thinking and R
confuse them in their deliberation of the case. However, instead of
S S
discharging the jury and ordering Count 1 to be retried before another jury,
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the judge allowed the case to proceed. This, it is argued, had prejudiced
B B
D1’s possible defence of being an intended victim. D1 had thus been
C prejudiced as a result of the unsatisfactory way the prosecution had C
conducted the trial and its oversight of the legal implications of the special
D D
relationship between D3 and D4, which was due to no fault of D1 at all.
E E
33. It would be noted that Count 2, against D3 and D4, was a
F F
conspiracy to procure entries in certain records in the banks by deception.
G The underlying transactions were the same LC transactions covered by G
Count 1. As the particulars of offence of Count 2 clearly showed, the
H H
deception alleged to have been perpetrated by D3 and D4 was to use false
I documents such as invoices, packing lists and cargo receipts required under I
the terms of LCs to cause the banks to make payments under the LCs to
J J
HKTEL. All the evidence on Count 2 was, as Mr Harris conceded, both
K relevant and admissible on Count 1. K
L 34. Count 3 against D3 and D4, albeit also relating to their receipt of L
M
the LC proceeds knowing them to represent the proceeds of an indictable M
offence, was entirely separate and had nothing to do with the hidden
N N
agenda issue. We do not need to say anything further on it.
O O
35. The joinder of Counts 2 and 3 to Count 1 on the indictment, in
P our judgment, plainly did not prejudice D1. The joinder of Count 2, P
focusing on the device of D3 and D4 in obtaining the proceeds of LCs
Q Q
which they caused Nan Lung (through D1) to open in their favour may
R support the hidden agenda as postulated by the prosecution. This might R
assist D1 if he could expand it to avail himself of the protection offered by
S S
section 159B(1) of the Crimes Ordinance. The joinder therefore only
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benefited D1 and could not have operated to his prejudice. D1 could have
B B
relied (as he in fact did) on the evidence of his alleged belief in the high
C social standing of D3 and D4 and the trust that he had placed on them so as C
to create a reasonable doubt that he was an intended victim of the deception
D D
in Count 1 perpetrated by D3 and D4.
E E
36. The prosecution proceeded with the trial on the basis of all three
F F
counts until the very last moment. The evidence relating to Count 2 had
G all been adduced. However, such evidence was, as we have said, also G
relevant to Count 1. There was no evidence exclusively adduced for
H H
Count 2 and there was nothing “lumped” together as suggested by
I Mr Harris. I
J 37. When the jury was directed by the judge to return not guilty J
verdicts on Counts 2 and 3, the evidence that might support the hidden
K K
agenda still remained. The not guilty verdicts would not have diminished
L whatever value this evidence might have in favour of D1. L
M M
38. From the question put by the jury to the judge, it appeared that
N they were curious as to why D3 and D4 could not be guilty of Counts 2 N
and 3. Ultimately, it could not have caused any confusion as suggested by
O O
Mr Harris. In fact, the explanation apparently sought by the jury was
P given and the defence of “intended victim” was left open by the judge to P
the jury in the judge’s summing up, when he said:
Q Q
“… in law, the 3 and 4 defendants, being husband and wife, are
rd th
R treated as one person and a person cannot conspire with himself. R
To put it simply, there must be at least two persons to form an
agreement. In this case, if you find that both the 1 st and
S 2nd defendants not guilty, I stress the word ‘both’, then as a matter of S
law, the 3rd and 4th defendants cannot be guilty as well, and you must
return a verdict of ‘not guilty’ in respect of the 3rd and 4th accused.
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A A
The reason being as I have said, a person cannot conspire with
B himself without others. The prosecution must prove beyond B
reasonable doubt that for each of the 1 st and 2nd defendants, they are
not the intended victims of a fraud scheme against the banks. If the
C C
prosecution fails to make you feel sure that they are not the intended
victims of the fraud scheme against the bank, then it must follow that
D there must be a reasonable doubt on the issue whether each D
defendant was dishonest in a sense which I had explained to you
earlier.” (Appeal Bundle p 13)
E E
39. The continuation of the trial on Count 1 after the disposal of
F F
Counts 2 and 3 could not have prejudiced D1 either. The evidence of the
G G
hidden agenda was still there, available for D1’s use. Similarly, the
H
defence of intended victim was similarly left open for D1. We do not H
accept that D1 could have been prejudiced in any way as contended by
I I
Mr Harris. In any event, it should not be forgotten that at all times, Count
J 1 remained as a charge that all defendants, especially D1, had to deal with. J
K 40. Mr Harris submits that in the way the jury framed their question, K
there was a possibility that they thought D3 and D4 were guilty of Counts 2
L L
and 3, and as they had been directed by the judge to return verdicts of not
M guilty on these two counts, they could have convicted D1 on Count 1, since M
without D1’s conviction, D3 and D4 (as man and wife and the only
N N
remaining conspirators) would have to be acquitted. This argument is
O premised, if we may say so, on the imagination or speculative theory that O
the jury was so perverse as to find an innocent person guilty, purely for the
P P
sake of enabling them to convict two guilty persons. This would also
Q Q
have been contrary to the judge’s clear direction to them that they had to
R
consider the case regarding each accused separately. This argument is R
obviously unsound and must be rejected.
S S
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A A
41. In any event, all counsel for the defendants never made any
B B
application to the judge for discharging the jury and having Count 1 tried
C before another jury, and Mr Harris is not saying that defence counsel had C
failed to discharge their duties properly at the trial.
D D
E 42. These two grounds have no substance. E
F Not letting the jury know the reasons for acquittal F
G G
43. Before leaving this matter, we wish to make an observation about
H the judge’s answer to the jury’s question (see para 31 above) as to why they H
had been directed to return verdicts of not guilty on Counts 2 and 3.
I I
44. After discussion with counsel, the judge said to the jury:
J J
“Mr Foreman, I have received a note from you. I will just read it
K out and ask you to confirm if this is what you have written. Please K
sit down. ‘As a group of responsible citizens, we would like to
know more information on why the verdict came to the conclusion
L of not guilty for the 2nd and 3rd count. Thank you.’ Is that what L
you have written? Right.
M M
Now, I fully understand your concern over this but as I have told you
very early at this trial and also this morning, it is a matter of law that
N you need to take my directions and act upon them. Over the N
weekend we had detailed discussions with counsel and a matter
regarding the 2nd and 3rd count has been resolved without having to
O O
trouble you over the facts. It’s a matter of law but I don’t need to
go into that now because there is no need. There is no need to
P trouble you. It’s as simple as that. I share your concern and it is P
very responsible that you have raised this question. It shows how
conscientious you are. Thank you very much.” (Appeal Bundle
Q pp 337-338) Q
R R
45. The reason for the acquittals was in fact very simple: D3 and D4
S were husband and wife and could not be guilty as co-conspirators. In our S
view, the jury was entitled to be told this simple answer and not be kept in
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A A
the dark about it. Normally, unless prejudice will be caused or some other
B B
exceptional reason exists, a jury is entitled to have its queries clarified. In
C the present case, the jury was informed that as a matter of law, Counts 2 C
and 3 would be resolved without the need to trouble them on the facts.
D D
The jury was of course later informed in the judge’s summing up that a
E conspiracy between husband and wife is not possible in law. Accordingly, E
no harm was done by the judge’s omission to answer the jury’s earlier
F F
question, but, as we have observed, a direct answer should have been
G given. G
H H
D1’s ground 4
I I
46. This ground alleges that the jury’s majority verdict of guilty in
J respect of D1 was inconsistent with its unanimous verdict of not guilty in J
respect of D2. It is the contention of Mr Harris that there were substantial
K K
similarities in the prosecution cases against D1 and D2. Both of these
L defendants were involved in the management of Nan Lung, they signed on L
M
the two written agreements, they signed the LC application forms and M
cargo receipts, they dealt with the bank officers together, and neither had
N N
any personal gain from the LC transactions. They were both persons of
O
good character, had very little experience or knowledge in LC procedures, O
and the prosecution would have to prove against each of them a dishonest
P P
intent to put the banks at risk or defraud them, and that they were intended
Q victims of the conspiracy of D3 and D4. Q
R 47. We do not need to go into any great detail in respect of this R
ground. There are several very significant distinctions between the
S S
positions of D1 and D2. D1 did not give evidence but D2 did. D1 was
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A A
the director and general manager of Nan Lung while D2 was the deputy
B B
general manager, carrying out his duties as instructed by D1. According
C to his evidence, D2 had been told by D1 that Nan Lung was prepared to do C
business with HKTEL in respect of textiles and garments and approval for
D D
this had been given by the Taiwanese Chairman of the Board. This
E evidence of D2 could be of great significance in the jury’s consideration E
which might have created a reasonable doubt in their mind that D2 did not
F F
have a dishonest intent in going along with what D1 instructed him to do.
G This must be contrasted with the fact that two directors of Nan Lung had G
given evidence that they had no knowledge of Nan Lung’s dealings with
H H
HKTEL, which was contrary to the alleged approval by the board of
I directors. I
J J
48. Mr Mackay, for the respondent, has also drawn our attention to
K the fact that D1 had admitted in his interview that the 9th LC was a device K
to enable Nan Lung to recoup part of the LC amounts that HKTEL had
L L
failed to repay, with no underlying goods in support, and the jury could
M have convicted him, rather than D2, on this distinct evidence alone. M
N N
49. This ground must fail.
O O
D1’s ground 3 and D3 and D4’s ground 1
P P
50. These two grounds allege that the judge erred in his summing-up
Q Q
in failing to put to the jury the defences relied on by all these applicants.
R It is contended that the overall tenor of the summing-up was unbalanced R
and unjustifiably tilted towards the prosecution.
S S
T T
U U
V V
由此
- 18 -
A A
51. The main thrust of these grounds relied on by all the applicants
B B
was the “openness” in which both D1 in Nan Lung and D3 and D4 in
C HKTEL dealt with the LC transactions. It is also contended that there was C
some evidence that at least some of the banks concerned were aware of the
D D
true purpose of the applications for LCs. The banks had more than
E sufficient collateral from Nan Lung for granting the facilities required for E
the opening of LCs and it is alleged that there was no evidence that D1
F F
attempted to conceal from anybody the true nature of the LC transactions.
G G
52. PW1, the lady supervisor of Nan Lung’s Accounts Department,
H H
agreed that the two written agreements had been shown to her by D1, with
I the effect of Nan Lung agreeing to lend $10 million to HKTEL for the I
latter’s business operation. However, PW1 clarified that she had not
J J
shown these written agreements to the banks to which applications for LCs
K were made by Nan Lung. She had seen these written agreements which K
had been shown to her, but she had not been provided with any copy.
L L
This was not evidence of openness towards the banks. It was merely that
M D1 did not hide the fact from PW1 that Nan Lung was using the LC M
transactions to lend money to HKTEL, and in any event PW1 would have
N N
known this as the supervisor in charge of the accounts because there was no
O evidence of any record of any sale of goods transactions in the books of O
Nan Lung.
P P
Q 53. PW1 also said in cross-examination that she had a conversation Q
with an officer from the Bank of China, a Mr Chan, who had been told by
R R
D1 that HKTEL had not repaid the loan. PW1 agreed that Mr Chan had
S told her that in the opinion of his bank, the transaction between Nan Lung S
and HKTEL was not the usual type of LC transaction, and that it was just a
T T
U U
V V
由此
- 19 -
A A
loan provided to HKTEL by Nan Lung by way of an LC. Mr Chan also
B B
warned PW1 to ask D1 to handle the matter with caution because D1 was
C advancing in age and might be prone to be deceived. However, this C
conversation did not amount to evidence that the bank was not misled when
D D
the LCs were applied for, because it only took place at the time when Nan
E Lung had defaulted to pay the bank on the LCs and Mr Chan was chasing E
for payment. This conversation must be put in the proper context and
F F
compared with what D1 and D2 had told the banks when they applied for
G the opening of LCs, which was that Nan Lung was branching out into the G
fashion business and required LC facilities for the purchase of supplies for
H H
that business, its associated companies, and China Southern Airlines.
I I
54. The second item of alleged “openness” was that according to the
J J
lady bookkeeper of HKTEL who was also responsible for keeping the
K books for WST and FDC, HKTEL maintained in its books a current K
account of Nan Lung, but no sales or purchase entries had been made in the
L L
ledgers of HKTEL relating to the LCs. This was done in accordance with
M D4’s instructions. This evidence was consistent and consonant with the M
admitted facts that none of the invoices relating to the first 7 LCs was
N N
entered into the sales ledger of HKTEL for the relevant financial year and
O that relating to the 9th LC, no entry was made in any purchase ledger of O
HKTEL for the financial year of 1997/1998.
P P
Q 55. The judge did remind the jury of a similar suggestion made by Q
counsel. He said:
R R
“Counsel suggested that the defendants did nothing to hide the flow
of funds and this shows the defendants must have thought that there
S was nothing illegal about the loan arrangement.” (Appeal Bundle S
p 40)
T T
U U
V V
由此
- 20 -
A A
56. Mr Mackay has made a point, which in our view is valid, that the
B B
written agreements and the books of the companies were internal
C documents never made available to the banks and that the proceeds of the C
LCs had to go through the companies’ books in any event, which was not
D D
actually openness.
E E
57. In our judgment, this so-called openness did not support the
F F
alleged lack of dishonest intent vis-à-vis the banks. The applicants made
G misrepresentations to the banks that there were the supplies of goods as G
evidenced by the false documents the applicants presented to them. One
H H
has to note that there was no evidence that the two written agreements had
I been shown to the banks, nor for that matter, the accounts and ledgers of I
Nan Lung or HKTEL. Quite on the contrary, D1 and D2 had represented
J J
to the banks that Nan Lung was branching out into the fashion business and
K they required LC facilities for the purpose of purchasing supplies for that K
business and its associated companies. Additionally, it has to be borne in
L L
mind that the evidence did not reveal any openness about the main part of
M the fraud at all, namely, that goods never existed. This was always M
concealed. Accordingly, on analysis, the openness point was not a valid
N N
point at all. The main part of the fraud (namely, the non-existence of
O goods) was never out in the open. The openness point was therefore not a O
point that had to be specially emphasised to the jury.
P P
Q 58. The prosecution case against D1 was very strong. He was the Q
person in charge of Nan Lung and instrumental in applying for the banking
R R
facilities for opening the LCs. He had told the bank that he required the
S LCs to purchase goods for the fashion business in which Nan Lung was S
going to branch out. He admitted in his cautioned interview that there
T T
U U
V V
由此
- 21 -
A A
was no underlying transaction for the LCs. There was evidence from the
B B
bank representatives that they would not have opened the LCs had they
C known that there were no underlying transactions. C
D D
59. The judge had directed the jury’s attention to the evidence that
E D1 had told D2 that Nan Lung’s dealing with and lending to HKTEL had E
the approval of the Board Chairman, and D1 had also expressed that D3
F F
and D4 were reputable socialites and he trusted them. These were the
G major pieces of evidence that might assist D1 in raising a reasonable doubt G
in the jury’s mind that he was not dishonest. The large amount of
H H
collateral provided the Nan Lung to the banks was also mentioned by the
I judge, and this might tend to raise doubt in the jury’s mind as to whether I
D1 had the dishonest intent to deceive the banks. The strong
J J
prosecution’s case against D1 was also put to the jury, and the judge fairly
K left all findings of facts to them. All in all, we do not find the judge’s K
summing-up unbalanced or unfair towards D1.
L L
M
60. Regarding D3 and D4 who, like D1, did not give evidence, the M
prosecution’s evidence against them was even stronger. They admitted in
N N
the Admitted Facts that invoices relating to the LCs had been issued by
O
HKTEL but no sales had been entered into HKTEL’s books. They also O
admitted the fund flowing of the LC proceeds, part of which were utilised
P P
for their personal, as opposed to business, purposes. They admitted that
Q they were unable to repay Nan Lung about $26 million that they had Q
received from the proceeds. They also admitted that they had become
R R
bankrupt. The so-called openness with which D1 dealt with the two
S written agreements in the presence of PW1 was neither here nor there as we S
have indicated. There was no evidence to suggest that there had been
T T
U U
V V
由此
- 22 -
A A
openness with the banks and all the indications were that so far as they
B B
were concerned, there had been none. On the contrary, an elaborate
C system had been put in place to deceive the banks, which negated any C
suggestion of “openness” towards them.
D D
E 61. In our judgment, the summing-up was in all the circumstances E
not unbalanced or unfair to D3 and D4 as suggested.
F F
D3 and D4’s ground 2
G G
H 62. This ground alleges that the judge erred in failing to direct the H
jury that the evidence given by PW1 on what D1 had said out-of-court to
I I
PW1 about D4’s participation in the arrangement of the LCs would not be
J evidence of that fact against D4. PW1’s evidence in-chief was that when J
she told D1 that she did not know how to process LC applications, D1 told
K K
her that D4 had already typed out the necessary forms. Mr Lok’s
L complaint is that during the course of PW1’s testimony, the judge did not at L
any stage direct the jury as to the limited use of this evidence, in that it
M M
could not be used against D4.
N N
63. Mr Lok submits that since what was said by D1 to PW1 about D4
O O
out of court was hearsay it was not admissible as against D4. This might
P
be correct in other circumstances, but in the present case where D1, D3 and P
D4 were charged with a conspiracy, the co-conspirator’s rule applies. It is
Q Q
only necessary to refer to para 36-60 of Hong Kong Archbold 2004, which
R reads: R
“Ordinarily, acts done or words uttered by an offender will not be
S evidence against a co-accused absent at the time of the acts or S
declarations. However, it is now well established that the acts and
T
declarations of any conspirator made in furtherance of the common T
U U
V V
由此
- 23 -
A A
design may be admitted as part of the evidence against any other
B conspirator. Such acts and declarations may provide evidence not B
only of the existence, nature and extent of the conspiracy, but also of
the participation in it of persons absent when those acts and
C C
declarations were made. This is known as the co-conspirator’s
rule.”
D D
64. Quite apart from the words spoken by D1 about D4 in what was
E E
plainly the furtherance of the conspiracy, there were significant admitted
F facts and there was other evidence referred to earlier which F
overwhelmingly established the participation of D4 in the conspiracy. D3
G G
and D4’s signatures were on the invoices and packing lists relating to the
H first 8 LCs and D4’s signature was on the cargo receipt under the 9th LC. H
PW1’s evidence further pointed out that D4 had brought along LC
I I
documentation to Nan Lung for signature when no LC number had yet
J been assigned to the documents. J
K K
D3 and D4’s ground 3
L L
65. This ground alleges that the judge erred in directing the jury that
M in relation to their consideration of the guilt of D3 and D4, they were M
entitled to take into account D1’s admissions that there were no real
N N
commercial transactions underlying the LCs.
O O
66. D1 did not give the evidence. However, in his cautioned
P P
interview, D1 admitted that he had never received any goods from the LC
Q transactions. Before summarising the incriminating parts of D1’s Q
interviews, the learned judge reminded the jury that D1’s answers in the
R R
interviews could not be used against any of the other defendants. The
S complaint under this ground is that towards the end of the summing-up, S
when the judge summarised the prosecution’s case against each of the
T T
U U
V V
由此
- 24 -
A A
defendants, and in dealing with the evidence against D3 and D4, he
B B
directed the jury in the following terms:
C “The other point you may wish to consider is this: it is not disputed C
by the 1st accused that there were no goods involved in all the nine
D LC transactions.” (Appeal Bundle p 40) D
E 67. This, it is submitted by Mr Lok, plainly contradicted the earlier E
warnings by the judge that the jury must not use any of the answers of D1
F F
in the interviews against the other defendants.
G G
68. We accept that the judge did mention D1’s said admission when
H H
he was dealing with the evidence against D3 and D4. However, earlier on
I in the summing-up the judge had unequivocally told the jury this: I
“Now, let us proceed straight to the interviews by the 1st defendant,
J Mr Tse. Before I take you to the interviews, there are two things I J
need to remind you of. In the statements during the interviews of
K
the 1st defendant by the police, the statement which the 1st accused K
made to the police in the absence of the 1 st, 3rd and 4th accused,
implicating them is not and cannot be evidence against any of them.
L To put it simply, because when the 1 st accused was interviewed, the L
2nd, 3rd and 4th accused were not there, right.
M So therefore, it cannot be evidence against the other three. The M
reason being they had no opportunity to contradict the implications
N by the 1st accused against them. You must therefore disregard any N
allegations by the 1st accused against the 2 nd, 3rd and 4th accused
during the interview. …” (Appeal Bundle p 28)
O O
69. This is a strong direction with the reasons explained to the jury.
P P
The later reference to D1’s admission of there being no goods involved in
Q Q
all the nine LC transactions could have been a slip of the tongue which, it is
R
apparent, went unnoticed by trial counsel or it would no doubt have been R
corrected. However, it should not have happened and we agree that this is
S S
an irregularity. It was, however, no part of the case presented on behalf of
T
D3 and D4 that there were genuine underlying transactions with goods as T
U U
V V
由此
- 25 -
A A
described in the LCs. Accordingly, we are satisfied that this was not a
B B
material irregularity.
C C
Conclusion as to convictions
D D
70. For the above reasons, D1’s application for leave to appeal
E E
against conviction must be dismissed. Regarding the applications made
F by D3 and D4, because of their ground 3, which identifies a minor F
irregularity in the summing-up, we grant leave to appeal. Treating the
G G
hearing as the appeal for D3 and for D4, and because the irregularity that is
H identified was not a material one, we dismiss their appeals. H
I I
Sentence
J J
71. In sentencing D1, D3 and D4, the judge took into account the
K fact that the conspiracy had caused the banks to pay out some $40 million K
under the LCs that were supposed to be supported by genuine commercial
L L
transactions. The end result was that Nan Lung, of which D1 was the
M M
general manager, had suffered a loss of about $26 million by way of bad
N
debts owed by HKTEL and/or D3 and D4. The judge adopted a starting N
point of 5 years’ imprisonment. He took into account the mitigating
O O
factors in the following terms:
P “The 1st accused is now 80 years of age. He has been in the airline P
business for some 40-plus years and I’ve heard from prominent and
respected members of the travel industry that he is a man highly
Q regarded. He has never committed any offence before and he has Q
contributed significantly to the airline industry. These I consider to
R be mitigating factors. R
In so far as the 3rd and 4th accused, I have evidenced before me that
S before they contravened the law, they were respected members of the S
community, they participated actively in a church community and
various welfare organizations and education institutions. I am told
T T
U U
V V
由此
- 26 -
A A
that it is because of the economic downturn that caused them to
B suffer financially and hence resorted to the scheme. B
This does not excuse themselves from criminal liability, however.
C Their previous contributions to society – I would look upon them as C
mitigating factors.” (Appeal Bundle pp 66-67)
D D
72. The judge gave an overall discount of one year to D1 and six
E E
months to each of D3 and D4.
F F
73. Mr Harris challenges the starting point of 5 years’ imprisonment
G being excessive and wrong in principle. He submits that the judge failed G
to consider sufficiently or at all the fact that D1 never received any
H H
financial benefit from the scheme and that his only motive was to enable
I I
Nan Lung to increase its income by charging commissions or handling fees.
J
He points out that D2 and D3 were the main culprits of the deception and J
had taken proactive roles in initiating the fraud. The major portion of the
K K
LC proceeds went to D3 and D4 and their associated companies. D1 did
L not receive a single cent or benefit in any way from the scheme. L
M 74. In assessing the appropriate starting point, one has to take into M
account the culpability of the offender as well as the effect of his offence.
N N
While the motive of D1 seemed to be earning some commission or
O handling fees for Nan Lung, he had joined D3 and D4 in perpetrating the O
fraud by making representations to the banks so as to obtain the facilities
P P
for the opening of the LCs, and submitting false documents to the banks to
Q induce them to pay on the LCs. As the general manager of Nan Lung, he Q
was in charge of Nan Lung’s affairs. Without his participation and effort,
R R
the banks would not have granted the LC facilities which caused them to
S S
pay out over $40 million on the LCs. Had Nan Lung not been wealthy
T
enough to repay what it owed to the banks under the LCs, the banks would T
U U
V V
由此
- 27 -
A A
have suffered badly. Nan Lung, D1’s employer, has now in turn to bear
B B
the loss of $26 million. The period over which the deception was
C perpetrated on the banks was about 1½ years involving 9 false LC C
transactions. In all the circumstances, we are not persuaded that the
D D
starting point of 5 years adopted by the judge was manifestly excessive or
E wrong in principle. E
F F
75. The fact that D1 never intended to benefit personally from the
G offence may to some extent reduce his criminality, but far more G
importantly, it is apparent that D3 and D4 were the main culprits having
H H
initiated the fraud. In this regard, we are prepared to accept that D1, at the
I age of 80 years, may have been more susceptible to the suggestions of the I
other applicants, whose social standing seems to have impressed him, to
J J
participate in the scheme without any benefit for himself and thinking little
K about the risk involved for Nan Lung and himself as a guarantor. After K
the present case had come to light, D1 retired from Nan Lung and he will
L L
apparently not be returning to work. There is little risk of his
M re-offending. M
N N
76. In all the circumstances, we consider that the sentence of 4 years’
O
imprisonment was manifestly excessive. There were mitigating factors of O
an exceptional kind in this case which distinguished D1’s position from D3
P P
and D4’s in a marked way. In our opinion, a sentence of 2½ years’
Q imprisonment would have been appropriate. Q
R Conclusion on sentence R
S S
77. We, therefore, grant leave to D1 to appeal against sentence, and
T treating his application as the appeal, we allow the appeal, set aside the T
U U
V V
由此
- 28 -
A A
sentence imposed by the judge, and substitute for it a sentence of 2½ years’
B B
imprisonment.
C C
D D
E E
F F
G (Geoffrey Ma) (M Stuart-Moore) (K H Woo) G
Chief Judge, High Court Vice-President Vice-President
H H
I I
Mr Graeme A Mackay, on fiat, instructed by the Department of Justice, for
J
the Respondent J
Mr Graham Harris and Mr Martin Wong, instructed by Messrs Paul W Tse,
K K
for D1 (the 1st applicant)
L L
Mr Lawrence Lok SC and Mr Edwin Choy, instructed by Messrs Fred Kan
& Co, for D3 (the 2nd applicant) and D4 (the 3rd applicant)
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
由此
A A
CACC 361/2004
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF APPEAL
D D
CRIMINAL APPEAL NO. 361 OF 2004
E (ON APPEAL FROM HCCC NO. 260 OF 2003) E
----------------------------------------------------------
F F
BETWEEN
G HKSAR Respondent G
and
H H
TSE CHING NG 謝靜吾 (D1) 1st Applicant
I CHENG KIN PING 鄭建平 (D3) 2nd Applicant I
J
LAM WAH LAM, MALINDA 林華琳 (D4) 3rd Applicant J
---------------------------------------------------------
K K
Before : Hon Ma CJHC, Stuart-Moore VP and Woo VP in Court
L L
Date of Hearing : 25 August 2005
M Date of Judgment : 6 September 2005 M
N
----------------------- N
JUDGMENT
-----------------------
O O
P Hon Woo VP (giving the judgment of the Court): P
Q Q
Introduction
R R
1. The applicants, together with another person, Mr Zhong Guosong,
S faced trial in the Court of First Instance before Pang J and a jury on three S
counts of conspiracy. The 1st applicant was the 1st defendant, Mr Zhong
T T
was the 2nd defendant, the 2nd applicant was the 3rd defendant and the
U U
V V
由此
- 2 -
A A
3rd applicant was the 4th defendant at the trial. The applicants will
B B
conveniently be referred to as D1, D3 and D4 respectively, while
C Mr Zhong as D2. C
D D
2. All the four defendants were charged with Count 1, a conspiracy
E to defraud, contrary to Common Law. The particulars of offence were E
that between 1 January 1997 and 20 November 1998, the four defendants
F F
conspired together to defraud the Bank of Communications Hong Kong
G Branch, the Bank of China (Hong Kong) Branch, the National Commercial G
Bank Limited, Hong Kong Branch by dishonestly causing Nan Lung Travel
H H
& Express (Hong Kong) Limited (“Nan Lung”) and Hong Kong Textiles
I Exchange Limited (“HKTEL”) to apply for and utilise credit facilities from I
the banks in the form of letters of credit (“LCs”), causing to be submitted
J J
false documents to the banks purportedly evidencing genuine underlying
K commercial transactions between Nan Lung and HKTEL or Sunpride K
International Limited (“SIL”), causing to procure the issue by the banks of
L L
LCs in favour of HKTEL or SIL, and causing the bank to release funds to
M HKTEL or SIL under the LCs. M
N N
3. D3 and D4 also faced two other counts, Counts 2 and 3.
O
Count 2 was a conspiracy to procure entries in certain records in a bank by O
deception, and Count 3 was a conspiracy to deal with property, knowing or
P P
having reasonable grounds to believe that the property represented the
Q proceeds of an indictable offence. Count 2 related to the false Q
documentation submitted to the banks under the LCs in the conspiracy in
R R
Count 1 as genuine documents, so as to cause HKTEL to be paid the
S proceeds of the LCs. Count 3 related to D3 and D4’s dealing with the S
T T
U U
V V
由此
- 3 -
A A
proceeds of the LCs received by HKTEL and SIL, which had been obtained
B B
by the conspiracies in Count 1 and Count 2.
C C
4. Towards the close of the prosecution’s case, the prosecution
D D
considered that Counts 2 and 3 were bad, because D3 and D4, the only two
E persons charged with the conspiracies in Counts 2 and 3, were husband and E
wife, and could not be guilty as co-conspirators by virtue of
F F
section 159B(2)(a) of the Crime Ordinance, Cap 200. The judge directed
G the jury to return verdicts of not guilty in respect of these two counts. The G
trial proceeded thenceforth on Count 1 only.
H H
5. In respect of this remaining Count 1, the jury unanimously found
I I
D2 not guilty, but by 6 to 1, they found D1, D3 and D4 guilty as charged.
J J
6. The judge adopted a starting point of 5 years’ imprisonment for
K K
the offence, and sentenced D1 to 4 years’ imprisonment. He imposed on
L each of D3 and D4 a sentence of 4½ years’ imprisonment. L
M M
7. D1 now seeks leave to appeal against both conviction and
N
sentence, whilst D3 and D4 have abandoned their applications regarding N
sentence and only seek leave to appeal against conviction.
O O
The involved companies
P P
Q 8. A number of companies were involved in the LCs transactions. Q
R 9. Nan Lung was a company incorporated under the laws of Hong R
Kong and was a partly owned subsidiary of China Southern Airlines prior
S S
to 1999. At the time material to the conspiracy in Count 1, the major
T T
U U
V V
由此
- 4 -
A A
interest in Nan Lung was owned by Taiwanese investors. At the material
B B
time, D1 was a director and general manager and D2 was the deputy
C general manager of Nan Lung. C
D D
10. Nan Lung was acting as the ticketing office for China Southern
E Airlines, promoting and selling airtickets. The ticket sales had an annual E
turnover of over $200 million for Nan Lung. Nan Lung had never
F F
conducted any business other than that relating to airtickets.
G G
11. HKTEL was a company incorporated under the laws of Hong
H Kong, and D3 and D4 were the directors and joint shareholders. H
I I
12. D3 and D4 were also the only directors and principal
J shareholders of Wah Shing Travel Service Limited (“WST”). They were J
the directors of SIL, another company incorporated under the laws of Hong
K K
Kong. They also owned the entirety of the interest in Forward
L Development Company (“FDC”), a firm established in Hong Kong. L
M M
13. Prior to the commencement of the trial on 2 July 2004, D3 and
N
D4 had both been made bankrupt. HKTEL was wound up on 21 August N
2000.
O O
The prosecution’s case
P P
Q 14. The prosecution’s case was that the conspiracy to defraud the Q
banks involved a total of 9 LCs. Details of these LCs and matters related
R R
to them were set out in the Admitted Facts agreed by the parties pursuant to
S section 65C of the Criminal Procedure Ordinance, Cap 221. The first S
7 LCs were opened with one or the other of the banks on the application of
T T
U U
V V
由此
- 5 -
A A
Nan Lung in favour of HKTEL each for a sum either of roughly
B B
$3.9 million (US$0.5 million) or roughly $7.8 million (US$1 million),
C purportedly for the purchase of textiles goods or garments by Nan Lung C
from HKTEL. In respect of each of these 7 LC transactions, it was D1
D D
and D2 who signed the cargo receipt documents, and the related invoices
E and packing lists were signed in some cases by D3 and in others by D4. E
The 8th LC was opened on the application of Nan Lung in favour of SIL,
F F
with the cargo receipt signed by D1 and D2 and the invoice signed by D4.
G The 9th LC was opened by the bank on the application of HKTEL in favour G
of Nan Lung, with the cargo receipt signed by D4 and the packing list
H H
signed by D1 and D2.
I I
15. The following are also significant admitted facts. The total
J J
value of the 8 LCs opened by Nan Lung came to almost HK$44 million.
K From the proceeds of these LCs, WST received not less than K
HK$9.6 million, FDC received not less than HK$6 million, D3 received
L L
not less than $3.9 million. In relation to the first 7 LCs, HKTEL issued
M sales invoices totalling almost HK$36 million. None of these invoices M
was entered into the sales ledger of HKTEL for the relevant financial years.
N N
In relation to the 9th LC, no entry was made in any purchase ledger of
O HKTEL for the financial year 1997/1998. O
P P
16. Another admitted fact was that the total amount remaining
Q unpaid by HKTEL to Nan Lung in respect of the first 8 LCs came to Q
$29.39 million. This indebtedness arose from the fact that the LCs were
R R
vehicles by which loans were effectually made by Nan Lung to HKTEL.
S S
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17. Since HKTEL had not repaid the LC proceeds to Nan Lung, Nan
B B
Lung had defaulted in repaying the banks on the first few LCs. After
C pressure exerted by D1 on D3 and D4, D3 and D4 persuaded D1 to take out C
the 8th LC in the name of SIL. The proceeds of the 8th LC were paid by
D D
HKTEL to Nan Lung to repay the banks for the first few LCs. The 9 th LC
E was also a device to reduce the indebtedness of Nan Lung to the banks E
under the earlier LCs.
F F
G 18. It was an admitted fact that part of the proceeds from the 9th LC, G
applied for by HKTEL, was used to repay Nan Lung in respect of the
H H
amount outstanding for the first LC. $3 million used by HKTEL for the
I partial repayment to Nan Lung for the 2nd LC was substantially from the I
proceeds of the 7th LC. $7.8 million used by HKTEL for the repayment to
J J
Nan Lung for the 2nd LC and the 3rd LC came from the proceeds of the 8th
K LC. K
L 19. Admitted were also two written agreements: one was made on L
M
26 March 1997 by D1 and D2 on behalf of Nan Lung and D3 and D4 on M
behalf of HKTEL, and the other agreement was undated and signed by D3
N N
and D4 of the one part and D1 and D2 on behalf of Nan Lung of the other
O
part. In his summing-up to the jury, the judge described these two written O
agreements as follows:
P P
“Both agreements bear the signatures of the 1 st and 2nd defendants.
However, there are no company chops appearing on those
Q documents. The gist of both agreements is that Nan Lung will Q
provide funds for the normal course of business of Hong Kong
R Textile and Sunpride International. The two agreements were never R
presented to China Southern Airlines’ management for approval.”
(Appeal Bundle p 16)
S S
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A A
20. It appeared from the two written agreements that Nan Lung
B B
agreed to enter into LC and trust receipt arrangements for $10 million to
C raise funds to be provided to D3 and D4 for the promotion of their textile or C
piecegoods business. In return, Nan Lung would get 2% of the LC
D D
amount and 5% bonus shares, but how the bonus shares were to be given
E was unspecified. Consequently, Nan Lung applied for and obtained the E
opening of the first 7 LCs with all the proceeds given to HKTEL.
F F
G 21. There was evidence from representatives of the banks that D1 G
and D2 of Nan Lung approached them for banking facilities to open LCs.
H H
They were told that Nan Lung wished to branch out into the fashion
I business. Nan Lung required LC facilities to purchase goods for sale in I
the Mainland in the fashion sector. The Bank of Communications
J J
prepared a credit analysis report on Nan Lung for the purpose of deciding
K whether to grant Nan Lung the facilities required. In that report it was K
stated that Nan Lung
L L
“… is expanding its business and is planning to assist its associated
M companies in the issuing of letters of credit for goods purchased, to M
engage in general trade and to bring in supplies for Southern
Airlines, … ”
N N
“It is understood from the client that the line of the documentary
O bills will mainly be used for bringing in supplies for Southern O
Airlines and for the issuing of letters of credit for associated
companies, so as to receive handling charges.”
P P
22. D1 or D2 had mentioned to the bankers that there was to be
Q Q
trading between Nan Lung and HKTEL. D1 never told them that the LCs
R applied for were actually loans, nor did he tell them that he was only R
interested in obtaining loans to finance HKTEL. The critical omission
S S
was that there were never going to be any goods even though the LC
T documents would assume their existence. The bankers said that if they T
U U
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A A
had known that there were no underlying commercial transactions without
B B
any goods ever involved, no facility would have been granted. This
C absence of goods (even though the documents would speak of their C
existence) was the crux of the deceit.
D D
E The defence case E
F 23. Only D2 gave evidence before the judge. D1, D3 and D4 did F
not. These defendants merely put the prosecution to proof, and as from
G G
the large amount of materials admitted in the Admitted Facts, allowing the
H inference to be drawn that there were no underlying transactions (and H
goods) for the LCs, it seemed that their defence was that either there was
I I
no conspiracy between them or they were not dishonest in dealing with the
J banks. J
K K
24. The record of the cautioned interviews of D1 and that of D2 were
L produced at the trial. D1 admitted in the interview that it was a way of L
re-routing money. He admitted that there were no goods or underlying
M M
transactions under the LCs and he believed that the whole scheme was to
N lend money to HKTEL. N
O O
25. There was evidence that D1 had said that he had no experience in
P
LC matters. He considered that D3 and D4 were people of high social P
standing and trusted them. There were references in the evidence to D1
Q Q
believing D3 to be associated with the Tung Wah Group and D4 with Po
R Leung Kuk. He was unaware of the LC procedures and just trusted D3 R
and D4 to enter into the transactions with the banks in order to raise loans
S S
for HKTEL.
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A A
26. In the record of D2’s interview as well as D2’s testimony, he said
B B
he was only the deputy to D1 and played a very limited role in the whole
C incident. He had no knowledge of LC matters and acted under the C
instructions of D1. He signed the two written agreements and the LC
D D
documents because he was told by D1 to do so. D1 had also told him that
E the whole thing had been approved by the Chairman of the Board, E
Mr Wong, who represented the Taiwan interest in Nan Lung.
F F
G 27. D3 and D4 did not give evidence. In cross-examination of PW1, G
the supervisor of Nan Lung’s Accounts Department, it was put by their
H H
counsel that the dealings between Nan Lung and HKTEL were open and
I not concealed in Nan Lung’s books. It seemed also to be D3 and D4’s I
case that in HKTEL’s books, there was no record of any sale and purchase
J J
transactions between HKTEL and Nan Lung, but the proceeds of the LCs
K were reflected as loans from Nan Lung on Nan Lung’s current account with K
HKTEL. It seemed that their case was that the openness of the
L L
transactions in HKTEL’s company books could have raised a doubt as to
M whether they had the dishonest intent required to be proved. M
N N
The grounds of appeal against conviction
O O
28. On behalf of D1, Mr Graham Harris raised four grounds of
P appeal against convictions. Three of these grounds are discrete and can P
conveniently be dealt with first, while the remaining ground can be dealt
Q Q
together with the first ground of appeal against conviction raised by
R Mr Lawrence Lok SC on behalf of D3 and D4. R
S S
D1’s grounds 1 and 2
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29. These two grounds relate to Counts 2 and 3. It is contended that
B B
as Counts 2 and 3 against D3 and D4 were wrong in law, given the way in
C which the case was opened and proceeded with, the joinder of these two C
defective counts prejudiced the fair trial of D1 upon Count 1. When the
D D
defects of Counts 2 and 3 became apparent towards the close of the
E prosecution case, the judge directed the jury to find D3 and D4 not guilty of E
these two counts. It is contended that in the interests of justice the judge
F F
should have discharged the jury and the remaining Count 1 be retried by a
G different jury, particularly so given the apparent confusion and concern G
expressed by the jury when directed to return the not guilty verdicts.
H H
I 30. Mr Harris submits that Counts 2 and 3 were effectively I
withdrawn just one day before the prosecution closed its case after the trial
J J
had proceeded for 17 days. Hitherto the prosecution had been conducting
K the trial and leading evidence on all three counts, adducing evidence on the K
basis that there had been a “hidden agenda” on the part of D3 and D4,
L L
which might have accorded D1 a defence under section 159B(1) of the
M Crimes Ordinance, that D1, D2 and Nan Lung were intended victims of the M
conspiracy and therefore not guilty as co-conspirators. Under this “hidden
N N
agenda”, evidence had been adduced to show that the funds obtained from
O the LCs were utilised by D3 and D4 for their own purposes. On the other O
hand, Nan Lung and D1 bore the financial risks associated with the funds
P P
obtained by the LCs and D1 shouldered a secondary liability to repay under
Q his personal guarantees given to the banks. Had the case proceeded down Q
this route, the jury would have had presented to them a scenario in which
R R
they would be entitled to conclude that D1 and D2 were intended victims of
S the scheme. When Counts 2 and 3 were gone, the evidence thus far S
adduced simply became “lumped “ together with that on Count 1. It is
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A A
contended that the two separate conspiracies were thus merged into one and
B B
the distinction between the role of D1 and that of D3 and D4 was gone,
C taking with it, inevitably, the section 159B(1) defence. The jury was left C
to concentrate on Count 1 in respect of which the spotlight was on the
D D
banks, being the only victims of the conspiracy remaining to be dealt with.
E It is submitted that this drastic change in the prosecution case and in the E
focus of the jury resulted in irrefutable damage to D1’s defence. Not only
F F
was the culpability of D1 magnified with the change of focus, but also the
G defence of intended victim faded away. D1’s trial was thus greatly G
prejudiced. By taking away the proper context in which Nan Lung and
H H
D1 could have been seen as victims, the effect on the issue of dishonesty on
I D1’s part is said to be devastating. Such damage was not cured by any I
proper direction given by the judge.
J J
K 31. The factual background of the second ground raised by Mr Harris K
was that after the judge had directed the jury to return verdicts of not guilty
L L
on Counts 2 and 3 as against D3 and D4, the jury posed a question in
M writing to the court: M
“As a group of reasonable citizens, we would like to know more
N N
information and why the verdicts come to the conclusion of not
guilty for the 2nd and 3rd count. Thank you.” (Appeal Bundle p
O 332) O
P 32. After discussion with counsel, the judge decided not to give a P
direct answer to the question, save to say that it was a direction in law and
Q Q
the jury was bound to follow the judge’s direction. It is contended by
R Mr Harris that this answer could only muddle the jury’s thinking and R
confuse them in their deliberation of the case. However, instead of
S S
discharging the jury and ordering Count 1 to be retried before another jury,
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A A
the judge allowed the case to proceed. This, it is argued, had prejudiced
B B
D1’s possible defence of being an intended victim. D1 had thus been
C prejudiced as a result of the unsatisfactory way the prosecution had C
conducted the trial and its oversight of the legal implications of the special
D D
relationship between D3 and D4, which was due to no fault of D1 at all.
E E
33. It would be noted that Count 2, against D3 and D4, was a
F F
conspiracy to procure entries in certain records in the banks by deception.
G The underlying transactions were the same LC transactions covered by G
Count 1. As the particulars of offence of Count 2 clearly showed, the
H H
deception alleged to have been perpetrated by D3 and D4 was to use false
I documents such as invoices, packing lists and cargo receipts required under I
the terms of LCs to cause the banks to make payments under the LCs to
J J
HKTEL. All the evidence on Count 2 was, as Mr Harris conceded, both
K relevant and admissible on Count 1. K
L 34. Count 3 against D3 and D4, albeit also relating to their receipt of L
M
the LC proceeds knowing them to represent the proceeds of an indictable M
offence, was entirely separate and had nothing to do with the hidden
N N
agenda issue. We do not need to say anything further on it.
O O
35. The joinder of Counts 2 and 3 to Count 1 on the indictment, in
P our judgment, plainly did not prejudice D1. The joinder of Count 2, P
focusing on the device of D3 and D4 in obtaining the proceeds of LCs
Q Q
which they caused Nan Lung (through D1) to open in their favour may
R support the hidden agenda as postulated by the prosecution. This might R
assist D1 if he could expand it to avail himself of the protection offered by
S S
section 159B(1) of the Crimes Ordinance. The joinder therefore only
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A A
benefited D1 and could not have operated to his prejudice. D1 could have
B B
relied (as he in fact did) on the evidence of his alleged belief in the high
C social standing of D3 and D4 and the trust that he had placed on them so as C
to create a reasonable doubt that he was an intended victim of the deception
D D
in Count 1 perpetrated by D3 and D4.
E E
36. The prosecution proceeded with the trial on the basis of all three
F F
counts until the very last moment. The evidence relating to Count 2 had
G all been adduced. However, such evidence was, as we have said, also G
relevant to Count 1. There was no evidence exclusively adduced for
H H
Count 2 and there was nothing “lumped” together as suggested by
I Mr Harris. I
J 37. When the jury was directed by the judge to return not guilty J
verdicts on Counts 2 and 3, the evidence that might support the hidden
K K
agenda still remained. The not guilty verdicts would not have diminished
L whatever value this evidence might have in favour of D1. L
M M
38. From the question put by the jury to the judge, it appeared that
N they were curious as to why D3 and D4 could not be guilty of Counts 2 N
and 3. Ultimately, it could not have caused any confusion as suggested by
O O
Mr Harris. In fact, the explanation apparently sought by the jury was
P given and the defence of “intended victim” was left open by the judge to P
the jury in the judge’s summing up, when he said:
Q Q
“… in law, the 3 and 4 defendants, being husband and wife, are
rd th
R treated as one person and a person cannot conspire with himself. R
To put it simply, there must be at least two persons to form an
agreement. In this case, if you find that both the 1 st and
S 2nd defendants not guilty, I stress the word ‘both’, then as a matter of S
law, the 3rd and 4th defendants cannot be guilty as well, and you must
return a verdict of ‘not guilty’ in respect of the 3rd and 4th accused.
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A A
The reason being as I have said, a person cannot conspire with
B himself without others. The prosecution must prove beyond B
reasonable doubt that for each of the 1 st and 2nd defendants, they are
not the intended victims of a fraud scheme against the banks. If the
C C
prosecution fails to make you feel sure that they are not the intended
victims of the fraud scheme against the bank, then it must follow that
D there must be a reasonable doubt on the issue whether each D
defendant was dishonest in a sense which I had explained to you
earlier.” (Appeal Bundle p 13)
E E
39. The continuation of the trial on Count 1 after the disposal of
F F
Counts 2 and 3 could not have prejudiced D1 either. The evidence of the
G G
hidden agenda was still there, available for D1’s use. Similarly, the
H
defence of intended victim was similarly left open for D1. We do not H
accept that D1 could have been prejudiced in any way as contended by
I I
Mr Harris. In any event, it should not be forgotten that at all times, Count
J 1 remained as a charge that all defendants, especially D1, had to deal with. J
K 40. Mr Harris submits that in the way the jury framed their question, K
there was a possibility that they thought D3 and D4 were guilty of Counts 2
L L
and 3, and as they had been directed by the judge to return verdicts of not
M guilty on these two counts, they could have convicted D1 on Count 1, since M
without D1’s conviction, D3 and D4 (as man and wife and the only
N N
remaining conspirators) would have to be acquitted. This argument is
O premised, if we may say so, on the imagination or speculative theory that O
the jury was so perverse as to find an innocent person guilty, purely for the
P P
sake of enabling them to convict two guilty persons. This would also
Q Q
have been contrary to the judge’s clear direction to them that they had to
R
consider the case regarding each accused separately. This argument is R
obviously unsound and must be rejected.
S S
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A A
41. In any event, all counsel for the defendants never made any
B B
application to the judge for discharging the jury and having Count 1 tried
C before another jury, and Mr Harris is not saying that defence counsel had C
failed to discharge their duties properly at the trial.
D D
E 42. These two grounds have no substance. E
F Not letting the jury know the reasons for acquittal F
G G
43. Before leaving this matter, we wish to make an observation about
H the judge’s answer to the jury’s question (see para 31 above) as to why they H
had been directed to return verdicts of not guilty on Counts 2 and 3.
I I
44. After discussion with counsel, the judge said to the jury:
J J
“Mr Foreman, I have received a note from you. I will just read it
K out and ask you to confirm if this is what you have written. Please K
sit down. ‘As a group of responsible citizens, we would like to
know more information on why the verdict came to the conclusion
L of not guilty for the 2nd and 3rd count. Thank you.’ Is that what L
you have written? Right.
M M
Now, I fully understand your concern over this but as I have told you
very early at this trial and also this morning, it is a matter of law that
N you need to take my directions and act upon them. Over the N
weekend we had detailed discussions with counsel and a matter
regarding the 2nd and 3rd count has been resolved without having to
O O
trouble you over the facts. It’s a matter of law but I don’t need to
go into that now because there is no need. There is no need to
P trouble you. It’s as simple as that. I share your concern and it is P
very responsible that you have raised this question. It shows how
conscientious you are. Thank you very much.” (Appeal Bundle
Q pp 337-338) Q
R R
45. The reason for the acquittals was in fact very simple: D3 and D4
S were husband and wife and could not be guilty as co-conspirators. In our S
view, the jury was entitled to be told this simple answer and not be kept in
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A A
the dark about it. Normally, unless prejudice will be caused or some other
B B
exceptional reason exists, a jury is entitled to have its queries clarified. In
C the present case, the jury was informed that as a matter of law, Counts 2 C
and 3 would be resolved without the need to trouble them on the facts.
D D
The jury was of course later informed in the judge’s summing up that a
E conspiracy between husband and wife is not possible in law. Accordingly, E
no harm was done by the judge’s omission to answer the jury’s earlier
F F
question, but, as we have observed, a direct answer should have been
G given. G
H H
D1’s ground 4
I I
46. This ground alleges that the jury’s majority verdict of guilty in
J respect of D1 was inconsistent with its unanimous verdict of not guilty in J
respect of D2. It is the contention of Mr Harris that there were substantial
K K
similarities in the prosecution cases against D1 and D2. Both of these
L defendants were involved in the management of Nan Lung, they signed on L
M
the two written agreements, they signed the LC application forms and M
cargo receipts, they dealt with the bank officers together, and neither had
N N
any personal gain from the LC transactions. They were both persons of
O
good character, had very little experience or knowledge in LC procedures, O
and the prosecution would have to prove against each of them a dishonest
P P
intent to put the banks at risk or defraud them, and that they were intended
Q victims of the conspiracy of D3 and D4. Q
R 47. We do not need to go into any great detail in respect of this R
ground. There are several very significant distinctions between the
S S
positions of D1 and D2. D1 did not give evidence but D2 did. D1 was
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A A
the director and general manager of Nan Lung while D2 was the deputy
B B
general manager, carrying out his duties as instructed by D1. According
C to his evidence, D2 had been told by D1 that Nan Lung was prepared to do C
business with HKTEL in respect of textiles and garments and approval for
D D
this had been given by the Taiwanese Chairman of the Board. This
E evidence of D2 could be of great significance in the jury’s consideration E
which might have created a reasonable doubt in their mind that D2 did not
F F
have a dishonest intent in going along with what D1 instructed him to do.
G This must be contrasted with the fact that two directors of Nan Lung had G
given evidence that they had no knowledge of Nan Lung’s dealings with
H H
HKTEL, which was contrary to the alleged approval by the board of
I directors. I
J J
48. Mr Mackay, for the respondent, has also drawn our attention to
K the fact that D1 had admitted in his interview that the 9th LC was a device K
to enable Nan Lung to recoup part of the LC amounts that HKTEL had
L L
failed to repay, with no underlying goods in support, and the jury could
M have convicted him, rather than D2, on this distinct evidence alone. M
N N
49. This ground must fail.
O O
D1’s ground 3 and D3 and D4’s ground 1
P P
50. These two grounds allege that the judge erred in his summing-up
Q Q
in failing to put to the jury the defences relied on by all these applicants.
R It is contended that the overall tenor of the summing-up was unbalanced R
and unjustifiably tilted towards the prosecution.
S S
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A A
51. The main thrust of these grounds relied on by all the applicants
B B
was the “openness” in which both D1 in Nan Lung and D3 and D4 in
C HKTEL dealt with the LC transactions. It is also contended that there was C
some evidence that at least some of the banks concerned were aware of the
D D
true purpose of the applications for LCs. The banks had more than
E sufficient collateral from Nan Lung for granting the facilities required for E
the opening of LCs and it is alleged that there was no evidence that D1
F F
attempted to conceal from anybody the true nature of the LC transactions.
G G
52. PW1, the lady supervisor of Nan Lung’s Accounts Department,
H H
agreed that the two written agreements had been shown to her by D1, with
I the effect of Nan Lung agreeing to lend $10 million to HKTEL for the I
latter’s business operation. However, PW1 clarified that she had not
J J
shown these written agreements to the banks to which applications for LCs
K were made by Nan Lung. She had seen these written agreements which K
had been shown to her, but she had not been provided with any copy.
L L
This was not evidence of openness towards the banks. It was merely that
M D1 did not hide the fact from PW1 that Nan Lung was using the LC M
transactions to lend money to HKTEL, and in any event PW1 would have
N N
known this as the supervisor in charge of the accounts because there was no
O evidence of any record of any sale of goods transactions in the books of O
Nan Lung.
P P
Q 53. PW1 also said in cross-examination that she had a conversation Q
with an officer from the Bank of China, a Mr Chan, who had been told by
R R
D1 that HKTEL had not repaid the loan. PW1 agreed that Mr Chan had
S told her that in the opinion of his bank, the transaction between Nan Lung S
and HKTEL was not the usual type of LC transaction, and that it was just a
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A A
loan provided to HKTEL by Nan Lung by way of an LC. Mr Chan also
B B
warned PW1 to ask D1 to handle the matter with caution because D1 was
C advancing in age and might be prone to be deceived. However, this C
conversation did not amount to evidence that the bank was not misled when
D D
the LCs were applied for, because it only took place at the time when Nan
E Lung had defaulted to pay the bank on the LCs and Mr Chan was chasing E
for payment. This conversation must be put in the proper context and
F F
compared with what D1 and D2 had told the banks when they applied for
G the opening of LCs, which was that Nan Lung was branching out into the G
fashion business and required LC facilities for the purchase of supplies for
H H
that business, its associated companies, and China Southern Airlines.
I I
54. The second item of alleged “openness” was that according to the
J J
lady bookkeeper of HKTEL who was also responsible for keeping the
K books for WST and FDC, HKTEL maintained in its books a current K
account of Nan Lung, but no sales or purchase entries had been made in the
L L
ledgers of HKTEL relating to the LCs. This was done in accordance with
M D4’s instructions. This evidence was consistent and consonant with the M
admitted facts that none of the invoices relating to the first 7 LCs was
N N
entered into the sales ledger of HKTEL for the relevant financial year and
O that relating to the 9th LC, no entry was made in any purchase ledger of O
HKTEL for the financial year of 1997/1998.
P P
Q 55. The judge did remind the jury of a similar suggestion made by Q
counsel. He said:
R R
“Counsel suggested that the defendants did nothing to hide the flow
of funds and this shows the defendants must have thought that there
S was nothing illegal about the loan arrangement.” (Appeal Bundle S
p 40)
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A A
56. Mr Mackay has made a point, which in our view is valid, that the
B B
written agreements and the books of the companies were internal
C documents never made available to the banks and that the proceeds of the C
LCs had to go through the companies’ books in any event, which was not
D D
actually openness.
E E
57. In our judgment, this so-called openness did not support the
F F
alleged lack of dishonest intent vis-à-vis the banks. The applicants made
G misrepresentations to the banks that there were the supplies of goods as G
evidenced by the false documents the applicants presented to them. One
H H
has to note that there was no evidence that the two written agreements had
I been shown to the banks, nor for that matter, the accounts and ledgers of I
Nan Lung or HKTEL. Quite on the contrary, D1 and D2 had represented
J J
to the banks that Nan Lung was branching out into the fashion business and
K they required LC facilities for the purpose of purchasing supplies for that K
business and its associated companies. Additionally, it has to be borne in
L L
mind that the evidence did not reveal any openness about the main part of
M the fraud at all, namely, that goods never existed. This was always M
concealed. Accordingly, on analysis, the openness point was not a valid
N N
point at all. The main part of the fraud (namely, the non-existence of
O goods) was never out in the open. The openness point was therefore not a O
point that had to be specially emphasised to the jury.
P P
Q 58. The prosecution case against D1 was very strong. He was the Q
person in charge of Nan Lung and instrumental in applying for the banking
R R
facilities for opening the LCs. He had told the bank that he required the
S LCs to purchase goods for the fashion business in which Nan Lung was S
going to branch out. He admitted in his cautioned interview that there
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A A
was no underlying transaction for the LCs. There was evidence from the
B B
bank representatives that they would not have opened the LCs had they
C known that there were no underlying transactions. C
D D
59. The judge had directed the jury’s attention to the evidence that
E D1 had told D2 that Nan Lung’s dealing with and lending to HKTEL had E
the approval of the Board Chairman, and D1 had also expressed that D3
F F
and D4 were reputable socialites and he trusted them. These were the
G major pieces of evidence that might assist D1 in raising a reasonable doubt G
in the jury’s mind that he was not dishonest. The large amount of
H H
collateral provided the Nan Lung to the banks was also mentioned by the
I judge, and this might tend to raise doubt in the jury’s mind as to whether I
D1 had the dishonest intent to deceive the banks. The strong
J J
prosecution’s case against D1 was also put to the jury, and the judge fairly
K left all findings of facts to them. All in all, we do not find the judge’s K
summing-up unbalanced or unfair towards D1.
L L
M
60. Regarding D3 and D4 who, like D1, did not give evidence, the M
prosecution’s evidence against them was even stronger. They admitted in
N N
the Admitted Facts that invoices relating to the LCs had been issued by
O
HKTEL but no sales had been entered into HKTEL’s books. They also O
admitted the fund flowing of the LC proceeds, part of which were utilised
P P
for their personal, as opposed to business, purposes. They admitted that
Q they were unable to repay Nan Lung about $26 million that they had Q
received from the proceeds. They also admitted that they had become
R R
bankrupt. The so-called openness with which D1 dealt with the two
S written agreements in the presence of PW1 was neither here nor there as we S
have indicated. There was no evidence to suggest that there had been
T T
U U
V V
由此
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A A
openness with the banks and all the indications were that so far as they
B B
were concerned, there had been none. On the contrary, an elaborate
C system had been put in place to deceive the banks, which negated any C
suggestion of “openness” towards them.
D D
E 61. In our judgment, the summing-up was in all the circumstances E
not unbalanced or unfair to D3 and D4 as suggested.
F F
D3 and D4’s ground 2
G G
H 62. This ground alleges that the judge erred in failing to direct the H
jury that the evidence given by PW1 on what D1 had said out-of-court to
I I
PW1 about D4’s participation in the arrangement of the LCs would not be
J evidence of that fact against D4. PW1’s evidence in-chief was that when J
she told D1 that she did not know how to process LC applications, D1 told
K K
her that D4 had already typed out the necessary forms. Mr Lok’s
L complaint is that during the course of PW1’s testimony, the judge did not at L
any stage direct the jury as to the limited use of this evidence, in that it
M M
could not be used against D4.
N N
63. Mr Lok submits that since what was said by D1 to PW1 about D4
O O
out of court was hearsay it was not admissible as against D4. This might
P
be correct in other circumstances, but in the present case where D1, D3 and P
D4 were charged with a conspiracy, the co-conspirator’s rule applies. It is
Q Q
only necessary to refer to para 36-60 of Hong Kong Archbold 2004, which
R reads: R
“Ordinarily, acts done or words uttered by an offender will not be
S evidence against a co-accused absent at the time of the acts or S
declarations. However, it is now well established that the acts and
T
declarations of any conspirator made in furtherance of the common T
U U
V V
由此
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A A
design may be admitted as part of the evidence against any other
B conspirator. Such acts and declarations may provide evidence not B
only of the existence, nature and extent of the conspiracy, but also of
the participation in it of persons absent when those acts and
C C
declarations were made. This is known as the co-conspirator’s
rule.”
D D
64. Quite apart from the words spoken by D1 about D4 in what was
E E
plainly the furtherance of the conspiracy, there were significant admitted
F facts and there was other evidence referred to earlier which F
overwhelmingly established the participation of D4 in the conspiracy. D3
G G
and D4’s signatures were on the invoices and packing lists relating to the
H first 8 LCs and D4’s signature was on the cargo receipt under the 9th LC. H
PW1’s evidence further pointed out that D4 had brought along LC
I I
documentation to Nan Lung for signature when no LC number had yet
J been assigned to the documents. J
K K
D3 and D4’s ground 3
L L
65. This ground alleges that the judge erred in directing the jury that
M in relation to their consideration of the guilt of D3 and D4, they were M
entitled to take into account D1’s admissions that there were no real
N N
commercial transactions underlying the LCs.
O O
66. D1 did not give the evidence. However, in his cautioned
P P
interview, D1 admitted that he had never received any goods from the LC
Q transactions. Before summarising the incriminating parts of D1’s Q
interviews, the learned judge reminded the jury that D1’s answers in the
R R
interviews could not be used against any of the other defendants. The
S complaint under this ground is that towards the end of the summing-up, S
when the judge summarised the prosecution’s case against each of the
T T
U U
V V
由此
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A A
defendants, and in dealing with the evidence against D3 and D4, he
B B
directed the jury in the following terms:
C “The other point you may wish to consider is this: it is not disputed C
by the 1st accused that there were no goods involved in all the nine
D LC transactions.” (Appeal Bundle p 40) D
E 67. This, it is submitted by Mr Lok, plainly contradicted the earlier E
warnings by the judge that the jury must not use any of the answers of D1
F F
in the interviews against the other defendants.
G G
68. We accept that the judge did mention D1’s said admission when
H H
he was dealing with the evidence against D3 and D4. However, earlier on
I in the summing-up the judge had unequivocally told the jury this: I
“Now, let us proceed straight to the interviews by the 1st defendant,
J Mr Tse. Before I take you to the interviews, there are two things I J
need to remind you of. In the statements during the interviews of
K
the 1st defendant by the police, the statement which the 1st accused K
made to the police in the absence of the 1 st, 3rd and 4th accused,
implicating them is not and cannot be evidence against any of them.
L To put it simply, because when the 1 st accused was interviewed, the L
2nd, 3rd and 4th accused were not there, right.
M So therefore, it cannot be evidence against the other three. The M
reason being they had no opportunity to contradict the implications
N by the 1st accused against them. You must therefore disregard any N
allegations by the 1st accused against the 2 nd, 3rd and 4th accused
during the interview. …” (Appeal Bundle p 28)
O O
69. This is a strong direction with the reasons explained to the jury.
P P
The later reference to D1’s admission of there being no goods involved in
Q Q
all the nine LC transactions could have been a slip of the tongue which, it is
R
apparent, went unnoticed by trial counsel or it would no doubt have been R
corrected. However, it should not have happened and we agree that this is
S S
an irregularity. It was, however, no part of the case presented on behalf of
T
D3 and D4 that there were genuine underlying transactions with goods as T
U U
V V
由此
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A A
described in the LCs. Accordingly, we are satisfied that this was not a
B B
material irregularity.
C C
Conclusion as to convictions
D D
70. For the above reasons, D1’s application for leave to appeal
E E
against conviction must be dismissed. Regarding the applications made
F by D3 and D4, because of their ground 3, which identifies a minor F
irregularity in the summing-up, we grant leave to appeal. Treating the
G G
hearing as the appeal for D3 and for D4, and because the irregularity that is
H identified was not a material one, we dismiss their appeals. H
I I
Sentence
J J
71. In sentencing D1, D3 and D4, the judge took into account the
K fact that the conspiracy had caused the banks to pay out some $40 million K
under the LCs that were supposed to be supported by genuine commercial
L L
transactions. The end result was that Nan Lung, of which D1 was the
M M
general manager, had suffered a loss of about $26 million by way of bad
N
debts owed by HKTEL and/or D3 and D4. The judge adopted a starting N
point of 5 years’ imprisonment. He took into account the mitigating
O O
factors in the following terms:
P “The 1st accused is now 80 years of age. He has been in the airline P
business for some 40-plus years and I’ve heard from prominent and
respected members of the travel industry that he is a man highly
Q regarded. He has never committed any offence before and he has Q
contributed significantly to the airline industry. These I consider to
R be mitigating factors. R
In so far as the 3rd and 4th accused, I have evidenced before me that
S before they contravened the law, they were respected members of the S
community, they participated actively in a church community and
various welfare organizations and education institutions. I am told
T T
U U
V V
由此
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A A
that it is because of the economic downturn that caused them to
B suffer financially and hence resorted to the scheme. B
This does not excuse themselves from criminal liability, however.
C Their previous contributions to society – I would look upon them as C
mitigating factors.” (Appeal Bundle pp 66-67)
D D
72. The judge gave an overall discount of one year to D1 and six
E E
months to each of D3 and D4.
F F
73. Mr Harris challenges the starting point of 5 years’ imprisonment
G being excessive and wrong in principle. He submits that the judge failed G
to consider sufficiently or at all the fact that D1 never received any
H H
financial benefit from the scheme and that his only motive was to enable
I I
Nan Lung to increase its income by charging commissions or handling fees.
J
He points out that D2 and D3 were the main culprits of the deception and J
had taken proactive roles in initiating the fraud. The major portion of the
K K
LC proceeds went to D3 and D4 and their associated companies. D1 did
L not receive a single cent or benefit in any way from the scheme. L
M 74. In assessing the appropriate starting point, one has to take into M
account the culpability of the offender as well as the effect of his offence.
N N
While the motive of D1 seemed to be earning some commission or
O handling fees for Nan Lung, he had joined D3 and D4 in perpetrating the O
fraud by making representations to the banks so as to obtain the facilities
P P
for the opening of the LCs, and submitting false documents to the banks to
Q induce them to pay on the LCs. As the general manager of Nan Lung, he Q
was in charge of Nan Lung’s affairs. Without his participation and effort,
R R
the banks would not have granted the LC facilities which caused them to
S S
pay out over $40 million on the LCs. Had Nan Lung not been wealthy
T
enough to repay what it owed to the banks under the LCs, the banks would T
U U
V V
由此
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A A
have suffered badly. Nan Lung, D1’s employer, has now in turn to bear
B B
the loss of $26 million. The period over which the deception was
C perpetrated on the banks was about 1½ years involving 9 false LC C
transactions. In all the circumstances, we are not persuaded that the
D D
starting point of 5 years adopted by the judge was manifestly excessive or
E wrong in principle. E
F F
75. The fact that D1 never intended to benefit personally from the
G offence may to some extent reduce his criminality, but far more G
importantly, it is apparent that D3 and D4 were the main culprits having
H H
initiated the fraud. In this regard, we are prepared to accept that D1, at the
I age of 80 years, may have been more susceptible to the suggestions of the I
other applicants, whose social standing seems to have impressed him, to
J J
participate in the scheme without any benefit for himself and thinking little
K about the risk involved for Nan Lung and himself as a guarantor. After K
the present case had come to light, D1 retired from Nan Lung and he will
L L
apparently not be returning to work. There is little risk of his
M re-offending. M
N N
76. In all the circumstances, we consider that the sentence of 4 years’
O
imprisonment was manifestly excessive. There were mitigating factors of O
an exceptional kind in this case which distinguished D1’s position from D3
P P
and D4’s in a marked way. In our opinion, a sentence of 2½ years’
Q imprisonment would have been appropriate. Q
R Conclusion on sentence R
S S
77. We, therefore, grant leave to D1 to appeal against sentence, and
T treating his application as the appeal, we allow the appeal, set aside the T
U U
V V
由此
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A A
sentence imposed by the judge, and substitute for it a sentence of 2½ years’
B B
imprisonment.
C C
D D
E E
F F
G (Geoffrey Ma) (M Stuart-Moore) (K H Woo) G
Chief Judge, High Court Vice-President Vice-President
H H
I I
Mr Graeme A Mackay, on fiat, instructed by the Department of Justice, for
J
the Respondent J
Mr Graham Harris and Mr Martin Wong, instructed by Messrs Paul W Tse,
K K
for D1 (the 1st applicant)
L L
Mr Lawrence Lok SC and Mr Edwin Choy, instructed by Messrs Fred Kan
& Co, for D3 (the 2nd applicant) and D4 (the 3rd applicant)
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
V V