HKSAR v. Yip Ka Ming

DCCC 891/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 891 OF 2014

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Reasons for Verdict

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1.The defendant has pleaded not guilty to one charge of fraud, contrary to section 16A(1) of the Theft Ordinance, Cap 210.

2.The particulars of the offence are that the defendant, between 3 May 2012 and 7 October 2013, supplied workers to BeSpark Technologies Engineering Limited (“BTEL”) - six are named - through a company run by him, Wing Feng Engineering Company (“WFE”).  He falsely represented to BTEL that the daily wage of these six named workers working at two construction sites was HK$720 a day.  He, by deceit and with intent to defraud, induced BTEL to pay $720 a day for these six which resulted in benefit to the defendant or prejudice or the substantial risk of prejudice to the said BTEL.

3.The prosecution case is that after the six workers were paid, they had to give the defendant the difference between the $720 a day they received and the wage they agreed with the defendant, ranging from $400 to $600 per day in this material period of time.

4.This payment to the defendant by these six workers is not denied.  The defendant received a total of about $300,000 from the six workers during the 17-month period of this charge.  This is not denied.

5.BTEL say they suffered a financial loss and the defendant gained financially as the result of the deceit, the misrepresentation.  He induced them to pay $720 a day by supplying BTEL with their contracts stating the daily wage was $720 per day.  If they had known wages were in fact less, they would not have paid $720 per day per worker.  He dishonestly inflated the daily wage.

6.The defence case is that BTEL were aware of the payment of part of their wages by the workers.  They condoned the practice, and with full knowledge of it, still paid the $720 per day per worker.

7.The issue in this case is the credibility of the witnesses and the defendant.  Whether the prosecution could prove all the elements of this fraud would depend on the credibility of the witnesses.

The Prosecution Case

8.In 2008, Sun Hung Kai Properties Limited began to build two developments, one in Tseung Kwan O, “The Wings I”, and one in Tuen Mun, “Century Gateway”.

9.BTEL was a subcontractor for the electrical installation works for the two sites.  BTEL further subcontracted works to a sub-subcontractor, Yung Feng Engineering Company Limited (“YFE”).  The defendant, with others, was a director of YFE, and he was familiar with BTEL’s staff.

10.In May 2011 the other directors resigned from YFE.  The defendant set up WFE with his brother, Yip Kin-sang, as the sole director and shareholder.  It was the defendant who ran and controlled WFE, not his brother.  He was, however, appointed a director in May 2013.

11.WFE took over the sub-subcontractor role previously held by YFE.  There was no written contract between YFE and BTEL. The nature of the contract was solely a supply of labourers to the two sites. WFE would supply BTEL with the contracts made between WFE and each worker.  In that contract the daily wage was set out.  For all six named workers it was $720 a day.  BTEL paid wages according to the daily wage set out in the contracts received from WFE and signed by each worker.  BTEL would deduct from wages paid to WFE workers the 5 per cent MPF contribution made by employees.  Sun Hung Kai Properties Limited required BTEL to pay WFE’s workers’ salaries directly to them, as well as also pay the employer’s MPF contribution.  This is despite these workers being employees of WFE and not BTEL.  None of the above was in dispute.

12.Ignoring the MPF contributions for a moment, there is no dispute BTEL paid $720 a day according to employment contracts as supplied.  It also paid WFE $120 per worker per day as a fee.  This is agreed, although when this fee system started is contentious.  What is not contentious is that the six workers did give the defendant approximately 30 to 40 per cent of their salary paid to them by BTEL. They either gave the defendant cash or paid it directly into his personal account, not an account of WFE.  The prosecution describe it as the defendant skimming off part of the $720 a day paid by BTEL.  As agreed, they gave him over $300,000 during the material period of time.

13.Why they had to pay him part of their salary is also contentious, but explained by the defendant in the witness‑box.  The prosecution say BTEL would not have paid $720 a day if they knew the workers had to pay part of it to the defendant.  They paid $720 a day on the basis that it was the actual wages according to the contracts signed.  They paid more than they should have, and suffered a loss.  He gained and they suffered a loss.  There was potential substantial risk of prejudice to BTEL.

14.There were substantial facts agreed by the parties and exhibited as P161 and P162.  They include the fact that all six named workers signed contracts of employment with WFE, signed by the defendant on behalf of WFE.  They include the attendance records and workers’ payment records at both sites.  Salary reports for all the workers are exhibited setting out salaries paid according to the attendance records and signed by the defendant to confirm their accuracy.  Payroll disbursement records are also exhibited.

15.Bankers’ affirmations for accounts held and used by the defendant and all six named workers are exhibited.  Company records pertaining to YFE and WFE are agreed.  It was an admitted fact the defendant has a clear record.  Exhibits P163 to P168 are witness statements of PW6 to PW11 respectively, agreed under section 65B of the Criminal Procedure Ordinance, Cap 221.  They are the six named workers, PW6 to PW11 on the witness list.

16.All workers knew the contracts stated $720 a day, more than their agreed wages.  All but PW6 had no idea why they were paid more and had to return the difference to the defendant.  Most did it without asking. All but PW6 said no one told them why this was done.  Some assumed it was the practice in this industry.

17.PW6 was told by his friend who got him the job at WFE that he himself was underpaid per day.  He says in P163 he was told that some of the excess salary PW6 had to pay back the defendant would be given to him, his friend, to make up this difference.  Besides this reason, he did not know why else he had to return a portion to the defendant.  Not one worker was told it was required to cover materials, tools or other labour costs.

18.The prosecution also relies on statements made under caution by the defendant.  Their voluntariness is not challenged, and admitted into evidence as Exhibit P143 and 144.  They were video-recorded interviews and played in open court on the first day of trial.

19.The prosecution says the defendant in the interviews agrees BTEL did not know of the practice of the workers giving him part of their salaries because they were not actually on $720 a day.  The defendant agreed their salaries are inflated without the knowledge of BTEL.

20.The prosecution says his interviews amount to an admission of fraud, deceiving BTEL by false representations.  He says himself if they knew, they would not have paid the workers $720 a day.

The Defence Case

21.The defendant elected to give evidence.  He explains that the Project Manager of BTEL PW2 knew what he did.  It was condoned by him.  PW2 told him to adjust the salaries internally.  He took this to mean he could say those workers earned $720 a day so BTEL would pay $720 a day, but in fact they earned less and the balance belonged to WFE.  He did not defraud BTEL.  He had no intention of deceiving them.  He did not pocket the money the workers gave him for his personal use; it belonged to WFE.  He needed it to pay some workers who earned more than the $720 BTEL offered.  He had to make up the difference to these workers.  He said he also had to pay for tools and materials WFE had to supply to the workers.

22.The defendant said he did not admit to the ICAC under caution that he had defrauded BTEL, made any false representations, inflated salaries or admitted any wrongdoing.  If it seemed otherwise, it was because the questions put to him were confusing, leading or hypothetical.  He thought he and the interviewing officer confused each other, and some of his answers were not as they seemed or read in parts.

23.There was much evidence about the contract or agreement terms between WFE and BTEL.  There was a change in how BTEL would pay WFE for its services and how WFE made any profit.  However, during the material time, the system of BTEL paying the workers’ salaries directly on behalf of WFE and according to their contracts with WFE was in place.  That is what is relevant to this charge.

24.WFE was told by BTEL the maximum they paid for workers supplied was $720 a day, and WFE accepted this.  At some stage they accepted a fee or payment of $120 a day for each worker supplied.  BTEL would deduct MPF payments made for each employee and the employer, being WFE accordingly. BTEL paid both sums on behalf of both parties.  When these changes were made, those not relevant to the charge are not agreed by the witnesses.

25.The defendant says BTEL offered incentives and inducements when he threatened to withdraw his workers from the two construction sites.  He went into great detail of meetings and discussions, but they did not relate to the daily wages payable to each worker.  That aspect of their working agreement did not vary or change during the material period of time.

The Law

26.The elements of the charge are:

(a) a deceit practised by the defendant;

(b) with intent to defraud;

(c) which induced the victim, BTEL, to do or not to do something; and

(d) resulting in a benefit to the defendant or prejudice or a risk of it to BTEL.

The prosecution must also prove the defendant was dishonest. The Ghosh test applies when considering dishonesty in relation to fraud; the test from the authority, R v Ghosh [1982] 1 QB 1053. That test has two limbs. First, the court considers whether the defendant acted dishonestly by the standards of ordinary, honest people, and if it finds he had, then secondly, the court considers whether the defendant himself must have realised that what he was doing was, by those standards, dishonest. To prove all the elements above, the prosecution must do this to the appropriate standard. The prosecution alone must prove all elements beyond reasonable doubt. The defendant has nothing to prove.

27.The defendant has a clear record, and I have warned myself accordingly.  Credibility is in issue here, and I will take into account the defendant’s good character when considering his credibility as a witness.  I will also consider the propensity and likelihood of this man committing this offence.  I have directed myself in accordance with the decision of Tang Siu Man HKSAR No 2 [1997] 1 HKCFAR 107.

The Evidence

28.The prosecution called several witnesses from BTEL.  PW1 was the sole proprietor of it, who only met the defendant on very limited occasions.  He confirmed the agreement with WFE was to supply workers to two sites.  His evidence was that BTEL agreed to pay a maximum of $720 a day per worker plus an administration fee of $120 a day per worker to WFE.  He confirmed the workers were paid directly by BTEL and BTEL also paid the employer’s MPF contribution on behalf of WFE.  He confirmed if the workers were not paid $720 a day, despite the contract terms, BTEL would not have paid the full amount of $720 a day, but the actual amount.  He said otherwise, BTEL would suffer a loss.  It was his money, after all.  He expected the defendant to inform BTEL the actual wage agreed by or received by the workers.  He would not agree the workers reimburse part of their salary paid by BTEL to the defendant or WFE.

29.He further explained that skilled workers received $720 a day, and those on less, for example, $450 a day, were unskilled workers and could affect the work done at the sites.  He also said it was PW2 who dealt directly with WFE and dealt with all financial issues.  He reported to PW1.  He agreed in cross‑examination that his company did owe WFE money, but explained he held it back because WFE refused to sign a declaration that in fact all workers were on actual wages of $720 a day as declared in their contracts, and that is what they took home.

30.PW2 was the project manager in charge of the two sites.  It was suggested to him in cross-examination that he was complicit and agreed or indeed suggested to the defendant that he state each worker earned $720 a day when they did not.  He did not agree he told the defendant to internally adjust the wages so part of wages paid by BTEL was taken from the workers to meet other labour costs and expenses.  His view was that if this was happening, there was an element of deceit.  He said the wages stated in contracts had to be the actual wages paid to each worker.  He did not consent to or agree to the arrangement that part of wages were rebated to the defendant.  He disagreed he told the defendant to pay these workers whatever amount he wanted from the $720 a day BTEL paid.  He was clear that if he had known of this practice he would have told his boss, PW1.  The contracts may have been cancelled and the police informed.

31.PW3 was a clerk working at BTEL.  Her duty was to calculate wages according to contracts supplied by WFE, the wages stated therein and the attendance records of the workers filled in daily at the sites.  Her evidence was that as early as May 2012, WFE invoiced BTEL $720 per day per worker; for example, Exhibit P120, pages 919 to 930, specifically at page 921.  She said if she knew the wages were false and not actually as per the contracts for$ 720 a day, she would have told PW1 and withheld payment from the workers.

32.There were some allegations put to her that the defendant amended some invoices of WFE using her personal computer in BTEL’s office.  The reason why was not entirely clear to me, but they were allegations only; not backed by any evidence.  She denied any knowledge of the allegations put to her.  They were not relevant to the particulars of the fraud alleged.

33.PW5, who is listed as PW5 but was in fact PW4 in sequence, Mr Wong, was a registered safety supervisor employed by BTEL.  Part of his duty was to collect from WFE the workers’ contracts to calculate their salaries. He said if he knew the workers were only actually receiving $400 or $450 of the $720 a day paid, he would still accept the contracts he collected, but he would tell the company, BTEL, that the salaries in the contracts were inflated, and see if the company would accept this.

34.He agreed that he would sometimes help workers fill in the contracts.  For example, Exhibit P7, a contract which was in fact filled in by him except for the name of the worker.  He explained he would ask the defendant what the salary was to be paid before he wrote it in.  If the defendant said $720 a day, that is what he would write in the contract.

35.Although PW6 was called to give evidence, as I said earlier, the six named workers’ statements were agreed under section 65B of the Criminal Procedure Ordinance.  Their evidence was not in dispute.  They all agreed to work for less, most at $450 a day, but received $720 a day.  They were told the difference had to be returned to the defendant.  It is noteworthy that two workers, PW7 and PW9, had at home two identical work contracts where the wage is stipulated at $450 a day.  These were accurate, but not for the purposes of BTEL’s records.  The two workers asked the defendant for contracts proving their actual income for personal reasons, and the defendant obliged them; Exhibits P136 and P137.

36.No one suggested that the six workers were forced or threatened when told they had to hand over a sum every month. However, there was a fear if they did not do it, they may lose their jobs.

37.Each witness describes how they got their jobs at WFE, what wage they were to receive per day, and how they received more than the agreed rate.  They then describe how they paid the defendant the balance or the difference of the two sums either by cash or a deposit into his personal bank account.  Some were given a raise of their daily wage after a period of time, but none were ever actually paid $720 a day.

38.I repeat no one except PW6 was given a reason for this practice.  PW10 actually asked the defendant why he was overpaid, but the defendant did not give him a reason or an explanation.  It was PW10 who asked the defendant specifically about tax implications in case his taxable income did not reflect his real income but in fact the inflated income.

39.The defendant gave evidence that he was the only honest witness and PWs 1 to 3 and PW5 were all dishonest witnesses.  He stated that he was told by PW2 to charge $720 a day per worker and then adjust the salaries actually paid internally himself.  He believed BTEL agreed to this scheme and he was not acting dishonestly nor intended to defraud BTEL.  The extra money he was given by the workers from their inflated wages was to go towards tools, materials, and other labour costs.  However, he could not show this through his own accounting records despite producing MFI3.  This document, MFI3, was labelled a wage adjustment table, but it was clearly a purpose‑made record for this trial, and only referred to $223,376.50 returned to WFE.  It is agreed the workers returned more than that to the defendant.

40.The defendant denied pocketing the difference despite an inability to account for the money in his financial records.

41.Clearly, if I believe the defendant’s case that BTEL condoned or allowed this practice, or he honestly believed this from what PW2 said to him, then a doubt is created.  If I reject his evidence, I must still be sure the prosecution witnesses’ evidence can prove the elements beyond reasonable doubt.

My Findings

42.It is not practical or necessary for me to repeat all the evidence produced.  In fact, both Mr Mitchell, for the prosecution, and Mr Boyton and Ms Ma, for the defence, set out the evidence and the law in full in their respective final submissions, MFI4 and MFI5.

43.I have carefully borne in mind all of the evidence of all of the witnesses, the strengths and the weaknesses, the contradictions and the support that is to be found amongst their evidence.  The same applies to all the points made for and against the prosecution and the defence.  That I do not mention a particular piece of evidence or facet does not mean that I have not considered it or factored it into my decision‑making.

44.I refer first to the video‑recorded interviews, P143 and 144.  The prosecution submit that the answers from the defendant amount to an admission of guilt.  It was agreed they were made voluntarily and are admissible.  However, the defendant gave evidence he said he did not want to participate in the second video-recorded interview, P144, because he had a stomach ache.  However, despite this, I was satisfied there was no challenge to the voluntariness at that stage in spite of the Admitted Facts paragraphs 10 to 14.

45.There are several damning answers in the two video‑recorded interviews that point to guilt.  In Exhibit P143 at counters 1124 to 1127, the defendant was asked:  “BeSpark didn’t know about it, is that correct?”  He answered:  “BeSpark probably didn’t know.”  He was asked:  “If it knew it, wouldn’t allow him to do so, allow you to do so, is that correct?”  He answered:  “Right.”

46.Having watched the video and read the transcript, I am in no doubt the defendant understood the questions and the discussion that preceded them.  Clearly the answers were in response to the discussion of the workers receiving $720 a day but having to give him money, having to make deductions from their wages they received.  The defendant said that BTEL did not know about this, and if they knew, they would not have allowed it.  That is clearly what he said.

47.This is in direct contradiction to his oral evidence.  When questioned about counter 1124 to 1127, he said he did not mean this.  I do not believe this.  I am sure he is only now trying to distance himself from an admission he made false representations to BTEL.

48.This is not the only admission.  In Exhibit P144 at counters 806 and 807, the defendant agrees the money the workers gave him from their salaries was illegal.  At counters 862 to 865, he agrees the money the workers gave him from their salaries was obtained by means of corruption or greed and obtained dishonestly.  He agrees no one at BTEL would have permitted him to inflate wages and take the difference.

49.The questions are not confusing, misleading or just hypothetical.  At counters 1006 to 1007, I am sure the defendant agrees BTEL did not know about the workers having to give the defendant money from their salaries paid by BTEL.  Nowhere does he explain PW2 told him he could amend wages internally.  Nowhere does he say PW2 or BTEL condoned the scheme as he says in the witness-box.  Lastly, nowhere does he deny he acted dishonestly, unlike what he says in the witness-box.

50.In P144 at counter 1015, when asked at the end of the interview if he had anything to add, just after he had agreed BTEL did not know the workers paid the defendant part of their wages, the defendant says:  “I only know that corrupted is corrupted.  You did it, then you did it.”  The defendant tried desperately hard in the witness-box to explain away all the damaging answers.  However, his explanations became more and more absurd and fanciful in cross-examination.  They made no sense and reeked of fabrication.  I am sure his answers in his two interviews point to an admission and knowledge on his part that what he represented to BTEL was false and dishonest.  The money he took from the workers was without the knowledge of BTEL, and they would not have paid if they had known this.  I am sure that is what he says in his interviews under caution.

51.I observed the defendant give evidence, and find that he answered most questions evasively.  He desperately wanted to distance himself from any wrongdoing, and when confronted with damning evidence, he could not give a satisfactory answer that indicated truth or any credibility. He was as poor a witness as could be imagined.  I do not hesitate in rejecting his evidence.  I do not believe his explanations, allegations against others and attempt to portray himself as the victim.  His evidence in the witness-box directly contradicted what he told the ICAC in his interviews.

52.The fact that no worker was told by him why they had to return part of their salary because it was inflated is indicative of the deceit.  If the returned moneys were legitimately for materials and tools as well as offsetting other labour costs, the workers would have known and have been informed of this.  There would have been proper records, or some records, for that matter.  There would be no reason to hide this from the workers.  When PW10 asked about the increased salary he received, the fact that the defendant did not give him an answer shows he was hiding the truth.

53.It would make no sense as suggested for BTEL to pay inflated wages knowingly even if there was a shortage of workers.  The risks to BTEL would be substantial if they condoned such a practice.  The quality of workers could not be assured, and the profit made by WFE undetectable or accountable.

54.Despite my rejection of the defendant’s evidence, I must still be convinced by the prosecution witnesses and evidence of the defendant’s guilt beyond reasonable doubt.  To reject his evidence does not mean the elements of the charge are proved to that required standard.

55.However, having considered the evidence of the owner and staff members of BTEL, I am sure their evidence is reliable and credible.  I do not find any discrepancy so serious that I doubt their evidence.  Their evidence is clear, reasonable, and, lastly, believable.

56.I reject the submission PW2 told the defendant he could internally adjust the workers’ wages despite the payment of $720 per day.  I am sure PW2 did not agree or know the defendant would inflate each worker’s daily wages when their actual wage was less.  I am sure if BTEL, or even only PW2, knew that the workers had to give a portion of their salary to the defendant, they would have put a stop to it.

57.Applying their evidence, the documentary evidence, the defendant’s admissions in his interviews and the workers’ evidence, I am sure all the elements of fraud are established.  The deceit and misrepresentation is obvious.  The defendant employed workers at $400 or $450 a day, but submitted contracts to BTEL that stated a wage of $720 a day.  That is falsity the defendant wanted BTEL to act upon and pay accordingly.  He inflated the wages and did not disclose the actual wage to BTEL.

58.By his actions the defendant clearly intended to defraud BTEL.  He submitted contracts he knew BTEL would rely upon to pay salaries and said in his interview that BTEL would not allow him to skim off part of the inflated wages if they knew about it.  This proves his intent.

59.I believed PW1’s and PW2’s evidence they did not know of the defendant’s arrangement with the six workers or the misrepresentation of the contracts.  They were induced by the contracts to pay $720 a day, which was clearly a loss to BTEL and a benefit to the defendant.  I find the workers were exploited as well to some extent.

60.I am sure my above findings show the defendant’s actions were obviously dishonest.  I am sure by the standards of reasonable and honest people, his actions were dishonest.  In fact, he admits in his interviews his actions were dishonest.  I have no doubt he knew what he did was dishonest.

61.Accordingly, and in spite of the defendant’s clear record, I am sure the prosecution can prove all the elements of this fraud charge beyond reasonable doubt.  Nothing submitted by the defence convinces me otherwise or causes me to doubt any of my findings.

62.Therefore, the defendant is convicted as charged.