HKSAR v. Chun Ting Kwan

DCCC 1013/2017

[2018] HKDC 1218

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1013 OF 2017

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Reasons for Verdict

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1.The defendant faces a single charge of fraud.

2.The charge arises out of the obtaining of a loan by the victim from a company called CY Associates, for whom the defendant worked.  It is said the defendant used a number of false representations to get the victim to enter into a loan with another loan provider, an intermediary, the purpose being to take a sum of money by way of security deposit and presumably to obtain commission on the loan.

3.The defendant says no false representations were made and the victim obtained the loan desired on terms that were fully explained, and those are borne out by the documentation that has been produced.

4.The issue in the case became simply the credibility of the 1st prosecution witness or the whole reliability of the 1st prosecution witness.

5.The prosecution case relied upon Admitted Facts and the sole evidence of PW1.  The Admitted Facts prove the existence of CY Associates Accounting Affairs Limited, and they operated a business out of Room 3, 712 Langham Place in Mong Kok.

6.The defendant was identified by PW1 as the person she dealt with in that company in an identification parade, and the payments made by PW1 were shown by the production of a banker’s affirmation. PW1’s evidence was that in the past she conducted a number of property transactions, taking out loans and mortgages.  She was well versed in the procedure for doing so.  She wanted to take out a loan for half a million dollars for a business operation.  Somewhat coincidentally, she received a call from a Mr Law, who said he was a staff of the Hang Seng Bank.  He said there were loans available.  He had seen her bank records.  He said it was difficult to take out a loan from the bank and suggested she approach the company to apply for a personal loan.  He recommended C & Y Accounting, told her of the address in Langham Place, and they would check her ability to repay.

7.It appeared that on 18 August PW1 did go to Langham Place.  She saw Jay Chun, who she identified as the defendant.  He gave her his name card, which was produced.  At C&Y a credit evaluation was carried out, and she also filled out a document produced as P8 and signed that on the same date.  This was an agreement for a client appointment loan application referral is what it was described as.  The loan amount was for 840,000.

8.She said the defendant had told her $340,000 of that was security money, and if a further loan with Hang Seng Bank was confirmed, the money would be returned to her.  She said the defendant told her that C&Y’s role was to assist HSB - that is, Hang Seng Bank - to help the borrower take out a loan.  When she signed P8 she realised C&Y were intermediaries to get the loan.

9.She eventually said that the defendant had told her she could not go direct to Hang Seng because HSB had a lot of bad debts and required intermediary companies to help borrowers to take out loans and see if the borrower had the repayment ability, and that had to be established over a three-month period.  She again later said that Mr Law had called her while she was meeting with the defendant.  She also said that had occurred after the meeting as well.

10.The defendant had told her she must go to a solicitor to sign the loan.  PW1 had gone on to say that when she returned home, she said she would not take out the loan, and that was because she thought that if HSB did not accept the application, then she would be left with a high interest rate loan, which is actually what turned out to be the case. As I said, she later said that Mr Law called her later and told her it was okay, but she said she wanted a document to confirm the loan with HSB.  Then, if there was, she would go and get them.

11.In consequence of this, she said two days later the defendant had called again and said there was a confirmation by Hang Seng Bank, but she needed to see the document, and he told her to go to the solicitor, sign the document, which the loan turned out to be Trustworthy, and then come back to him.

12.It was established that she went to the solicitor and she did sign the loan and the terms of the loan were explained to her.  She said she had been surprised during that process and had called the defendant, who said it was a procedure.  She had asked who would bear the amount of the interest, and the defendant said the bank would take care of it, but it was the bank’s usual procedure and he did not understand it, and that after the loan was guaranteed, the money would be returned to her.

13.Again, she related another conversation where he called her before she signed and said he, the defendant, spoke to Mr Law, and it would all be okay.

14.PW1 said she thought she trusted Mr Law, and so she signed the document.  She in fact received a cheque for $763,900. There was a handling fee of $500 and three instalments deducted.  Eventually she deposited the cheque into the bank and took out $263,400 in cash.  She met the defendant and gave him the money.  It was then she said she had been given by the defendant a Hang Seng Bank loan application form to sign.  She took photographs of that with her mobile phone which were produced as P12.

15.She was given a receipt for $263,400 which was described as a TU fee payment.  She was eventually told by a lady at C&Y that the Hang Seng Bank had not approved her application.  She produced a document that she said proved that, but in fact it did not.  She must have been mistaken about it.

16.She had actually complained to a man called Felix Tsang, who had been another defendant in this case.  He had offered her 50,000 in compensation and later increased that to 80,000.

17.PW1 said as a result of these transactions she had lost a total of $382,000.  She had repaid the Trustworthy loan in full, but she had lost the security deposit and the handling fee and five loan instalments.

18.The prosecution case is one of fraud.  They rely on the false representations (a) through to (g) on the indictment, and it was said that one or a number of those representations led her to enter into the loan with Trustworthy which was a loan of 840,000 and a payment of 263,400 in Hong Kong currency which was of benefit to C&Y or resulted in prejudice or a substantial risk of prejudice to the 1st prosecution witness.

19.The defence case was as follows.  The defendant did not give or call evidence, and no adverse inference can be drawn from that decision.  The defence say that the case is entirely reliant on PW1’s evidence, and they say it is simply confused and unbelievable.  Her testimony contained inherent improbabilities and there were a number of large material discrepancies.  They say would someone who is an experienced borrower and merchandiser rely on what was said to be purely oral representations that a contractual liability would be established; that the document that she signed was in fact described as a second mortgage, not a personal loan, which contradicted her evidence.  She signed a document saying that she would have to pay a sum of money and believed, without any written assurances, that it would be repaid to her.  It was also said that she had never met Mr Law and only spoke with him on the telephone, and in fact only met the defendant twice, for short periods of time; that there were a number of discrepancies between her witness statements and her testimony.

20.The defence did suggest that PW1 had decided to make the allegations to avoid having to make payments on the loan to Trustworthy, but she had in fact repaid that sum.

21.The case must, of course, be proved to a criminal standard - that is, beyond reasonable doubt - and the prosecution have got to show that the defendant practised a deceit by deliberate reckless words or conduct with an intent to defraud, and in doing so induced PW1 to do something which resulted in the benefits pleaded on the indictment or prejudice or the substantial risk of prejudice to, in this case, PW1.  Because the word “deceit” incorporates dishonesty, so the defendant must be shown to be dishonest as well.

22.It is apparent from the hearing that the primary issue to be resolved is the credibility, and more particularly the reliability, of PW1.  If one accepts her as being honest, can her evidence alone be sufficient to convict the defendant to a criminal standard?  It is PW1’s evidence that what she says caused her to enter into the Trustworthy loan were the representations of Mr Law supported by some statements and actions of the defendant.

23.The initial approach was by Mr Law representing himself as being a staff of HSB.  It was he who said that clients had to take out intermediary loans to test the client’s repayment, and he recommended C&Y as being a company to be approached.  Eventually PW1 went and C&Y carried out the credit evaluation.  When PW1 signed P8, she said, “The 340,000 was for security money, and if the loan with HSB is confirmed, this sum will be refunded to me.”  She said the defendant said that to her face to face.  C&Y assisted HSB by helping the borrower take out a loan.  She also said that before she signed the Trustworthy loan, the defendant had told her the loan with HSB was confirmed, and also, whilst in the process of signing the loan, she said she called the defendant to ask him about the interest payment of 60,000, and he had told her over the phone that the bank would take care of it.  It was the bank’s usual procedure and he did not understand it. Again, that he had called her before the loan was signed, and told her he had spoken to Mr Law and it would be okay.

24.It was also apparent the defendant had received the 263,400 from PW1 and given her the receipt.  However, in cross‑examination she said she relied on Mr Law when she signed P8 and P10; that she had not said that in her witness statement.  She said that the defendant had maintained the three monthly repayments, although that had not been in her witness statement.  In fact, in respect of the confirmation by HSB in her statement she said the defendant said it first, then Mr Law had confirmed it, and then the defendant told her again.  Yet in evidence she said Mr Law had called her two days after she spoke to the defendant and then the defendant had called her.  She later said that they had both called her about this, and probably the defendant called her first.  She said in evidence she had never seen the confirmation from HSB because she trusted Mr Law to get it, yet in her witness statement she said she trusted the defendant about it.

25.It would appear there is some overlap in her recollection between these two characters, and the details do operate inconsistently.

26.In respect of the $263,400 given to the defendant, she actually said in re-examination that she thought there was no relationship between that payment and the HSB loan she was applying for, which contradicted her earlier evidence that it had been taken by the defendant as a security for that loan.

27.PW1 did not challenge that.  She agreed she had signed P2 and the Trustworthy loan, and she understood all her obligations under that loan and that the P8 document referred to the $360,000 as being C&Y’s fees for obtaining the loan and there was no mention of it being a security deposit, and yet she still signed it because she thought she would obtain the HSB loan if she signed and paid the three months’ interest on the Trustworthy loan.

28.Unfortunately in the hearing the evidence of PW1 was at times disjointed and chronologically fractured.  She would revert to earlier conversations and interventions which made discerning a sequential route through her evidence challenging.  She would also present details at trial that were different from her account in her witness statement.  Of course, this is to be expected in a case where events take place over a period of time where there are a number of meetings and different people as well.

29.We know she met the defendant twice, never met Mr Law, but did speak to him on a number of occasions; in fact, on her evidence, more communication than she had with the defendant.  But she also refers to telephone conversations with the defendant.

30.I will make it clear that I do not accept the defence contention that she has fabricated a story to evade the responsibilities of the Trustworthy loan, but I do note the defence submission that the paperwork supports their version that PW1 knew the nature of her responsibilities under the Trustworthy loan and was aware of the requirements of the loan that were explained to her and also the fee involved in obtaining that loan.

31.It would appear from her evidence that the reason she would enter into a loan could be that she believed that a lower interest loan would be available in the future if she paid that loan, and she had made the application for a loan at C&Y’s premises, but we do not know what the interest on the loan was.

32.But can the defendant be said, as a certainty, to have made any or a combination of the false representations containing (a) to (g) of the charge, and can I be sure that it led to the entering into the loan, and also into the payment particularised in the indictment?

33.The witness did appear honest, and she did attribute to the defendant representations contained within the representations pleaded in (a) to (g) which I have already outlined; for example, that HSB had given initial approval for a personal loan application; that HSB would approve the loan if she showed a good payment record.

34.However, she did introduce matters that contradicted somewhat.  For example, in respect of the security deposit:  as to the security deposit, she said it would be returned to her once the loan was paid off or after three months’ repayment had been made and HSB had approved her loan; and finally, that it was not related to the application for the HSB loan at all.

35.It would appear that in some aspects, her evidence in the case is internally what I would call incompatible.  It would appear that in respect of this detail it is unlikely she has recalled the evidence correctly.

36.I have to make an overall assessment in light of what would be described as the burden of the standard of proof.  This is not a civil case.  I am not dealing on a balance of probabilities here.  I have to be satisfied so that I am sure about the defendant’s involvement in this case.  I must precisely attribute certain words to him.  I must be satisfied they are not a conglomeration of what he and somebody else might have said.

37.Overall, I found that PW1 tried to recall honestly, but it led to a confused and fractured narrative, and a confusion of who actually said what.

38.Therefore, I cannot conclude to a criminal standard the defendant’s involvement in the fraudulent misrepresentations alleged in the indictment and how and why the moneys were obtained from PW1 that she paid to the defendant.  There must be considerable suspicion.

39.That, at the end of the day, cannot amount to criminal proof.  The charge will be dismissed.