Case Document

100%Judiciary

HCCC 116/2018

[2021] HKCFI 1487

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO 116 OF 2018

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BETWEEN
	HKSAR
	v
	CHEUNG, Kin-chung	2^nd Accused
	CHAN, Chi-shing	3^rd Accused
	LEE, Ying-wai	4^th Accused

________________________

Before:

Hon Andrew Chan J in Court

Date of Hearing:	11 March 2021
Date of Decision:	26 May 2021

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D E C I S I O N

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1.The 2^nd, 3^rd and 4^th Accused (D2, D3 and D4) followed their acquittal in HCCC 116/2018 applied for costs in defending their cases. At the hearing on 11 March 2021, I refused D2’s application and reserved both D3 and D4’s applications for decision. The followings are reasons for my decision.

2.It is not disputed that when a defendant is found not guilty, he should normally be compensated out of public revenue for the costs incurred in defending the charges. In considering whether the defendant should be deprived of all or part of his costs, the Court must look to the defendant’s conduct generally, as long as such conduct is relevant to the charges he faced. The conduct most relevant to the application must be the defendant’s conduct during investigation and at trial.

3.In Ting James Henry v HKSAR [1], the Court of Final Appeal held that:

“16. It may often be the case that a defendant’s conduct during the investigation and at the trial is such that it brings suspicion on himself, providing a ground for refusing him costs. Such conduct has been described as “most relevant” to the discretionary exercise. However, it is incorrect to suggest (and the authorities give no warrant for suggesting) that a defendant can only be regarded as having brought suspicion on himself by virtue of his conduct during the investigation or at trial and not otherwise. The discretion is not bounded by any such inflexible rule. By his conduct prior to the investigation and trial stages, including conduct which formed part of the setting for the charges laid against him, the defendant may plainly have brought suspicion upon himself. There is no reason to ignore such conduct in the exercise of the court’s discretion on costs following an acquittal on the charges laid, provided always that the discretion is not exercised so as to undermine the presumption of innocence, and in particular, provided that its exercise does not involve the court in adopting a position at variance with the defendant’s acquittal by the tribunal of fact.” (Emphasis added)

4.In respect of D2, I am of the view that D2 has brought suspicion on himself and / or has misled the prosecution into thinking the case against him is stronger than it is.

5.In the present case, D1 and D2 were charged together with other persons with one count of conspiracy to defraud. D1 was convicted after trial whereas D2 was acquitted. The conviction of D1 suggested that the jury was satisfied beyond reasonable doubt that there was in existence a fraudulent scheme involving the use of purchase orders from bogus mainland Chinese buyers in acquiring electronic components.

6.Evidence revealed that these bogus mainland Chinese buyers were introduced by D2 to his employer Britestone. D2 told his superior (ie PW1) that it was a golden opportunity for Britestone to expand its electronic component business into the mainland market. D2 also told PW1 that the purchase of the electronic component for its onward sales to the mainland Chinese buyers had to go through Cohome (ie a company operated by D1). D2 acted as the point of contact between the bogus mainland Chinese buyers and Britestoneon all aspects of this business from beginning to end including the placing of orders, the delivery, the follow-up on products such as goods with old date code and the chasing of payments.

7.All the purchase orders from these bogus mainland Chinese buyers were received by Britestone through emails via D2. D2 was also responsible for chasing payments from these bogus mainland Chinese buyers. When chasing for payments on behalf of Britestone, D2 however used different email addresses to some of the bogus mainland Chinese buyers. In fact, all the bogus mainland Chinese buyers introduced by D2 defaulted in paying Britestone more or less at the same time which could hardly be coincidental. The above mentioned circumstances suggested that D2 was deeply involved in the sales of electronic component to bogus mainland Chinese buyers. His relationship and / or dealings with the bogus mainland Chinese buyers were known to D2 personally and he was the only person who could offer an explanation. Yet, D2 decided not to. Although D2 remained silent throughout, both at the investigation stage and during trial as it was his right, there was no explanation given by D2.

8.During deliberation, the jury asked the following question:

“If D2 found out the fraud or suspected it [was] a fraud but he chose not to disclose his concern and proceeded with the transactions, is this considered as conspiracy to defraud?”

It therefore can be gleaned that the jury was highly suspicious of D2’s conduct too. D2’s conduct was not only highly suspicious but also inevitably led the prosecution into believing the case against him was strong.

9.In respect of D3, he sought to recover costs in the amount of HK$949,581, being his contribution to the legal aid. D3 faced one count of money laundering in circumstances where he received money from Cohome and paid the money to Britestone purportedly to settle invoices issued by Britestone to two bogus mainland Chinese buyers.

10.D3 allowed his bank account to be used as an additional layer in D1’s money circulation. D3’s mobile telephone number had been used in some of the sales transactions ie invoices from Britestone to CHLS and RXPE. D3’s English name, email address and signature appeared in setting up some of the companies which were involved in the business. Evidence revealed during trial that D1 was using the tactics of circulation of money and goods in the fraudulent scheme and this additional layer of bank account allowed D1 to conceal the source of money. There was no explanation whatsoever from D3 for the use of his bank account in receiving money from Cohome and sending it onwards to Britestone. As D3 was not known to be involved in any part of the sales of electronic component from Britestone to the bogus mainland Chinese buyers, there was, as a matter of fact, no need for the use of his bank account.

11.The appearance of D3’s English name, his mobile telephone number and email address on a number of documents, in particular, in relation to the setting up of Cohome; Jinhui Logistic, a warehouse company which was used to receive and store the electronic components; RXZK, a company used by D1 in paying Britestone; CHLS (Hong Kong), a company with similar name to one of the bogus mainland Chinese buyers all pointed to D3’s suspicious involvement. Additionally, one of the shareholder and director of Jinhui Logistic, RXZK and CHLS (Hong Kong), Chen Zhimin happened to be a co-conspirator in D1’s fraudulent scheme.

12.In addition, D3 was ex-colleague of D1, both worked for Arrow, a manufacturer of one of the electronic components involving in the sales in this case.

13.In HKSAR v Rahman Md Sheikh Mojibur [2], the Court of Appeal held that whilst it was the right of the respondent to remain silent, it did not mean that he could not be deprived of his costs if he chose to exercise that right. The reasons for D3’s involvement in particular in allowing D1 to use his bank account was only known to himself. All these circumstances when putting together were highly suspicious. Had there been some reasonable explanations given by D3 for the use of his bank account, the transfer of funds, his association with the above mentioned companies and the appearance of his name etc on documents during the investigation stage, D3 might not be charged in the first place. Hence, D3’s application for costs is refused.

14.In respect of D4, he faced one count of money laundering in circumstances where he received money from Cohome and paid the money to Britestone purportedly to settle invoices issued by Britestone to two bogus mainland Chinese buyers where D4 had little connection to these sales transactions. D4 elected to testify during the trial and offered an explanation regarding the flow of money in and out of his personal bank account for the first time.

15.His explanation was that he was asked by D1 to pay on behalf of D1’s suppliers as D1 was going to mainland China and could not possibly pay for the goods when they arrived. As a result, D4 went to the banks to purchase cashier orders for D1. Had D4 told the police the version of event which he put forward during trial, he would, mostly likely, not be charged for the offence.

16.In addition to the above, D4’s mobile telephone number was used as the contact telephone number for Welldone Shenzhen in one Letter of Authorization in relation to two of the bogus mainland Chinese buyers, ie CHLS and RXPE. D4’s mobile telephone phone number also appeared on two CHLS and three RXPE invoices respectively. The money flow in and out of D4’s bank account was incompatible with his income declared to the Inland Revenue. D4, an accountant, was no stranger to accounting and banking practices. He should have no difficulty in realizing the significance behind the use of cashier order. The use of cashier order, in this case, to conceal the true identity of the paying party was obvious. At the investigation stage, all these circumstantial evidence pointed to the fact that D4 was somehow connected to D1’s business and begged for an explanation.

17.To add more suspicion, D4 was selective in answering questions from the police. He chose only to answer unimportant questions during police interview. On the other hand, he exercised his right of silence in respect of, in my view, more relevant and important questions (highlighted by Mr Mitchell in his submission). D4, of course, was entitled to exercise his right. That inevitably led the police or the prosecution came to the view that in the absence of any legitimate explanation for the transfer of money, the case against D4 was strong.

18.Given the above, I am of the view that D4 should be also deprived of the costs in defending his case.