HKSAR v. Chan Kam Ching

Read the full judgment text of CACC 230/2019 on BabelCite. This Court of Appeal judgment was delivered on 7 January 2021 before Yeung VP, Pang JA and Pang J.

Criminal law – false instruments – use of a copy of a false instrument contrary to s.74 of the Crimes Ordinance (Cap 200) – use of a false instrument contrary to s.73 of the Crimes Ordinance (Cap 200) – meaning of false instrument under s.69(a)(vii) – Ding Rights and Small House Policy – sham transactions in conveyancing – mortgage loan application supported by false Agreement for Sale and Purchase (ASP) and Assignment – applicant was a sole solicitor who had acted for the parties since 2000 – whether the ASP and Assignment were false instruments – whether the applicant knew the instruments were false – whether the applicant had a 'double intent' to induce the recipient to accept the instrument as genuine and to act to his or another's prejudice – whether trial judge erred in refusing to admit expert evidence from a solicitor – whether 'selling Ding Rights' arrangement with no genuine sale and purchase between registered owner and purchaser amounts to a sham. The applicant, a solicitor, prepared an ASP and Assignment in 2007 to facilitate a HKD1.5 million mortgage loan from GE Capital, falsely representing that CHAN (a nominal Ding) sold the Property to LAI for HKD3 million, when no such sale and purchase ever took place and no money passed between them. Held, dismissing the application for leave to appeal: (1) The ASP and the Assignment were false instruments within s.69(a)(vii) of the Crimes Ordinance because the purported sale and purchase between CHAN and LAI never occurred and the instrument was made in circumstances in which it was not in fact made; following HKSAR v Lau Kam Ying, the earlier arrangement vesting the Land in CHAN's name was a sham that did not pass legal title to CHAN, so the Assignment could not have transferred any title. (2) The trial judge was entitled to find the applicant knew the instruments were false, given his long-standing involvement since 2000, his verification of signatures, execution of the Land Registry Memorials, and communications with GE Capital; the 'standard practice' explanation demonstrated his understanding of the sham arrangement. (3) The applicant plainly had the double intent to induce GE Capital and the Land Registry officers to accept the false instruments as genuine and to act in the discharge of their duties to the applicant's advantage. (4) The trial judge did not err in refusing to admit expert evidence from a solicitor, as the proposed matters were not within the proper ambit of solicitor expert evidence and were not necessary for the court's determination. Leave to appeal refused; appeal dismissed.

Legal issues: Whether the ASP and the Assignment are false instruments under s.69(a)(vii) of the Crimes Ordinance · Whether the applicant knew or believed the instruments were false and had the requisite double intent · Whether the trial judge erred in refusing to allow the defence to call a solicitor as an expert witness

Outcome: Application for leave to appeal against convictions refused; appeal dismissed. The applicant remains convicted on all three counts and the original sentence of 8 months' imprisonment suspended for 2 years stands.

Cited by 5 cases · Cites 6 cases

Case No.CACC 230/2019[2021] HKCA 7[2022] 1 HKLRD 647
Court
Court of Appeal
Date07 Jan 2021
JudgeYeung VP, Pang JA and Pang J
Case Document
100%Judiciary

[English Translation – 英譯本]

CACC 230/2019

[2021] HKCA 7

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL CASE NO. 230 OF 2019

(ON APPEAL FROM DCCC NO. 844 OF 2017)

__________________________

BETWEEN

HKSAR Respondent
and
CHAN KAM CHING Applicant

__________________________

Before: Hon Yeung VP, Pang JA and Pang J in Court

Date of Hearing: 1 December 2020

Date of Judgment: 7 January 2021

______________________

JUDGMENT

______________________


Pang J (giving the Judgment of the Court):

Introduction

1.On 29 March 2019, after trial before HH Judge Lo (“the Trial Judge”), the Applicant was found guilty of 1 count of “Using a copy of a false instrument”[1] and 2 counts of “Using a false instrument”[2], and was sentenced to a total of 8 months’ imprisonment suspended for 2 years.

2.The Applicant applied for leave to appeal against convictions.

3.Charge 1 alleges that the Applicant, on or about the 18th day of June 2007, in Hong Kong, used a copy of an instrument, namely an Agreement for Sale and Purchase dated the 4th day of June 2007 between CHAN Wai Man and LAI Yee Kum, Kate (“the ASP”) in relation to the property located at No. 13A Yeung Siu Hang, Tuen Mun, New Territories (“the Property”) which was, and which he knew or believed to be, a false instrument, with the intention of inducing GE Capital (Hong Kong) Limited (“GE Capital”) to accept it as a copy of a genuine instrument, and by reason of so accepting it to do or not to do some act to his own or any other person’s prejudice.

4.Charge 2 alleges that the Applicant, on or about the 20th day of June 2007, in Hong Kong, used the ASP, which he knew or believed to be false, with the intention of inducing a staff member of the Land Registry (“the Land Registry”) of the Development Bureau of the Hong Kong Special Administrative Region to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any other person’s prejudice.

5.Charge 3 alleges that the Applicant, on or about the 5th day of July 2007, in Hong Kong, used an instrument, namely an assignment dated the 21st day of June 2007 between Chan Wai Man and Lai Yee Kum, Kate in relation to the Property, which he knew or believed to be false, with the intention of inducing a staff member of the Land Registry to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any other person’s prejudice.

The Prosecution Case

6.Most of the facts in this case are not disputed, and were submitted to the Court as Admitted Facts. The important matters have been set out in the form of a table in the Respondent’s written submissions, which this Court has adopted and collated as follows:

Dates Events
2 June 1993 The Applicant established John Chan & Co., Solicitors (at all material times, the Applicant was the only lawyer of the firm).
15 November 1996 So Chi (“SO”) and Lau Chi Wai (“LAU”) bought 2 parcels of agricultural land in Yeung Siu Hang Village, Tuen Mun, New Territories at the price of HKD380,000, and appeared to have conveyed 1 of them (“the Land”) to Chan Wai Man (“CHAN”), an NT indigenous villager, on the same day at the price of HKD200,000.
18 November 1996 CHAN instructed a solicitor to write to the District Lands Office, Tuen Mun, to apply for a Free Building Licence for Small Houses (“Ding Houses”) in relation to the Land.
2 January 1998 CHAN created a Power of Attorney, and appointed SO to act on his behalf in following up with Tuen Mun District Lands Office on matters relating to the Land.
17 April 1998 Tuen Mun District Lands Office issued a Building Licence concerning the Land, Clause 4 of which stipulated that the licensee shall not, either directly or indirectly, reach any agreement or arrangement with anyone to convey the Ding House within a period of 5 years from the issuance of the Certificate of Compliance, without consent of the officers of the Lands Department.
26 October 2000 SO and LAU (“the Vendors”) and Lai Yee Kum Kate (“LAI”) (“the Purchaser”) executed an assignment agreement in respect of the Land – the Vendors agreed to assign the Land together with the Building Licence to LAI at the price of HKD1,050,000. The execution of the assignment agreement by LAI was witnessed by the Applicant. The Applicant did not register this assignment agreement with the Land Registry for LAI.
2 October 2000 Date of the receipt on the collection of the HKD200,000 deposit by the Applicant’s firm from Shum Kin Wing (“SHUM”) paid on LAI’s behalf.
24 October 2000 Date of the receipt on the collection of the balance of HKD850,000 by the Applicant’s firm paid by SHUM on LAI’s behalf.
From Year 2000 The Applicant began taking instructions from SHUM to deal with the affairs of erecting a Ding House on the Land and subsequent matters.
28 December 2001 The Applicant’s firm wrote to Tuen Mun District Lands Office on CHAN’s behalf to invite them to inspect the completed Ding House (“the Property”) and issue the Certificate of Compliance. A Power of Attorney executed by CHAN was attached to the letter.
15 March 2002 Tuen Mun District Lands Office issued the Certificate of Compliance to CHAN through the Applicant’s firm.
2002, after the Property was built The Property was occupied by SHUM and LAI.
14 March 2007 The 5-year alienation restriction period on the Property expired.
April – May 2007 SHUM instructed the Applicant to transfer the registered ownership of the Property to LAI’s name, and expressed that there was the plan to apply for a mortgage loan on the Property.
3 May 2007 The Applicant’s firm created a Power of Attorney for CHAN, authorizing SHUM to deal with the Property on CHAN’s behalf.
21 May 2007 The Applicant’s firm faxed the draft version of the Agreement of Sale and Purchase of the Property to GE Capital.
28 May 2007 LAI submitted to GE Capital a property mortgage application form to apply for a loan of HKD1,500,000 on the Property.
30 May 2007 GE Capital staff approved the mortgage loan application.
4 June 2007 The alleged date on which the Agreement of Sale and Purchase relating to the Property (“the ASP”) was entered into – which was executed by SHUM as the lawful attorney on CHAN’s behalf as the vendor and by LAI as the Purchaser. (The execution) of the ASP was witnessed by a clerk of the Applicant’s firm, and the Applicant attested to the clerk’s signature. The consideration for the Property set out in the ASP is HKD3 million, and the purchaser had paid HKD300,000 as deposit and another sum of HKD1.2 million.
11 June 2007 GE Capital sent a written instruction to the Applicant’s firm, requesting the latter to prepare a first legal charge in relation to the mortgage loan on the Property.
18 June 2007 The Applicant’s firm submitted to GE Capital the information and documents required in relation to LAI’s mortgage loan application, including a copy of the ASP [3] and the Deed of Declaration by SHUM[4], and requested GE Capital to release the loan.
20 June 2007 The Applicant’s firm successfully registered the ASP[5] with the Land Registry. The Applicant had signed at the bottom of the Memorial in verification of the content therein.
21 June 2007 The Applicant’s firm received in its bank account the loan on the Property, and a transfer was made to SHUM’s account the next day.
The Applicant’s firm prepared an assignment in respect of the Property transaction.
5 July 2007 The Applicant’s firm successfully registered the assignment (“the Assignment”)[6] with the Land Registry. The Applicant signed at the bottom of the Memorial in verification of its content.
2013 The Applicant testified as a defence witness at the trial of DCCC 175/2013 (SHUM and LAI were the defendants) which concerned charges commonly known as “money laundering”.

7.Apart from the Admitted Facts, Mr. Ma Mo Shuet, who in 2003 was employed by GE Capital as the Manager of the Credit Department also testified in court. He pointed out that at the time of the offence the Company would not make loans for Ding Houses that required payments of premia; he also expressed that the ASP dated 4 June 2007 was for confirming that the mortgage loan application was for a new sale and purchase. He also pointed out that generally the mode of payment of the sale and purchase price would affect his valuation of the property, and the bank had to know, that if in fact no money was paid and received, there must be a problem with that sale and purchase; and if a transfer was facilitated by way of a deed of gift, that would also affect the bank’s decision on the mortgage security or the loan application, because this would pose risks to the title that the bank can acquire.

8.Chan Man Kin, GE Capital’s Credit Management Supervisor in 2003, was also called as witness by the Prosecution to testify. He pointed out that should a solicitor’s firm discover a problem with the title, the firm would have to report to the bank; and the bank’s release of a mortgage loan was based on the payment clauses in the agreement for sale and purchase. If there was in fact no payment or receipt of money, then the bank would not approve that mortgage loan application.

DCCC 175/2013, a related case

9.Apart from the above, in the present case the Prosecution has submitted the audio recording and transcript of the Applicant’s testimony given in 2013 as a defence witness in DCCC 175/2013, another District Court case. The Applicant pointed out that he had dealt with many transactions of sale or purchase of land in the New Territories and assignments of Ding Houses, including the Property, for SHUM and LAI. Relevant details will be given in subsequent paragraphs.

The defence case

10.The Applicant’s stance in this case is that SHUM was the beneficial owner of the Property. As such, there was nothing wrong for SHUM to sell the legal interests in the Land in his capacity as CHAN’s attorney, together with SHUM’s own beneficial interests in the Property, to LAI for HKD3 million. And for that purpose, it was necessary to prepare the ASP and the Assignment. The Defence called SHUM as DW1 to establish such facts.

11.SHUM gave evidence that as he had the Power of Attorney from CHAN, he acted for CHAN in that ASP as the vendor, and that the ASP reflected the truth, i.e., he was exercising the right by selling to LAI CHAN’s legal interests in the Land together with his own beneficial interests in the Property at the cost price of HKD3 million. He expressed that he had received from LAI HKD1.5 million as deposit, but chose to return to LAI what he had received, because although LAI and him were not officially married, LAI was his de facto wife.

12.SHUM agreed that subsequent to the execution of the ASP, he did not deliver to CHAN any money in relation to the Property, and CHAN had no right to receive any payment from him or from LAI either. SHUM also expressed that he did not know CHAN, had no agreement with CHAN, and he also did not know what agreement existed between CHAN, SO and LAU; but should there be the need to contact CHAN in the course of the transaction, he would give notice to SO or LAU for arrangements.

13.SHUM agreed that he instructed Chang Sau Man, a staff member of the Applicant’s firm, on 27 April 2007 to officially transfer the registered ownership of the Property to LAI, and to arrange a mortgage loan of HKD1.5 million; but he denied having knowledge that the bank would not accept property by way of a deed of gift as security for a mortgage; he also denied that the ASP was prepared by the firm on request for the purpose of satisfying the requirements of a mortgage loan. SHUM agreed that later he handed HKD1.2 million out of the mortgage loan to LAI.

14.SHUM said, even when no mortgage loan was taken out, he would still have instructed the firm to convey the Property to LAI. He also pointed out that all the building and construction costs of the Property were paid by him. As to the fact that they reported to the Ratings and Valuation Department that the building costs of the Property together with that of the fencing wall were in the sum of HKD1.3 million after they had moved into the Property, SHUM said that he had no recollection and it could be an approximate construction cost figure filled in by the Applicant’s firm on their own.

15.DW2 Chang Sau Man (“CHANG”) was a Senior Clerk responsible for land sales and purchases in the Applicant’s firm. She testified that in April 2007 when the Certificate of Compliance on the Property reached 5 years, the firm received SHUM’s instruction to convey the Property to LAI, his wife. This was the first time she dealt with matters concerning the Property. On 27 April 2007, SHUM instructed her to convey the title to the Property back to LAI and to take out a mortgage loan of HKD1.5 million, and asked her to get a bank to perform valuation first. At that time, SHUM did not give instructions on the price for the assignment. On 3 May of the same year, CHANG received a reply from the Bank of China that the valuation was HKD4 million and she immediately carried out an estimate on the stamp duty fee required, and notified SHUM of the situation by telephone. SHUM responded that he intended to sell the Property to LAI at a cost price of HKD3 million.

16.CHANG further said that afterwards, she prepared the formal ASP by herself based on the draft ASP. On 21 May of the same year, LAI called her and said she wanted to have the mortgage loan from GE Capital, and asked the firm to fax the draft contract to GE Capital. CHANG acted accordingly. Subsequently on 4 June, SHUM and LAI executed the ASP, which CHANG witnessed. The Applicant was not present at the execution. He only verified CHANG’s signature afterwards.

17.CHANG said that as SHUM was the attorney, he had the right to receive payments. Therefore, after the firm had received the mortgage loan money, the money was transferred to SHUM.

18.The Defence had applied for calling an expert witness, but that was refused by the Trial Judge.

Reasons for the ruling

19.The Trial Judge pointed out that the Applicant started handling matters concerning the Land and those of building rights for LAI and SHUM since 2000, and since then SHUM and LAI had been giving instructions to the Applicant on matters relating to the development of the Land and the construction of the Ding House, and let him follow up on various legal matters.

20.The Trial Judge therefore found that:

“122. The Prosecution submitted that the various pieces of evidence mentioned above show that since October 2010 (should be 2000) the Defendant dealt with, for SHUM and LAI, the assignment of the Land, the construction of the Property and various legal issues after the Property was built, and he must clearly know:

(1) although CHAN, a male indigenous villager, was the registered owner of the Land, the nominal holder of the Building Licence and the Certificate of Compliance, he never had all, any or part of the beneficial interests in the Land and the Property from 15 November 1996 to 21 June 2007;

(2) as early as 26 October 2000, the beneficial interests in the Land and building rights were conveyed to LAI by the Defendant personally handling, witnessing the assignment [and] executing the assignment agreement. Ever since that day LAI has been the beneficial owner of the Land and the Property;

(3) the assignment agreement was not sent to the Land Registry for registration, because (it) contravened the provisions and regulations of the Building Licence;

(4) the Property was conveyed in less than 5 years after the issuance of the Certificate of Compliance, which would require prior approval from the Lands Department and payment of premium to the government;

(5) if the registered ownership of the Property was conveyed back to LAI’s name by way of a deed of gift, the title of the Property would be affected and there would be accompanying legal risks, and there would also be difficulties in applying to the bank for a mortgage loan with the Property;

123. I totally agree with the above statements.”[7]

21.The Trial Judge continued to point out that she had considered but was of the view that SHUM was not an honest and reliable witness, and therefore SHUM’s testimony was not accepted, because[8]:

(1) in this case, SHUM said that LAI had already paid him HKD1.5 million and there was still HKD1.5 million outstanding, but this was not the stance SHUM and the Applicant took at the trial of DCCC 175/2013;

(2) even if SHUM wanted to sell his beneficial interests to LAI, LAI should make payment to SHUM instead of making payment to CHAN as stated in the ASP;

(3) before the preparation for the ASP, SHUM had told the Applicant that he “was in need of money, therefore the registered ownership had to be changed”; and

(4) for the mortgage loan in question, SHUM paid that to LAI within a short time, except for the HKD200,000; this was inconsistent with SHUM’s version that he had asked for HKD3 million for the conveyance of his own beneficial interests to LAI.

22.The Trial Judge found that in the relevant context, the Applicant clearly knew that there was absolutely no agreement between CHAN and LAI for the latter to pay CHAN HKD3 million or 1.5 million.

23.The Trial Judge also considered the Applicant’s testimony under oath in DCCC 175/2013: the Applicant stated that his purpose of preparing the Assignment was to assign the legal rights of the Land from CHAN to LAI, and that LAI was the beneficial owner of the Property long ago; although LAI would not pay HKD3 million “hard cash” to CHAN, the Applicant was of the view that the statement in the Assignment that LAI purchased the Property for HKD3 million was “broadly speaking” a fact[9] , because LAI had paid moneys to procure the Land, to build the Property and the fencing wall. However, the Trial Judge held that since the Applicant had admitted that CHAN did not receive a cent from LAI or SHUM, and even expressed that stating a purchase price in the Assignment was just following the “standard practice” for transactions of this kind, then the Applicant had admitted that the Assignment was not made in the circumstances described.

24.Therefore, the trial judge ruled that the Applicant knew LAI and CHAN did not have the so-called sale and purchase transaction; LAI did not pay HKD 3 million to purchase the Property from CHAN, and the instruments referred to in Charges 1-3 were all false instruments[10]. The trial judge continues:

“172. Since the Defendant knew clearly that there was no reason for CHAN to be able to receive any money from LAI, let alone $3,000,000, there was no reason for the making of a sale and purchase agreement. In fact, an assignment would already be sufficient to convey the legal interests to LAI directly, so the only reasonable inference is that the contract was used for [arranging] a mortgage with GE Capital, so as to let [one wrong character] them think that this was a case of a loan on a newly purchased property instead of a refinance case, and that it involved a transaction price of $3,000,000, and the loan amount of $1,500,000 was for the balance of the property [price]. In fact, it was impossible for the Defendant to be unaware of the existence of this contract, because [it] was him who personally executed that application form for a postponement of stamp duty payment in relation to the contract.[11]

25.Regarding the point of whether the Applicant had a “double intent”, the trial judge found that the Applicant clearly intended to induce GE Capital to accept the copy of the ASP as a genuine copy, and to induce officers of the Land Registry to accept the ASP and the Assignment as genuine instruments, with the intention to induce them to do relevant acts in their discharge of job-related duties.[12]

Grounds of appeal

26.The Grounds of Appeal put forward by Ms Maggie Wong, SC for the Applicant can be summarized as follows:

(i) The Trial Judge has not fully or properly dealt with the point that the above-mentioned instruments (or their copies) have not totally lost their nature as a result of the untrue matter (that is, LAI did not pay HKD3 million to CHAN), and hence wrongfully found in law that the ASP (or its copy) and the Assignment were false instruments;

(ii) In view of all the evidence in the case, the Trial Judge wrongly found that the Applicant knew or believed those instruments to be false; and for Charges 2 and 3, the Trial Judge wrongly found that the Applicant had a double intent; and

(iii) On the issues of whether the sale and purchase and the assignment as described in the above-mentioned instruments were true, and whether the practice adopted by the Applicant’s firm in handling the transaction objectively conformed to the usual practices and approval in the industry, the trial judge wrongly rejected the application by the Defence for calling Ms Doreen Kong, a solicitor, as an expert witness.

DISCUSSION

(i) Whether the instruments in question are false instruments

27.Ms Wong SC emphasized that the essence of the ASP and that of the Assignment was to convey the rights and interests of the Property, and in view of the overall evidence in this case, the nature of the instruments did exist, i.e., the legal interests of the Property had indeed been conveyed to LAI by CHAN by way of the Assignment; and in fact there was a bona fide consideration in this assignment of property.

28.Ms Wong SC cited a number of authorities[13] to submit that the law relating to “false instruments” was contravened because the document involved was false, that is, the document tells a lie about itself. If it is merely the case that the documents contain a lie, then this is not against the law. Ms Wong SC also cited the case of Attorney General’s Reference (No 1 of 2000)[14] to show that when the court considers whether a document tells a lie about itself, the focus is whether the background facts are contradictory to the nature of the document.

29.Hence, Ms Wong SC criticized the Trial Judge for having mistakenly held that the instruments lost their nature and became false simply because LAI did not pay HKD3 million to CHAN at the material time. At the same time, the trial judge did not take into consideration that there was in fact bona fide consideration on LAI’s part, that is, she had paid about HKD3 million to procure the Land, build the house and the fencing wall.

30.Apart from that, Ms Wong SC also cited the doctrine of estoppel in contract law to submit that an instrument which contains an untrue representation of payment receipt does not undermine its validity or binding effect. Therefore the lawful acts in civil law should not be treated significantly differently in criminal law.

31.This Court agrees that in order to determine whether a document is a false instrument, the nature of the document has to be considered, and that includes what is provided in section 69(a)(vii) of the Crimes Ordinance, which has been quoted many times by both parties in this case, that is, “an instrument is false, if it purports to have been – made or altered on a date on which or place at which or otherwise in circumstances in which it was not in fact made or altered”.

32.Although Ms Wong SC stressed that the nature of the ASP and the Assignment was to convey the interests in the Property, this Court has the following observations.

33.Generally, the nature of agreements for sale and purchase is to deal with sale and purchase transactions. In other words, in respect of the ASP, the sale and purchase negotiations and transactions by both parties in relation to the Land and the Property had to exist before the preparation of the ASP; and the nature of the document should reflect the sale and purchase in question. Hence, leaving aside the veracity of the sale price and the payment condition as stated in the ASP and by solely considering the facts admitted by the Defence, i.e., LAI and CHAN had never performed any transaction at any time, that would be sufficient to show that the ASP is a false instrument, because that instrument was ostensibly prepared under the circumstances of LAI and CHAN performing a sale and purchase transaction, but in fact it was not so. Because both parties did not enter into negotiations or reach any agreement in respect of that transaction, nor was there the intention to do so, the transaction did not exist in nature. Hence at all material times when CHAN (or SHUM as his attorney) and LAI executed the ASP, the identity of a real vendor and that of a real purchaser never existed, nor was there the intention to exercise the related legal rights or shoulder the related obligations arising from the provisions stated in the ASP.

34.In short, the circumstances of that sale and purchase stated in the instrument in question did not exist, and the terms on the price and payment set out by both parties were not facts either; to put it more directly, the instrument is just like a sheet of blank paper and does not reflect the truth, no matter in nature or in terms of the clauses.

35.As for the Assignment, even though Ms Wong SC emphasised that the nature of the instrument did exist, i.e., through the Assignment, CHAN did assign the legal interests in the Land and those in the Property to LAI, but this Court must point out that, in the case of HKSAR v Lau Kam Ying[15], which also deals with Ding Rights and assignment of land, Yeung VP has made the following observations:

“9. The Small House Policy, a policy that only favours the “Dings”, is often exploited if not abused, and it is common practice for the “Dings” not to exercise the “Ding Rights” by building Small Houses themselves, but to “sell” them to a developer at a price.

10. The developer acquires some land and allows the “Dings” to become the registered owners of the land to enable them to apply to build Small Houses. The developer’s interest is usually protected by a Declaration of Trust executed by the “Ding” in its favour. After the development is completed, the “Ding” will assign the land together with the Small House to the developer or its nominees.

11. There was no dispute that there was such an arrangement between Howin Industrial Ltd (“Howin”) and a group of “Dings” in Tai Po in the mid-1990s.

12. In 1994/1995, Howin, having purchased pieces of lands in Lot Nos 82 and 83 in DD7 (the land), asked agents to recruit “Dings” who were willing to sell their “Ding Rights”.

15. Since a “Ding” must be the registered owner of the proposed building site before the application to build a Small House would be considered, Howin conveyed titles of the 19 sections of the land to 17 “Dings” by assigning to each of them one or two sections, ostensibly for $250,000 (“the 1994/1995 Assignment”). In fact, none of the “Dings” had to pay any money to Howin.

156. As rightly pointed out by counsel for the respondent, the “Dings” were never intended to be “Purchasers” and Howin was never intended to be the “Vendor”, and the stated consideration of $250,000 was not and never intended to be paid.

157. It is plain that the sole purpose of the 1994/1995 Assignment was to create the illusion- a false representation- that the “Dings” were both legal and beneficial owners of the sections of land in question, when in fact they were not.

159. Counsel for the respondent refers us to the cases of Snook v London and West Riding Investments Ltd [1967] 2 QB 786 and Re Yates (a bankrupt) [2004] All ER (D) 373 in relation to the term “sham”.

160. At p 802 of the judgment in Snook (supra), Diplock LJ said at C-F:

“…a ‘sham’, it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any)…”

162. There can be no doubt that the arrangement under the 1994/1995 Assignment was a sham transaction and the judge was right in having so ruled. The judge was right in finding that the “Dings” were never legal or beneficial owners of the sections of land in question.”[16]

36.At the same time, Kwan JA (as she then was), further pointed out:

“189. The first question I ask is whether the 1994/1995 assignments did pass title to the Dings. Mr Chan contended they did, because it was intended by both Howin and the Dings that the Dings should become the legal owners of the lands in order for them to make use of their “Ding rights” to apply to the government to build small houses on the lands under the Small House Policy. They should be regarded as “bare legal owners”.

190. I do not agree with this. The 1994/1995 assignments only gave the appearance of vesting legal title of the lands in the Dings in purported transactions for sale and purchase. In actual fact, there was no sale of the lands by Howin to the Dings. The purchase price of $250,000 stated in each of the assignments was not paid by any of the Dings and was not meant to be paid. Instead, Howin agreed to pay each of the Dings $200,000 (and did pay some instalments before it became insolvent) for the sale of their “Ding rights” to apply to government to build on the lands. Quite clearly, it was the common intention of all parties that the 1994/1995 assignments were not “to create the legal rights and obligations which they give the appearance of creating” (Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802E to F). In other words, these assignments were a sham. As Mr Coleman, SC had submitted, the only purpose of these assignments was to create the illusion that the Dings were the legal and beneficial owners of the lands.

192. Thus, the Dings, as parties to the sham transactions, could not rely on the 1994/1995 assignments as vesting in them the title of the lands in what purported to be transactions for sale and purchase. The court can ignore these assignments in determining in which person or entity the title of the lands was vested. As between the Dings and Howin, there is no reason why the court should give effect to these assignments which all parties knew and accepted were a sham…

194. As the 1994/1995 assignments were sham transactions and did not vest the title of the lands in the Dings, the 2006/2007 assignments could not operate to transfer the title from the Dings to CGG.

195. If, contrary to my views, the 1994/1995 assignments did transfer legal title of the lands to the Dings, I do not think CGG had acquired good title under the 2006/2007 assignments unencumbered by the beneficial interest of Howin. The present situation was very different from the cases cited by Mr Chan where a subsequent purchaser may make use of the legal requirement for registration of an instrument affecting land without committing a fraud (Kwok Siu Lau v Kan Yang Che (1913) 8 HKLR 52; Chu Yam On v Li Tam Toi Hing (1956) 40 HKLR 250; Midland Bank Trust Co Ltd v Green; Markfaith Investment Ltd v Chiap Hua Flashlights Ltd [1991] 2 AC 43; Wellmake Investments Ltd v Chan Yiu Tong).

196. In those cases, the courts had made clear the mere fact that the subsequent purchaser had notice of the prior unregistered instrument did not make him mala fide or otherwise not a bona fide purchaser. In the present case, there was much more than mere notice. And it was very different from the situation when property was expressed to be assigned subject to an option to renew a lease.[17]

37.Although the facts of the above case are not exactly the same as those in the present one, the legal principles expounded by the Court of Appeal in that case are equally applicable to the present one.

38.First of all, what is not disputed in this case is that the Land was first purchased by SO and LAU and then, by way of assignment, vested it in CHAN’s name. But in fact, CHAN was not the real buyer, and did not make payment to purchase the Land from SO and LAU. On the contrary, he just sold his Ding Right to the two persons. In other words, CHAN was never the owner of the Land.

39.In fact, the assignment agreement executed by SO, LAU and LAI on 26 October 2000 has clearly set out that SO and LAU were small house developers. After they had purchased the Land, they “allocated” it to CHAN’s name, so as to facilitate CHAN’s application to the Lands Department for a Free Building Licence, and this assignment agreement has also expressly stated that SO and LAU agreed to assign to LAI the beneficial interests of the Land and the building rights under the Building Licence for HKD1.05 million. This assignment agreement further proves that SO and LAU were the real holders of the Land.

40.Hence, although Ms Wong SC asserted that through the Assignment, CHAN did convey the legal interests in the Land and those in the Property to LAI; however, based on the legal principles expounded by the Court of Appeal in the Lau Kam Ying case, the assignment made between SO, LAU and CHAN at that time was actually a sham transaction, and did not vest the title of the Land in CHAN.

41.Because CHAN had never obtained the legal interests in the Land from SO and LAU, the Assignment executed on 21 June 2007 between SHUM as CHAN’s attorney and LAI could not have taken any effect, and did not convey the title from CHAN to LAI.

42.As such, the conveyance of legal interests that Wong SC had relied on was not achieved at all through the Assignment. What is more in line with the facts was that the legal interests of the Land were already vested in LAI under the assignment agreement executed in 2000 between SO, LAU and LAI; and if one were to say the Assignment was to vest the beneficial interests in the Property to LAI, then according to the defence case at the trial, that was merely a transaction between SHUM and LAI, with CHAN having no part in it at all, and it was entirely not the nature or the contents represented in the ASP and the Assignment.

43.Although the Trial Judge did not rely on the Lau Kam Ying case to conduct the above-mentioned fundamental analysis in her Reasons for Verdict, the reasoning in her Reasons for Verdict is correct and reasonable, and just as the Trial Judge has pointed out, even if SHUM had hoped to convey the legal interests in the Land and those in the Property to LAI’s name, an assignment could already achieve the purpose without the need to prepare the ASP separately. This Court is of the view that the Prosecution’s submission at trial that the preparation of the ASP was only for the purpose of obtaining a loan from GE Capital is reasonable.

44.Based on the above analysis of this Court, Ms Wong SC’s criticisms of the Trial Judge that the latter had not considered the bona fide consideration that LAI had actually paid, the principle of estoppel in civil law, and had wrongly considered hearsay evidence are all collateral matters, and could not have affected the finding of the fact that the ASP and the Assignment are actually false instruments. Hence, this Court is of the view that there is no need to deal with them one by one.

(ii) Applicant’s knowledge

45.Based on the overall development of the incidents in the case and the Applicant’s long-term participation, this Court is of the view that there was very sufficient evidence before the Trial Judge and for her to rule that the Applicant did know that the ASP and the Assignment were false instruments. As the Trial Judge has pointed out in her Reasons for Verdict:

“177. In fact, according to the records, on 11 March 2005, when the five-year period of the Certificate of Compliance on the Property was still in force, SHUM already mentioned to the Defendant that he wanted to change the registered ownership of the Property and then take out a mortgage loan so as to use the money after paying the premium. But again, that did not materialize after the long lapse of time due to breaches of regulations on the Property. In the course of the events, the Defendant was closely involved in handling those issues. In May 2007, the Defendant brought up the matters of change of registered ownership and mortgage. To sum up the Defendant’s own background, the relationship between the Defendant and SHUM, the Defendant’s understanding of the Land and the Property since the agreement in 2000, the context of the Defendant’s testimony in the District Court in 2013, the Defendant’s participation in the instrument dated 4 June 2007, including verification of the signature[s] on the instrument, personal execution for the deferment of the stamp duty payment for the instrument and the application, as well as execution on the Land Registry Memorial in relation to the instruments, sending a letter dated 18 June 2007 to GE Capital together with the documents the latter requested (including copies of those false instruments), and multiple solicitor’s letters issued to GE Capital to address the bank’s queries, all issued on 21 June 2007, all these took place before the mortgage loan was released on 21 June 2007.

178. I am of the view that at the material times the Defendant was absolutely aware of the existence and the content of the instrument of 4 June 2007, in particular the consideration of HKD3,000,000, LAI and CHAN as the contracting parties and the payment mode as well as the HKD3,000,000-Assignment are all untrue. These are false instruments, and fall into the ambit of section 69(a)(vii) of the Ordinance.

179. In fact, he spent a lot of time in court to explain how CHAN could be considered to have received the HKD3,000,000 but to no avail. Given the Defendant’s background, he was absolutely aware that these were false instruments or copies of false instruments, and he was also absolutely aware and of the view that any reasonable person would have come to the view that these were false instruments, and in fact any reasonable person would have come to the view that these are false documents.

186. Similarly, when the Defendant executed the Memorials for registration with the Land Registry, obviously it was to give instructions to the colleagues in the firm to deliver the false instruments in question, namely the ASP dated 4 June 2007 and the Assignment dated 21 June 2007, to the Land Registry for registration. Afterwards, the Defendant did deliver these instruments to the Land Registry on 20 June 2007 and on 5 July 2007 for registrations, which undoubtedly constituted the use of them.

187. Clearly, the Defendant also intended to induce colleagues at the Land Registry to accept such false instruments as genuine, and intended to induce such colleagues at the Land Registry, by reason of accepting such instruments as genuine, to register such instruments in the discharge of their job-related duties.”

46.Ms Virginia Lau, Senior Assistant Director of Public Prosecutions representing the Respondent, also submitted in her written submissions that the Applicant has participated in many matters relating to the Property, and was necessarily well aware that the Land and the Property already belonged to LAI since 26 October 2000. The reason why the assignment agreement between SO, LAU and LAI was not registered with the Land Registry was that the assignment was in contravention of the provisions and regulations of the Building Licence; that if an assignment was to be made within the 5 years after the issuance of the Certificate of Compliance, approval of the Lands Department and a payment of land premium would be required; further, if the registered ownership of the Property was changed to LAI in 2007 by way of a deed of gift, the title of the Property would be affected, and there would be accompanying legal risks, thereby affecting the bank’s decision to approve a mortgage loan. The proposition of a “standard practice” by the Applicant in DCCC 175/2013 further proved that the Applicant actually used this method to make a sham, with the intention of preventing the Lands Department or others from discovering that Ding Rights were being sold and that the Ding Houses were sold in breach of the regulations.

47.Hence, the Respondent submitted that the Trial Judge was certainly entitled to find that at the time of the offence, the Applicant knew that both the ASP and the Assignment were false.

48.In fact, when the Applicant testified in DCCC 175/2013, he admitted that he fully understood how “selling Ding Rights” worked, and also clearly stated that a developer merely “gave the piece of land to a Ding nominally, and the Ding did not have to pay out of his own pocket and indeed would have money to recieve.”[18]

49.Ms Wong SC also put forward the point that the Applicant only prepared the ASP and the Assignment in accordance with instructions and information from SHUM, so he would not question the instructions and the accuracy of the information. It would seem that Ms Wong SC was trying to show with this submission that there was no reason for the Applicant to know or believe that the instruments were false; but this proposition disregarded a more fundamental issue: no matter whether the transaction price was HKD3 million, or whether LAI had paid SHUM HKD1.5 million as deposit, the ASP and the Assignment did not formulate the transaction between SHUM and LAI, but rather the Applicant had prepared those instruments which on the face of them formulated the sale and purchase reached between CHAN and LAI and the details thereof when he clearly knew that CHAN and LAI did not undergo any sale and purchase transaction.

50.This Court is of the view that, based on the Applicant’s understanding of the matter and long-term participation, and his clear knowledge that there was actually no sale and purchase transaction between CHAN and LAI, he must know that the ASP and the Assignment were false instruments. In these circumstances, the Applicant’s claim that he only acted in accordance with the instructions, or the claim that he knew SHUM and LAI had indeed paid out about HKD3 million on building the house and the fencing wall are no reasons for exoneration.

51.Furthermore, Ms Wong SC submitted that the Applicant did not have any dishonest intent, but dishonesty is not an element of the charges in this case.

52.As for the issue of “double intent”, this Court is of the view that the Trial Judge has correctly pointed out:

“203. Even if PW1 did not care about the veracity of that instrument and registered the same, in fact according to the law, as long as the Defendant had the above two intents to induce, it was sufficient to constitute a prejudice; moreover, the evidence shows that from the way of handling adopted in the past by PW1’s colleagues, there was no total disregard for the authenticity of the instrument.

207. Regarding Charges 2 and 3, the double intent in question is clearly aimed at the officers responsible for registering instruments in the Land Registry, with the intent to induce them to accept these instruments, that is, the 4 June 2007 ASP and the 21 June 2007 Assignment, as genuine [instru]ments and to register these false instruments after accepting them as genuine. And of course, this act of registering these instruments was a result of acceptance of the same [as] genuine by the colleagues at the Land Registry in the discharge of their job-related duties. In accordance with the interpretation of the Ordinance, this of course constitutes a prejudice.

208. Regarding Charge 1, the double intent in question was to target the colleagues in GE Capital such as PW1 and PW2, who were involved in loan approval and release of the loan , with the intent to induce them to accept a copy of that false instrument (i.e., the ASP dated 4 June 2007) as a copy of a genuine instrument and with the intention to make them approve the application and release the mortgage loan after accepting the copy of the false instrument as a copy of a genuine instrument, and such acts were a result of their acceptance of the copy of the false instrument as a copy of the genuine instrument in the discharge of their job-related duties, which of course also constituted prejudice in the Ordinance, that is, the “prejudice” under section 70(1)(f) of the Ordinance.”[19]

(iii) Defence expert witness

53.Regarding this issue, Ms Wong SC takes the view that the Defence should have been allowed to call an expert witness to give opinions on the following matters: how a reasonably competent solicitor would handle the assignments of properties with Ding Rights; whether a property assignment without hard cash paid and received would affect the mortgagor’s title; and the validity of the related instruments.

54.This Court is of the view that the above questions are obviously not what a solicitor can give evidence as an expert on. First of all, against what background and with what knowledge the Applicant handled the instruments in this case bears no relation to how a solicitor would handle the assignments of properties with Ding Rights under general circumstances. Further, whether the “general practice” must be necessarily correct and in compliance with legal principles still leaves room for discussion; as such, calling a solicitor to testify on this issue may not assist the court in dealing with the matters in question. As for the other issues raised by Ms Wong SC, it is obvious that the court can only come to a decision after considering all the relevant evidence, which does not fall within the ambit of the so-called expert opinion that a solicitor can give.

55.Therefore, this Court is of the view that the trial judge has rightly refused to allow the witness in question to appear in court to testify.

Conclusion

56.Based on the foregoing, this Court rules that none of the grounds of appeal put forward by the Applicant can sustain. This Court therefore refuses the Applicant’s application for leave to appeal against convictions and the appeal is dismissed.

(Wally Yeung) (Derek Pang) (Anthea Pang)
Vice President Justice of Appeal Judge of the Court of First Instance

Ms Virginia Lau, Senior Assistant Director of Public Prosecutions and Ms Sabra Lo, Senior Public Prosecutor of Department of Justice, for the Respondent

Ms Maggie Wong, SC, leading Mr Newman Wong and Ms Karry Lau, instructed by Chui & Lau, Solicitors & Notaries, for the Applicant

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. Richard K. L. Man, Barrister-at-law.



[1]   Contrary to section 74 of the Crimes Ordinance, Cap 200.

[2]   Contrary to section 73 of the Crimes Ordinance, Cap 200.

[3]   This is the copy of the ASP referred to in Charge 1.

[4]   For the Deed of Declaration, see p.228 of the Appeal Bundle.

[5]   This is the false instrument referred to in Charge 2.

[6]   This is the false instrument referred to in Charge 3.

[7]   Appeal Bundle pp. 58-59.

[8]   Reasons for Verdict paras 133-142, Appeal Bundle pp 61-63.

[9]   Reasons for Verdict paras 152-161, Appeal Bundle pp. 65-68.

[10]   Reasons for Verdict para 165, Appeal Bundle p. 69.

[11]   Appeal Bundle pp. 71 and 72.

[12]   Reasons for Verdict paras 184-189, Appeal Bundle p. 75 and 76.

[13]   Yiu Kenneth Lik Kin v HKSAR FAMC 6/1997, 5 December 1997, unreported; HKSAR v Lung Wai Hing CACC 217/2015, 28 November 2016, unreported; HKSAR v Huynh Bat Muoi [2001] 4 HKC 643 and SJ v Yeung Hon Keung Larry [2007] 4 HKC 397.

[14]   [2001] Cr App R 218: The tachograph record in that case indicated that the driver of the passenger coach had been taking a break, but in fact he continued driving during the alleged break time, and there had not been another driver driving as suggested on the record.  Related statutes: Forgery and Counterfeiting Act 1981 s. 9(1)(g) in the UK, which is identical to the provision of s.69(a)(vii) of the Crimes Ordinance in Hong Kong.

[15]   CACC 422/2010, 26 March 2013, unreported.

[16]   This Chinese translation was provided by the Respondent.

[17]   This Chinese translation was provided by the Respondent.

[18]   Appeal Bundle p.239 H-J.

[19]   Appeal Bundle pp 79-81.

Other Judgments in This Case

Further hearings and rulings under CACC 230/2019