HKSAR v. Chong Wai Chung

CACC000371/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1997, No.371
(Criminal)

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Coram: Hon. Power, V.-P., Mayo and Stuart-Moore, JJ.A.

Date of Hearing: 18 March 1998

Date of Judgment: 18 March 1998

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J U D G M E N T

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Power, V.-P. (giving the judgment of the Court):

1. The applicant faced one charge of theft. It was particularized that he, in January 1996, at 24th floor, 463 Lockhart Road, Wan Chai, stole one plastic injection moulding machine model No. TM 180-C 84 and two plastic moulding machines model No. TM 180-C 83, the property of Maxi-Toyo Company Limited ("Maxi-Toyo"). He pleaded not guilty to that charge and was found guilty after trial before Judge Lin in the District Court and sentenced to imprisonment for two years, suspended for two years. He now seeks leave to appeal against that conviction.

2. In the first half of 1996, the applicant was the general manager of Maxi-Toyo, a subsidiary of Lippo Industries. That company bought and sold used machinery. At the same time he and his wife owned a company known as Greatime Limited ("Greatime"). In December 1995, Maxi-Toyo purchased 14 second-hand plastic injection moulding machines and related accessories from a Japanese company which was operating in China. The agreed price for those 14 machines was $4.28m.

3. By January 1996, all but five of the 14 units had been sold. According to the applicant's evidence, on 18th January he decided to buy three of the units for Greatime at a price of $50,000. The judge found that the sale took place on that day and went on to find that on 22nd January, Greatime sold those units to Wai Hing Tai (HK) Trading Co. ("Wai Hing Tai") for $288,000. There has been no challenge to those findings. The evidence of the latter sale was an invoice from Greatime to Wai Hing Tai dated 5th February 1996. Wai Hing Tai paid for those machines by instalments in February, March and April.

4. Wai Hing Tai had secured the services of Kwok Leung Transport to deliver the goods from China to Hong Kong. The invoice of Kwok Leung is dated 26th January. It was paid on 16th February. There is no record of any sale to Greatime in the books of Maxi-Toyo.

5. The applicant left Maxi-Toyo on 19th July 1996 and this matter came to light only because a stock check in September 1996 revealed that the three units were missing. A search of Maxi-Toyo's books turned up an invoice dated 29th May 1996 issued to Wai Hing Tai for maintenance to the three machines. This invoice charged only for expenses incurred by the maintenance staff and not for the service itself.

6. Among the prosecution witnesses was Mr. Liew Swee-yean, PW2, who was the financial controller of Lippo. He confirmed that $50,000 was paid into Maxi-Toyo's account on 9th January by Fico Forest Limited. This payment is evidenced by a receipt voucher of Maxi-Toyo which was Exh.P8 at trial. The receipt voucher bears under the heading "Name of Account". The hand-written words "Customer's receipt" but these have been struck out and replaced by the word "Sales". The characters for Fico Forest Limited (Sham Lam Yau Han Gong Si) are written over a tippexed patch on the document which, when examined, can be seen to have originally been the characters "Kit Tai", which is the Chinese name of Greatime. This was a document which cried out for explanation. Further it refers to an invoice (Exh.P9) dated 7th February 1996, which deals with a 30-horse-power air-conditioner. The transaction set out therein according to the witness PW2 did not exist. He contended that Maxi-Toyo's books were incomplete and that they had been altered. This contention is undoubtedly correct.

7. The chairman and managing director of Lippo gave evidence as PW4, in which he said that he had required all staff to read the staff handbook which states that staff should avoid any situation which does or may involve conflict between personal and company interest. He said that he made it clear to the applicant that the machines were to be sold at a 10% gross profit, and to be sold to bona fide purchasers. He said that they could be sold to staff but at a market price, and that the market price for these three units would be in the vicinity of $200,000 to $300,000.

8. The trial judge had some doubt as to whether this witness had ever personally reminded any staff of the contents of the staff handbook and was not prepared to accept the valuation which he placed upon the three units.

9. The applicant gave a cautioned statement when interviewed by the police in which he admitted that he controlled Greatime and said that he purchased the units on 26th January 1996. It is of importance to look at that question and answer:

"Q. When did Greatime Limited purchase three injection moulding machines from Maxi-Toyo Ltd., for how much and how is payment made.

A. On 26th January 1996 Greatime Limited purchased three injection moulding machines from Maxi-Toyo. They were purchased for $50,000 cash and during the period between late January and early February, deposit was made to Maxi-Toyo Ltd.'s Hong Kong Bank account."

10. It will be remembered that the date upon which the judge found that the sale was made to Wai Hing Tai Trading was the 22nd January. It will be also remembered that the only date on Exh.P8, the importance of which we will come to in a moment, was 9th January.

11. The applicant gave evidence saying that when he found that there were five units left he did, what was, in effect, a favour to his company, by buying three of them for $50,000 on 18th January. He explained Exh.P8 in the following rather involved way. He said that a Shenzhen company had paid a deposit of $50,000 to Maxi-Toyo pursuant to an oral purchase agreement which fell through and that, to save the trouble of having to make transfers, he treated that deposit as the payment for the machines and had Greatime pay $50,000 to the Shenzhen company. He was unable to explain why, on Exh.P8, the characters for Greatime had been obliterated and replaced by the characters for Fico Forest and why Exh.P8 made reference to Exh.P9. He gave evidence that he had intended, if he could, to repair the units and that, if that was not possible, to write them off. This, however, did not happen as he had managed to sell them to Wing Hing Tai for $288,000. This sale, he said, did not produce a profit of $238,000, as appears on its face, as $150,000 was Chinese sales tax and as the price also had to make allowance for the value of a guarantee and maintenance service undertaking which were not included in the sale by Maxi-Toyo to Greatime. He went on to say that the sales tax was in the outcome exempted, in other words not claimed, by the Chinese authorities, but had also to concede that Wai Hing Tai had never pressed him for a refund.

12. Not surprisingly, in our view, the judge did not find the applicant to be a credible witness. He said:

"I did not find the evidence of the defendant credible. The manner he described how he switched the deposit of the Shenzhen company into the sale price from Greatime was devious, illogical and unlikely to say the least. It was also not supported by any evidence. How was it that there was no entry on the company's books showing the original deposit by the Shenzhen company? If he was so eager to do his employer a favour, why did he not buy the whole lot of five units? This simply does not make sense.

His contention in relation to the terms of sale to Wai Hing Tai was not put to PW3, Madam Ho Fung-ming, and therefore was not supported by her evidence. Further, if the terms of sale included maintenance service, why did the company issue an invoice for reimbursement of expenses incidental to the maintenance service carried out by the company in May 1996 and why did the company do it for free. I need not go further.

Coupled with the evasive way he answered questions in court, I found the defendant simply did not tell the truth and I reject his evidence so far as it is inconsistent with the prosecution's contentions."

13. The trial judge then went on to make the following findings of fact:

"Having rejected the evidence of the defendant, I remind myself that it does not automatically mean that the prosecution has proved its case. The burden of proof rests fairly and squarely on the prosecution on matters of law as well as fact.

Greatime is a legal entity, a conceptual existence incapable of making any decision or doing any physical act of its own. As the defendant was the only person in charge of Greatime, for all intents and purposes what it did should be attributed to the defendant himself. It would be artificial to distinguish his own acts and acts done on behalf of Greatime. Accordingly, I found the sale to Greatime was in fact the sale to the defendant himself. In effecting the sale on behalf of the company to Greatime, the defendant had caused the company's property to be sold to himself.

Miss Chan Wai-chiu, the accounts staff with the company who happened to be registered as the company secretary of Greatime was not called by either side to explain why and how P8 was altered thus. On the face of the documents, it appeared that the company had never sold the said units. I was told, however, that the transaction was evidenced by P8 to P9 was a sham. I also noted that the invoice issued by Greatime, i.e. P12, was not found in the company's books. Why did it befall the buyer to issue an invoice for goods purchased? I will never be able to understand. Although at the material time the defendant was in charge of the company, I have no evidence before me about its size and division of labour. I therefore will not make any inference from the sorry state of affairs with the accounts that it was the undoing of the defendant. I can only say that the company's accounts were in a mess and it was neither here nor there.

Having considered the facts of the case as a whole, I am satisfied beyond all reasonable doubt that at the time of sale the defendant knew that the said units could fetch prices that are way above HK$50,000. In my view, the real market value of the units were not relevant in this particular case, although the fact that they were resold at $288,000 is indicative of their proper value. The sale from the company to Greatime with the defendant acting for both sides was conducted without the knowledge of PW4. I also accept PW4's evidence that he would not have approved such a sale."

14. The applicant is represented today by Mr. Wan who also appeared below. Originally he had five grounds of appeal but the fifth ground was abandoned.

15. Ground 1 reads as follows:

"The Learned Trial Judge erred in finding that the Applicant at the time of appropriate knew that the said machines could have yielded a much higher price than the $50,000 paid when the evidence and/or his finding shows:

a. the date of appropriation could be on the 18th January 1996;

b. there is no evidence that Wai Hing Tai had made the offer of $288,000 for the said machines on/or before the 18th January 1997;

c. PW4 had no idea as to the condition of those machines and was unable to give any reliable estimate as to the market value of those machines;

d. the remaining two machines were sold at a total price of $35,000."

16. Having rejected the evidence of PW4, the trial judge was satisfied that there was no evidence to establish the specific market price at the time of the sale to Greatime. He could, perhaps, have made more of the sale on 22nd for $288,000 but he did not, instead being content to hold no more than that the machines could fetch prices way above $50,000. Putting aside for the moment the matter raised in Ground 2, we are satisfied that it was not necessary for him to do more than that. There is nothing in this ground.

17. Ground 2 reads that the judge erred in finding that the applicant was dishonest at the time of appropriation, in that he failed to take into account a number of factors. The two factors upon which real reliance was placed before us were:

"e. there is no evidence to show that the company would have agreed to sell the machines to Wai Hing Tai with the conditions attached.

f. further or in the alternative, the Learned Trial Judge erred in rejecting the defence evidence as to the conditions attached to the sale contract when there is no evidence from the prosecution to suggest otherwise."

18. The argument that is advanced by Mr. Wan is that the trial judge failed to take into consideration the difference between the agreement which Greatime entered into with Wai Hing Tai and the original agreement for purchase entered into between Greatime and Maxi-Toyo which difference, it was submitted, would have considerably increased the price properly to be paid for the machines. It is said that the price of $288,000, which was the price paid by Wai Hing Tai, included $150,000 for Chinese sales tax and the value of the guarantee and the maintenance service. It is submitted that support is given to this contention by the evidence of PW2, Madam Ho Fung-ming of Wai Hing Tai, who said that a guarantee had been given, and that there had been a promise to provide service. It is suggested that no inference adverse to the applicant can be drawn from the fact that the original sale was $50,000 because once the $150,000 sales tax is added to this and an amount of say $90,000 is apportioned to cover guarantee and service, then the court could not but have doubt as to whether there was any dishonesty in the original sale for $50,000. This argument, we are satisfied, collapses when one bears in mind that the judge rejected the evidence of the applicant which was the only evidence as to the two sales and, in particular, as to the $150,000 which was said to cover Chinese sales tax. Once that is rejected, then there is nothing that would explain the enormous difference between the sale of $288,000 and the sale in which the price was $50,000. Even if an amount of $88,000 is apportioned to cover a guarantee and maintenance service, there is still a huge gap that is left unexplained. Indeed the evidence as to Greatime's liability in that regard is itself suspect given the invoice of 29th May 1996 issued by Maxi-Toyo to Wai Hing Tai for maintenance. There is no weight in the suggestion that somehow the trial judge failed to take material matters into account which would have occasioned doubt as to whether the applicant behaved dishonestly.

19. The third ground suggests that the judge erred in finding the real market value was not relevant. There is nothing in this ground. The trial judge, as we have already said, did not find the actual market value but found that the value was very much in excess of the amount of $50,000 and it was not necessary for him to find more than that.

20. Ground 4 submits that the judge erred in drawing an adverse inference against the applicant "in his possible breaching of the staff regulations and failing to inform the company as to his interest in Greatime when such regulation does not even impose a duty on the applicant to inform the company of those matters".

21. The judge made no finding of any failure to inform the company. What he said was that the applicant was "in breach of the express prohibitions stated in the staff handbook ...." Not only is this correct but it is also to be observed that the provisions referred to do no more than lay down minimal standards of honest behaviour. There is nothing in this final ground.

22. The conviction was neither unsafe nor unsatisfactory and the application is dismissed.

Representation:

Mr. P.S. Chapman, S.A.D.P.P. for the Respondent.

Mr. Peter Wan instructed by Messrs. Wong & Yip for the Applicant.