HKSAR v. Tsoi Chak Fai

CACC000405/2002

CACC 405/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 405 OF 2002

(ON APPEAL FROM HCCC 71 OF 2001)

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Coram: Hon Stuart-Moore VP, Stock JA and Lunn J

Date of Hearing: 27 November 2003

Date of Judgment: 19 December 2003

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J U D G M E N T

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Stuart-Moore, VP (giving the judgment of the Court):

Background

1.On 22 July 2002, the Applicant, aged 45, was convicted by a jury on 12 counts of conspiracy to defraud, contrary to Common Law and section 159C(6) of the Crimes Ordinance, Cap. 200, following a trial before Tong J in the Court of First Instance. On the following day, the Applicant was sentenced to a total of 10 years' imprisonment.

2.The Applicant now seeks leave to appeal against conviction and sentence.

3.The 12 counts were set out in identical terms save for the dates and the names of the banks which were allegedly the target of these conspiracies. Taking the particulars of count 1 as an illustration of them all, this alleged that the Applicant:

".... between the 1st day of April 1998 and the 31st day of July 1998, in Hong Kong, conspired with WU Qiuqiong, MA Po, POON Yuk-lan, TAM Shui-yee, CHEUNG Yeh-ping and other persons unknown to defraud American Express Bank Limited ('the Bank') by dishonestly:

(a) causing Guangnan (Holdings) Limited ('the Company') to apply and to utilize credit facilities from the Bank in the form of a Letter of Credit numbered I/980264;

(b) submitting or causing to be submitted false documents to the Bank purportedly evidencing genuine underlying commercial transactions between the Company and Guangnanyuen Overseas Trading Company;

(c) causing the Bank to grant the Company utilization of facilities under the said Letter of Credit; and

(d) causing the Bank to release a sum of $3,000,000.00 United States currency to Guangnanyuen Overseas Trading Company under the said Letter of Credit." (Appeal bundle pp. I-II)

4.These particulars describe a scheme to defraud banks by means of fraudulently obtained letters of credit using a method with which this court has become all too familiar in recent years. The offences were alleged to have occurred between April and November 1998 and were said to have involved transactions which, in monetary terms, amounted to a total of $150,500,000.

5.We were informed that, at the time of trial, two of those named as co-conspirators, Wu Qiuqiong ("Wu") and Ma Po ("Ma"), had absconded to the Mainland. Two others, Poon Yuk-lan ("Poon") and Tam Shui-yee ("Tam") gave evidence as immunised witnesses for the prosecution.

6.It was conceded by Mr Stirling, on the Applicant's behalf, that there had been no dispute at trial either as to the existence of the conspiracies alleged in the counts of the indictment or as to each of the named co-conspirators being a party to those conspiracies. The central issue, and effectively the sole one of any real importance, focused on whether the prosecution could prove that the Applicant was a knowing party to the conspiracies. His defence amounted to an assertion that he had been used as an innocent dupe to carry out tasks which, as it turned out, were important acts in furtherance of the conspiracies.

7.A brief outline of the companies to which reference is made in this case, and the connection which the alleged conspirators had with them, is necessary before going into greater detail of some of the evidence adduced at trial.

8.The Applicant was the brother-in-law of Ma, a person whose business interests occupied much of his time in the Mainland. Ma also had an interest in two companies in Hong Kong, namely, Guangnanyuen Overseas Trading Company ("Guangnanyuen") which he owned and Kwok Wah Overseas Trading Company ("Kwok Wah") which was owned by his wife, Li Ki-wa. Li Kei, the Applicant's wife, is the sister of Li Ki-wa. The Applicant was an authorised signatory on the accounts of Guangnanyuen and Kwok Wah and was, essentially, the person responsible for the running of those companies, both of which were utilised to create fictitious transactions purporting to show them as vendors selling goods to Victory Land Limited ("Victory").

9.At all material times, Wu was a director of Victory. Wu and Ma were friends. At Victory, where the two immunised witnesses were employed, Poon was the accounts manageress and Tam was the deputy business manageress.

10.Victory was a wholly-owned subsidiary of Guangnan (Holdings) Limited ("Guangnan"). Guangnan was a publicly listed company in Hong Kong with well-established letter of credit facilities with a number of banks.

Prosecution's case

11.We can adopt in large measure the summary of the prosecution's case which the Respondent has prepared for these proceedings. It was alleged that in 1998, Wu approached the Applicant and Ma requesting their assistance in creating fictitious business transactions whereby Guangnanyuen and Kwok Wah would purport to act as vendors of goods to Victory. They both agreed to assist Wu with his plan. The business transactions, which the false documentation they created purported to show, were all to be settled by way of letters of credit following applications to the banks by Guangnan. It was alleged also that there was an agreement that the proceeds of the letters of credit, received either by Guangnanyuen or by Kwok Wah, would be returned by the Applicant to Victory or Guangnan.

12.Between 1 April 1998 and 30 November 1998, acting on behalf of Guangnanyuen, the Applicant was involved with seven sets of bogus sale and purchase transactions with Wu of Victory, totalling US$13,596,061.54 (approximately HK$106,000,000) in value. Guangnan then made seven separate applications to different banks in Hong Kong, namely, American Express Bank Limited, Bayerische Vereinsbank AG, The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi Limited, Deutsche Genossenschaftsbank, Cariplo-Cassa di Risparmio delle Provincie Lombarde SpA, and Crédit Agricole Indosuez for letters of credit in favour of Guangnanyuen, using the letter of credit facilities previously granted by those banks to Guangnan.

13.Similarly, between 1 April 1998 and 30 November 1998, this time acting on behalf of Kwok Wah, the Applicant was involved with five further sets of bogus sale and purchase transactions with Wu of Victory. These purported to be valued at US$5,704,328 (approximately HK$44,500,000). Guangnan then applied to five more banks in Hong Kong, namely, The Sanwa Bank Limited, Unibank, Dresdner Bank, Banque Worms and the Bank of East Asia Limited, for letters of credit in favour of Kwok Wah, again using Guangnan's pre-existing letter of credit facilities with those banks.

14.With the assistance of Wu and other staff at Victory, the Applicant was alleged to have caused others to create false commercial documents, including contracts, invoices, packing lists and certificates of quality. The Applicant's signature appeared on several of these false documents, which he had signed either for and on behalf of Guangnanyuen or for and on behalf of Kwok Wah. The Applicant submitted the false supporting documents to the advising banks of Guangnanyuen and Kwok Wah for the purpose of showing that all the letter of credit applications were supported by genuine underlying commercial transactions.

15.In due course, the banks approved and released payments under the letters of credit to Guangnanyuen and Kwok Wah respectively, having placed reliance on the documents presented to them. After receipt of these payments, the Applicant caused the proceeds to be transferred either into Victory's or into Guangnan's bank account having first contacted Tam, the deputy business manageress of Victory, to ascertain the account into which he had to remit the funds. On seven occasions, the remittances were routed through the Applicant's personal bank accounts and, on some occasions, either in addition or by way of alternative, the accounts of other companies associated with Guangnan were utilised. The tracing of the funds emanating from these fraudulent transactions was illustrated by means of coloured charts (Exhibit P 1251). Seemingly, however, no significance could be attached to the Applicant's use of his own bank accounts as it appeared that he had acted similarly in the past, for reasons of convenience, when dealing with genuine letter of credit transactions.

16.The motive attributed by the Applicant for these transactions, when questioned in interviews with the ICAC, the records of which were admitted into evidence after a voir dire, was that Guangnan to his knowledge had cash flow difficulties.

Defence case

17.The case for the Applicant was a simple one. He did not dispute the fact that the underlying transactions, leading to the issue of the twelve letters of credit and evidenced by documents of which he was aware, were a sham. He asserted that he had been unaware of the true position at the time he signed the various documents which were used to support the existence of these transactions. As the judge aptly put the matter:

"In cross-examination the defendant agreed that the coloured charts accurately showed the routes of the sums of money and the bank accounts in relation to all the counts. He did not dispute the existence of the transactions but he pointed out that his role was confined to the transfers of the money. The defendant said that now he accepted that there (were) really no goods for the transactions but at the time he did not know." (Appeal bundle p. 33)

The judge later said:

"The defendant agreed that his defence was in fact quite simple. It was a case that he thought the transactions involved real goods. He returned the money to Victory Land thinking that they would be converted into Renminbi and be remitted back to the mother company (Guangnan). He did not associate the money with bank loans but thought that they were payments for the goods." (Appeal bundle p.35)

The explanation for the return of the money to Victory was something which prosecuting counsel, in his final speech (Appeal bundle p. 340), was able to say had never once been mentioned by the Applicant during the many hours he had been interviewed in relation to these offences.

Grounds of appeal

18.Mr Stirling advanced two grounds of appeal. The first of these was that the judge had omitted to direct the jury that they could not rely on the speculative content of answers given by witnesses as a basis upon which to draw inferences about the Applicant's state of knowledge and intent.

19.This ground was directed at the testimony given by Poon and Tam who together provided the majority of the circumstantial evidence which the prosecution relied upon to establish the Applicant's involvement in the conspiracies.

20.Poon, as the accounts manageress, had provided evidence of Victory's involvement in obtaining letters of credit from the banks, through Guangnan, having prepared the documents which were processed for this purpose. She spoke of having seen the Applicant with Tam in Victory's office at and before the relevant time covered by the indictment, although she had not personally dealt with the Applicant. Then, summarising a part of her evidence, which Mr Stirling contended called for a particular direction to the jury to warn them that they should not allow a witness' speculation to form the basis of any inferences they might draw, the judge said:

".... In her re-examination the witness clarified that she would expect the defendant to have knowledge about the fraudulent invoices, the cargo receipts and the letters of credit because his company had to prepare the invoices and submit the documents to the bank. The defendant should also know about his request to the bank to collect the money from the issuing banks. In other words, he should know about the documents which bore his signatures." (Appeal bundle p. 14)

21.Tam's evidence revealed that she had dealt with the Applicant directly in relation to all the applications for letters of credit. In particular, it was the Applicant who supplied her with documents purporting to have emanated from the beneficiary companies under the letters of credit namely, Guangnanyuen and Kwok Wah. She said that she was aware these documents were bogus. They were then processed by her and many were passed to the Applicant for signature.

22.There came a time when the Applicant, who at his own insistence was unrepresented at trial despite strenuous efforts to persuade him to seek legal aid, asked questions in cross-examination the effect of which was to find out from Tam if people outside Victory's own staff would know that the transactions were fraudulent. Tam answered:

"Just like what I have said previously, when a fraudulent LC was to be opened Wu Qiuqiong would probably have informed someone of his company, informing them that a fraudulent LC was going to be opened. Then the LC would be opened and it would reach their company. Well, under such circumstances it is my belief that (the defendant) would know that it is fraudulent." (Appeal bundle p. 190)

23.A little later Tam said that she thought the Applicant "should know whether the LC was genuine or fraudulent", but she agreed she had never told the Applicant that the transactions were false. She later said, when challenged about the Applicant's state of knowledge, that the process was such that "he probably knew". She also said that the contents of the documents she had "appraised" for the letters of credit should have been known to the Applicant, and she agreed that she had guessed the Applicant knew the transactions were fraudulent.

24.Mr Stirling submitted that the opinions about the Applicant's state of knowledge given by Poon and Tam were plainly inadmissible. No doubt such opinions had been given as the result of ill-advised cross-examination on the part of the Applicant, but Mr Stirling argued that it was a matter for the judge to have remedied in the summing up by directing the jury to disregard such opinions. The judge's failure to do so, he contended, left a danger that the jury may have drawn an inference based on those opinions.

25.There can be no question that the judge should not, with respect, have allowed the witnesses to give replies to questions calling for expressions of opinion or guesswork on their part.

26.No doubt these witnesses had every reason to have strong suspicions that the Applicant was a knowing party to the fabrication of numerous documents over many months. This did not, however, justify the introduction of speculation on their part, however overwhelming the inference may have been which they seem to have drawn. In saying this, we appreciate, of course, that it may be difficult to stop cross-examination, particularly when conducted by a defendant in person, at a time when it is in full flow. This Applicant showed himself to be a highly articulate advocate in his own cause and it may very well be that the judge felt reluctant to intervene. If that was so, the remedy lay in the summing up where the matter could have been put right.

27.The well settled position in law, in this regard, is succinctly expressed in Archbold 2003, at para 10-64, where the test of admissibility in respect of opinion evidence is said in general to be that:

"... parol evidence is not admissible with regard to anything not immediately within the knowledge of the witness; he must speak of facts which happened in his presence, or within his hearing. This rule excludes both hearsay and the expression of opinion or belief."

This paragraph then continues with the exceptions to the rule where experts and the like are concerned.

28.Ultimately, Mr Reading, SC, on the Respondent's behalf, accepted that the judge should have given a direction to deal with the personal opinions expressed by Poon and Tam as to the Applicant's state of knowledge. He submitted, however, that the judge had sufficiently directed the jury, with regard to speculation in general, that they would readily have understood from these directions that guesswork, whether on the part of the jury or the witnesses, was an insufficient basis from which to draw any conclusions adverse to the Applicant.

29.The two passages particularly relied on by Mr Reading came early on in the summing up. Firstly, immediately after the burden and standard of proof had been explained, the jury were directed:

"You must not equate suspicion with guilt. So, at the end, if you find yourself suspicious that the accused might be guilty, then you are not in a position to convict him. Even if you think that the accused is probably guilty, you are not in a position to convict him. You must be satisfied so that you are sure that he is guilty before you can convict him of any of the counts." (Appeal bundle p. 2)

30.The second passage came a little later, when the jury were told not to speculate about matters on which no evidence had been called and not to try to "fill in the gaps in the evidence by speculation". This direction was repeated when the judge turned to the approach to be taken towards the drawing of inferences. He said:

"I said earlier that when you consider the evidence, you must not speculate. It means that if there is a gap in the evidence which cannot be filled by a logical and reasonable inference, then you must not try to fill the gap by guessing. However, members of the jury, you are entitled to draw inferences from facts that you accept as true. So, if you find certain facts proved on the evidence before you, you are permitted to say, 'Well, on the basis of those fact(s) which I find proved, here are other facts about which I can be sure.'

I will give you a very simple example. If you see there is thick, black smoke coming out from the windows of a flat, you may reasonably infer that there is something burning inside. But whenever you wish to draw an inference, I ask you to bear in mind the following matters.

One, you can only draw an inference based on the facts that have been proved to your satisfaction. You must not draw an inference based on mere suspicion. To use the same example, if you only suspect and are not sure that there is smoke coming out from the window, then you cannot infer that there is something burning inside the unit." (Appeal bundle p. 5)

31.The judge's directions as to speculation were essentially the standard directions which are given in almost all cases. They did not provide the warning to the jury which, in our view, was specifically required in this case, that the guesswork of the two immunised witnesses should not be allowed to play any part in their assessment of the case against the Applicant.

32.This omission, in the context of a trial we were told had occupied about 30 days, would have had less significance if the judge had not chosen to remind the jury in the summing up of Poon's evidence that, in effect, the Applicant should have known about the documents which bore his signature and of Tam's account that "she felt that (the Applicant) knew about the application(s) for these letters of credit but she could not recall what he had said, nor his exact reaction."

33.This being said, both witnesses had laid an extremely thorough framework as a basis for the suspicions they were led by the Applicant into saying they had about his knowledge of the bogus transactions.

34.The summing up provides a brief account of the roles played by Poon and Tam and the way they had described the Applicant fitting into the scheme. What emerges from this is that Poon had worked for Victory since 1995 as an accountant and in 1998 was the accounts manageress working under Wu. She was familiar with the way that Guangnan would obtain letters of credit on Victory's behalf. She was aware of cash flow problems with Guangnan and Victory and how Victory had been falsely inflating its commission returns to make their position look healthier. The letters of credit were obtained to generate cash to cover bad debts. Wu would inform Tam of the "customer's" name for which the letter of credit was to be opened. Tam informed Madam Cheung who was responsible for preparing the invoices and Tam would also tell the "customer" into which account the money should be repaid. Poon knew the Applicant. She had seen him with Tam at the Victory offices. She knew also that no goods were involved in any of the letter of credit transactions and that this was an unlawful activity in which she was engaged. However, she followed Wu's instructions. The "customers" involved in these unlawful transactions were Guangnanyuen and Kwok Wah.

35.Tam, for her part, also worked at Victory under Wu. She was familiar with the letters of credit procedure for genuine transactions and the documents which were required before the banks would issue them. She was aware of Guangnan's cash flow problems and that Guangnanyuen and Kwok Wah were "beneficiaries" of the "cash" letters of credit. Tam used to contact the Applicant who acted on behalf of those companies regarding these transactions, but for genuine transactions she would contact Ma. The Applicant sometimes came to her office to sign the documentation and she would speak to him about the amount involved in the letters of credit. For this reason, she thought the Applicant would know about the falsity of the transactions. Furthermore, as the judge put it in the summing up:

"Madam Tam said in a real transaction she would contact the beneficiary regarding the issue of transportation. The supplier would fax over a shipping notice to her. But in a cash letter of credit situation there would be no discussion about that as there were no goods involved. Madam Tam said that in her discussion with the defendant for this cash letter of credit, he never mentioned how the goods would be delivered...." (Appeal bundle p. 15)

36.Poon said that the normal procedures were followed for the transactions which she knew were improper. The applications would be signed first by Wu. Then, she would fax them through to the Applicant who would fax them back having signed them. Ultimately, either Poon or the Applicant would present the necessary documents to the banks. Once the Applicant had received the funds, he would telephone Poon to find out where they should be sent.

37.Having regard to these and other factors which these two witnesses were able to recount about the transactions where letters of credit were fraudulently obtained, it is not surprising that they "thought" the Applicant also knew. He had been involved at almost every stage in all the transactions which were not genuine.

38.The failure on the part of the judge, in such circumstances, to warn the jury that expressions of belief by Poon and Tam about the Applicant's state of knowledge amounted to mere speculation and should be ignored, when this was the central issue in the case, was in our opinion a material irregularity. However, having heard counsel as to the proviso under section 83 of the Criminal Procedure Ordinance, Cap. 221, we are satisfied, in view of the strength of the evidence against the Applicant, that no miscarriage of justice has actually occurred.

39.We shall give leave on this ground.

40.In his second and last ground of appeal, Mr Stirling submitted that the judge "may have confused the jury" by giving the following direction:

"So, if you find that the defendant has signed on documents, which showed that there was a sale where there (were) really no goods involved, and the defendant knew that the documents were to be submitted to the bank for letters of credit or loans, then you would have to consider, in light of the definition, whether the defendant had acted dishonestly or not." (Appeal bundle p. 11)

41.Mr Stirling's complaint was focused on the words contained in this extract: ".... documents, which showed that there was a sale ....". This was said to have been potentially confusing because, at trial, there had been no dispute that the goods described in the documents were non-existent or that the documents were then to be presented to the banks, for the purposes of obtaining letters of credit. The real question for the jury had all along been whether the Applicant was aware, at the material time, that the goods referred to in the documents did not exist. Leaving the matter in the way the judge had expressed it, was said by Mr Stirling to have negated the Applicant's defence as well as the directions which the jury had been given on dishonesty.

42.In fact, while this particular extract from the summing up makes no reference to the Applicant's state of mind, it cannot be looked at in isolation.

43.At the end of this direction, the judge had gone on to say that the jury should consider "whether the defendant had acted dishonestly or not" in the light of the "definition" he had just given of the elements of "dishonesty". The judge had postulated the question, when dealing with the second of these elements:

".... must the defendant himself have realised that what he had agreed to would be regarded as dishonest by reasonable and honest people? In deciding on this you must consider the defendant's own state of mind at the time of this event." (Appeal bundle p. 11)

44.When later reviewing the evidence given by the Applicant, the judge gave a detailed summary of his account, reminding the jury that the Applicant had "stressed that he never suspected that there were no goods in the transactions". A little later, having gone through other conflicts in the evidence, where the Applicant had taken issue with the testimony of prosecution witnesses, the judge said that the Applicant: "did not dispute the existence of the transactions but he pointed out that his role was confined to the transfers of the money. (He) said that he now accepted that there were really no goods for the transactions but at the time he did not know".

45.In a later passage from the summing up, where the judge was again summarising the evidence, so far as it related to the Applicant's state of knowledge, he said:

"The defendant agreed that his defence was in fact quite simple. It was a case that he thought the transactions involved real goods. He returned the money to Victory Land thinking that they would be converted into Renminbi and be remitted back to the mother company. He did not associate the money with bank loans but thought that they were payments for the goods.

Based on this simple account, the prosecution asked the defendant, several times, if he thought the money was purchase money and that Victory Land had the money to pay for the goods without a loan, why would it be necessary for the money to go through this route before it was transferred back to the mother company? The defendant had given different answers about this, such as the need to have transactions for the bank account and also that it could maintain the flexibility of the accounts. Members of the jury, it will be a matter for you to decide whether the truth lies.

The prosecution asked the defendant why he did not disclose this simple version to the ICAC in any of the interviews. The defendant said that because he could not recall so much, his mind was confused at the time, he could only recall that he had not done anything bad. Later, he hinted to the fact that he did not want to disclose it because he was afraid there might be a situation of money laundering. But then he added that even if it was money laundering, it was done without his knowledge." (Appeal bundle p. 35)

46.It is apparent from these extracts that the jury could not have been left in a state of confusion about the main issue to be decided in the case. When the judge said that if the Applicant had signed documents showing there was a "sale" where, in reality, no goods were involved and if the Applicant knew that the documents he signed were to be submitted to the banks, the judge was merely saying that if those matters had been established, it was then a question of whether the Applicant had acted dishonestly when he signed the documents.

47.Whilst we do not consider that there could be any doubt about this interpretation, particularly remembering that the whole of the Applicant's defence was centred on this issue, the judge brought this into sharp focus near the end of the summing up when he said:

"Members of the jury, as the prosecution had pointed out, despite the length of the trial and the volume of the documents, the trial came down to relatively simple points of credibility and reliability of witnesses and what inferences that could be drawn. Of course, that does not mean that the issues are not important ones for you to consider. As a suggestion, perhaps you may approach the case in the following manner:

One. You may decide whether you would believe the account given by the defendant in court. If you believe him, that he really had no knowledge about the absence of goods and Wu Qiuqiong or even Ma Po were just using him as a front man to transfer the money, then you have to acquit the defendant and you need not go further. Even if you think what he said may be true, you will have to acquit the defendant. When you consider the issue of the defendant's credibility and reliability, you should take into consideration all the relevant evidence presented to you and apply all the relevant directions I have given to you.

Two. Even if you find that you do not believe the defendant, you cannot then assume that he is therefore guilty. You have to remember that the prosecution bears the burden of proof and they have to prove their case beyond a reasonable doubt. You should consider whether the prosecution witnesses were credible and reliable. You may think, in this regard, that the most important witness for the prosecution on the contested issues would be Madam Tam, as she appeared to have direct dealings with the defendant regarding these transactions.

Three. If you find that you are not sure of Madam Tam's credibility and reliability, then you would probably have no alternative but to acquit the defendant on all the counts. However, if you do accept that Madam Tam is a credible and reliable witness and what she said was true about talking to the defendant about the letters of credit, asking him to sign on the related documents after she had prepared them, etc., then you have to consider the issue of inference.

You should remember my direction to you in this respect. Hence, in short, you have to decide, on the evidence you accepted as being true, could you infer that the defendant had knowledge about the fraudulent nature and purpose of the letters of credit, and if so, was he a party to the conspiracy to defraud the banks by dishonestly doing or assisted in the doing of the things referred to in the counts? ...." (Appeal bundle pp. 43-44) [Emphasis added]

48.The passage selected for criticism by Mr Stirling was taken a little out of context. It is unfortunate that he made no reference to the other passages in the summing up to which we have referred. Had he done so, he may well not have pursued the point.

Conclusion on conviction

49.For the reasons we have given earlier, we shall grant leave to the Applicant having regard to the arguments which were advanced under the first ground. We shall treat the hearing as the appeal and, applying the proviso under section 83 of the Criminal Procedure Ordinance, the appeal against conviction is dismissed.

Sentence

50.Summarising the position on sentence, the judge pointed to the fact that the 12 counts of conspiracy to defraud had involved a total sum of US$19 million of which US$4 had remained unpaid by Guangnan. The judge found that the Applicant was more than the mere part-time assistant at Guangnanyuen and Kwok Wah which he had maintained. It was abundantly plain that the Applicant had signed fraudulent documents with knowledge of their contents and that his role was a vital one in the operation of the fraud.

51.The judge went on to consider the potential damage frauds of this kind can do to the reputation which Hong Kong has for commercial integrity. He accepted, while not losing sight of the losses incurred by the banks as well as the potential losses they could have suffered, that the Applicant had not been shown on the evidence to have derived any personal benefit.

52.Finally, the judge reviewed a number of decisions of this court in similar frauds before imposing six years' imprisonment on each count. On the "Guangnanyuen" offences, counts 1 to 7, the sentences were ordered to run concurrently. A similar order was made on counts 8 to 12 which involved the "Kwok Wah" transactions. However, the judge ordered that four years of the sentences on counts 8 to 12 were to run consecutively to the totality of sentence on the other counts, making 10 years in all.

53.Mr Stirling submitted that, whilst six years' imprisonment was a proper sentence for these offences, 10 years was manifestly excessive in that all of the transactions had been in reality part of the same scheme. It was submitted that it was unrealistic to treat the offences as falling into two separate groups deserving separate and additional punishment. As to this point, it is only right to say that the judge plainly did not adopt this approach. He took a "global sentence of 10 years" as the appropriate term to impose and achieved this object by making a portion the sentence on the last counts consecutive to the earlier counts.

54.Mr Stirling went on to indicate that there had in any event, since sentence was imposed, been a change of circumstances in that the outstanding monies, namely, $38,500,000, under the letters of credit had now been recovered. As to this, the Respondent accepted that in effect about 65 per cent of Guangnan's debts had now been repaid and that the creditors had agreed to accept the balance in the form of shares in a new company (GDE). Whilst it is apparent that the debt may have been settled, the Applicant did, of course, make no contribution towards its settlement. This was, therefore, a matter of less relevance to the Applicant then it would have been in a case where the culprit had paid compensation or made restitution himself. Nevertheless, this was a factor to be taken into account.

55.The Respondent, in the light of other decisions of the courts in similar cases, conceded that a sentence of 10 years' imprisonment, having regard to all the circumstances of the case and the Applicant's role in it, was manifestly excessive.

56.Every case must, necessarily, be decided on its own facts. Having regard to the part played by the Applicant in a scheme of fraud of this magnitude, which ultimately resulted in no actual loss, we have concluded that the appropriate sentence would have been in the region of eight years.

Conclusion on sentence

57.For the purposes of sentence, therefore, we shall grant leave and, treating the hearing as the appeal, we shall impose a sentence of eight years' imprisonment in totality.

58.In order to achieve this, the six-year sentences imposed on each count will remain. We shall quash the order that four years on counts 8 to 12 should run consecutively to the concurrent terms of six years imposed on all the other counts. Instead, we shall order that the six-year sentences on all counts, except count 3, should run concurrently. On count 3, which involved the release of US$11,532,000 under the letter of credit in that transaction, the sentence of six years' imprisonment will run consecutively to the other sentences to the extent only of two years' imprisonment.

59.The effect, therefore, of our order is that the overall term of imprisonment to be served by the Applicant will be reduced by two years from 10 years to eight years' imprisonment. To this extent, the appeal is allowed.

Representation:

Mr John Reading, SC, DDPP and Mr Gavin Shiu, Ag SADPP,of the Department of Justice, for the Respondent.

Mr W.N.C. Stirling and Mr Chan Chung Ming,instructed by Messrs Ho, Tse, Wai & Partners, for the Applicant.

Remarks:
Leave to Appeal by Applicant to Court of Final Appeal refused. Please refer to the appeal judgment of FAMC000015/2004.