HKSAR v. Lau Chung Yee & Another
Read the full judgment text of CACC 420/2000 on BabelCite. This Court of Appeal judgment was delivered on 27 November 2001.
2. There was a second charge against D6 and D7 for failing to keep books of account, contrary to section 121(4) of the Companies Ordinance, Cap 32, in that they between 22 July 1999 and 12 August 1999, in Hong Kong, being directors of a company, namely Profit Style, failed to take all reasonable steps to secure compliance by the company with the requirements of section 121 of the Companies Ordinance.
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CACC000420/2000 CACC 420/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 420 OF 2000 (ON APPEAL FROM DCCC NO. 284 of 2000) -------------------------
------------------------- Coram : Hon Stuart-Moore VP, Woo JA and Lugar-Mawson J in Court Date of Hearing : 15 November 2001 Date of Judgment : 27 November 2001 ------------------ JUDGMENT ------------------ Hon Woo JA (delivering the judgment of the Court) : Introduction There are two applicants before us who were D5 and D6 on trial before Judge Sweeney in the District Court. They were charged together with 5 other defendants of conspiracy to defraud, contrary to common law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200. The particulars of offence alleged that the seven defendants, between 21 July 1999 and 12 August 1999, in Hong Kong, conspired together and with other persons unknown, to defraud such persons as might be induced to give money to invest, by dishonestly:
2.There was a second charge against D6 and D7 for failing to keep books of account, contrary to section 121(4) of the Companies Ordinance, Cap 32, in that they between 22 July 1999 and 12 August 1999, in Hong Kong, being directors of a company, namely Profit Style, failed to take all reasonable steps to secure compliance by the company with the requirements of section 121 of the Companies Ordinance. 3.All defendants pleaded not guilty to the first charge and D6 and D7 pleaded not guilty to the second charge. 4.At the conclusion of the trial, in which none of the defendants testified or called evidence, the Judge convicted D1 to D6 of the first charge while acquitting D7 of that charge and convicted D6 and D7 on the second charge. 5.After calling for reports, on 5 October 2000, the Judge passed the following sentences:
6.Before us, D5 applies for leave to appeal against her sentence of 3 years and 9 months. D6 seeks leave to appeal against his conviction on the first charge and against his sentences on both charges. The facts 7.On 6 July 1999, Profit Style, a shelf company, was sold to D6 and D7. They became its registered directors. 8.Documents relating to Profit Style that were required to be filed under the Companies Ordinance were filed in the Companies Registry on 23 July 1999. The documents included D6's consent to act as the director of Profit Style. 9.In late July 1999, the landlord of the offices at 616-617 Chevalier Commercial Premises Centre, 8 Wang Hoi Road, Kowloon Bay, was informed that the premises would be occupied by Profit Style. 10.Profit Style purported to be engaged in the food snacks and jewellery business. However, when police raided its premises on 12 August 1999, they did not find any trace of such business. When the police arrived, persons inside the premises locked the door at the entrance and all the doors of every room inside. The police gained entry by force, only to find shredded papers and computers with little information about the company. 11.Profit Style placed advertisements in newspapers for office assistants or cleaners, the work was to start immediately and no experience was required. Six of the victims who testified at the trial were middle-aged women who previously worked in factories or unskilled positions. They told the Judge about reading the advertisements and going to Profit Style's premises for an interview. After the interview, each victim was hired immediately. Then she was taken to a room where she was paired with another "new recruit" (the first player). In fact, the new recruit was a conspirator with the function to gain the victim's trust and obtain information about her financial situation. The victim and the new recruit were given calculations to do. They were doing this for a day or two, all the while the new recruit was building the victim's trust, assuaging any suspicion the victim might have had about the company, and enquiring financial information from her. 12.Then, another friendly conspirator (the second player) appeared and told them about benefits from being a Profit Style employee. They were told Profit Style was also a fund manager for the Hong Kong Government and it managed funds which earned up to 150% interest per year. The victims were told that Profit Style had various investment funds such as "Hong Kong Government Fund", "Consumption Market Fund" and "Consumer Market Fund". These funds did not exist. 13.While the victim was digesting this impressive information, a manager (the third player) would enter the room and hand a wad of cash to the second player which would reinforce what the second player had said. The victim and the new recruit were told how they could take advantage of this investment, but first the head office in Taiwan had to approve their joining the investment scheme. A phone call would purportedly be made and within minutes they were informed that approval was granted. 14.The victim and the new recruit were each to go to their banks immediately and withdraw money for the investment. The victim withdrew money and handed the money to the manager, who told her that she had invested in a "risk free" investment. The victim was required to fill in forms that she did not understand. 15.Shortly thereafter, she was told that she had made an immediate profit (or interest) on her investment. 16.She was then encouraged to place buy and sell orders on the loco London gold or silver market. The victim did not have a clue what this involved. Nevertheless, following the new recruit she filled out buy and sell order forms, called an internal number "216" and placed her orders. In fact, Profit Style had insufficient funds, equipment, documentation or trading procedures to trade gold or silver in the London market. 17.Within minutes, the victim was told that she had lost her initial investment and some of the company's money. She was pressurized to go out and obtain as much as she could to repay this debt and square her position. 18.After the victims left Profit Style, they realized that they had been duped and complained to the police. 19.The involvement of D5 in the conspiracy was described by PW4 and PW5. D5 was in the position of a "new recruit" and she and another new recruit, D4, were together with PW4 on 5 and 6 August 1999. Separately, on 10 and 11 August 1999, D5 was paired with PW5. She established her rapport with both of the victims and helped persuade them to invest in the company's claimed investment schemes. She also purportedly invested an amount of money together with the victims. When their "investments" were lost, D5 pretended that she would also try to get more money to cover her own position. She urged PW5 to get more money to square her (PW5's) position, and told her not to report the matter to the police. 20.The findings by the Judge of D6's involvement in the conspiracy were based on his admissions in the cautioned statement made on 18 February 2000. The circumstances under which he made the statement were as follows. 21.Upon an ex parte application by an authorized officer, pursuant to s 4(2) of the Organised and Serious Crimes Ordinance, a judge of the Court of the First Instance made a Production Order dated 31 January 2000 ordering D1, D2, D6 and D7 to produce to a police officer numerous documents relating to Profit Style, including all accounts and employment records, not later than the end of the period of seven days from the date of the service of the order on them respectively. On 18 February 2000, D6 and D7, along with their solicitor, attended the offices of the Commercial Crimes Bureau, and made a statement to the police. D6's statement was produced as exhibit P15 (with certified translation, exhibit P15(a)) at the trial without objection by D6's counsel. The beginning part of the statement reads:
22.The sergeant went on to tell D6 that he wished to ask some questions regarding the offence with which D6 might be charged. The sergeant then cautioned him and after D6 replied that he understood, questions were asked and answers provided. 23.In his reasons for verdict, the Judge said:
Grounds of appeal 24.D6's grounds of appeal against conviction are only directed at the first charge of conspiracy, as follows:
25.Against sentence, D6's grounds of appeal are as follows:
26.D5's grounds of appeal against sentence are as follows:
D6's conviction 27.Grounds of appeal (1), (2) and (3) raised on behalf of D6 hinge on whether D6 made the admissions voluntarily that were relied on by the Judge in convicting him of the first charge. If the admissions were not voluntary, they are simply not admissible and should not have been admitted by the Judge and there would have been insufficient evidence against D6 on that charge. Alternatively, even if the admissions were voluntary, was it unfair to D6 for the Judge to have admitted them in evidence? These grounds can be conveniently dealt with together. 28.The admissions were made in D6's statement to the police in response to the Production Order of 31 January 2000. The Production Order was made pursuant to s 4(2) of the Organized and Serious Crimes Ordinance, Cap 455 ("OSCO"). That was for the production by a person who appears to the court to be in possession or control of the material to which the application resulting in the making of the order relates (s 4(2)). "Material" includes any book, document or other record in any form whatsoever, and any article or substance (s 2(1)). The person to whom the order is directed is not excused from producing any material so ordered on the ground that to do so might tend to incriminate him (s 4(12)(a)), but he may claim legal privilege (s 4(11)(a)). S 4(13) provides that "Any person who without reasonable excuse fails to comply with an order made under subsection (2) commits an offence and is liable to a fine at level 6 and to imprisonment for 1 year." It is the key contention of Mr McGowan, for D6, that this subsection (13) hung over D6's head in his making the admissions in the statement dated 18 February 2000. This threat of liability to criminal prosecution, so it is argued, affected D6's right of silence and made his admissions involuntary, and the statement should not have been admitted. 29.The argument is misconceived. S 4(13) makes the failure to comply with the Production Order without reasonable excuse an offence. It does not impose any compulsion on D6 to make any statement to the police. His attendance at the Commercial Crimes Bureau and making the statement to Sgt 4406 was purely voluntary. D6 attended with a solicitor, and presumably must have been acting under legal advice. Even if he failed to comply with the Production Order, it was not incumbent upon him, in order to prevent or avoid prosecution under s 4(13), to give a statement to the police. Having a reasonable excuse or not, he was never ordered or in any way obliged to provide any statement. If he were charged for breaching the Production Order, he could provide the reasonable excuse, if any, eg, in court. The Production Order only required him to produce material and documents, not that a statement be made by him. This is different from what may be required under s 3 of OSCO which authorises the Secretary for Justice to require the person to whom an order made thereunder is directed to "answer questions or otherwise furnish information with respect to any matter that reasonably appears to an authorized officer to be relevant to the investigation" (s 3(3)(c)(i)). While s 3 similarly excludes self-incrimination as a ground for not complying with an order made thereunder (s 3(1)(a)), accepts legal privilege as such a ground (s3(9)), and makes failure to comply without reasonable excuse an offence (s 3(13)), it differs from s 4 in that it excludes the use of the information and material provided under s 3 against the ordered person in criminal proceedings (s 3(12)). It is abundantly clear, therefore, that as the Production Order was made pursuant to s 4 and not s 3, there was no obligation or compulsion whatsoever for D6 to give a statement to the police which he did on 18 February 2000. The question of involuntariness did not even arise for consideration. 30.Mr McGowan refers us to the decision of the Court of Final Appeal in Secretary for Justice v Lam Tat Ming [2000] 2 HKLRD 431. The court there was concerned with confessions made by the accused persons to undercover ICAC agents. At p 440H-441D, Li CJ said:
31.Mr McGowan argues that as D6 might have been under the impression of being compelled to provide the statement, it would not be fair for the Judge to have admitted the statement against him at the trial. Moreover, he submits that D6 had given the statement to provide a reasonable excuse for failing to produce documents in order to prevent prosecution under OSCO so that the statement should not have been admitted against him and used for the purpose of proving a different offence, ie, the first charge of conspiracy to defraud. 32.D6 made the admissions to the sergeant after he had been cautioned and he answered questions put by the sergeant to him after a further caution. He knew full well that he was not obliged to say anything or answer any question and what he said might be given in evidence. He was accompanied by a solicitor. There could have been no misunderstanding that he was compelled to make the admissions. No threat or inducement was uttered by the sergeant (Transcript p 250P-Q). D6 did not testify and there was no evidence what he was thinking when he made the admissions. 33.Indeed, not only did counsel for D6 at the trial, Mr Cosgrove, raise no objection to the admissibility of the statement (Transcript p 250S), he was party to persuading the Judge to admit the statement. This can be seen from the following exchange after the Judge raised with prosecuting counsel, Mr Coghlan, his disquiet about a possible breach of D6's right to silence and whether D6's statements were sought to be admitted relating to the first charge or the second charge, while the second charge was for breaching the Companies Ordinance and not the Production Order.
34.Both Mr McGowan and Mr Blanchflower SC, for the respondent, submit that the italicised part of the passage cited above is wrong. We agree, for it is plain that the explanation or the statement containing it was not given under any statutory power and its admissibility has nothing to do with any requirements of OSCO. 35.Mr McGowan contends that both Mr Coghlan and Mr Cosgrove were operating under a misapprehension of the law and this demonstrates that D6 made the cautioned statement under the same misapprehension. However, no evidence was adduced as to how D6's mind was working when he made the statement. Even if he was thinking of providing a reasonable excuse for failing to comply with the Production Order, that did not alter the fact that he, with legal advice, went to the police to offer his explanations and answers to questions willingly and voluntarily. He knew full well that whatever he said might be given in evidence. There is no law to say that his admissions to any criminal offence in his voluntary statement cannot and should not be used in any criminal proceedings. There was no evidence that whatever was in his mind was caused or induced by the police. There is no valid basis to attack the voluntariness of the statement. Neither D6, nor his solicitor, made a whimper of a condition that the statement could only be used for any limited or specific purpose. 36.Mr Blanchflower has directed our attention to the decision of the High Court of Australia in Suresh v The Queen (1998) 72 ALJR 769 in support of his contention that if trial counsel for the defence made a calculated decision to have D6's statement admitted because he thought it would be to D6's advantage, D6 could not turn round to say on appeal that the admission of the statement was unfair to him. In that case, the appellant was tried for sexual offences against the daughter of his friends. Two school friends of the girl testified that she told them (over six months after the alleged event) that her "uncle" had sexually abused her. That uncle was not identified, but there was evidence the victim habitually called the appellant "Uncle Suresh". No objection was taken to the admission of the evidence of the school friends or of the victim as to her conversation with them. The appellant's trial counsel said this evidence was admissible as "recent complaint", but this was a tactic to establish that by "uncle" the victim meant a blood relative, not "Uncle Suresh". If the jury believed that, the victim's statement to her school friends would amount to a prior inconsistent statement. The appellant was convicted. At p 774, para 23 of the report, McHugh J said:
Kirby J stated in paras 57-58 at p 780:
37.In the present case, D6's statement was admitted with the agreement of his trial counsel. Mr McGowan makes no complaint that trial counsel conducted D6's defence incompetently. The statement was voluntary and made in the presence of a legal adviser. Its contents afforded strong proof of D6's position and involvement in the management of the company which was the corporate façade of the conspiracy. In all the circumstances, we do not think that it was unfair to D6 for the Judge to have admitted the statement. Indeed, it would be odd for the Judge in the situation he found himself to have interfered and taken it upon himself to exclude the statement when the defence counsel was anxious for this evidence to be admitted. Grounds (1), (2) and (3) must fail. 38.Ground (4) contends that even if the statement is admissible, its contents do not prove D6's agreement to participate in the conspiracy with the necessary knowledge and intention, or indeed that he was even aware of its existence. Mr McGowan further argues that Profit Style had been in existence from around 6 July 1999 (para 6 of the Admitted Facts) and the conspiracy was only alleged to have begun from 21 July 1999, and that there was no sufficient evidence of the connection between D6 and the conspiracy as found by the Judge. 39.While D6 was the person who had agreed to be the director of Profit Style, he also admitted in his cautioned statement the following matters. The accounting and income records of the company were inputted into the company's computer system; he knew the police had taken away the company's computers, although there was no evidence that he was present during the police raid on 12 August 1999; he described Profit Style as his company; he said the staff records were missing; and he employed someone to input the data into the computer. The rest of the evidence was that Profit Style was not running a business of trading in food snacks and jewellery as represented and D6 was a director on 22 July 1999 when the fraudulent scheme began. On 5 August 1999 (the day after PW4 commenced work with Profit Style), D6 opened Profit Style's bank account with the Hang Seng Bank. He was the sole signatory of the account. In the account opening documents he used Profit Style's company chop; he described himself as an "authorised person" of Profit Style; he provided information of Profit Style's address, that Profit Style had 20 employees, and it was a limited company; and he provided the Bank with copies of Profit Style's Certificate of Incorporation and Business Registration Certificate, the latter showing that it was registered on 24 July 1999. He provided the Bank with a Mandate showing that the directors of Profit Style had authorised him to open the account. The signing arrangement was for D6 to sign "with company chop". When the account was opened $5,000 was deposited, presumably by D6. 40.In the light of all these various items of evidence, it was open for the Judge to draw the irresistible inference that D6 was an important member of the conspiracy to be operated under the guise of a legitimate business run by Profit Style. Ground 4 fails. Sentence - general 41.On the nature and operation of the conspiracy the Judge had this to say:
42.The Judge concluded that the business of Profits Style was an elaborate conspiracy to defraud and that Profit Style served no other purpose in the months of July/August 1999 than to cheat unsuspecting members of the public out of their money. He said:
43.The Judge went on:
44.The Judge also made observation on the prevalence of these types of frauds:
45.The Judge took the view that the amount of losses to which the victims testified did not represent the full amount of the conspiracy's taking:
46.The Judge also found that each of the defendants, D1 to D6 inclusive, played an active role in the conspiracy. He said:
47.There were also two common features regarding the defendants in this case. There was a common observation made in respect of all the defendants in the probation officers' reports, that greed might have possibly played a part for their involvement in the fraudulent scheme. Further, none of the defendants showed any remorse for what they had done. 48.The Judge was of the view that for the mastermind of the scheme, a starting point of 6 to 7 years' imprisonment was appropriate. He, however, did not find that any of the defendants was the mastermind, so he adopted 4 years' imprisonment as a starting point. For each of the defendants who had a clear record, the Judge reduced from the starting point a period of 3 months. 49.It emerged in the present application that in CACC 11/2001 (12 October 2001, unreported), on appeal from DCCC 513/2000, where seven defendants were charged, a very similar conspiracy was operated through a company called Sheen Victory Trading Limited and that the 3rd defendant and the 4th defendant in that case were respectively the same persons as D4 and D2 in the present case. Similarly, Sheen Victory was a sham company which had been set up solely for the purpose of deceiving unsuspecting members of the public seeking employment into parting with their money. The scam was a sophisticated one involving detailed planning and not inconsiderable expenses. The trial judge sentenced each of the defendants to 4 years' imprisonment, and gave a reduction of 2 months for three of the defendants who had clear record. One feature of that case which did not appear in the present one was that there were two police raids on Sheen Victory's premises, one in January 2000 and the other in March 2000. Some of the defendants were involved in the conspiracy which was carried on between 19 November 1999 and 1 March 2000, namely, in both phases with the police raid in January 2000 in between. Two of the defendants, D5 and D6 in that case, applied for leave to appeal against sentence. D5 did not participate in the second phase of the conspiracy whereas D6 only joined the conspiracy a week before the second police raid, after the January raid. The Court said at paragraph 8 on page 7 of its judgment:
50.Regarding the applicants, because of their participation in only one of the two phases of the conspiracy, the Court concluded at pages 8-9 of the judgment as follows:
51.The Court of Appeal reduced the sentences of D5 and D6 by 6 months in each case to achieve parity of sentence. 52.We take the view that a starting point of 4 years cannot be criticised for heartless and cruel scams of this kind, where gullible people, innocently seeking jobs, are deliberately enticed into parting with their hard-earned and sometimes life savings. The Court reduced the sentences of D5 and D6 in CACC 11/2001 not because the sentences of 4 years' imprisonment for them were inappropriate, but because of their lesser participation than the other defendants in the two-phased conspiracy in that case. As expressed by the Court, we say again that a starting point of 4 years for participants in such conspiracies is necessary and appropriate both for punishment and deterrence. For the mastermind, of course, a much heavier sentence should be imposed. Sentence - D5 53.Ms Remedios, on behalf of D5, submits that the culpability of the defendants in the present case, especially bearing in mind the part played by D5, is less than that of the applicants in CACC11/2001 in the following aspects:
54.She also stressed that D5 only played an unimportant and minor role in the conspiracy. We do not agree. D5 was the "new recruit" (first player) whose part was to establish rapport with the victim to obtain her trust and allay her suspicion and fear. She also performed the task of seeking as much information about the victim's financial situation as possible, so that her colleagues in the conspiracy could deceive as much money from the victim as possible. She also played the part of reinforcing the threat to the victim that she still owed the company money and urging her not to report the matter to the police. Her role was as essential as the part played by the second and the third players who each took an active part in inducing the victims to part with their money. 55.While the length of operation of the conspiracy as well as the amount defrauded are relevant factors in considering sentence, they are by no means the only ones. This was a case where the police acted very swiftly: shortly after reports were made, they raided the premises of Profit Style. Though those defendants who were in the premises at the time of the raid locked the doors to block police entry, while destroying as much papers as possible to avoid detection, the police did take away all the records that they could find and the computers from the company, thereby making it quite difficult, if not impossible, for the company to resume its task of defrauding people. That must have been the main reason why the scam only lasted three weeks. A great number of advertisements had been put up in newspapers to attract unsuspected persons who were seeking jobs. The Judge was satisfied that the scheme and the scale of the operation were "clearly designed to attract as many victims as possible in a short period of time." 56.In all the circumstances of this case, and considering D5's role in the conspiracy, we are of the view that the 4-year starting point adopted by the Judge was not a bit too long. We feel that the Judge was over generous in giving D3 a 3-month discount for her previous clear record, to arrive at a sentence of 3 years and 9 months' imprisonment. In Secretary for Justice v AU Man-kei and others, CARR 2/2000 (11 August 2000, unreported), which was a model agency fraud case, the Court of Appeal said, at page 27D-M:
57.In this case, there was evidence from PW4 and PW5 that D5 was with them in two consecutive periods of time. D5 appeared to play a similar role towards these victims. She should count herself fortunate for the Judge's allowing her a 3-month discount for her so-called clear record. Her application to appeal against sentence is dismissed. Sentence - D6 58.Regarding D6, the Judge formed the view that D6 played an active role in the management of the company. He was the key figure to the corporate façade of Profit Style. He was at least helping the mastermind and operators, assuming such people existed, to hide behind the corporate veil to avoid detection. In such circumstances, the starting point of 4 years adopted by the trial Judge for him for the first charge was nothing other than appropriate. D6's ground (1) against sentence has no merit and must fail. 59.Regarding the second charge, it is argued that the Judge failed to decide on a necessary element required by s 121(4)(b) of the Companies Ordinance, namely the offence was committed "wilfully", before sentencing D6 to imprisonment. It is clear from the record (Transcript p 255R) that the Judge had read s 121 of the Companies Ordinance during the course of the production of D6's cautioned statement. It is therefore difficult to assume that the Judge did not have in mind the requirement of wilfulness before passing a sentence of imprisonment, as required by s 121(4)(b) of the Ordinance. No company documents were found by the police at Profit Style's premises, nor was any produced pursuant to Production Order. It is plain, therefore, that D6 wilfully did not keep proper books and accounts of Profit Style "as are necessary to give a true and fair view of the state of the company's affairs and to explain its transactions", in accordance with s 121. He could not have intended otherwise because Profit Style was a fraudulent scheme right from the beginning. Ground (2) of the appeal against sentence must also fail. 60.There is, however, a matter in the sentences imposed on D6 that gives rise to concern. The Judge gave him 4 years' imprisonment for the first charge and 3 months' imprisonment for the second charge, suspended for 2 years, to run concurrently with the sentence for the first charge. This suspended sentence, running concurrently with the immediate custodial sentence of 4 years, is against established sentencing practice. In Attorney General v Tse On [1986] HKLR 215, at 217D-H, the Court of Appeal reviewed the practice adopted in England and concluded that:
See also Cross & Cheung: Sentencing in Hong Kong, 3rd Ed pp 437-438. 61.We propose to correct this error under our powers in section 83I(3) of the Criminal Procedure Ordinance, Cap 221, by replacing D6's suspended sentence for the second charge with a term of 3 months' imprisonment, to run concurrently with the 4-year term for the first charge. Conclusion 62.In the result, D5's application for leave to appeal against sentence is dismissed. D6's application for leave to appeal against conviction and sentence is also dismissed. 63.For the reasons we give in paragraphs 60 and 61 above, we set aside the suspended sentence for the second charge imposed by the Judge on D6 and impose in substitution therefor a term of 3 months' imprisonment, to run concurrently with his sentence for the first charge. The sentence for the first charge, ie, 4 years' imprisonment, remains unchanged.
Representation: Mr M C Blanchflower SC, SADPP, and Mr Raymond Cheung, GC, of the Department of Justice, for the respondent. Ms Corinne Remedios, instructed by the Director of Legal Aid, for the 1st applicant (D5). Mr James H M McGowan, instructed by Messrs Ivan Tang & Co, for the 2nd applicant (D6). |
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