HKSAR v. Ho Kin Hang, Kenneth
Read the full judgment text of CACC 152/2005 on BabelCite. This Court of Appeal judgment was delivered on 27 September 2005 before Woo VP, Cheung JA, Yeung JA.
Criminal law – bribery – Prevention of Bribery Ordinance (Cap 201) sections 9(3) and 12(1) – agent using documents with intent to deceive principal – appeal against conviction – whether convictions safe and satisfactory – whether trial judge erred in rejecting exculpatory parts of co-defendant's out-of-court statements as evidence – whether bona fide claim of right defence available – appellant project manager of interior design company RHK – quotations from sub-contractors marked up over genuine prices with excess paid to appellant through company owned by him and his wife – evidence that principals instructed appellant to mark up contractor quotations to earn extra percentage fees on top of contract fee – admissions in cross-examination that RHK charged clients based on inflated quotations – discrepancy in principal witness's evidence not resolved by trial judge – whether principal was deceived by inflated quotations – R v Rozeik [1996] 1 WLR 159 applied – whether R v Myers [1998] AC 124 extends to exculpatory parts of co-defendant's statements – R v Kastratovic [1985] 19 A Crim R 28 considered – appeal allowed – convictions quashed – retrial ordered.
Legal issues: Admissibility and consideration of D2's out-of-court statements as evidence for the appellant · Whether convictions were safe and satisfactory given discrepancies in evidence on intent to deceive · Whether main contractor/bona fide claim of right defence applied
Outcome: Appeal against conviction allowed; convictions on Charges (9) to (20) quashed; sentence and order for payment of $129,456.30 set aside; retrial ordered on the 12 charges.
Cited by 13 cases · Cites 1 case
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CACC 152/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 152 OF 2005 (ON APPEAL FROM DCCC NO. 1025 OF 2004) --------------------------- BETWEEN
-------------------------- Before : Hon Woo VP, Cheung and Yeung JJA in Court Date of Hearing : 27 September 2005 Date of Judgment : 27 September 2005 Date of Reasons for Judgment: 5 October 2005 ---------------------------------------------------- REASONS FOR JUDGMENT ---------------------------------------------------- Hon Woo VP (giving the reasons for judgment of the Court): Introduction 1.On 12 August 2005, sitting as a single judge of this court, I granted leave to the appellant Ho Kin-hang, Kenneth to appeal against conviction. The appeal was heard on 27 September 2005. At the conclusion of the appeal, we allowed the appeal against conviction and set aside the sentence and the order made by the judge that the appellant pay back to RHK the total amount of $129,456.30 within 1 month from 18 March 2005. We also ordered a re-trial. Our reasons appear below. 2.The appellant faced a total of 20 charges, being Charges (1) to (20), and was tried as the 1st defendant before Judge Toh in the District Court together with another person, the 2nd defendant (“D2”), who faced six charges, namely, Charges (21) to (26). 3.On 18 March 2005, the judge acquitted the appellant of Charges (1) to (8) and D2 of Charges (21) to (26). Charges (1) to (8) were offences contrary to sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap 201, alleging against the appellant, being an agent, for accepting or soliciting an advantage from D2, as an inducement to or reward for or otherwise on account of the appellant doing or having done an act in relation to his principal’s affairs or business, namely inviting Growinet Limited, owned by D2, to submit quotations for the projects handled by the appellant’s principal and employer, RHK Design Limited (“RHK”). Charges (21) to (26) were also corruption charges against D2 and they mirrored some of Charges (1) to (8) laid against the appellant. 4.Charges (9) to (20) were different offences, contrary to sections 9(3) and 12(1) of the Prevention of Bribery Ordinance. These 12 charges were laid against the appellant for his being an agent, using documents with intent to deceive his principal. The documents alleged in these charges to have been used by the appellant to deceive his principal, RHK, were quotations for work or services to be performed by contractors employed by RHK. Charges (9) to (18) involved two companies named “Au Mei” owned by the same proprietor, which did work and provided services to RHK. Charges (19) and (20) involved quotations from two other companies. The quotations contained prices that had been inflated or marked-up over the actual or genuine prices charged by the contractors. 5.At the conclusion of the trial, the judge found the appellant not guilty of Charges (1) to (8) and D2 not guilty of Charges (21) to (26). She, however, found the appellant guilty of Charges (9) to (20). She passed a sentence of two years’ imprisonment on the appellant on each of Charges (9) to (18), to run concurrently. She also passed a sentence of two years’ imprisonment on Charge (19) and Charge (20), with one year of each of the sentences to run consecutively to the sentence imposed on Charges (9) to (18). The total of the sentences therefore came to 4 years’ imprisonment. The judge also ordered the appellant to pay back to RHK the total amount of $129,456.30 within 1 month from 18 March 2005. 6.The appellant appealed against both conviction and sentence. 7.The appellant’s complaint against sentence is that it was too heavy, especially in view of the fact that the total amount involved of about $130,000 was not too substantial. From what is to be made apparent below, we did not need to deal with sentence. Background facts 8.It is necessary to briefly set out some background facts for an easier understanding of Charges (9) to (20) of which the appellant was found guilty by the judge. The following facts were admitted by the prosecution and the appellant pursuant to section 65C of the Criminal Procedure Ordinance, Cap 221:
9.Regarding these 12 charges, the judge described:
Acquittal 10.In her Reasons for Verdict, the judge explained why she found the appellant not guilty of Charges (1) to (8) and D2 not guilty of Charges (21) to (26). She was not satisfied that the amounts paid or sought to be paid by D2 to the appellant were for the purpose as alleged in the particulars of offence of these charges. She placed no weight on the interview records of D2 to the ICAC regarding his admissions of paying the amounts to the appellant as kickbacks. Conviction 11.The judge accepted the evidence of PW1, the managing director of RHK, and PW2, the other director of RHK. PW1 disagreed that the appellant had dual roles, that is an employee of RHK and also a main contractor of RHK. PW2’s evidence was that the appellant was not to assume the role of contractor providing services to RHK. PW2 was adamant that RHK employees were not allowed to solicit or accept advantages in respect of RHK’s affairs. She did not know that the appellant owned Golden Flow, a company owned by the appellant, to which the excess between the inflated prices and actual quoted prices had been paid. She disagreed that RHK gave the appellant permission to moonlight by providing services to other contractors. The judge also pointed out that the defence submission that the payments of such excess from the contractors were for genuine services provided by Golden Flow was not substantiated by any evidence. Did the appellant intend to deceive RHK and in fact deceive RHK? 12.It appears reasonably clear that the parties agreed at the trial and before us that the key issue between them is whether the appellant had the required intent to deceive RHK and whether the inflated quotations were to his knowledge intended to mislead RHK. Grounds of appeal 13.A number of the appellant’s grounds of appeal against conviction revolve around his defence intimated in cross-examination of the prosecution’s witnesses; he did not testify before the judge. 14.His case was that although he was employed as a project manager by RHK, he assumed another role, that of a main contractor of RHK, which role and interest were independent of that of his employee’s capacity as the project manager. He asked the contractors who would submit quotations for work and services to be performed for RHK to inflate the prices so as to cover the fees for his services as a main contractor. In this connection, he challenges the evidence of PW1 and PW2, who were directors of RHK, admittedly the principal of the appellant, of their absence of knowledge of his alleged role of a main contractor and the services provided by him to RHK as such. He contends that the judge should have accepted it as a standard practice of the construction and decoration trade that the main contractor must require some additional fees to perform his job and such fees must be added on top of the price quoted by various contractors so as to fund the expenses to be borne by the main contractor, such as to pay the costs for transportation, removal of debris, rewiring and touch-up work. He also contends that the judge had erred in rejecting the evidence of the work and services, such as providing drawings etc that had been provided by him for fees which were covered by the inflated amounts in the contractors’ quotations to RHK. 15.He also challenges the evidence of PW1 and PW2 of their absence of knowledge of the inflated prices, and submits that the evidence demonstrated that they had expressly or impliedly authorised him to ask contractors to inflate the quoted prices. He alleges that these two witnesses were dishonest persons because they inflated the prices quoted by contractors to earn more than they contracted for with project owners or end-users who were RHK’s clients, and thus their evidence should not have been accepted by the judge. He also relies on a civil action between RHK and him as the motive for PW1 and PW2 to get him convicted. 16.He asserts that the judge erred in disregarding the “evidence” of D2 in the records of D2’s statements made in interviews with ICAC officers that supported his defence. 17.He also complains that his counsel at trial had not fully apprehended his case and had not fully and correctly presented it to the court. Main contractor and extra services 18.The defence case appeared to be that apart from being an employee in the position of project manager of RHK, the appellant was providing services to RHK and the contractors as the main contractor. The services were alleged to include providing drawings and, in respect of Mr Ng (PW5), the proprietor of Au Mei, of translation services which was necessitated by the fact that PW1 and PW2 did not speak Chinese whereas Mr Ng did not speak English. The judge dealt with the evidence that drawings were usually provided by RHK although sometimes, RHK would require drawings from contractors, for example, the specialist contractors for cable wiring, which were called shop drawings or site drawings. 19.On this aspect, the judge said:
The defendant or 1st defendant mentioned in the passages cited referred to the appellant. 20.It is thus clear that the judge had considered the appellant’s case regarding his alleged role and work as a main contractor and dismissed it in her Reasons for Verdict. Subject to the matters referred to below when we deal with “intent to deceive”, there seems to be nothing wrong in the judge’s conclusions, simpliciter, in this regard. 21.Moreover, it appears to us that the claim that the appellant assumed the role of a main contractor and the inflated amount of the quoted prices by contractors was to cover his services as such was relied on as a bona fide claim of right. But such a defence has its limitations. In R v Kastratovic [1985] 19 A Crim R 28, King CJ stated:
22.Thus, absent knowledge on the part of RHK that the appellant was assuming the role of a main contractor and making charges for his services provided as such by way of asking contractors to inflate the quoted prices, since the charges were not presently due and payable by RHK to him as the main contractor, this claimed defence of a bona fide claim would necessarily fail. D2’s out-of-court statements 23.There is, however, a point made by the appellant in his grounds of appeal which must be examined. The appellant puts the point in this way:
24.On the other hand, on behalf of the respondent, Mr Edmond Lee submits that the acquittal of the appellant and D2 on the other charges has nothing to do with the propriety of the convictions under Charges (9) to (20), because the acquittal was not caused by the judge’s belief that the appellant had done any extra work for D2. 25.The relevant passage in the judge’s Reasons for Verdict is as follows:
26.At the end of her Reasons for Verdict, the judge stated that she did not give any weight to the answers given by D2 in these two interview records because:
27.The judge described the interrogation technique adopted by the officer that it was in the form of telling D2 that the officer found the answers given by D2 unacceptable and wanted a more acceptable explanation. The unacceptable answers were that the percentage of the inflated quoted price given to the appellant by D2 was for the appellant’s provision of services, ie the appellant would prepare the engineering diagrams, and that D2 considered it was a proper commercial activity. 28.After the interrogation, D2 agreed with the question put by the officer:
29.While the judge had placed no weight on D2’s answers in the two interview records, apparently such answers related to those which were incriminating to D2. The judge might also have placed no weight on the exculpatory answers. But because she had expressly said what D2 said in his video interview records “cannot be used as evidence either for or against the 1st defendant”, she had obviously not considered the exculpatory answers (including the “unacceptable answers” referred to in para 27 above) which might support the appellant’s case that he provided extra services to the contractors in Charges (9) to (20) rendered in the context of a main contractor. 30.The judge’s ruling that D2’s interview records were not evidence against or for the appellant was obviously based on the rule against hearsay. D2 did not give evidence before her and thus whatever D2 had said out of court was not admissible as evidence relating to the appellant. However, there is an exception to the hearsay rule, which is that if defendant A had made an out-of-court statement incriminating himself which would or might exonerate defendant B, then the statement is admissible. See Archbold Hong Kong 2005, p 765 para 11-13 and R v Myers [1998] AC 124. 31.The rule as can be discerned from Myers is that where there is a voluntary confession against interest made by defendant A, which is relevant to the defence of defendant B, the confession is admissible in evidence as to A’s credibility and as to the facts in issue. Even if defendant A does not give evidence and therefore not liable to be cross-examined as to his credibility, defendant B should be allowed to cross-examine the person to whom the confession is made as to the terms of the confession. 32.While the point taken by the appellant does not seem to be covered by the rule in Myers, because it is not the part of D2’s statements incriminating D2 on which the appellant seeks to rely, our view is that the exculpatory part, for what it was worth, must be relevant to the appellant’s defence and therefore should have been considered as evidence regarding the appellant. It was wrong for the judge to have ruled that it was evidence neither for nor against the appellant. 33.Nevertheless, the “unacceptable answers” referred to in para 27 above is marginal, both in force and in relevance, because the judge did not accept it as the basis for the acquittal or the appellant of Charges (1) to (8) and D2 of Charges (21) to (26), nor did she accept the appellant’s claim as a main contractor, and because as we said before the main contractor issue boils down to a claim of right defence which would not assist the appellant. Competence of defence counsel 34.Regarding the complaint by the appellant that his counsel at trial had not fully apprehended his case and had not fully and correctly presented it to the judge, the appellant had not provided us with any particulars. We need only refer to the passages cited below of defence counsel’s cross-examination of PW2 to say that this complaint is utterly without substance. Veracity and reliability of the evidence of PW1 and PW2 35.The appellant attacks the veracity and reliability of the evidence of PW1 and PW2, his bosses in RHK, whose evidence the judge accepted. This kind of attack would not normally be fruitful, for this Court would in most cases defer its view on such matters to that of the trial judge who has the advantage over this Court of receiving the evidence first-hand, with an opportunity of seeing and hearing the witnesses giving evidence. See HKSAR v Lee Hon Shun, CACC 636/1999 (13 March 2001, unreported) pp 5P-7G. 36.In this case, however, the appellant has in his typed submissions consisting of just short of 100 pages, set out passages in the trial transcript of witnesses’ evidence in support of this ground. On the evidence to which he has referred, it seems to us that the following grounds raised by him find support. 37.From the documents seized by the ICAC from RHK’s offices, such as purchase orders or documents containing the notation of “actual”, “credit difference”, “credit PO (ie purchase order)” or “special discount”, and especially where such documents bore the signatures of PW2, who was responsible for costing of the works undertaken by or under RHK, a reasonable doubt may be raised to show that PW2 had knowledge of certain marked-up prices quoted by the contractors. This point is also supported by the admissions of PW1 and PW2 that RHK made profits over and above the amount of percentage fee charged by RHK (as stipulated in contracts between it and the client who was the project owner or the end-user) based on the amount of construction cost billed to the client. In particular, in cross-examination by the appellant’s counsel at trial, PW2 made the following significant admissions:
38.The evidence of DW1, a retired government official called by the appellant, was that in relation to two construction projects for ASTRI funded by the Government, RHK was entitled to charge the percentage stipulated in the contract, but was not allowed to earn anything more. The appellant also relies on DW1’s evidence to support his allegation that PW1 and PW2 were dishonest and unreliable. DW1’s evidence appeared to contradict PW1’s evidence that RHK earned an extra profit of 5 per cent as special discount on top of the 6 to 8 per cent of the contract sum (Appeal Bundle p 153B-D), and was also contrary to PW2’s evidence cited above. 39.Mr Lee draws our attention to the fact that DW1’s evidence did not relate to any of the quotations which were the subject matters of Charges (9) to (20) or to any of the projects in question. There seems to be no dispute over this. But this does not fully deal with the point made by the appellant. 40.Mr Lee also refers us to the explanation of PW1 and PW2 that there were two kinds of services provided by RHK to clients, namely,
41.Thus, Mr Lee argues, RHK, which usually provided “consultancy plus construction” service to its clients, would not have made extra or secret profits by overstating the prices in the quotations of the contractors. The reason is that it would be RHK’s duty to pay the contractors and the clients would not be required to pay more if the charges of the contractors increased, and therefore any inflated amount of the contractors’ charges would only operate to the detriment of RHK. 42.Mr Lee submits that PW2’s evidence in cross-examination was a bit confusing when she was asked about the overstating or inflation of the quotations. She put her evidence right during re-examination:
43.In our view, this evidence of PW2 in re-examination seemed to retract her earlier admissions in cross-examination that PW1 and PW2 had given instructions to the appellant to mark up quotations from contractors and that the appellant was asked to deal with contractors for RHK in respect of the inflated quotations and get the contractors’ consent to accept the discount (Appeal Bundle pp 205T and p 207A, referred to in para 37 above). This is at least a significant discrepancy in PW2’s evidence, which should have be resolved by the judge, but she did not deal with it in her Reasons for Verdict. There was no explanation from PW2 why she made the admissions in cross-examination from which she appeared to depart in re-examination. For the sake of fairness, we would take the most favourable version in the appellant’s favour in the consideration of this appeal. 44.Regarding the consultancy plus construction kind of service provided by RHK, there did not appear to be any reason for RHK, through the appellant, to ask contractors to mark up their quotations. Mr Lee seems to suggest that RHK’s administrative or costing staff marked up the quotations for arriving at the fixed sums RHK charged the client, but no evidence was adduced as to why they had to mark up individual contractor’s quoted prices for them to arrive at the fixed charge instead of marking up the overall price quoted by all contractors so as to cover its consultancy fee of 6% to 8%, its other work over mere consultancy work and another certain percentage for taking the project risks. Indeed, this suggestion is contrary to PW2’s evidence in re-examination:
45.Thus, it is reasonably clear that the mark-up procedure did not apply to the turnkey arrangement which was apparently the consultancy plus construction contract. The only inference therefore is that the mark-up procedure applied to the pure consultancy service. There was, however, little conceivable reason why the contractors’ quoted prices had to be marked up but for RHK to make secret profits. 46.The admissions that PW1 and PW2 had instructed the appellant to mark up the contractors’ quotations and deal with them on the inflated quotations would have a most significant impact on the issue of “intent to deceive” as a necessary ingredient of the charges on which the appellant was convicted. 47.Whenever there was an inflated quotation from a contractor, the client would have to pay (a) the inflated amount as the cost charged by contractors, and (b) a percentage fee charged by RHK based on the inflated price. The price as inflated would not cause any monetary loss to RHK, and there was no evidence that RHK would be prejudiced in anyway other than the implication that RHK might have been charged by the contractors of the inflated sum, which would harm RHK where it had made a turnkey fixed sum contract with the client. However, this prejudice was not caused where a pure consultancy contract was involved, because the client, and not RHK, would pay the inflated price to the contractor. 48.These significant admissions of PW2 were intimately connected with RHK’s knowledge that the prices in Charges (9) to (20) were inflated and thus were most relevant in considering whether RHK was deceived, which would be most material for considering the issue whether the appellant had the intent to deceive RHK with the inflated prices. It is possible that the practice of the appellant obtaining inflated prices on quotations was known or condoned by RHK with the attached advantage that its percentage charge on the clients would be based on a larger denominator. Then it cannot be said that RHK was deceived: see R v Rozeik [1996] 1 WLR 159, at 163E and 164H, as applied in HKSAR v Chung Yee Fong, Helen, CACC 33/2004 (26 Aug 2004, unreported), paras 58-64. 49.From another angle, if the appellant knew that when obtaining inflated prices from the contractors, it would not have any adverse monetary effect, as opposed to monetary advantage, on RHK, then the necessary ingredient of his intent to deceive RHK with the inflated prices might reasonably be doubted. 50.The appellant relies on DW1’s evidence and RHK’s practice of marking up quotations from contractors in at least two ways. 51.First, that practice had the effect of enabling RHK to make secret profits from the clients, which was not allowed by the contractual terms between them and RHK. That was dishonest. The practice would have increased RHK’s profits by enlarging the basis for RHK’s percentage fee and for RHK to pocket the difference between the inflated price and the genuine price. PW1 and PW2’s evidence and their credibility should have been examined in this light, but the judge had not done so. 52.Secondly, the appellant was admittedly the only person in RHK who was responsible for liaising with contractors and in view of the admissions of PW1 and PW2 that sometimes RHK made profits over and above the contract stipulated percentage fee and PW2’s admission that the appellant was asked to deal with contractors in respect of the inflated quotations, a reasonable doubt is created in that appellant’s acts of asking contractors to inflate the quoted prices under the convicted 12 charges might have been known to RHK or had been expressly or impliedly authorised by RHK, his principal, especially in cases where PW2’s signatures appeared on the documents bearing the marked-up prices. Thus PW1 and PW2’s testimony to the effect that they were misled or deceived by the documents referred to in the charges may reasonably be doubted, undermining the ingredient of “with intent to deceive” required to be established to sustain the 12 charges. It should be noted that on the basis of RHK’s earnings being a percentage of the total construction cost, any inflated quotation made by a contractor would only have increased RHK’s profit and would not in anyway operate to its detriment monetarily. 53.It does not appear that the judge had touched upon these significant matters and the implications from them in her Reasons for Verdict save, as Mr Lee accepts, on two occasions. In para 12 of her Reasons for Verdict she simply accepted PW2’s evidence of PW2’s disagreement with the proposition that RHK permitted the appellant to moonlight by providing services to contractors in return for the appellant asking contractors to mark up the quotations for RHK. In para 16 of her Reasons, the judge said:
54.The judge made reference to the secret profits allegedly made by RHK and concluded that that did not affect the evidence of PW1 and PW2. No reason was given why it was so. The serious implications of such secret profits, if a reasonable doubt was entertained that such had been made, possibly affecting the main issue of RHK’s knowledge of the appellant’s charged dealings with the contractors, negating his intent to deceive, and attacking the honesty of the witnesses and thus their credibility, as we have attempted to state above, had not been expressly considered. 55.The evidence, chiefly relating to the main contractor issue, of the appellant’s services to the contractors, allegedly over and above what a co-ordinator of the project would provide in the discharge of his duties as the project manager employed by RHK, and of his footing the bill for some minor items or minor defective or wrong jobs, might have some bearing on whether PW1 or PW2 knew or condoned his getting inflated quotations from the contractors. 56.On the issue of “intent to deceive”, PW1 and PW2 were the principal witnesses. While their evidence was that they did not know that the appellant assumed the role of a main contractor and that the appellant had caused the quoted prices under the 12 charges to be inflated, whether this evidence was credible should be of the utmost importance in the deliberation of the judge. Yet the judge did not devote any part of her Reasons for Verdict on the aspects referred to above that might seriously cast doubt on these witnesses’ credibility. 57.In all the circumstances, we do not feel that the convictions were safe and satisfactory and they must therefore be quashed, with the sentence set aside. The order for payment of the sum of $129,456.30 that flowed from the conviction must also be set aside. Retrial 58.On the other hand, we are in no position to evaluate the evidence of this case, especially the credibility of PW1 and PW2. We are not, as a trial judge is, equipped to resolve the discrepancies in the evidence of a witness or witnesses, by merely examining the evidence on paper without any opportunity to hear and observe each individual witness first-hand. We cannot say that on the evidence as a whole there is no reasonable prospect of a conviction on the 12 charges, nor are there any other circumstances to show that it would be unfair for the appellant to face trial again. We feel, therefore, that justice will be served for a retrial of the 12 charges to be ordered. Conclusion 59.For the above reasons, we allowed the appellant’s appeal against conviction, set aside the sentence and the payment order and ordered a retrial.
Mr Edmond Lee, SGC of the Department of Justice, for the Respondent The Appellant, in person | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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