HKSAR v. Kwan Hin Kee

CACC190/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO.190 OF 2005

(ON APPEAL FROM DCCC 1037 OF 2004)

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BETWEEN

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Before : Hon Stuart-Moore VP, Stock JA and Lunn J in Court

Date of Hearing : 16 February 2006

Date of Judgment : 16 February 2006

Date of Reasons for Judgment : 21 February 2006

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REASONS  FOR  JUDGMENT

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Lunn J (giving the judgment of the Court) :

1.The applicant applied for leave to appeal against his conviction on 20 April 2005 by Judge Wright in the District Court of a single charge of using false instruments, contrary to section 73 of the Crimes Ordinance, Cap.200 (“the Ordinance”).  At the hearing of the application, after the court drew his attention to the provisions of section 70 of the Ordinance, his counsel, Mr H.Y. Wong, informed the court that the applicant abandoned his application.  Accordingly, we dismissed the application for leave to appeal against conviction and indicated that we would give our reasons for so doing in due course.  We do so now.

The charge

2.The charge alleged that on or about 26 March 1996 in Hong Kong the applicant used four false instruments dated 25 March 1996, namely two sets of alleged minutes of a meeting of the Board of Directors of New Faith Development Limited (“ New Faith”) and two sets of an alleged resolution in writing of all the members of New Faith, which were and the appellant knew or believed to be false with the intention of inducing somebody to accept them as genuine and by reason of so accepting them to do or not to do some act to his own or any other persons prejudice.

The prosecution case

3.The prosecution case was that at all material times New Faith was a company in which the applicant and his two brothers Kwan Hin Chee (PW3) and Kwan Hin Ban (PW4) each held 1 million of the 3 million issued share capital and of which each of them was a director.  The company was the corporate vehicle used by the brothers to hold the various properties that they had inherited on their father’s death.

4.The company had banking facilities with Dao Heng Bank, including an overdraft facility.  Leung Chi Chuen (PW1), an officer of that bank, testified of the banking facilities granted to the company by the bank.  The applicant was an authorised signatory of the company’s account with the bank.  At the end of 1995 the applicant contacted him and asked that the overdraft facility granted by the bank to the company be increased from $1 million to $13 million, stating that the purpose was to purchase further properties for long-term rental.  In the result, by a letter of 24 January 1996 the bank offered to increase the company’s overdraft facility limit to $10 million subject to various conditions being met, including the grant of a first legal charge for all monies over nine stipulated properties and a personal guarantee from the applicant in the sum of $10 million.  At a meeting on 26 January 1996 between Mr Leung and the applicant the latter accepted the offer and signed the letter on behalf of the company.  Mr Leung testified that he explained to the applicant the formalities required of the company by the bank to enable the bank to execute a first charge on the properties stipulated in the offer letter, namely the provision of a set of minutes of a meeting of the Board of Directors of their acceptance of the overdraft facilities on those conditions and a related written resolution of all the members of the company.

5.Mr Kwok Ping Fai (PW2), an employee of the bank’s solicitors, testified that at the request of the bank, he drafted appropriate sets of minutes and a resolution to be passed, by the board of directors of New Faith and all the members of the company respectively, and sent them to the applicant on 20 March 1996.  The applicant telephoned him and confirmed that the documents were in order.  By a letter dated 23 March 1996 to the applicant Mr Kwok requested the applicant to sign and return the enclosed documents, including the Legal Charge, together with the minutes and the resolution.  In response, the solicitors were provided with those documents, including sets of those minutes and the resolution dated 25 March 1996 that, on the face of the documents, were signed by the applicant and his fellow directors and shareholders, his two brothers.  By a letter, dated 26 March 1996, the bank solicitors wrote to the bank enclosing copies of those documents advising them that they had prepared the first charge as requested.  The related legal charge signed by the applicant and dated 26 March 1996 is stamped as registered in the Land Registry, with the date 24 April 1996.

6.Kwan Hin Chee (PW3) and his brother Kwan Hin Ban (PW4) both denied that they made the signatures against their respective names on the minutes of the meeting of the Board of Directors or on the resolution.  Both of them denied that the applicant had ever approached them and asked them for their consent to the resolution that the properties owned by the company be made the subject of a first charge or that the overdraft banking facilities of the company be increased to $10 million. 

7.Kwan Hin Ban (PW4) testified that in April or May 2001 he took over the management of New Faith and discovered, for the first time, that the company owed about $10 million to the bank.  In the course of his inquiries of the bank as to how that debt had been incurred the bank provided him with a copy of the resolution.  He made a report to the police in May 2002.  He produced in evidence two tape recordings of conversations that he had had with the applicant on 15 and 22 August 2002, in which they had discussed his allegation made to the applicant that the minutes and resolution were fabricated and that the grant of the overdraft facility to the company and the charge over the properties of the company were not authorized.  The applicant accepted he had not been authorised to make the application.

The defence case

8.The applicant, a man of good character, a practising solicitor at the time of the alleged offence and a practising barrister at the time of his trial did not give or call evidence at his trial.  His case, as put in cross-examination, but denied by his brothers PW3 and PW4, was that the minutes and the resolution dated 25 March 1996 had been signed by the two of them, he having sent them to Australia for them to append their signatures.  The two of them had done so, knowing full well that the documents were required by the bank in order to support an application by the company for an increase in the overdraft banking facility provided by the bank and to create a first charge over the stipulated properties held by the company.  Each brother denied such knowledge and agreement.

Reasons for verdict

9.The judge stated that he accepted the evidence of PW3 and PW4, that the signatures against their respective names on the minutes and the resolution were not their signatures.  In particular, the judge found :

“ I accept too, their evidence generally and, specifically, that there were no discussions between them and the Accused about property speculation or that speculation was the underlying reason for the application to increase the overdraft.”

10.Having found that the applicant was in sole day-to-day control of the company the judge concluded :

“ I consequently drew the inference, as the only inference which no reasonable man could fail to draw, that the accused knew or believed at the time he tendered the resolution and minutes to the bank, that the instruments were false…”

11.The judge acknowledged that the ingredients of the offence required proof of a “double intention” in respect of the applicant.  In respect of the first limb of intention, the judge stated that he was satisfied that the applicant intended :

“… the bank to accept the resolution and minutes as genuine”.

Moreover, in respect of the second limb he said that he was satisfied that thereby the applicant :

“… intended the bank would accept them as such and perform an act, the approval of the increase in the overdraft facility.”

Of the issue of prejudice to the bank, the judge found that :

“… even if the company were unable to defeat the first charge over its properties, the bank’s interests would still have been prejudiced by the Accused : the fact that the company had available to it the means to seek to avoid liability on the basis of apparent authority prejudiced the bank’s interests in that it obliged the bank to defeat an additional, albeit spurious, defence raised by the company; moreover, the bank would have lost the use of the money which it had made available to the company as a result of its reliance on the false instruments supplied by the Accused and which it required as a precondition to the granting of the increase facility.”

Grounds of appeal against conviction

12.By Grounds 1 to 4 it had been argued on behalf of the applicant that the judge erred in determining that he was satisfied of the second limb of the requisite mens rea in the ingredients of the offence, namely that the applicant intended that the bank act to its prejudice.  It was contended that given the security held by the bank on the property of the company there was no actual loss.

13.By Ground 5, it had been submitted that the judge ought to have placed no weight on the tape recordings of the two conversations between the applicant and PW4 and that he erred in inferring therefrom that the applicant acknowledged that he acted without authority in obtaining the increase in the overdraft facility.

The respondent’s submissions

14.Grounds 1 to 4 : the issue of proof of the applicant’s intention that the bank act to its prejudice.

15.In her helpful written submissions Miss Wong submits on behalf of the respondent that proof of the second limb of “double intention” in the applicant is made out by proof that he intended the bank, having accepted the false minutes and the resolution as genuine, to act to its prejudice by granting an increase in the overdraft facility to the company and permitting drawdowns of the facility by the company, as and when requested.  She submits that thereby the bank suffered a temporary loss of the property, which falls squarely within the provisions of section 70(1)(a) of the Ordinance, part of the definition of the term “prejudice” applicable to the offence created by section 73 of the Ordinance.

Conclusions

Grounds 1 to 4

16.At the outset of the hearing of the application the court drew the attention of counsel for the applicant to the provisions of section 70 of the Ordinance.  The relevant provisions of section 70(1) are in these terms :

“… an act or omission intended to be induced is to a person’s prejudice if, and only if, it is one which, if it occurs will —

(a)   result in his permanent or temporary loss of property;

…

(e)  result in somebody being given an opportunity to gain a financial advantage from him otherwise than by way of remuneration; or

(f)   be the result of his having accepted a false instrument as genuine … in connection with his performance of any duty.”

Section 70(5) provides :

“In subsection (1)(a) loss includes a loss by not getting what one might get, as well as a loss by parting with what one has.”

17.When asked to address the court as to why each one of the three subsections did not operate, in the circumstances of this case, to provide proof of “prejudice” to the bank, counsel for the applicant provided no answer but, after an adjournment, indicated that his instructions were to abandon the application for leave to appeal against conviction.

18.Clearly, the course taken by the applicant, in face of the perfectly simple provisions of section 70 of the Ordinance, was appropriate.  In granting the increased overdraft facility to the company, the prejudice to the bank was that it “parted” with those monies in circumstances otherwise than in accordance with its preconditions, which preconditions had been clearly and repeatedly articulated to the applicant.  Clearly, that was not only a “loss” as defined in section 70(1)(a) and (5) of the Ordinance but also prejudice that falls within the ambit of both section 70(1)(e) and (f), namely an act which, if it occurs, will :

“ (e)  result in somebody being given an opportunity to gain a financial advantage from him otherwise than by way of remuneration;

(f)   be the result of his having accepted a false instrument as genuine… in connection with his performance of any duty.”

19.In each case, the act so induced was, and was intended to be, the granting of an increased overdraft facility by the bank to the company.  In respect of subsection (e), that was a “financial advantage” to the applicant.  In respect of subsection (f), the “duty” that arose was that of the bank officer from his contract of employment who, having accepted the false minutes and the resolution as genuine, approved the increased draft facility of the company.

20.It follows that there was overwhelming evidence upon which the judge was entitled to be satisfied of the proof of the second limb of intention.  In the result, in our judgment there is no merit in any of the grounds of appeal.

Ms Wong Kam Hing, SGC, of the Department of Justice, for the Respondent

Mr Wong Hay Yiu, instructed by Messrs Yeung & Chan, assigned by DLA, for the Applicant