HKSAR v. Chen C F James and Others
Read the full judgment text of CACC 377/2005 on BabelCite. This Court of Appeal judgment was delivered on 3 May 2006 before Stock JA, Cheung JA and Tang JA.
Criminal law – false instrument – using a copy of a false instrument – possession of a false instrument – forged US Federal Reserve Bonds with face value of US$100 million each – applicants approached four banks (Deutsche Bank, Brinks, J P Morgan, HSBC) to store bonds and issue safekeeping receipt – whether applicants knew or believed documents were false – subjective test – circumstantial evidence including astronomical face values totalling HK$195 billion for 250 bonds – unusual emphasis on lawful nature of bonds in draft receipt – persistence in approaching multiple banks despite earlier refusals by Deutsche Bank and Brinks – sole aim to obtain bank receipt evidencing custody – purpose to use receipt as guarantee of good financial standing to entice advances from third parties – joint enterprise – all three applicants part of common scheme – 1st and 2nd applicants present at all meetings from Deutsche Bank to HSBC – 3rd applicant produced three original bonds at HSBC – 3rd applicant identified himself with the bond-owning organisation – folly argument rejected – no fool-proof fraud – supervisory report argument rejected – entrapment not a valid defence in Hong Kong law – R v Sang – application for leave to appeal against conviction dismissed
Legal issues: Whether leave to appeal against conviction should be granted
Outcome: Application for leave to appeal against conviction dismissed.
Cited by 8 cases
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CACC 377/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 377 OF 2005 (On Appeal From District Court Criminal Case No. 212 of 2005) ______________________ BETWEEN
Before : Hon Stock JA, Cheung JA and Tang JA in Court Date of Hearing : 20 April 2006 Date of Judgment : 3 May 2006 ______________________ J U D G M E N T ______________________ Hon Cheung JA (giving judgment of the court) : Appeal against conviction 1.The three applicants were convicted after trial by Deputy District Judge M.C. Jenkins of two charges. The first was for using a copy of a false instrument. The second was for possession of a false instrument. They were sentenced to two years’ imprisonment to be served concurrently in respect of each of the charges. They now apply for leave to appeal against conviction. Facts 2.It is the prosecution’s case that the three applicants worked together to ask local banks to store forged ‘US Federal Reserve Bonds’ for them and issue a ‘safekeeping receipt’ in respect of those forged bonds. Deutsche Bank 3.The events unfolded in September or October 2004 when the 1st applicant approached Deutsche Bank and asked Mr. Andrew Lo, one of its vice-presidents, whether the bank would store bonds for him and provide a receipt for the bonds. Mr. Lo felt suspicious of the authenticity of the bonds. He refused the request. Brinks 4.The next event that happened was that the 1st and 2nd applicants asked a security firm, Brinks Asia Pacific Limited (‘Brinks’), to deliver bonds to a bank and the bank was to provide a safekeeping receipt. 5.A meeting was arranged with Mr. Guy Bullen, a director of Brinks on 10 November 2004. Brinks at this time had alerted the police of the request and an undercover police officer, Senior Inspector Jacqueline Yao (‘Inspector Yao’) of the Commercial Crime Bureau was present together with a member of the United States Secret Service. The 1st and 2nd applicants together with a Miss Chien were present at the meeting. At this meeting, the 2nd applicant told Mr. Bullen that an international organization had a number of United States government bonds which he wanted Brinks to deliver to a bank for safekeeping. The 2nd applicant produced at this meeting a number of copy documents which were the subject matter of the first charge. The documents were :
6.The 2nd applicant said that there were 250 such bonds and after this delivery there would be another one involving an even larger quantity. Mr. Bullen told the applicants that he had very serious reservations about the proposed transactions. He stated that the bonds were likely to be counterfeit in view of their unusually high face value. He also told the 2nd applicant he should contact a bank directly to store the bonds. 7.After this meeting the 1st or 2nd applicant repeatedly contacted Mr. Bullen about the proposal and suggested that J P Morgan Chase Bank (‘J P Morgan’) be used to deposit the bonds. Mr. Bullen, however, told them that Brinks was not interested as there was doubt over the authenticity of the bonds. J P Morgan 8.At the meantime Inspector Yao had maintained contact with the 1st and 2nd applicants. On 19 November 2004 she arranged a meeting for the 1st and 2nd applicants to meet another undercover police officer who pretended to be from J P Morgan to discuss the storage of the bonds. At this meeting Inspector Yao was present together with other police officer from the Commercial Crime Bureau, namely, Senior Inspector Watkin (‘Inspector Watkin’). The 1st, 2nd and 3rd applicants were present at this meeting together with their lawyer, one Mr. Wong. Earlier when Inspector Yao was arranging the meeting, the 2nd applicant informed her that apart from him and the 1st applicant, a representative of the owner of the bonds and a lawyer would be present at this meeting. 9.At this meeting the 2nd applicant repeated to Inspector Watkin what he had said earlier at the Brinks meeting about the background of the bonds. Inspector Yao told the applicants that no matter which bank was to be entrusted with the task, it would have to be proved that the bonds were legitimate. 10.Shortly after this meeting, another meeting was held between Inspector Yao and the 1st and 2nd applicants. The 2nd applicant told her that the 3rd applicant did not wish to deal with J P Morgan as the 3rd applicant had been cheated by them in the past. The 2nd applicant asked her to approach HSBC. HSBC 11.The police arranged a meeting with HSBC on 10 December 2004. The 1st, 2nd and 3rd applicants together with a Miss Michelle Wong attended HSBC. They were met by Ms Wendy Tsui (‘Ms Tsui’), the Business Banking Manager and her boss, Mr. Kelvin Au (‘Mr. Au’). At this meeting the 2nd applicant stated that they had 250 United States government bonds, each with a face value of $100 million. They wished to deposit these bonds with the bank and the bank would have to issue a receipt to them confirming the deposit of the bonds. A draft receipt was produced by the 2nd applicant who said that he hoped the draft would be used by the bank. 12.Mr. Au told the applicants that his department did not provide such a service and suggested that the private banking service of HSBC might have such a service. He said he would refer the matter to that department. 13.On 18 December 2004 Ms Tsui met the 1st and 2nd applicants and Miss Michelle Wong again at HSBC. Apart from Ms Tsui a Mr. RingoWong (‘Mr. Wong’) of the bank’s Security Department and an undercover police officer, Police Constable Chan (‘Constable Chan’) were present. When asked to produce the original bonds Miss Michelle Wong explained that the person who had the bonds should be coming from Taipei but his plane had been delayed. Mr. Wong said that the bank had to see the originals before they could do anything. Miss Michelle Wong and the 2nd applicant stated that the bank had already seen copies of the bonds. 14.Two days after this meeting Miss Michelle Wong telephoned Ms Tsui that they now had the original bonds. A meeting was arranged for 22 December 2004. At this meeting the 1st, 2nd and 3rd applicants were present. Miss Wendy Tsui and Mr. Kelvin Au were also present. The 3rd applicant took out three original bonds with a face value of US$100 million each. He claimed that they were the original bonds. These were the subject matter of the second charge. Mr. Au then asked Ms Tsui to contact the security department of the bank. He asked the applicants to return in an hour. 15.After one hour the meeting resumed. By this time Mr. Wong and Constable Chan were also present. 16.The 2nd applicant explained that the JuHuilong Investment Company was established in 1934. It had lent a large amount of gold to the United States government during a bad period of the United States economy. In return for the loan the United States government had issued the bonds by way of security and the 3rd applicant was responsible for managing the bonds. It should be pointed out that earlier at the meeting on 10 December 2004 the 1st applicant produced a name card describing himself as the Vice General Manager of Huilong Finance Investment (Group) H.K. Limited (‘Huilong’) while the 2nd applicant produced a name card bearing the name and address of the same company. His title was stated to be a Special Assistant. At the meeting on 18 December 2004, the 1st and 2nd applicants produced name cards which contained the names of Huilong and that of another company, namely, JuHuilong Financial Investment Group (H.K.) Company Limited. 17.The 1st applicant then produced what appeared to be a power of attorney from the JuiHuilong Company authorizing the 1st applicant to deal with what was described as special instruments. Constable Chan asked why it was necessary to deposit the bonds with the bank. The 2nd applicant replied that the time was right because the United States economy was in good shape. The applicants were then told that the bank would contact them later and the bonds were returned to them. The arrest 18.When the applicants reached the outside of the bank’s building they were arrested by police officers. The three bonds which had been produced at the meeting were found on the 3rd applicant. After the arrest the 2nd and 3rd applicants were interviewed by the police. The records of their interview were produced as evidence at the trial. Applicants did not give evidence 19.All three applicants did not give evidence at the trial. Agreed false instruments 20.The applicants were represented by lawyers at the trial. According to the admitted facts agreed by the parties pursuant to section 65(C) of the Criminal Procedure Ordinance Cap. 221, the documents referred to in the two charges were false instruments. Knowledge and belief 21.In this appeal, the 1st applicant was represented by Mr. Peter Duncan, SC and Ms Jane Ho. The 2nd and 3rd applicants were not represented by lawyers. 22.The main thrust of the 1st applicant’s case, which was also relied upon by the 2nd and 3rd applicants, was that the judge was wrong to find that they knew or believed that the documents were false which is an essential ingredient of the offence. The test is a subjective one. 23.There was, of course, no direct evidence as to the state of mind of the applicants. It was their right to choose not to give evidence but this means that there was no evidence of them taking any steps to verify the authenticity of the bonds. Circumstantial evidence 24.In our view there was ample circumstantial evidence to show that the applicants knew fully that the bonds were false instruments. 25.To begin with the face value of each bond was of a very high value of US$100 million and when the 3rd applicant produced the three bonds to HSBC, they would have a value of about HK$2.34 billion. 250 of these bonds would be in the value of HK$195 billion. These are astronomical figures and would have alerted any person with some commonsense that they were too good to be true. In other words the bonds could not have been genuine ones. As a matter of fact both Deutsche Bank and Brinks had expressed their views that the bonds were not genuine. Despite this the applicants had persisted in asking two other banks (i.e. J P Morgan and HSBC) to store the bonds and to provide a storage receipt for them. This can only indicate that they knew the bonds were false. The receipt 26.The bonds had by then matured but the applicants had chosen not to cash or negotiate them or simply deposit them in a safe deposit box of a bank. Their sole aim clearly was to get a receipt from a bank evidencing that the bonds were in their custody. 27.The terms of the draft receipt produced to HSBC is revealing. It provided further evidence on the purpose of the applicants’ conduct and their state of knowledge. The terms of the draft were :
Purpose of the receipt 28.The draft emphasised the lawful nature of the bonds. This in our view is a rather unusual specification if articles were simply entrusted to a custodian for safekeeping. 29.The judge said the safekeeping receipt would have served some purpose. In our view it is legitimate to infer from the circumstances of the cases that the applicants knew that the bonds were not genuine and the purpose of securing a bank to safekeep these instruments was to obtain the receipt from a reputable and internationally renowned bank so that they might use it as some kind of guarantee of good financial standing. After all, so it could then be represented, a bank had certified that it kept some highly valuable bonds of a lawful nature for the customer. It is not difficult to appreciate that such a guarantee would most likely be used to entice people (be they sophisticated or gullible) to lend or advance money to the applicants. They would rely on the strength of the receipt for their advances. In other words the task of getting the banks to store the bonds and to provide a receipt with an emphasis on the lawful nature of the bonds was part of a fraud scheme and the applicants knew that the bonds were not genuine ones. 30.While the prosecution had not advanced this purpose, it does not mean that the court was not entitled to draw such an inference based on commonsense and its knowledge of commercial dealings. The folly argument 31.Mr. Duncan argued that if the applicants knew that bonds were not genuine, it would be foolish for them to approach the banks who might examine the bonds and discover they were not genuine documents. In this case the 3rd applicant had gone as far as to produce three original bonds to HSBC. Mr. Duncan submitted that this indicated that the applicants did not know or believe that the bonds were false instruments. Furthermore, according to the draft receipt there was a reference to a supervisory report. This suggested that HSBC would have carried out its own investigation on the genuineness of the bonds before it would accept them for safekeeping. 32.In our view, this argument which sounds attractive at first brush was not a matter of substance. We do not accept that this will seriously challenge the finding on the knowledge or belief of the applicants on the falsity of the bonds. In the first place, there was no indication that the supervisory report referred to in the draft receipt was to be obtained by HSBC itself. It could well be something to be supplied by the applicants in their task to secure HSBC to safekeep the documents. In any event in the discussions with the bank officers there was no mention of this supervisory report or that the applicants would allow HSBC to have a verification of the bonds. 33.In our view there is no such thing as a fool-proof fraud. By its nature a fraud consists of falsities which might be detected sooner or later. What the fraudsters were doing was to take a deliberate risk with the hope that their fraud scheme would not be discovered too soon. Hence the idea of showing HSBC the original bonds does not indicate that the applicants knew or believed that the documents were true. They knew unless they have to satisfy HSBC with this request first before they could get it to safekeep the bonds. 34.In any event the argument proceeds on the basis that HSBC would have carried out an examination on the authenticity of the bonds before it would agree to undertake the task and that the applicants would also have agreed to this requirement. This in fact had not happened before the applicants were arrested by the police. 35.In our view the knowledge or belief of the falsity of the documents on the part of the applicants was clearly established. Joint Enterprise 36.All three applicants were clearly part of a scheme in which false instruments were used. With a deception scheme of this nature, it would be naive to think that the 1st and 2nd applicants would only ask a stranger (i.e. the 3rd applicant) to join after the scheme had already begun. 37.The 1st and 2nd applicants were present at the various meetings starting with Deutsche Bank to the time when they were arrested after the meeting with HSBC. 38.The 3rd applicant of course did not appear at the meeting with Deutsche Bank or Brinks and only appeared in the meeting with the purported officer of J P Morgan and the subsequent meetings with HSBC. We are also satisfied that the 3rd applicant was also involved with the Brinks incident which was the subject matter of the first charge. His appearance in this case took place very shortly after the Brinks meeting of 10 November 2004 when he attended the meeting of 19 November 2004 with the purported officer of J P Morgan. 39.J P Morgan was not asked to handle the safekeeping because according to the 2nd applicant, the 3rd applicant did not want J P Morgan to be instructed as he had been cheated by them before. This evidence was clearly admissible against the 3rd applicant as a statement in furtherance of a joint enterprise. Furthermore, according to the representations made by the 2nd applicant, the 3rd applicant was the representative of the owner of the bonds. According to the 3rd applicant’s own admission to the police, he had closely identified himself with the organisation which held the bonds : he had worked in that organisation for almost 20 years and his duty was to manage a certain part of the documents. In our view, the judge was correct to find all three applicants guilty of the two charges. Entrapment 40.The 2nd applicant had also argued that the judge had failed to consider entrapment by the police who arranged the Brinks and HSBC meetings without which the original bonds would not have been eventually produced. Entrapment was clearly not a valid defence in law : see R. v. Sang [1980] AC 402. Others 41.The 2nd applicant had also relied on the supervisory report argument which we had dealt with earlier. 42.The judge in his Reasons for Verdict referred to the evidence that bonds were issued to the JuHuilong Company in 1934. He said this was absurd given the fact that the company was only incorporated in Hong Kong on 21 January 2004. It is not necessary for us to determine whether the judge had misunderstood the evidence in this regard. The date of incorporation was a very insignificant matter which does not need to be relied upon in the finding of guilt against the applicants. There was overwhelming evidence pointing towards their guilt. Conclusion 43.Accordingly we will dismiss the application.
Mr. Peter Duncan, S.C. and Ms Jane Ho, instructed by Messrs Liu Chan Lam, for the 1st Applicant 2nd Applicant, in person, present 3rd Applicant, in person, present Mr. Robert S.K. Lee, Senior Assistant Director of Public Prosecutions of Department of Justice for the Respondent |
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