HKSAR v. Woo Mei Bo Mable

CACC000565/2002

CACC 565/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 565 OF 2002

(ON APPEAL FROM DCCC NO. 305 OF 2002)

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Coram: Hon. Cheung J.A., Hon. Yeung J.A. and Hon. Seagroatt J. in Court

Date of Hearing: 30 July 2003

Date of Judgment: 15 August 2003

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J U D G M E N T

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Hon. Cheung J.A. :

Application for leave to appeal

1.The applicant was convicted after trial by H H Judge Longley of six charges, namely, one charge of obtaining a pecuniary advantage by deception (Charge 2), evasion of liability by deception (Charge 4) and four charges of theft (Charges 6, 7, 8 and 9). She now applies for leave to appeal against conviction.

2.These charges can be divided into two groups. The first group is Charges 2 and 4 which arose out of the purchase by the applicant of a new Mercedes-Benz car ("the car"), while the other group of charges arose out of a purported purchase of shares by the applicant for others.

Facts relating to Charges 2 and 4

3.On 25 June 2000 the applicant went to the showroom of Pan-Ray Motors Centre ("Pan-Ray") and agreed to buy a new car for $1,150,000.00. She would buy the car on hire-purchase terms and she was to trade in her nine-year-old Mercedes-Benz car.

4.The applicant signed a sale and purchase agreement. She gave her address as Flat 1A, the First Floor, Tai Yuen, No. 11 Village Terrace, Happy Valley, Hong Kong ("the Happy Valley address").

5.Subsequently a hire-purchase proposal was prepared by the staff of Pan-Ray for submission to a finance company called Associates Financial Services (Asia) Limited ("AFS"). The same Happy Valley address was written in the hire-purchase proposal.

6.AFS had to carry out a credit inspection of the applicant. One of the requirements was to obtain proof of the applicant's residential address. A staff of AFS spoke to the applicant on the telephone and she confirmed that she was living at the Happy Valley address. She told the staff that she was the tenant there.

7.As requested by AFS she supplied proof of her address, namely, two telephone bills in her name. The most recent one giving her address at a post office box in Fanling and an earlier one giving her address at the Happy Valley address.

8.AFS approved the application. One of the conditions that was attached to the granting of the loan was that one month rental under the hire-purchase agreement should be paid in advance.

9.A hire-purchase agreement was prepared by AFS and sent to Pan-Ray for the applicant's signature. The applicant signed this agreement. The applicant was told by Pan-Ray that she had to make out two cheques to AFS each in the sum of $27,073.00. One was to be dated 7 July 2000 and the other 7 August 2000. The cheque dated 7 July 2000 was to satisfy the condition that the defendant paid one month's rent in advance.

10.The admitted facts showed that on 7 July 2000, $1,150,000.00 was transferred from the bank account of AFS to Pan-Ray's account. The admitted facts stated that this was "the fund loaned under the hire-purchase agreement".

11.The applicant collected the car on the same day from Pan-Ray. She handed over two cheques to Pan-Ray. One of the cheques, however, was not dated 7 July 2000 as requested but 11 July 2000. The applicant informed Pan-Ray that date was written because she was waiting for her fund manager to transfer the necessary money into her account.

12.Neither cheques were honoured on presentation by reason of lack of funds. As it turned out, the Happy Valley address given by the applicant was occupied by someone else between 1996 and December 2001. The Happy Valley address was not the residential address of the defendant in July 2000.

13.No payment was made by the applicant under the hire-purchase agreement. AFS sued the applicant for payment under the hire-purchase agreement and obtained judgment against the applicant on 4 October 2000 in the sum of $1,166,257.34. The car was repossessed by AFS on 6 January 2001.

Facts relating to the Charges 6, 7, 8 and 9

14.Mr. Wong Pan Yuen ("Mr. Wong") was an estate agent. He had shown the applicant a number of properties for sale. The applicant told Mr. Wong that she knew someone working in the MTR Corporation who could assist her in obtaining 30,000 MTR shares at a discounted price by way of internal subscription. She asked Mr. Wong if he was interested to buy the shares.

15.Mr. Wong accepted the offer to buy the shares. Pursuant to the agreement with the applicant, he transferred $165,000.00 into an account in the name of Lo Wai Chuen on 28 September 2000 (Charge 6). The applicant had told him that it was her husband's account. It was actually the account of her brother-in-law.

16.After the MTR shares had been listed, Mr. Wong instructed the applicant to sell the shares. The applicant told Mr. Wong that the shares had been sold and gave him a cheque for $324,000.00 which represented the proceeds of sale of the shares. The cheque was drawn by Forever Rich Consultancy Limited ("Forever Rich").

17.The cheque was dishonoured. Mr. Wong failed to recover any money from the applicant.

18.After Mr. Wong had paid the $165,000.00 to the applicant, she approached him and his colleague, Mr. Kim Fong, with an offer to buy new shares at a discounted price from a company called Sinopec.

19.Two other colleagues of Mr. Wong were also interested in buying the shares. One of them, Miss May Ko ("Miss Ko"), said she wished to buy $65,000.00 worth of shares and paid for them by transferring $50,000.00 into Mr. Wong's account and delivering a blank bearer cheque for $15,000.00 to Mr. Wong who paid it directly into the account of the applicant's brother-in-law (Charge 7).

20.Another colleague, Miss Ngan Pik Chau ("Miss Ngan"), wished to buy $26,000.00 worth of shares and paid the amount into the account of Mr. Wong.

21.Mr. Wong held $76,000.00 of the purchase money from Miss Ko and Miss Ngan. However, instead of transferring the whole sum into the account of the applicant's brother-in-law, he only transferred $62,000.00. He kept the balance of $14,000.00 as a profit for himself. The transfer of $62,000.00 was effected by two separate transfers, namely, $10,000.00 (Charge 8) and $52,000.00 (Charge 9).

22.After Mr. Wong made the transfer of $62,000.00, the applicant told him that the Sinopec shares had been bought. Later, she told Mr. Wong that she had sold the shares and would transfer the proceeds of sale to Mr. Wong's account. However, no transfer was ever made.

23.On 20 November 2000, contradicting the applicant's earlier claim that both the MTR and the Sinopec shares had been obtained and sold, a fax was received from Forever Rich, stating that the subscription for the MTR and Sinopec shares were unsuccessful.

24.On 23 November 2000, Mr. Wong, Miss Ko and Miss Ngan reported the matter concerning the MTR and Sinopec shares to the police. Later on the applicant was arrested.

Charge 2

25.The particulars of Charge 2 is that the applicant on 7 July 2000 by deception, namely, by falsely representing to AFS that her residential address was at the Happy Valley address, dishonestly obtained for herself a pecuniary advantage, namely a hire-purchase loan granted by AFS in the amount of $1,150,000.00 in respect of the car.

The loan

26.The only argument that was raised in respect of this charge was that the applicant could not have obtained a "hire-purchase loan" by deception as there was no loan in which she was involved.

The sale and purchase agreement

27.The sale and purchase agreement dated 25 June 2000 made between the applicant and Pan-Ray stated that the payment terms would be by way of hire-purchase. Under the column of hire-purchase, there was initially a handwritten figure of $24,869.00 x 60 months. The figure of $24,869.00 was then crossed out and replaced by $27,073.00.

The hire-purchase agreement

28.In the hire-purchase agreement dated 7 July 2000 made between AFS and the applicant, AFS was described as the owner and the applicant was the hirer. It was agreed between the parties that "That the owner shall, with effect from the date hereof, let and the hirer shall hire the goods more particularly described in the schedule at the hire rent and for the hiring period, each as specified in the schedule, and on and subject to the terms and conditions numbered one to nineteen hereinafter specified".

29.The goods described in the hire-purchase agreement was the car. Under the column of "Hire Rent" in the schedule of the hire-purchase agreement, it was stated that the "Hire Purchase Price" was $1,624,380.00. This was made up of the following sums :

Balance of Cash Price to be Financed : $1,150,000.00; and

"ADD-HIRE Charges" at the fixed rate of 8.2% per annum : $474,380.00.

30.The column further stated that the hiring period was sixty months; the hirer shall pay $27,073.00 "monthly hire rent"; the first payment was due on 7 August 2000 and thereafter on the seventh day of each month. An advanced hire rent of one monthly hire rent of $27,073.00 was also required.

31.Under Clause 4 the hirer agreed that until such time as he became the owner of the goods by the proper exercise of the option or with the specific written consent of the owner, the goods are and will remain the sole and exclusive property of the owner, the hirer will have possession of the goods as a mere bailee.

32.Clause 5-01 required the hirer to pay the option sum of $300.00 and punctually pay the owner the hire-purchase price of the goods during the hiring period by monthly payments of hire rent of the amount specified in the schedule.

33.Clause 6 stated that provided that the hirer has duly observed and performed his obligations, he shall have the option, exercisable on the last day of the last hiring period, to purchase the goods for the option price specified in the schedule.

Nature of a hire-purchase agreement

34.Before I examine the applicant's argument, it is necessary to understand the nature of a hire-purchase agreement. Benjamin's Sale of Goods 6th Edition contains a useful summary :

“ Para 1-053

Hire-purchase agreements. At common law, a hire-purchase agreement may be defined as a contract for the hiring of goods under which there is conferred on the hirer an option to buy the goods. The salient features of such an agreement are : first, that during the currency of the agreement the property in the goods remains in the owner, while the hirer is a mere bailee having no power to dispose of them; and, secondly, that the hirer has an option to buy the goods but not a binding obligation to do so. In practice, hire-purchase is a device used in order to give possession and the use of goods to an intending buyer over a period during which he pays the price, with interest, by instalments while the seller retains the title to the goods as security for the unpaid balance of the price. The success of the hire-purchase form has been due to two decisions in the House of Lords in the year 1895. McEntire v. Crossley Bros, in which it was held that a hire-purchase transaction was not caught by the Bills of Sale Acts, since there was no assignment or right to seize granted to another by the owner of the goods; and Helby v. Matthews, in which it was held that the hirer, having an option but not an obligation to buy the goods, had not "agreed to buy" them, even conditionally; and therefore had no power to confer a good title on a third party and so to defeat the owner's security as had been the case in Lee v. Butler.

Para 1-054

Financing of hire-purchase agreements. In modern practice the credit given to a customer who takes goods on hire-purchase is commonly not carried personally by the dealer or shopkeeper from whose stock the goods were selected, but instead by a specialist finance house which pays or advances cash to the dealer, and may also undertake the collection of the instalments. This is usually done in one of two ways. In the "block discounting" method, the dealer himself lets the goods on hire-purchase to his customer, and then assigns or agrees to assign ("discounts") to the finance company his contractual rights under the hire-purchase agreement..... In other cases, the "direct collection" system is used, under which the dealer first sells the goods to the finance company, and the company then lets the goods on hire-purchase directly to the customer. Here there is a sale of goods from the dealer to the financial company, but there is normally no contract at all between the dealer and his customer." (emphasis added)

Section 18

35.The relevant parts of section 18 of the Theft Ordinance are as follows :

“ Obtaining pecuniary advantage by deception

(1) Any person who by any deception (whether or not such deception was the sole or main inducement) dishonestly obtains for himself or another any pecuniary advantage shall be guilty of an offence and shall be liable on conviction upon indictment to imprisonment for 10 years.

(2) The cases in which a pecuniary advantage within the meaning of this section is to be regarded as obtained for a person are cases where --

(a) he is granted by a bank or deposit-taking company, or any subsidiary thereof the principal business of which is the provision of credit --

(i) a credit facility or credit arrangement;

(ii) an improvement to, or extension of, the terms of a credit facility or credit arrangement; or

(iii) a credit to, or a set off against, an account,

whether any such credit facility, credit arrangement or account --

(A) is in his name or the name of another person; or

(B) is legally enforceable or not;

(b) he is allowed to borrow by way of overdraft, or to take out any policy of insurance or annuity contract, or obtains an improvement on the terms on which he is allowed to do so, whether any such overdraft, policy of insurance or annuity contract --

(i) is in his name or the name of another person; or

(ii) is legally enforceable or not; or

(c) he is given the opportunity to earn remuneration or greater remuneration in an office or employment, or to win money by betting."

36.In order to bring the offence within section 18(1) one has to see whether any of the three situations described in section 18(2)(a) to (c) is present.

37.Section 18(2)(b) and (c) are plainly irrelevant because the applicant was not allowed to borrow by way of overdraft, or to take out any policy of insurance or annuity contract or obtains an improvement the terms on which she was allowed to do so. Further, she was not given the opportunity to earn remuneration of greater remuneration in an office or employment or to win money by betting.

Credit facility or credit arrangement?

38.The only relevant section is section 18(2)(a). This is a subsection which is unique to Hong Kong. There is no equivalent in the English Theft Act upon which our ordinance is based.

39.Inevitably, in a transaction like this, terms such as financing and loans are being used. And from an economic point of view, the finance house entering into a hire-purchase transaction is lending money on the security of goods, as judges have on more than one occasion pointed out : Goode : Hire Purchase Law and Practice 2nd Ed. page 51.

40.However, one cannot describe the hire-purchase agreement as granting a credit facility or credit arrangement to the applicant by way of a "hire-purchase loan" of $1,150,000.00, nor was it an improvement to, or extension of, the terms of a credit facility or credit arrangement; or a credit to, or a set off against, an account. A person obtains a credit facility or credit arrangement when credit is made available to him. The applicant did not receive any credit. She hired the car from AFS with an option to purchase at the end of the hiring period.

41.The arrangement between the applicant and AFS as evidenced by the hire-purchase agreement was a hiring agreement. The price of the vehicle plus interest which was described as hire charge was to be paid by the applicant to AFS by sixty equal instalments of "hire-rent".

42.AFS did not grant a credit facility or credit arrangement to the applicant on the security of the car. As apparent from the terms of the hire-purchase agreement, AFS was the owner of the car and remained to be so until the sixty monthly instalments of "hire-rent" were fully paid and the option to purchase had been exercised by the applicant. This is a typical hire-purchase agreement described in Benjamin.

No credit was obtained

43.The fact that the applicant did not receive credit when entering into a hire-purchase agreement can be further supported from the case of R v. Garlick (1958) 42 Cr. App. Rep. 141.

44.In that case the appellant was convicted on two charges of obtaining credit under false pretences or by means of fraud other than false pretences, contrary to section 13(1) of the Debtors Act, 1957. The first charge is irrelevant to this case. The second charge arose out of a hire-purchase agreement in the usual form in relation to a bicycle.

45.The English Court of Appeal quashed the conviction on the second charge. It held that :

“ We had not had an opportunity of seeing that document or the other document, the credit sales agreement, but we thought that, if it was a hire-purchase agreement in the usual form, that raised a very serious doubt whether it could be said that the appellant, in such circumstances, in incurring a debt or liability, obtained credit. Mr. Durand, for the Crown, has quite frankly admitted that it is impossible for him to seek to uphold the conviction on the second count. The hire-purchase agreement was in the usual form, under which the ownership of the bicycle remained in the person who was letting it out on hire, the only obligation on the hirer, that is to say the appellant, being to pay a deposit and then to pay on some specified date each month the amount of hire which became due. He had a right, as hirers usually have under this type of hire-purchase agreement, to terminate the agreement at any time, if he desired to do so, during the period of it. The bicycle did not become his property until the last period of hiring had occurred and he had paid the whole balance, and then he would become the owner on the payment of some small sum. In such circumstances it is impossible to say that the appellant obtained credit."

46.The terms of the agreement as described above are the usual hiring plus option to purchase terms, just like those in this case. In my view, the rationale of this decision is that one must look at the nature of a hire-purchase agreement not from an economic point of view but from its true legal nature. If its true legal nature is one of a hiring contract with an option to purchase, then one cannot say that a credit arrangement is thereby granted to the applicant.

Legislative change in England

47.Seagroatt J. in his judgment refers section 360(2)(a) of the Insolvency Act 1986. The position is that a bankrupt is guilty of an offence if he obtains credit to a certain amount. That section provides that the reference to the bankrupt obtaining credit includes, among other things, where goods are bailed to him under a hire-purchase agreement, or agreed to be sold to him under a conditional sale agreement.

48.While this section effectively overrules Garlick in a way, it actually re-enforces the argument that a hire-purchase agreement is not a credit arrangement. Legislation is required to deem a hire purchase agreement to be a credit arrangement when in fact it is not.

49.Further, whatever the legislative position may be and irrespective of whether the decision in Garlick was based on the concession by the Crown, in my view the rationale behind the decision is a sound one.

Goods not sold on credit

50.Further as pointed out in Goode at page 48 that a true hire-purchase agreement is not a contract of sale because the later requires an obligation to purchase whereas in a hire-purchase agreement the hirer is under no obligation to purchase but has merely an option which he may exercise or decline. If it is not a contract of sale, there it cannot be said the car was sold to the applicant on credit.

51.As pointed out earlier, section 18(2)(a) is unique to Hong Kong. In England section 16(2)(a) of the Theft Act, which had since been deleted, provided that the cases in which a pecuniary advantage is to be regarded as obtained include those where 'any debt or charge for which he makes himself liable or is or may become liable (including one not legally enforceable) is reduced or in whole or in part evaded or deferred'.

52.Goode at page 841 commented that that section does not cover the case of a person who by means of a deception dishonestly obtains goods on hire-purchase or credit sale :

“ A hire-purchase agreement does not start as a binding sale for cash which the seller then agrees to give the buyer time to pay. The payment by instalments is an essential ingredient of the transaction from the beginning. Hence no debt or charge exists, either actually or prospectively, before the hire-purchase agreement is entered into. The same applies to most credit sale transactions."

53.The relevance of this passage is that the emphasis again is on the nature of the hire-purchase agreement. No credit was granted to the applicant because the hire-purchase agreement was not a binding sale for cash which the seller agreed to give the buyer time to pay. In other words there was no credit arrangement.

Money-lending

54.Mr. Madigan, counsel for the respondent, referred to Financings Limited v. Baldock [1963] 2 Q.B. 104, in which Diplock L.J. (as he then was) also described the business nature of a hire-purchase transaction as that of money lending. However, it is necessary to read the whole of Diplock L.J.'s speech to understand the context of this statement :

“ In order to avoid the necessity of complying with the statutory requirements relating to money-lenders and to bills of sale, hire-purchase finance companies enter into a contract with the hirer whereby they hire to him a chattel for a fixed period at an agreed monthly rental and confer upon him an option to purchase the chattel at the end of the fixed period for an agreed (and nominal) sum. The business nature of the transaction is that of money lending, and accordingly clauses are inserted by the finance company in the contract of hire in an endeavour to ensure that upon breach by the hirer of his obligation to pay an instalment of hire, the finance company shall be entitled, not only to terminate the contract of hire, but also to recover from the hirer sums which bear no relation to the damages appropriate to a breach of a genuine contract of hire. But hire-purchase finance companies cannot eat their cake and have it. If they choose to conduct their business by entering into contracts of hire of chattels, instead of entering into money lending contracts secured by chattel mortgages, their legal rights will be governed by the terms of the contracts into which they enter and by the general principles of law applicable to contracts of that nature." (emphasis added)

55.It is apparent from this passage that while the nature of a hire-purchase transaction is one of money lending, the finance company had not chosen to enter into a money lending contract with the hirer. The actual contract is one of hiring goods with an option to purchase at the end.

56.If the applicant defaulted in the payment of the instalment, the hire-purchase agreement set out detail methods of calculation of the damages that might be recovered by AFS. But this does not answer the question whether credit facility or credit arrangement was obtained by the applicant in the first place.

57.In truth and in fact the applicant was merely a bailee of the car and as a term of the bailment she had to pay a monthly payment to AFS.

In the name of another person?

58.Section 18(2)(a) states that the credit facility or credit arrangement can be in the name of the defendant or in the name of the another person.

59.In this case, it cannot be said that a credit facility or credit arrangement or a loan of $1,150,000.00 had been granted to Pan-Ray. As seen from the passage in Benjamin, in order to enable AFS to enter into the hire-purchase agreement with the applicant, Pan-Ray has to assign the title of the car to AFS. The amount of $1,150,000.00 it received from AFS is the consideration for the assignment of the title of the car. It cannot be a credit facility or credit arrangement or a loan by AFS to Pan-Ray.

60.At the trial a certified copy of the "Vehicle Registration Document" of the car was produced. The applicant was stated to be the registered owner. However her signature did not appear at the column of signature of registered owner. I do not regard this as showing that AFS was not the owner of the car. There was no evidence that the original document was handed to the applicant. More likely it was kept by AFS as evidence of ownership of the car. The applicant was described as the registered owner in order to effect the car insurance in her name as was the situation in this case. This arrangement accords with the commercial nature of the transaction.

My view

61.In my view section 18(2)(a) was not engaged. She might have obtained a property, namely, the car by deception but she did not obtain a pecuniary advantage in the nature of a hire-purchase loan of $1,150,000.00. The applicant might also have obtained a hire-purchase agreement by deception but it does not follow that she has thereby obtained a "hire-purchase of loan of $1,150,000.00" or a credit facility or credit arrangement.

62.In fact the applicant was also charged with obtaining the car by deception from Pan-Ray (Charge 1) which the applicant was found not guilty of. In my view the proper charge should be the applicant obtaining the car by deception from AFS and not Pan-Ray. But as the charge was dismissed by the judge, I do not need to say any more on it.

63.In the circumstances, the conviction under Charge 2 was not proved.

Alternative charge

64.The applicant was also originally charged with furnishing false information in respect of her residential address in the hire-purchase agreement (Charge 3). This is said to be an alternative to Charge 2. As the judge found the applicant guilty of Charge 2, he did not deal with this charge.

65.Mr. Ross, counsel for the applicant, argued that there was no evidence to show that the address in the agreement was the residential address of the applicant. The agreement itself did not refer to a residential address. In my view as shown to the matters stated in paragraph 6 and 7 above there was ample evidence to show that that address required was intended by both AFS and the applicant to be her residential address. One cannot look at the document in isolation.

66.However, I am reluctant to make a finding on a charge which the judge had not specifically dealt with. In this case even if Charge 2 is to be quashed, it will not make any difference to the overall sentence to be served by the applicant.

Charge 4

67.The particulars of the offence is that the applicant on 7 July, 2000, with intent to make default in whole on an existing liability by herself to make payment of $27,073.00 to AFS in respect of her hire-purchase loan for the car, dishonestly induced AFS to wait for payment by deception, namely by falsely representing that the cheque dated the 11 July, 2000, would be a good and valid order for the payment of $27,073.00 if presented for payment on or after that date.

Intention to make default

68.In respect of Charge 4, the applicant argued that there was insufficient evidence to support an element of the offence, namely she intended to make default on her hiring charge when she handed over the cheque of 11 July 2000.

69.The judge held that the applicant well knew that there would be no funds in the account to meet the cheque on 11 July 2000 at the time when she delivered it to Pan-Ray on 7 July 2000. He held that she had no intention of making payment in relation to the obtaining of the loan and thereby the car.

70.Mr. Ross argued that the judge made no specific ruling about the assertion by the applicant that she was waiting for the transfer of money by her fund manager.

Section 18B

71.Section 18B of the Theft Ordinance is as follows :

“ Evasion of liability by deception

(1) Subject to subsection (2), where a person by any deception (whether or not such deception was the sole or main inducement)--

(a) with intent to make default (whether the default is permanent or otherwise) in whole or in part on any existing liability to make a payment, or with intent to let another do so, dishonestly induces the creditor or any person claiming payment on behalf of the creditor to wait for payment (whether or not the due date for payment is deferred) or to forgo payment; or

he shall be guilty of an offence and shall be liable on conviction upon indictment to imprisonment for 10 years."

Evidence of deposit

72.There was evidence produced at the hearing that the applicant had faxed to AFS three documents in her name purportedly showing fixed bank deposits of $800,000.00, $2,000,000.00 and $100,000.00.

73.It was an admitted fact that the deposit documents for the amounts of $800,000.00 and $2,000,000.00 were obtained by means of cheques which were dishonoured on presentation and had therefore been cancelled.

74.Mr. Ross submitted that the two deposit slips for $800,000.00 and $2,000,000.00 were inadmissible as hearsay statement. There was no banker's affirmation produced in relation to the current account on which the two dishonoured cheques were based. Consequently, all that was known about the cheques is that at some time after the deposit slips were obtained the two cheques were dishonoured.

Charge proved

75.The judge did not rely on these two deposit slips in finding that Charge 4 had been proved.

76.In my view, having considered all the circumstances of the case even without these two deposit slips, there was ample evidence to sustain Charge 4. To start with it was an agreed fact that the cheque was dishonoured upon presentation for want of funds. The applicant had deliberately given a false address to AFS. After she had driven away the car she had not paid a single cent for the use of the car. The car was only repossessed after the applicant was arrested on 4 January 2001. She told the police the whereabouts of the car.

77.Under the hire-purchase agreement the first instalment payment was due on 7 August 2000 but the applicant was also required to pay an advanced instalment payment. Instead of providing a cheque dated 7 July 2000 for the advanced payment, the applicant gave a post-dated cheque of 11 July 2000 on the pretext that she was awaiting for the transfer of money into her account from her fund manager. This cheque was meant to be presented and met on 11 July 2000. It was dishonoured on presentation. No explanation was given by her why her excuse was not fulfilled.

78.The only reasonable and irresistible inference that one could draw from all these facts is that the applicant did intend on 7 July 2000 to make default in paying $27,073.00 to AFS. She was correctly convicted on this charge.

Charges 6, 7, 8 and 9

79.The remaining four charges are charges of theft. A person commits theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it.

80.The particulars of the 6th Charge is that the applicant on 28 September 2000, in Hong Kong, stole a thing in action, namely, a credit balance of the sum of $165,000.00, owed by the Hongkong and Shanghai Banking Corporation Limited ("the Bank") to Mr. Wong, in his account.

81.The other charges are in similar terms with a variation in the amount of the credit balance.

The argument

82.The complaint of Mr. Ross is that there was no evidence that the applicant had appropriated any of the funds transferred by the cheques from Mr. Wong and others to purchase the shares. Mr. Ross is in effect relying on an argument that he had raised in HKSAR v. Wong Cho Sum [2001] 3 HKC 268 and rejected by this Court.

Debt and appropriation

83.It is necessary to identify the basic principles. The following principles can be gathered from the case of Kohn (1979) 69 Cr. App. 395 :

1. Where an account is in credit the relationship of debtor and creditor exists between the bank and the customer.

2. The customer is the creditor while the bank is the debtor. A debt is owing by the bank to him.

3. That debt is something which cannot be physically handled, i.e. it is not a thing or chose in possession; it is a thing or chose in action, namely something which can only be secured by action.

4. A defendant appropriates the debt when he caused the customer's credit balance in his account to be diminished. The situation is analogous to the theft of a chattel by destruction.

84.This Court in Wong Cho Sum adopted the approach in Kohn.

85.The applicant defrauded Mr. Wong and his colleagues on the pretext that the money would be used to subscribe for the MTR and Sinopec shares at a discounted price.

86.Relying on the case of Kohn the applicant had obviously appropriated the money because by reason of the transfer of the fund from the accounts of Mr. Wong and Miss Ko to the account of the applicant's brother-in-law and the payment of cheque by Mr. Wong to that account, the debts owing by the banks to Mr. Wong and Miss Ko had been diminished to the extent of the transfer and the payment of the cheque. The appropriation took place when the credit balance in Mr. Wong and Miss Ko's accounts became reduced.

Diminution in credit balance

87.Mr. Ross submitted that Charges 6, 8 and 9 were different from Charge 7 in which the former charges were also concerned with direct transfer of money whereas Charge 7 was concerned with a payment by cheque.

88.I can see no difference whether the diminution is due to a direct transfer of funds from one account to another or as a result of the presentation of a cheque. The ultimate result is a diminution in the credit balance of the victim's bank account and a corresponding increase in the credit balance of the account which the applicant was able to control. The victims in this case were directed by the applicant either to transfer the fund or pay a cheque to the specified account. She obviously could control this account. In either of the two situations stated above, she had assumed the rights of ownership of the debts. The assumption of such rights constitutes appropriation.

Preddy

89.Mr. Ross relied on R. v. Preddy [1996] A.C. 815 which was followed by this Court in HKSAR v. Goh Swee Yan Angelina [2000] 2 HKC 711, in which Lord Goff, dealing with question of whether the defendant had obtained property belonging to another, held that when the bank account of the defendant is credited, he does not obtain the lending institution's chose in action. On the contrary, that chose in action is extinguished or reduced pro tanto, and a chose in action is brought into existence, representing a debt in an equivalent sum owed by the different bank to the defendant. In those circumstances the defendant cannot obtain property belonging to another i.e. to the lending institution. The property belongs to himself.

90.As pointed out by this Court in Wong Cho Sum the Preddy situation deals with the question of the defendant obtaining property belonging to another and was not concerned with the question of appropriation by the defendant. In so deciding this Court had also considered the addendum to the judgment of the English Court of Appeal in R. v. Graham [1997] 1 Cr. App. R. 302 which expressly affirmed the correctness of Kohn.

91.In Goh Swee Yan Angelina, one of the charges was theft. This Court referred to the judgment of Graham [1997] 1 Cr. App. R. 302 which stated that,

“ If in any case the reasoning in Preddy is fatal to a conviction [for an offence of obtaining property by deception], it is likely to be fatal to a conviction [for an offence of theft] also unless, in the case of a chose of action, it can be shown that the chose in action appropriated was at the time of appropriation the property of another."

92.As pointed out in Wong Cho Sum, this Court, however, was not referred to the addendum of the judgment of Graham which expressly affirmed Kohn. This is what the English Court of Appeal said in the addendum :

“ We wish to make it clear that nothing we said was intended to cast doubt on the principle that theft of a chose in action may be committed when a chose in action belonging to another is destroyed by the defendant's act of appropriation as defined by section 3(1) of the Act."

93.This addendum clearly demonstrated the fallacy in Mr. Ross's submission. It is important to bear in mind that the relevant element of the offence in theft is "appropriation" and not "obtaining".

94.I see no reason why a departure should be made from our early decision in Wong Cho Sum.

Consent from Mr. Wong and Miss Ko

95.The fact that Mr. Wong and Miss Ko agreed to the transfer of the funds or pay the cheque did not preclude an appropriation from taking place. Lord Browne-Wilkinson in Gomez [1993] A.C. 442 stated that,

“ ....... I regard the word "appropriation" in isolation as being an objective description of the act done irrespective of the mental state of either the owner or the accused."

96.In R. v. Hinks [2001] 2 A.C. 241 Lord Steyn at page 251 referred to the speech of Lord Browne-Wilkinson and affirmed that it is immaterial whether the act was done with the owner's consent or authority. He held that Gomez gave effect to section 3(1) of the Theft Act (i.e. section 4 of the Theft Ordinance) by treating "appropriation" as a neutral word comprehending "any assumption by a person of the rights of an owner".

97.The law as held in Gomez, destroyed the argument that an indefeasible gift of property cannot amount to an appropriation. This was affirmed in Hinks.

98.The Gomez and Hinks line of cases were also adopted by this Court in Wong Cho Sum. The same approach was followed by this Court in HKSAR v. Cheng Lap Sun Patrick [2001] 4 HKC 524. A corollary of this approach is that it is not necessary to show that the victim had been coerced in making the transfer or that the fraudster had actively assisted the victim in the transfer.

Additional Requirement?

99.Mr. Ross seemed to derive from Wong Cho Sum the additional requirement that in appropriation the fraudster must actively assist in the act of transfer of the funds. In my view this is a wrong reading of the judgment. In that case, the defendant had actively took part in the transfer of funds and that was what this Court had said. It did not mean in every case such additional activities are required. The actus reus of theft consists simply (1) in the appropriation of (2) property (3) belonging to another.

100.If the applicant directs the victims to transfer the funds or pay the cheque to her brother-in-law's account and assumes the right of ownership of these funds, this is sufficient for the purpose of appropriation.

101.In my view Charges 6, 7, 8 and 9 had been proved.

Conclusion

102.I would grant leave and allow the appeal in respect of Charge 2. I would dismiss the application for leave to appeal against the conviction of the other charges.

Hon. Yeung J.A. :

103.I have the opportunity to reading the draft judgment of Hon Cheung JA. I agree with his judgment on charges 6, 7, 8 and 9. For the reasons expressed in his judgment, I would dismiss the applicant's application relating to those charges.

104.However I am unable to agree with his judgment relating to the 2nd charge.

105.In all criminal trials there are two principal objectives of the law. One is that a defendant should not be convicted of the crime which he is charged when he has not committed it. The other is that a defendant who is guilty of the crime with which he is charged should be convicted.

106.The 2nd Charge against the applicant was brought under section 18(1) of the Theft Ordinance. It is a charge of obtaining a pecuniary advantage by deception.

107.There is no doubt that the applicant had falsely represented to Associated Financial Services Limited (AFS) that her residential address was a bogus address at Happy Valley. Mr. Ross on behalf of the applicant did not seek to argue otherwise.

108.It was however suggested that the arrangement between the applicant and AFS was one of hire-purchase agreement and the applicant did not in fact obtain any loan from AFS. In the circumstances, the applicant had not been granted a credit facility or credit arrangement to meet the requirement of section 18(2)(a)(i) of the Theft Ordinance.

109.Anyone trained in law would be aware of the standard terms in hire-purchase agreements and would understand how hire-purchase arrangement works.

110.In substance, a hire-purchase agreement is a tri-parte arrangement whereby the seller (dealer) would get paid for the goods, the buyer (hirer), who cannot afford to pay the price in cash would be financed by finance company for the acquisition of the goods and the finance company would act as the lender by making payment direct to the seller. The finance company would get back the loan with interest from the buyer by monthly instalments (as Hire Rents).

111.The applicant wanted to buy a Mercedes-Benz car from Pan-Ray Motors Centre but was unable to pay cash for it. She obtained the necessary credit facility/arrangement from AFS to enable her to acquire the car.

112.On the Vehicle Registration document issued by the Transport Department, the Mercedes-Benz car was registered under the name of the applicant.

113.Despite the description of AFS as the owner of the car under the hire-purchase agreement, the applicant was obliged to :

(i) maintain the car in good condition and to effect any necessary repair/replacement;

(ii) to execute insurance coverage for the car; and

(iii) to obtain all necessary licenses, permits and permissions for the use of the car.

114.These factors, together with those identified by Hon. Seagroatt J. are indicative of the true nature of the arrangement in question.

115.I too, am of the view that the applicant had indeed obtained a pecuniary advantage (a credit facility or credit arrangement in the form of a hire-purchase agreement). The applicant was rightly convicted of the 2nd charge.

116.For my part, I would dismiss her application for leave to appeal against conviction in respect of the 2nd charge as well.

Hon. Seagroatt J. :

117.I agree with the judgment of my Lord, Cheung J.A. save that I respectfully differ as far as Count 2 is concerned.

118.Count 2 charges obtaining a pecuniary advantage in relation to a hire purchase agreement. The actual wording of the charge describes the pecuniary advantage as a hire-purchase loan. The expression hire-purchase loan is a layman's description of how the public views such a facility.

119.The charge is framed under section 18(1) of the Theft Ordinance with specific consideration of section 18(2)(a)(i) for the definition of pecuniary advantage as a credit facility or credit arrangement. The English Theft Act 1968 originally had virtually identical wording save that its definition of pecuniary advantage in the directly corresponding sub-sub-section was

“ any debt or charge for which he makes himself liable or is or may become liable......is reduced or in whole or in part evaded or deferred."

The English sub-sub-section was repealed in 1978. However The Hong Kong Theft Ordinance, which was amended in 1986, clearly decided to define more precisely the matters which constituted a pecuniary advantage. It is not disputed that a hire-purchase company is a deposit-taking company. The issue in this count in the indictment was whether there was a credit facility or credit arrangement. It is immaterial (as it was in the English statute) whether it was legally enforceable or not. The deception is the false representation that the address she gave was her residential address. It was not such. Not was there any arrangement whereby she was entitled to use it as a correspondence address.

120.The substance of the charge itself was concerned with the purchase of a Mercedes-Benz car. The Defendant was not able to purchase it with cash from the dealer. Her old vehicle was accepted in part exchange and the agreed value $78,000.00 was treated as a deposit. In order to finance the acquisition of the new vehicle the dealer sold it to a hire purchase company for $1,150,000.00 (i.e. the cost price less the deposit).

121.The hire purchase company then entered into an agreement through the agency of the dealer with the Defendant that she would pay monthly instalments over five years. The text of the agreement relating to the cost is significant.

122.$1,150,000.00 is described as "the balance of the cash price to be financed". That is a clear reference to the net cash price after deduction of the deposit. To the balance are added what are described as hire charges. These are calculated by reference to an interest rate of 8.25% per annum on the cash price of $1,150,000.00. The total is then divided by the number of monthly instalments. An option price of $300.00 is identified as the nominal payment to be made at the end of the term which, when paid, will transfer title to the Defendant.

123.AFS (The hire-purchase company) carried out what was described as a credit inspection of the applicant. Naturally the company wanted to obtain proof of the Defendant's residential address. The admitted facts referred to "The fund loaned under the hire-purchase agreement". Although legally title did not pass until the very final payment, the Defendant became the registered owner.

124.The wording and the nature of the agreement although a hire-purchase agreement, is to provide a credit facility whereby the Defendant can eventually acquire title to the car. That is the substance of the agreement. Section 18(2)(a)(i) provides that a pecuniary advantage is obtained where a person is granted a credit facility or credit arrangement by a deposit taking company (inter alios), the principal business of which is the provision of credit.

125.It is agreed that a Hire-Purchase Company is a deposit taking company. In reality its principal business is the provision of credit. The protection for a Hire-Purchase Company is that title shall not pass to the hirer until all payments have been made. This is what distinguishes a hire purchase agreement from a credit-sale agreement where title passes on the completion of the agreement and initial payment.

126.The reference in the agreement to "balance of the cash price" and "fixed rate 8.25% p.a." are indicative of the true nature of the agreement - a loan repayable over 60 months before title can pass.

127.Benjamin's Sale of Goods, 6th edition, at paragraph 1-053 puts its finger on the reality :

“ In practice hire-purchase is a device used in order to give possession and the use of goods to an intending buyer over a period during which he pays the price with interest by instalments while the seller retains the title to the goods as security for the unpaid balance of the price."

And at paragraph 1-54 :

“ In modern practice the credit given to a customer who takes the goods on hire-purchase is commonly not carried personally by the dealer. ... but instead by a specialist finance house which pays or advances cash to the dealer and may also undertake the collection of instalments."

128.In Financings Limited v Baldock [1963] 2 QB 104, a case decided by the English Court of Appeal prior to the current English hire-purchase legislation, Diplock L.J. said :

“ In order to avoid the necessity of complying with the statutory requirements relating to money-lenders and bills of sale hire purchase companies enter into a contract with the hirer ... The business nature of the transaction is that of money-lending."

That court was dealing not with a criminal deception but with the contractual dispute between the owners (hire-purchase company) and hirer following repossession of the vehicle after the hirer failed to pay the first two instalments. No question of deception arose. It was concerned with the legal rights of the owners as determined by the terms of the contract and the general principles of law applicable to such contracts. The later comments by Diplock L.J. commencing with "But hire-purchase finance companies cannot eat their cake and have it" are relevant only to contractual rights, in my view, and do not affect the criminal law.

129.I think it is unarguable that the Defendant obtained a hire-purchase facility by deception. The nature of the facility is described by statute as a credit facility or credit arrangement. This is the true nature of a hire-purchase agreement and what the criminal law aims at. In the charge the home-spun term 'hire purchase loan' is used. That is how the public views it. For the purposes of future drafting of such charges it will be better to use the term hire purchase credit facility or arrangement.

130.The decision of the Court of Criminal Appeal in England in R. v Garlick Crim. App. R. 1958 [42] p. 14, predates current hire purchase legislation. It was also concerned with obtaining credit by fraud or false pretences under the Debtors Act, 1957. The court held that under a hire-purchase agreement a hirer had not obtained credit since ownership did not pass until payments under the agreement had been made in full. The Crown made a concession that it could not sustain the conviction at the outset and the court did not see the material document, namely the hire purchase agreement. It proceeded to give a short judgment which seemed to ignore the reality of the transaction.

131.There is only one reference to Garlick's case in the 1997 edition of Archbold and none in the current-edition (2003). The 1997 edition refers to section 360(2)(a) of the Insolvency Act 1986 as effectively reversing the decision in Garlick. In that section a bankrupt obtains credit if he enters into an agreement whereby goods are bailed to him under a hire purchase agreement. By virtue of that statutory provision in relation to a hire-purchase agreement, credit is obtained where a bankrupt obtains the benefit of such an agreement. The reference to the principle in R. v Millar 65 Crim. App. R 79 surviving, does not affect the position because the alleged offence was not under section 360(2)(a) of the Insolvency Act 1986.

132.Accordingly despite the repeal of the old sub-sub-section of the English Statute the current English legislation regards the obtaining of the benefit of a hire-purchase agreement by a bankrupt as the obtaining of credit. The Hong Kong Statute gives similar effect, albeit in the context of the broad concept of theft. The legislation of the two jurisdictions in my view are ad idem as regards the gravamen of an offence in relation to a hire-purchase company and is to be distinguished from those civil court decisions which are concerned with enforceability of conditions as opposed to offences of deception in one form or another.

133.In my view this Defendant obtained a credit facility by deception. The fact that it was particularized as a hire-purchase loan does not vitiate the charge. It is simply a vernacular expression. I would therefore dismiss the Defendant's application in relation to Count 2 as well.

Hon. Cheung J.A. :

134.Accordingly the application for leave to appeal in respect of Charge 2 is dismissed by a majority and in respect of the other charges is dismissed unanimously.

Representation:

Mr. P.K. Madigan S.G.C. of Department of Justice for the respondent

Mr. Philip Ross instructed by M/s Simon Cheng & Co. for the applicant