HKSAR v. Peter Raymond Baird

DCCC242/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 242 OF 2011

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Reasons for Verdict

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1.The defendant in this case has been charged with fraud, contrary to section 16A of the Theft Ordinance, Cap. 210, Laws of Hong Kong.

2.The prosecution case against the defendant can be found in the particulars of the offence, which allege that a company called Rodspear Limited, a Hong Kong registered company, of which the defendant was a director and a 50 per cent shareholder, would make payment for cut and polished diamonds exported by Masumi Overseas Private Limited, (“MOPL”), a company operated by PW1 to Rodspear, who in turn would procure a valid stand by letter of credit in favour of MOPL in order to secure the contract goods.  As part of this agreement MOPL was required to deposit into the account of a company called Peinhador Capital Management Limited, a company of which the defendant was the sole shareholder and sole director, a sum of US$700,000 escrow funds, which would be returned to MOPL if PCML failed to procure the standby letter of credit. 

3.It is alleged against the defendant that he, well knowing that no standby letter of credit would ever be forthcoming, and with intent to defraud, induced PW1, on behalf of MOPL, to deposit such escrow funds into the bank account of PCML and not to take any prompt action against the defendant, Rodspear and/or PCML for the recovery of the escrow funds, resulting in benefit to himself, Rodspear and/or PCML, or prejudice to PW1 and/or MOPL.

4.Prior to the calling of any oral testimony some admitted facts, marked as Exhibit PA, were admitted pursuant to section 65C of the Criminal Procedure Ordinance, Cap. 221, dealing with matters not in dispute such as the directorship and shareholdings of Peinhador Capital Management Limited and Rodspear Limited.  The bank accounts of Peinhador and Gold Far East Limited, the defendant being the sole signatory to the Standard Chartered Bank account of Peinhador and PW1 being a signatory of the Axis bank account to Gold Far East were all matters also that were agreed. 

5.It was further admitted that a remittance of US$700,050 was transferred from the Axis bank account on 16th November 2010, and that between 22nd November 2010 and 6th December 2010 various sums totalling US$609,753 was withdrawn by way of transfers from the Standard Chartered Bank account with Peinhador.  In addition, the movement record, the arrest of the defendant and the fact that he has a clear record in Hong Kong was also agreed.

6.The only witness to testify on behalf of the prosecution was indeed PW1, Mr Doshi Santoshkumar Prakashchand, who I will call PW1.  He testified that he operates a company, which I will call Masumi or MOPL, which is involved in the trading, processing and manufacturing of gold and diamond jewellery.  He said that, in October 2010, he was introduced to the defendant, Mr Peter Baird, who he recognised in court, there being no issue as to identity, and a Korean by the name of Alfred Yoo, by a Mr Sumeet Guptha. 

7.He said he was told that the defendant was the managing director of a company called Peinhador, and also was the CEO of a company called Rodspear Limited, whose head office was in Ireland.  I should mention here that it is an admitted fact that both companies, that is Peinhador and Rodspear, have their registered offices at exactly the same location, at Unit 2408, 24th Floor, Wing On House, Des Voeux Road, Central. 

8.Indeed it was at these offices that PW1 said that he had various meetings with the defendant and Alfred for the supply of cut and polished diamonds.  There were four to five such meetings, PW1 said, between himself, the defendant and Alfred from the first meeting in October 2010, culminating in the execution of an agreement on 10th November 2010 between Rodspear and Masumi for the supply of cut and polished diamonds at a contract price of US$50 million.

9.It was the evidence of PW1 that at each of these meetings the defendant was present.  Another person, who he called “Rory” was not physically present at the meetings but with whom he had telephone contact during the meetings.

10.The agreement itself was produced and marked as Exhibit P1.  There is, I should say, a clear mistake on the face of this document as it is dated 10th October 2010.  PW1 initially testified that this was the correct date, but then later on confirmed this to be a mistake, the correct date being the date indicated on the top of the document, that is 10th November 2010.  In any event, the witness confirmed that he signed the agreement on behalf of Masumi, and he saw the defendant sign on behalf of Rodspear.

11.PW1 testified that the parties agreed, as witnessed by the agreement itself in paragraph 1, that the importer, that is Rodspear, would arrange for a standby letter of credit in favour of MOPL’s bank to enable MOPL to obtain finance for the purchase of diamonds.  His evidence was that his company did have credit facilities from its own bank but he needed the standby letter of credit to drawdown those credit facilities in order to procure the goods.  He accepted that he was the one who brought up the issue of the standby letter of credit.

12.As a result of this, PW1 said that he and the defendant entered into negotiations and together drafted an escrow agreement, Exhibit P2, in his office.  Both Peter, that is the defendant, and Alfred were there, he said, and Rory was on the phone.  He said that the defendant was totally involved in the negotiation.  The agreement itself was dated 11 November 2010.  PW1 said that he signed it and stamped it and handed it over to Alfred.  At the time he said the defendant was not present, but later he said the document was returned to him after it was signed by the defendant.

13.PW1 confirmed the terms of the escrow agreement which inter alia provided that, upon payment of an escrow fund by MOPL into Peinhador’s Standard Chartered bank account, Peinhador would, within seven days, procure a standby letter of credit for US$5 million in favour of MOPL’s bank from Scotiabank. Further, Peinhador was to hold the fund in escrow on behalf of MOPL for a maximum period of 14 days. 

14.He confirmed that paragraphs 5, 6, 7 and 8 of Exhibit P2 referred to the payment terms, and in particular that in the event that Peinhador provided the standby letter of credit to MOPL the escrow funds should be released to Peinhador, upon receipt of a written confirmation by MOPL, and further, that in the event that Peinhador failed to procure the standby letter of credit to MOPL, the escrow fund should be returned to MOPL within 14 days of the date of the agreement.

15.In accordance with the terms of this agreement PW1 said that he arranged for a transfer of US$700,050 from what he called his friend’s company account, which was in fact a company called Gold Far East Limited, their account with the Axis Bank Limited on 17th November to Piendedor’s account with Standard Chartered Bank.  He confirmed that he did not receive any standby letter of credit within the seven days as specified in the agreement, and indeed said that he still, to this day, had not received any standby letter of credit. 

16.Accordingly, PW1 said that he contacted the defendant, either on 24th or 25th November 2010, who told him that the standby letter of credit was under process of being issued.  As a result, an extension of the escrow agreement was entered into on 4th December between himself on behalf of MOPL and the defendant on behalf of Peinhador, extending the issue of standby letter of credit to 20th December.  This document was produced as Exhibit P9.  When signing this document PW1 testified that the defendant mentioned nothing to him about the funds which he, PW1, believed still to be in the escrow accounts held at the Standard Chartered Bank.

17.Pausing here, the reality, of course, was quite different, as the admitted facts confirm, that by 4th December 2010 more than US$500,000 had been transferred out of the escrow accounts by the defendant himself being the sole signatory of the Standard Chartered bank account.

18.On 13th December PW1 testified that he received a call from the defendant.  He went to his office, where the defendant showed him a letter, Exhibit P10, ostensibly from the Scotiabank, indicating that the standby letter of credit had been issued and would be in PW1’s account by the 16th.  When by the 16th no standby letter of credit had been received PW1 said that he decided to terminate the escrow agreement and demanded his money back, however, on 21st December, he said he received an email from the defendant with an attachment which purported to be the standby letter of credit from Scotiabank, Exhibit P11.  He said he accordingly checked his account at HSBC, both at Mumbai and Bangladesh, but no credit facilities had been received.  From 22nd to 30th December, PW1 testified that he tried to contact the defendant, Rory and Alfred by phone, and/or by visiting their offices, but was unable to contact them. 

19.Many matters were raised with PW1 in cross-examination.  It was suggested to him that it was, in fact, Rory O'Driscoll who was the person intimately involved with the obtaining of the standby letter of credit from Scotiabank, rather than the defendant.  PW1’s response to this was that although he spoke to Rory on the phone and received and sent e-mails to him he never actually met him until 5th January, and this was in Dubai.  All of his negotiations were done with the defendant, he said. 

20.PW1 initially, in cross-examination, denied that he was a signatory to the bank account of Gold Far East Limited.  It was not until he was confronted with the mandate to open up the account that he agreed that he was a signatory.  His explanation for his earlier denial was simply that he did not remember. 

21.PW1 accepted in cross-examination that around October of 2000 he had negotiated with a number of companies in order to obtain arrangements with regard to standby letters of credit, Exhibits D1 to D3 being examples.  However, he denied the proposition put to him that in relation to P1, that there was never any intention to trade in $US50 million worth of diamonds, but that this was simply a mechanism for PW1 to obtain a standby letter of credit for general trading purposes.  This was denied.

22.It was suggested also to the witness that the irregularities in Exhibit P1, together with its vagueness as to quantity and quality of diamonds to be supplied, belied the fact that this was a genuine contract.  The witness’s response to this was that Rodspear was to give a specific order once the standby letter of credit was opened, and he remained adamant that the defendant had told him that Rodspear and Peinhador were involved in the diamond trade.  It was also suggested on behalf of the defendant that at no time that PW1 had contact with O'Driscoll prior to the initial escrow agreement of 11th November was the defendant present.  PW1 disagreed with this, saying that at all times the defendant was present and the discussions took place in his office, in the conference room.

23.PW1 being the only witness to give oral evidence on behalf of the prosecution, that completed the case for the prosecution.  I ruled against submissions of no case to answer on behalf of the defendant, and the defendant, as is his right, elected to remain silent. 

24.The central issue for this court is quite simply whether or not the prosecution have proved, to the high standard required, an intention to defraud on the part of this defendant in the way the prosecution have chosen to particularise the charge against him.  For myself, I found PW1 to give generally truthful evidence, which I accept, and there is no question that he had a genuine sense of grievance.  He has, after all, lost the majority of the US$700,000 that was deposited into the escrow account held at the Standard Chartered Bank.  He has lost this money at the hands of the defendant and the defendant alone.  It was he who had the sole signing rights on this account.

25.It is an agreed fact that, between 22nd November 2010 and 6th December 2010, and before any standby letter of credit, including P11, had been issued, that a total of US$609,735 was moved out of this account.  It is beyond per adventure, therefore, that the defendant was responsible for this.  The defendant is clearly in breach of the terms of the escrow agreement, and therefore in breach of trust. 

26.Moreover, it was the defendant alone who entered into an extension of the escrow agreement on 4th December 2010 at a time when he knew the vast majority of the escrow funds had been transferred, and I accept the evidence of PW1, that at the time this document was signed nothing was said by the defendant about the moneys supposedly being held in the account.  This I find to be quite deliberate on the part of the defendant.  The withdrawal of the funds from the escrow account and the extension of the escrow agreement are, I find to be the dishonest manifestations of the false representations that were made to PW1 and which have been particularised in the charge.

27.The escrow agreement had been extended until 20th December 2012.  The evidence of PW1, which I accept, is that the defendant called him into his office on 13th December 2012 and handed him exhibit P10, indicating that the standby letter of credit had been issued and would be reflected in his account by December 16th.  This, I have no doubt, was given to PW1 to keep him sweet, so to speak.  And whilst there is no direct evidence to suggest that PW1 knew of the falsity of this document, due to my findings in relation to the actions of the defendant in relation to the withdrawal of the escrow funds and the extension of the agreement, I have no difficulty in inferring, and indeed do infer, that he must have known that it was false.

28.Similarly with regard to P11, which is ostensibly the standby letter of credit, whilst this document is clearly not genuine, and I so find as I have accepted the evidence of PW1, that after he received this document from the defendant on 21st December 2010 he checked his HSBC account both at Mumbai branch and Bangladesh and discovered that the funds had not been received, there is no direct evidence that the defendant at the time he gave the document to PW1, knew it to be false. 

29.However, the fact is that this standby letter of credit was, on the face of it, issued by Rodspear’s bank account, Rodspear being a company in which the defendant at the time was a director and 50 per cent shareholder.  I therefore have little difficulty in finding, and indeed do find, that the defendant was well aware of its falsity.  I further find that this document was given to PW1 by the defendant in a clear attempt to prevent PW1 from recovering the escrow funds in accordance with the terms of the escrow agreement.

30.Much was made by defence counsel as to the involvement of others in this episode, in particular Rory O'Driscoll.  The suggestion being that, as there is no reference to Rory O'Driscoll in the charge at all, the stance of the prosecution being therefore that he was no more than an innocent agent despite clear evidence to the contrary, how can it follow that the defendant was engaged in fraud?

31.There is no doubt in my mind whatsoever that the evidence of PW1 clearly suggests that O'Driscoll was indeed involved in this fraud to a lesser or greater degree.  However, in my judgment the fact that the prosecution have decided not to name Mr O'Driscoll, or anyone else for that matter, for whatever reason in the charge, does not mean that the defendant cannot be involved in this fraud. 

32.Another matter that was raised by counsel for the defence was that Exhibit P1 was not a genuine contract and that PW1 had it executed to support the standby letter of credit, which was his real objective. There is no doubt that it was PW1 who proposed the standby letter of credit initially.  However, I have no doubt, and indeed find, that the defendant seized this opportunity to create the foundations of the fraud that was eventually perpetrated on PW1.  I have accepted the evidence of PW1, that the defendant was engaged in the negotiations for the standby letter of credit with PW1 throughout.  It was not the case, I find, having accepted PW1’s evidence, that he merely sought a standby letter of credit for general trading purposes. He is a diamond trader and was seeking business for the export of cut and polished diamonds.  Whilst I accept that Exhibit P1 was not a genuine contract for the supply of cut and polished diamonds the point is that PW1 thought that it was. 

33.I am perfectly well aware that the defendant is a person of clear record in Hong Kong, and I have directed myself accordingly in this regard.  However, despite this, for the foregoing reasons and having regard to all of the evidence and exhibits, both defence and prosecution in this case, I say that I am satisfied the prosecution have proved each and every element of this charge against the defendant beyond all reasonable doubt, and I convict him accordingly. 

Please refer to CACC217/2012 for the relevant appeal(s) to the Court of Appeal.