HKSAR v. Hung Fan Kit

CACC 399/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 399 OF 2011

(ON APPEAL FROM DCCC 582/2011)

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REASONS FOR JUDGMENT

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Hon Line J (giving the reasons for judgment of the court):

1.On 19 December 2012 we quashed the conviction on charge two; dismissed the application for leave to appeal the conviction on charge one and reduced the sentence on charge one to two years’ imprisonment, saying we would give our reasons later. This we now do.

2.The applicant was convicted of two charges of theft in the District Court by Deputy Judge M Chow.  The first charge alleged that he stole 49 jewels between 24 November 2009 and 14 July 2010, belonging to Best Follow Ltd.  The second charge alleged theft of seven diamonds between 27 February 2010 and 10 August 2010, belonging to China Diamond Corporation Ltd.

3.There was no dispute that both of the victims had parted with the items in question in circumstances where they dealt with the applicant, who had been known to them previously as someone in the jewellery business.  It was admitted that the jewels were received by, and the diamonds supplied to, a company called Diamond Station Ltd with which the applicant was associated.

4.There was no dispute that the victims did not recover their property and that they were not paid.

5.Central to the case against the applicant was the finding made by the judge that the applicant had control of, and was the one to run the business of, Diamond Station Ltd.  It was this company that had been trading from their own premises until August 2010, when it literally shut up shop and disappeared.

6.The first attack upon the convictions was to challenge the finding that the applicant controlled Diamond Station Ltd.  The reasons supporting the finding of fact are given in paragraphs 51 to 53 of the Reasons for Verdict.  In summary, they included that it was the applicant who dealt with the victims and gave the appearance of making the decisions; that he told the first victim that it was he who had opened a shop where they could put their jewels; that he hired and fired the employee who worked in the shop; that he told that employee what to do with the diamonds received; and that he had access to the safe and that he was free to take diamonds from the safe when he needed them.

7.Those reasons had to be seen against the background of the admitted facts, which revealed that it was the applicant's wife who set up Diamond Station Ltd on 20 April 2009 and acted as the sole director; that in June 2009 the ownership of the company was transferred to a man called Au who then became the sole director; that the directorship was then transferred to the applicant on 6 July 2010, while Au still maintained ownership; and that Au and the applicant's son were authorised signatories on the company account.

8.In our judgment, the judge was entitled on the evidence to make the finding of control, notwithstanding the corporate detail.  We note features in her summary of the evidence that reinforce the particular grounds she gave for the finding, such as PW4, a salesman at China Diamond Corporation Ltd, speaking of seeing the applicant sitting in the "boss cabin"; of him occupying one of the three rooms at the company premises; the family nature of the undertaking, with five persons working in Diamond Station, namely the applicant, the applicant's wife, the applicant sister, the employee and a part‑time lady; and the fact that it was the applicant's reputation that led the alleged victims to trust their goods as they did.  Nothing more was said about the man called Au.

9.We also note that the applicant elected not to give evidence.  He declined the opportunity to deny control, a matter particularly within his own knowledge.  He cannot complain if his election made the inference of control the easier to draw.

10.In relation to charge one the 49 jewels were supplied between 24 November 2009 and 14 July 2010.  Their total value was just over 1 million Hong Kong dollars.  The items were supplied on the basis that the alleged victim, Best Follow Ltd, could have any item back at any time, but on the other hand the applicant and/or Diamond Station Ltd was free to sell them, in which event they would have to be paid for.  None of the 49 items was sold.  Other items to a value between one half and 1 million dollars were supplied and returned.  Items were supplied up until July 2010.

11.The position was different in respect of the diamonds, the subject of charge two.  Diamonds were supplied on approval by China Diamond Corporation Ltd to Diamond Station Ltd and when the latter indicated that it wished to purchase one or more of them an invoice was raised evidencing the agreement to purchase.  In respect of each of the seven diamonds an invoice was raised.  It was agreed that Diamond Station Ltd pay by a post dated cheque in respect of three diamonds.  Three post dated cheques were so drawn but were dishonoured in August 2010.  In respect of the diamonds where no cheque was issued, it was common ground that payment was not due forthwith but within 1 to 2 months.  The seven invoices ranged in date between 13 April 2010 and 3 June 2010.

12.It was submitted by the defence that there could have been no theft of property belonging to China Diamond Corporation Ltd as the property in the goods had passed to Diamond Station Ltd upon the agreements to purchase, evidenced by the raising of the invoices.  The Reasons for Verdict did not deal with the submission.  The submission appears to us to be well founded.  It was unfortunate that neither the prosecution nor the judge seemed to have directed their mind to the point.

13.Of course, if the applicant, through his control of Diamond Station Ltd, dishonestly brought about the appropriation of diamonds when their owners parted with possession of them, either before or at the time of their respective invoices, he would be guilty of theft.  However, there was no clear indication of dishonesty as early as 3 June. Indeed there was some evidence to suggest an effort to carry on trading at that time.  The bank statements of Diamond Station Ltd for April, May and June 2010 show activity and receipts of $438,000, $720,000 and $119,000 odd respectively.  The respondent accepted before us that the prosecution’s case had never been put on the basis of dishonesty at the date of the invoices. We do not think it possible now to proceed on that basis.

14.The respondents argued that the diamonds had to be regarded as belonging to China Diamond Corporation Ltd as they retained a proprietary right or interest in them as section 6(1) of the Theft Ordinance provided "property shall be regarded as belonging to any person having possession or control of it, or having in it any proprietary right or interest…"  This submission was based upon the fact that the invoices bore printed words "Before full receipt of payment of the total amount the mentioned goods will be considered on consignment".  It is said that the words "on consignment" had the effect in the circumstances of reserving to the seller a proprietary right or interest.

15.Rule four of section 20 of the Sale of Goods Ordinance has the effect of passing the property in goods supplied on approval to the buyer when the buyer does an act adopting the transaction.  Entering the agreements to purchase would obviously constitute such an act.  This is so unless a different intention appears.  The two witnesses from China Diamond Corporation Ltd were asked no questions about the intention of their company in this regard or what was intended about title in the light of the words "on consignment" on the invoices.

16.We note that the first invoice, Exhibit 3 dated 13 April 2010, had been printed with the terms for payment as “Cash”, but that this had been amended in manuscript to “60 days”.  The invoices thereafter have printed dates for later payment.  The evidence of PW2 was to the effect that their standard trading terms were cash for new customers but that they altered them for the applicant’s transactions due to their history of satisfactory trading together.  He spoke of granting a grace period for payment.

17.We have to look to the documents to ascertain if there was an intention to reserve a proprietary interest.  If it had been the case that a witness from China Diamond Corporation Ltd had claimed some retention of title, especially when payment was due only after 60 days, we believe the claim could well have been amenable to challenge.  We say this as Diamond Station Ltd was a retail business with a shop just of Nathan Road.  It is therefore difficult to see how China Diamond Corporation Ltd could contemplate asserting rights against the goods when the likelihood was that they had been sold to an untraceable member of the public, especially a public with a large proportion of international tourists.

18.The alteration of the standard cash terms created a tension with the term that the goods be considered as on consignment. We can see that the term may have some sensible application where payment was due forthwith and it may have been that some time may pass whilst the diamond was set or the like.  It may be that the seller could take back his goods in such circumstances.  However, we find it hard to see a sensible application once the diamond is on the finger of the departed retail customer and payment to the original seller is not due for sixty days.

19.Given the agreement for the sale of the diamonds,the use of an invoice indicating by its terms a sale and the thrust of the evidence that a sale was being made to Diamond Station Ltd, the words "on consignment" cannot, or may well not, bear their ordinary meaning as signifying delivery of goods to an agent for sale on behalf of the consignor as principal.  It would seem to us reasonable to infer that both companies contemplated the sale of any diamond when the buyer had a customer, likely to be a retail customer, to sell on to.  In that situation and on the facts of this case it is not safe to conclude that the words "on consignment" operated to reserve to the seller any right or interest in the goods.  A reasonable inference on the evidence is that the property in any of the diamonds passed on the date of the raising of its associated invoice; that there was no reservation or retention to the title of those goods; and that payment was due at the end of the period that the parties had agreed in any particular case.  In other words an outright sale with a credit period for payment.

20.In the context of this criminal case it goes without saying that if the prosecution had to put their case on the basis of some reservation to the title of the goods, they bore the burden of establishing that for sure.  On the evidence available in this case they did not discharge that burden.

21.We directed our minds to the prospect of some further appropriation by the applicant after the invoices were raised and the property belonged to Diamond Station Ltd.  However, the case was conducted on a wholly different basis and the matter was never properly explored.  Accordingly, we do not think it right to seek to support the conviction on charge two on such a different ground.

22.Accordingly, we were of the view that the conviction on charge two cannot be sustained.  We would emphasize that our decision concerning charge two was based on the particular facts of this case, most significantly that the initial appropriation when property passed on the raising of an invoice could not be shown to have been dishonestly undertaken.

23.In relation to charge one, it may have been the case, because of the ongoing supply and return of jewels up to 14 July, that all was in order and no deficiency existed.  The 49 items remained the property of Best Follow Ltd.  It was from this time on that there was every indication that the business was failing.  By 10 August 2010 Diamond Station Ltd had closed shop and Best Follow Ltd were unable to recover their property.

24.It was an overwhelming inference that someone had appropriated the 49 items.  Someone took those 49 valuable items from the small family business that was failing.  In the absence of an explanation, it was an overwhelming inference that doing so was dishonest.  Given the finding of fact as to who controlled the company, and had access to the safe where the items were stored, it was an irresistible and inevitable inference that it was the applicant who did so.

25.It may well have been that the dishonest appropriation of the jewels took place after 14 July and before 9 August 2010.  Charge one alleged theft between 24 November 2009 and 14 July 2010.  It would have been happier if the date had been amended, but we do not regard the averment as to time to be material.  The first prosecution witness, a lady from Best Follow Ltd, spoke of looking for payment until a time in August 2010. In relation to the issues, nothing turned on the date of 14 July 2010.

26.Accordingly, the application for leave to appeal conviction in relation to charge one was dismissed.  In relation to charge two we granted leave and treated the hearing of the application as the appeal and quashed the conviction and sentence.

27.The judge passed a sentence of three years’ imprisonment on charge one.

28.The applicant was 55 years old when sentenced, married with a son.  He had a clear record.  It could be said of his behalf that he had not set up Diamond Station Ltd in order to cheat and that the offence arose in the context of a failed legitimate enterprise.  It could be said that there was an element of breach of trust involved, because the evidence disclosed that time for payment was granted because of a history of honest trading between the parties which had engendered trust.

29.We agree with the submission made by Mr Acton Bond that this was not a classic breach of trust situation and that the three‑year starting point indicated in the case of Cheung Mee kiu [2008] 1 HKC 113 for the theft of property in breach of trust worth $1 million could fairly be mitigated.

30.We note that the quality and degree of trust reposed in the applicant was not great; that the offence involved straightforward commercial transactions between independent parties dealing at arm’s length; that there was no elaborate cover‑up or false accounting; that the period over which the offence was committed was short and arose as the consequence of the failure of a legitimate business; that there was no obvious aggravation arising from the use to which the stolen property was put or the effect on the victim company.

31.In the circumstances we judge that a starting point for sentence of up to two and a half years’ imprisonment is appropriate for charge one.  We note that the applicant was a family man in his mid fifties with a history of honest trading and that this was his first fall from grace.  We also give weight to the fact that the applicant surrendered himself to the police in August 2010.  In those circumstances we judge a sentence of two years’ imprisonment to be merited.  

32.We therefore allow the application for leave to appeal sentence, treat the hearing of that application as the appeal, and reduce the term of three years’ imprisonment to one of two years.

Mr Alain Sham DDPP, of the Department of Justice, for the respondent

Mr Jonathan Acton‑Bond and Mr Victor Cheung, instructed by Simon C W Yung & Co, for the applicant