HKSAR v. Mak Chai Kwong and Another
Read the full judgment text of DCCC 956/2012 on BabelCite. This District Court judgment was delivered on 24 June 2013.
1. This case concerns events that took place between 8 th June 1985 and 31 st December 1990.
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DCCC 956/2012 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CRIMINAL CASE NO 956 OF 2012 ----------------------
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--------------------- Reasons for Verdict --------------------- 1.This case concerns events that took place between 8th June 1985 and 31st December 1990. 2.The 1st defendant, Mr. MAK Chai-kwong (“Mak”), is the former Secretary for Development and the 2nd defendant, Mr. TSANG King-man (“Tsang”), is the Assistant Director of the Highway Department. 3.It is the Prosecution case that Mak and Tsang dishonestly misled the Hong Kong Government into granting them Private Tenancy Allowances (“PTA”) to which, in all the circumstances, they were not entitled. 4.It is the Prosecution case that the two defendants entered into a fraudulent agreement to obtain PTA through cross‑holding and bogus cross-leasing of two flats, ie Flat 21E and Flat 22E of Block 9, City Garden, North Point. On papers, Mak and his wife, WONG Lai-king (“Wong”), were the owners of Flat 21E whereas Tsang and his wife, PAU Wai-ming (“Pau”), were the owners of Flat 22E. On papers, Wong leased Flat 21E to Tsang whereas Pau leased Flat 22E to Mak. Mak and Tsang both applied for and obtained PTA under the respective leases. 5.The Prosecution alleges that Mak and Wong were in fact the beneficial owners of Flat 22E while Tsang and Pau were the beneficial owners of Flat 21E. In other words, Mak and Tsang agreed to purchase flats in which they later resided but to register the flats in the Land Registry, not in their own names but in the names of each other and pretended that they were renting from each other flats in which they did not have a proprietary or financial interest. 6.The Prosecution alleges that Mak and Wong purchased Flat 22E but the property was registered in the name of Tsang and Pau. Tsang and Pau purchased Flat 21E but the flat was registered in the names of Mak and Wong. Through bogus cross-leasing, Mak leased Flat 22E from Pau whereas Tsang leased Flat 21E from Wong. Both Mak and Tsang successfully applied for and obtained PTA from the Hong Kong Government. 7.Flat 21E was sold in 1990 by Tsang under a power of attorney (PA/1) signed by Mak and Wong. Tsang kept the sale proceeds of Flat 21E after settlement of the mortgage loan and the related expenses. It is the Prosecution case that Tsang was able to keep the sale proceeds of Flat 21E because all along he was the real owner of Flat 21E. 8.Flat 22E was sold by Mak in 1992 under a power of attorney signed by Tsang and Pau (PA/3). Mak kept the sale proceeds of Flat 22E after settlement of the mortgage loan and related expenses. The Prosecution alleges that Mak was able to keep the sale proceeds of Flat 22E because all along he was the real owner of Flat 22E. 9.It is the Prosecution case that Mak and Tsang had made false representations to the Hong Kong Government to the effect that they did not have a financial or proprietary interest in the flat they leased and the leases they entered into were genuine. 10.The prosecution also alleges that Mak and Tsang had concealed and failed to disclose that they each had a financial or proprietary interest in the flat that they leased by stating the landlord to be their respective wives. 11.CSR 852(5) as on 24th July 1985 (pg. 5) provides that:
12.CSR 852(5) as on 13th March 1989 (pg. 6 & 7) provides:
For the purpose of this regulation, ‘relative’ includes –
13.Mak and Tsang face one joint charge of “Conspiracy to Defraud” (Charge 1). Mak and Tsang also face charges of “Agent using document with intent to deceive his principal”, Charges 2 and 3 against Mak and Charges 4 to 6 against Tsang. 14.Charge 1 concerns the alleged fraudulent agreement between Mak and Tsang. Charges 2 to 6 concern the submission of Applications for PTA and a memorandum for renewal of PTA by Mak and Tsang in relation to Flat 21E and Flat 22E. 15.Mak and Tsang pleaded not guilty to the respective charges. 16.As Mak and Tsang exercised their right and elected not to give evidence, the case of Mak and Tsang largely emerged from the questions put to the prosecution witnesses in cross-examination and the cautioned interviews of Mak and Tsang. 17.In a nutshell, the defence case is that there was no cross-holding of properties, there was only cross-leasing between Mak and Tsang. In fact and in law, Mak and Wong were the owners of Flat 21E; Tsang and Pau were the owners of Flat 22E. The leases were genuine and what they did, ie cross-leasing the properties to each other to claim PTA was a practice adopted by many civil servants at the time and it was not unlawful for civil servants to obtain PTA through cross-leasing. 18.It is the defence case that Mak and Tsang decided to swap the flats in 1990 after Mak and Tsang had ceased to receive PTA. As a result of the swap, Flat 21E was sold in December 1990 under an assignment signed by Tsang pursuant to PA/1 signed by Mak and Wong. In May 1992, Flat 22E was sold under an assignment signed by Mak and Pau pursuant to PA/3 signed by Tsang and Pau. 19.It is the defence case that since the two properties had been swapped, all the sale proceeds of Flat 21E, after settlement of the mortgage loan and other related expenses, were paid to Tsang and all the sale proceeds of Flat 22E, after settlement of the mortgage loan and other related expenses, were paid to Mak and Wong. 20.I heard evidence from 16 witnesses called by the Prosecution. They are: I. Civil Servants PW1 LUI Kin-fun Frankie - Principal Permanent Secretary of the Civil Service Bureau; PW13 LAU Sui-pun - former Executive Officer Grade II in the Home Purchase Unit of the Civil Service Branch of the Government Secretariat; PW14 LUK Ming - former Senior Executive Officer Grade in the Home Purchase Unit; PW16 KONG Suk-fan - Press Secretary for the Development Bureau; II. Former Classmates of Mak and Tsang PW2 LIM Wan-fung Vincent - Fractional Appointment Professor in the School of Architecture of the Chinese University of Hong Kong; PW3 LAW Fung-ping - Assistant Commissioner of Transport Administration and Licensing Branch; III. Tenants, Purchasers and Property Agent PW4 LEUNG Hung-tsang Dennis - Former tenant of Flat 22E between December 1988 and December 1992; PW5 TSANG Wai-wah - younger sister of Tsang, she was an Engineer of the Hong Kong Government in 1989, she rented Flat 21E and obtained PTA while Tsang was on study leave. The lease was for a term of two years commencing from 1st December 1989. PW4 terminated the tenancy from 19th August 1990. PW4 went on study leave from 28th September 1990; PW9 HAI Chui-kuen - PW9 purchased Flat 21E in late 1990; PW11 CHAN Kwok-ming Raymond - the property agent who handled the sale of Flat 21E in late 1990; IV. Witnesses from Messrs Lawrence Ong & Chung (“LOC”) PW6 LAI Sai-on Andus - a solicitor of LOC, he was an articled clerk in 1990. He was responsible for the preparation of the following documents:
Lai denied he had prepared any formal or informal trust document for Mak and/or Tsang in relation to Flat 22E. PW7 HO Kwok-wing - Part-time depot attendant responsible for the storage of documents in relation to LOC; PW8 WANG Kin-yuk - Executive Clerk of LOC; PW10 CHUNG Kam-wing Calvin - Partner of the LOC; PW12 ONG Tung-sing - Partner of LOC; V. ICAC Officer PW15 HONG Chi-man Lawrence - the officer-in-charge of this case. 21.Of all the witnesses called by the Prosecution, none of them could testify directly to the alleged agreement between Mak and Tsang, the evidence against Mak and Tsang is entirely circumstantial. 22.At the conclusion of the Prosecution case, I found that Mak and Tsang each had a case to answer on the respective charges. 23.As said Mak and Tsang exercised their right and elected not to give evidence. 24.Mak called one defence witness, Mr. WONG Wing-ping Joseph. Mr. Joseph WONG joined the Hong Kong Government in 1973 and retired in 2007. Mr. Joseph WONG was posted to the Civil Service Branch in 1988 and took up the post of Deputy Secretary of Civil Service. He was in charge of the salaries, housing benefits of all civil servants. The Admitted Facts 25.Facts which are not in dispute were admitted between the Prosecution and the Defence. There are two sets of Admitted Facts reached between all parties. In addition, there is a set of Admitted Facts between the Prosecution and Mak (D1) and another set between the Prosecution and Tsang (D2). The Admitted Facts are voluminous, 28 pages in total. I have considered all the admitted facts and the exhibits produced but I shall only set out the Admitted Facts briefly in this judgment. 26.The Admitted Facts reached between all three parties covers the following matters:
27.The Admitted Facts between the Prosecution and Mak set out:
28.The Admitted Facts between the prosecution and Tsang deal with the followings:
The Cautioned Interviews of Mak 29.Mak attended five cautioned interviews voluntarily; thrice on the 12th and twice on 13th July 2012. They are mixed statements in nature. In short, Mak told the ICAC that:
The Cautioned Interviews of Tsang 30.In his cautioned interviews, Tsang told the ICAC, inter alia, that:
Discussion Long Lapse of Time 31.Given the long lapse of time since the purchase of Flat 21E and 22E, I am mindful of the possible difficulties which the defence may face as a result of such long lapse, for example, some bank statements could not be retrieved and the transaction file of Flat 22E had been destroyed by Messrs Lawrence Ong & Chung. Mak and Tsang might have difficulties in recalling details of the events in their cautioned interviews. I am aware that live witnesses may have difficulties in recalling events that took place over 20 years ago. The Evidence of PW1 to PW16 32.PW1 - PW1 gave evidence that prior to 1st January 1994, the Civil Service Bureau was responsible for the policy and administration of PTA for civil servants. PW1 has access to all documents related to PTA including those before January 1994. 33.For the declaration in the PTA application, PW1 testified that, whether it was then or now, the honour system applies. The officers of the PTA Unit would check if the applicant was already obtaining any other housing benefits, they would also check the name of the applicant, his spouse and the landlord. 34.For the provisions in CSR 852(5) as contained in the declaration, the PTA Unit would assume that the applicant was honest and they would not vet the ownership or the financial interest of the leased property. PW1’s evidence in this respect is consistent with the evidence of PW13 and 14. I find his evidence credible and reliable. 35.PW1 confirmed that Mak started to receive PTA from 1981. 36.PW1 also confirmed that there was no prohibition against cross-leasing under the CSR, but he stressed that the applicants should not breach the provisions as stated in CSR 852(5) about the ownership and financial interest. It is common ground between all parties that cross-leasing between civil servants for the purpose of obtaining PTA is not unlawful. 37.PW13 - PW13 dealt with and processed the PTA application of Tsang and Mak. She approved Tsang’s application for PTA at page 131. She approved Mak’s application by a memo dated 27th October 1986 (pg. 67-68). PW13 approved Tsang’s application by a memo dated 20th October 1986 (pg. 130-131). 38.I accept PW13’s evidence that in assessing the application for PTA, she would assume that the information provided by the applicant was truthful. I accept PW13’s evidence that if she found out that the property that an applicant proposed to lease was in fact owned by him or his spouse or that the applicant or his spouse had a financial interest in it, PW13 would not approve the application as the applicant would not meet the requirements of the CSR. 39.PW14 - PW14 testified that in her role as a Senior Executive Officer in the Civil Service Branch of the Government Secretariat, she dealt with applications for PTA. I accept PW14’s evidence that for the information contained in the application for PTA, PW14 would not take her own steps to check to see if the information was correct, ie whether the applicant had a financial interest in the property he was renting. As PW14 said, she had no channel to verify the information provided. I accept her evidence that she would ensure that the signature clause underneath the declaration had been signed by the applicant. 40.I accept PW14’s evidence that she approved Tsang’s application for PTA made in 1988 (pg. 139) by a memo dated 13th July 1988 (pg. 146). For the application for PTA made by Tsang in October 1990 (pg. 184-187), PW14 approved it by a memo dated 9th November 1990 (pg. 190-192). 41.It is clear from PW14’s evidence all along she was aware of the requirement of the CSR that if an applicant had a financial interest in the property he was leasing, he would not be entitled to PTA. In my judgment, I see no reason why PW14 would approve an application for PTA if she knew or believed the applicant had a financial interest in the property he was leasing. 42.PW14 was cross-examined about the amended CSR which came into effect in March 1989 which concerned “accommodation owned by a trust of which the officer and/or a relative of the officer is or are a beneficiary.” 43.It is true that before spring 1989, PW14 and her colleagues would not enquire about whether there was a trust. It does not follow that, before spring March 1989, an applicant who applied for PTA in respect of an accommodation owned by a trust of which the officer was a beneficiary did not have a financial interest in that property. The evidence of PW14 is not that before spring 1989, even if she and her colleagues knew or believed that an applicant for PTA who rented a property owned by a trust of which he was a beneficiary had a financial interest in that property, PW14 and her colleagues would still process and approve the PTA application knowing the officer had a financial interest in the property. 44.It is clear from PW14’s evidence that she did not know why the rule was amended. If before spring 1989, PW14 and her colleagues did not realise or appreciate that an applicant could have a financial interest in the accommodation owned by a trust of which he was a beneficiary, it is only natural that PW14 would not care about the existence or otherwise of a trust. 45.PW14 was adamant that in respect of the PTA applications made by Tsang, she would not approve any of them if she had known that the declaration about whether the applicant or his wife were the owners of the flat to be rented or had any financial interest in the flat to be rented was false. 46.In my judgment, the changes to the CSR, ie the specific references to the accommodation owned by a company or a trust do not alter the important general requirement that an applicant for PTA should not have a financial interest in the property he leased. 47.PW2 and PW3 - The evidence of PW2 and PW3 is not in dispute. It shows that Mak and Tsang had been classmates together when they took the Master degree course in the Hong Kong University in 1982, ie before the purchase of Flat 21E and Flat 22E in 1985. There were social contacts between the classmates, including Mak and Tsang. 48.PW4 – Mr. Dennis LEUNG impressed me as an honest and credible witness. He is an independent witness. He resides in Canada and has no interest to serve in this case. Mr. LEUNG’s ability to recall details of events that took place over 20 years ago is remarkable but I am convinced that he was telling the truth when he recounted these details. However, nothing important turned on details like the ladies clothes in the closet and who it was that showed him the Flat 22E. 49.I accept Mr. LEUNG’s evidence that he paid his rent to Tsang in 1991 and 1992 by cheques. In fact, at the time of Flat 22E’s sale in 1992, Mr. LEUNG was still paying his rents to Tsang. If there was a swap of properties in 1990, one would expect Mr. LEUNG be informed that Mak and Wong had become the new owners of Flat 22E and henceforth Mr. LEUNG should pay his rents to Mak, not Tsang. With a swap of properties in 1990 and with the sale of Flat 21E and the retention of the sale proceeds by Tsang, one can see no reason why Tsang, not Mak, should continue to receive rent from Mr. LEUNG for Flat 22E. 50.The fact that Tsang continued to receive rent from Mr. LEUNG after 1990 is wholly incompatible with Mak’s and Tsang’s claim that they had exchanged the properties in 1990. 51.I agree with the Prosecution submission that it is perfectly possible that Tsang had been accounting to Mak for the rent received from Mr. LEUNG albeit there is no banking evidence available after the long lapse. Such arrangement is compatible with the Prosecution’s case that all along Mak and Tsang did not want others to know about their true arrangements. 52.PW5 - TSANG Wai-wah’s evidence shows that Tsang had been controlling behind the scene. Firstly, TSANG Wai-wah did not negotiate the rental for Flat 21E with the landlord, Wong. Secondly, the tenancy agreement was handled over to her by Tsang. Thirdly, for no good reason, her lease did not contain a break clause, yet she was able to break her lease on 19 August 1989 and she did not have to talk to the landlord. All these show that it was Tsang who was arranging things for her in relation to her leasing of Flat 21E. 53.Tsang’s parents acquired the property at 27 Maidstone Road on 19th March 1984. Before TSANG Wai-wah got married in 1987, she resided at the Maidstone Road address with her parents. Before Tsang left Hong Kong for his study leave, an application was made to the PTA Unit that Tsang be allowed to retain his PTA as his parents “who have both retired and are dependent on him to support their living and are now residing with him.” (pg. 154) No doubt it must be Tsang who provided the aforesaid grounds in support of the application to retain his PTA. 54.It is of significance that PW5 testified when she moved into Flat 21E, the flat was empty. It contradicts the claim that Tsang’s parents were residing with Tsang at Flat 21E. 55.From the evidence, I have no difficulty in inferring that Tsang’s parents were not residing at Flat 22E with Tsang. Tsang only used his parents as a pretext to support his application to retain his PTA payments during his study leave. It was after Tsang had failed in his application that he arranged PW5, his younger sister to lease and live in Flat 21E. By doing so, Tsang could make sure that he and his family could continue to live and reside at Flat 21E after the study leave. As a matter of fact, PW5 did break her lease from 19th August 1989, the very day Pau and the children returned to Hong Kong from the United Kingdom. 56.Tsang’s attempt to retain his PTA by claiming that his parents were residing with him when they were not, the lease of Flat 21E to his younger sister, PW5, during Tsang’s study leave, the arrangements made by Tsang, the absence of a break clause, the breaking of the lease by PW5 and reoccupation of Flat 21E all indicate that Tsang had very strong control in the affairs of Flat 21E. The lease of Flat 21E to PW5 is also consistent with the Prosecution case that with PW5’s PTA entitlements, Tsang could use PW5’s rentals to pay for his mortgage while he was away on study leave. 57.PW6 – Mr. LAI joined LOC as an articled clerk in 1989. He is still with the firm. He handled the transaction of Flat 21E in 1990. With the aid of the file of LOC that relates to the transaction, PW6 is able to testify the file was opened on 27th November 1990. Flat 21E was sold at the price of $2.49 million with PW9, Ms. HAI Chui-kuen, as the purchaser and Mak and Wong as the vendors. Tsang sold the property under PA/1. PA/1 was executed by Mak and Wong in PW6’s presence at LOC on 1st December 1990. The balance of the sale proceeds were paid to Tsang after paying off the mortgage and settling legal costs. 58.On 8th December 1990, Tsang and Pau executed PA/2, authorising Mak and Wong to deal with matters relating to the sale of Flat 22E. 59.On 11th May 1992, Tsang and Pau executed PA/3. PA/3 was in identical terms with PA/2. I accept PW6’s evidence that LOC would advise its clients to renew a power of attorney after one year of the power of attorney and that explains why PA/3 came into existence. 60.On 13th May 1990, Mak and Wong signed an agreement to sell Flat 22E to Brillex Development for 4.8 million. Brillex then sold Flat 22E to HO Kwok-wing under a confirmor sale. I accept PW6’s evidence that the balance of the sale proceeds was paid to Mak and Wong after paying off Wayfoong for the mortgage loan. 61.I accept PW6’s evidence that due to the long lapse of time, he could not recall why Flat 21E and Flat 22E were sold under PA/1 and PA/3 respectively. 62.I accept PW6’s evidence that a copy of PA/2 was kept on the transaction file for Flat 21E as PA/2 and the sale agreement for Flat 21E were both signed on 8th December 1990. 63.PW6 was taken through the contents of P197. P197 is a fax document extracted from the file of Flat 21E. The original at page 2964 is unreadable and the contents have been enhanced by Government Chemist and there is a typed version for easy reading (P276 @ pg. 2922-2951). I accept PW6’s evidence that he prepared PA/1 and PA/2 according to the written instructions stated in the fax. 64.Although PW6 agrees with Mr. CHENG that the fax document “was probably addressed to me,” it is clear from the enhanced copy at page 2956 that the document was addressed to Mr. Andus LAI. 65.PW6 also gave clear evidence that he wrote the words “PA” on top of the words “Authorization Document.” The underlining of the words “Authorization Documents” is consistent with PW6’s practice to underline things that he had to prepare. In fact, PA/1 and PA/2 were executed on 1st and 8th December 1990 respectively. I have no doubt that the fax message was addressed to PW6. 66.It is also clear from PW6’s evidence that when he told the ICAC he could not recall “whether it was faxed to him by Tsang or Mak or other people,” the original fax document was unreadable, in PW6’s words, “there’s no colour at all in the document.” 67.It is clear from the evidence of PW6 that he had not prepared any formal or informal trust document for Mak and Tsang. He gave cogent reasons why he had not done so. It was PW6’s practice to underline on documents things that he had to prepare, for example, the words “authorization document’ at page 1274. The words “Declaration of Trust” in the fax instructions are not underlined. It was PW6’s practice to keep a copy of the documents that he prepared in conveyancing transactions on his file. 68.It is quite clear that there is no declaration of trust in the LOC file of Flat 21E. It is true that PW6 was asked to prepare a declaration of trust for Flat 22E, not Flat 21E, but when PW6 handled the matters in 1990, the file of Flat 22E had not yet been created, if PW6 had prepared a declaration of trust in 1990, one would expect a copy of it be included in the file of Flat 21E. 69.More importantly, given the fact that there were outstanding mortgage loans for Flat 21E and Flat 22E, PW6 would advise his client that a formal trust would entail lots of problems, for example, obtaining the consent of the mortgagee. If a client insisted on the preparation of a formal trust, PW6 would refuse. Although there are no attendance notes to assist PW6’s memory, the fact that there was a refund of $1,000 by LOC reinforces PW6’s view that he had not prepared a formal trust for Flat 22E and hence there was a refund of legal costs. 70.I do not think PW6 would, as suggested by the defence, help Tsang to prepare an informal written trust, one that was not witnessed by a lawyer, not registered at the Land Registry, no payment of stamp duty and the mortgagee would not be informed. PW6 gave very good reasons why he would not prepare an informal trust for Tsang, he would be in breach of the professional conduct. Firstly, a document prepared by LOC must be witnessed by someone of the firm. Secondly, it might amount to a fraud against the bank. Thirdly, non-payment of stamp duty would cause problem. 71.I accept PW6’s evidence that given that there were outstanding mortgage loans for Flat 21E and Flat 22E, an exchange of properties could not be done by a deed of exchange. 72.PW7 – Mr. HO Kwok-wing is an elderly gentleman who gave his evidence in a straightforward manner. He gave clear evidence that the file for Flat 22E which had a closed file number of C7903 was destroyed on 16th June 2011. As for the file for Flat 21E which bears the closed file number C14346, PW7 retrieved the file and returned the same to LOC Central office on 11th July 2012. P304 is a record made and kept by PW7. It shows that on 11th July 2012, PW7 returned the file C14346 to LOC’s Central office. PW7 says it was PW8 who asked for the file. 73.PW7 had kept a record of the files destroyed in P303. PW7 explained why P303 starts at page 150. P303 is not a formal record and PW7 used it to record the lots of files for the wastepaper company engaged to destroy the files. Furthermore, PW7 had to report to the office that files with certain serial numbers had already been destroyed. PW7 just picked a waste book in the warehouse and used it to make his record. 74.One can see that P303 was in fact an ordinary petty cash book that one can buy from stationary shops. As PW7 said, all these books are always paginated, if PW7 just picked a waste book in the warehouse, it is only natural that PW7’s record did not start from page 1 of the petty cash book. In my judgment, PW7’s evidence is credible and reliable. He has no motive to fabricate P303, P304 and their contents. 75.In my judgment, what is important is whether the file of Flat 22E had been destroyed in 2011, it does not matter whether it was PW7 who shredded the file of Flat 22E or it was handed over to a wastepaper company for destruction. 76.I accept the evidence of PW7 that he was instructed that he could destroy files with closing numbers between 15 to 20 years old. When there was not enough space, PW7 would inform PW8, the latter would arrange for a wastepaper company to send people to the depot to collect the files and it was PW7’s responsibilities to have the documents arranged beforehand. 77.I accept PW8 evidence that she had a discussion with PW6 after they learned from the newspaper that LOC was involved in the transactions of Flat 21E and Flat 22E. I accept also she called PW7 and asked for the files of Flat 21E and Flat 22E. She was only able to get the file of Flat 21E as the file for Flat 22E had been destroyed. The evidence of PW8 on this aspect is consistent with the general chronology of events in July 2012 and the evidence of PW7. It also explains why PW7 wrote down “JW/LA” as the requesting party who asked for the file of Flat 21E in P304. 78.I accept also PW8’s evidence why the file of Flat 21E, which was created in 1990, was closed in 1997 whereas the file of Flat 22E, which was created in 1992, was closed in 1993. A file could not be closed until after it had been retrieved by PW8’s colleagues for closing. 79.PW8 was criticised for affixing the “Cancelled” stamp on opening register and the closed register after she was interviewed by the ICAC on 12th July 2012. 80.I accept PW8’s evidence that when she asked her colleagues to affix the “Cancelled” stamp on the two books, she did not realise the two books would be required by the ICAC on 25th April 2013. It is clear from the evidence that PW8 did not just ask for a “Cancelled” stamp be affixed to the entry related to Flat 22E but to a number of files as well. More importantly, when PW8 gave her second statement on 25th April 2013, PW8 told the ICAC she put back those “Cancelled” stamps after 12th July 2012. It demonstrates that she had no intention to cover up anything by applying the “Cancelled” chop after 12th July 2012. 81.It is clear from PW8’s evidence that although the Law Society requirement was that files that had been closed for over 15 years could be destroyed, it had been the policy of LOC that the firm would destroy files with closed numbers of 20 years old. Due to shortage of space, PW10, Mr. CHUNG, instructed that files with closed numbers between 15 years and 20 years could be destroyed. The compromise made by Mr. CHUNG explains why the file related to Flat 22E, which was closed in 1993, was destroyed in 2011. It also explains why PW8 told the ICAC in her statement that “when Ho finds a file that had been closed for more than 20 years, Ho will inform the law firm that the files need to be destroyed.” It also explains why PW7, Mr. HO, told the ICAC in his statement “When there is not enough space for storage and the documents of closing numbers are dated over 20 years ago, I will pull out the envelopes concerned and inform Miss Janet WANG of the law firm” yet in court PW7 testified files between 15 and 20 years old would be destroyed. 82.PW10 – Mr. Calvin CHUNG gave short evidence that the letters “LA” in the conveyancing file of Flat 21E indicates that the file had been passed to PW6 for handling. PW10 had not done anything on the file of Flat 21E. Mr. CHUNG said he hardly dealt with any conveyancing work in 1990, he did mostly commercial litigation. I have no reason not to believe his evidence. 83.PW12 – Mr. ONG Tung-sing, a partner of LOC gave evidence that he took PW6 as his articled clerk in 1989. In respect of the sale of Flat 21E, PW11 only verified the signature of PW6 in PA/1 at page 1135. He had no personal knowledge of the persons involved in PA/1, ie Mak, Wong and Tsang at page 1132. He had no recollection of preparing a declaration of trust by Tsang and Pau in favour of Mak and Wong. It is quite clear to me that PW12 was not involved in LOC’s dealings with Mak and Tsang. The 65B Statement of Mr. LAM Yu-hung Andy 84.I considered the statement of Mr. LAM Yu-hung Andy (P307A). Mr. LAM was a solicitor with LOC between mid-1990 and early 1992. He now practises as a barrister. I attach full weight to Mr. LAM’s statement. I accept Mr. LAM did not take part in the preparation of PA/1 and PA/2 and he did not take part in handling the conveyancing transaction of Flat 21E in 1990. I accept Mr. LAM did not know Mak, Wong and Tsang. 85.PW9 - PW9, Madam HAI gave simple and straightforward evidence that in 1990 she and her husband were looking for a flat for their own occupation. She decided on Flat 21E in 1990 because it could be sold with vacant possession. I have no reason not to accept her evidence. 86.PW11 – Mr. Raymond CHAN, the property agent, was unable to recall details of the transaction in relation to the sale of Flat 21E in 1990. The only matter he could testify with some certainty is that since PA/1 only came into existence on 1st December 1990 and given that the memorandum of agreement was signed by the purchaser (PW9) on 27th November 1990, the initial deposit was not passed on to the vendor until 1st December 1990 or after. I see no reason why PW11 would lie on this matter as PW11 said he would be concerned that the initial deposit should not be left with a person who might not have the authority to receive it. 87.PW15 – Mr. HONG Chi-man Lawrence, the officer-in-charge in this case, was tendered for cross-examination at the request of Mr. CHENG. PW15 agreed that in the investigation of this case, PW15 was able to obtain documents suggesting that Tsang had claimed PTA back in 1982. PW15 also attempted to obtain bank records but he could not manage to obtain bank records of more than seven years. 88.Mr. CHENG elicited from PW15 that the ICAC received two formal complaints by two persons who perhaps had a political axe to grind. Mr. CHENG is right that I should not concern myself with the political aspect of this case. 89.PW16 - I accept PW16’s evidence that at 9.45 am on 7th July 2012, she received an email from Tsang which contains an initial draft for PW16’s comment (pg. 1735-1737). Prior to that, Mak had spoken to PW16, telling PW16 that Tsang would draft a reply in response to the media’s enquiries. At 10.11 am on the same day, PW16 received another email from Tsang, copy was also sent to Mak. In that email Tsang added another paragraph to the bottom (pg. 1738-1741). 90.In both drafts, Tsang stated:
91.One can see that nowhere was it mentioned in both drafts that there was an exchange or swap of properties between Mak and Tsang. The arrangement stated in both drafts sounded more like an advancement of money by Mak to Tsang by selling Flat 21E and repayment by Tsang to Mak by selling Flat 22E at a later time. 92.If Tsang had swapped his flat with Mak, it is difficult to see why he failed to mention the swap in both drafts at a time when there was press coverage and media’s enquiries. Section 65B Statements 93.I have considered the contents of all the statements produced under section 65B of the Criminal Procedure Ordinance. I attach full weight to the matters deposed of in the statements produced. The Effect of the Assignments and Mortgages on Financial Interest 94.I do not agree with Mr. CHENG that once the assignments and mortgages for Flat 21E and 22E had been executed, Mak could not in law have any financial interest in Flat 22E and Tsang could not in law have any financial interest in Flat 21E. 95.In the case HAU Kam Chor, the Appeal Committee of the Court of Final Appeal agreed with the conclusion of the Court of Appeal that the term “financial interest” should be given its ordinary meaning. It is not practicable to have an exhaustive definition of the term “financial interest.” In the present case, I have considered the dictionary meaning of the words “financial” and “interest.” The word “financial” according to the Shorter Oxford English Dictionary means “Of or pertaining to revenue or money matters.” The word “interest” means:
96.I have also considered the definition of the word “property” in section 3 of Cap 1 which provides: “Property includes: (a) money, goods, choses in action and land; and
97.I appreciate that the CSR is not an ordinance and the danger in adopting the definition of the word “property” in Cap 1 in construing the CSR. In my judgment, however, there is good reason that the meaning of “financial interest” in the CSR should follow the spirit of definition of “property” in Cap 1. It follows that the term “financial interest” in CSR should include present and future, vested or contingent interest. 98.In my judgment, notwithstanding the execution of the assignment and the equitable mortgage, Mak could in law have a financial interest in Flat 22E if Tsang and Pau were holding Flat 22E on trust for Mak and Wong. 99.Similarly, notwithstanding the execution of the assignment and the equitable mortgage, Tsang could in law have a financial interest in Flat 21E if Mak and Wong were holding Flat 21E on trust for Tsang and Pau. 100.The important question is: whether the Prosecution can prove to the required standard that during the period of time that Mak and Tsang had applied for and obtained PTA in respect of Flat 22E and 21E respectively:
101.If Mak and Wong were holding Flat 21E on trust for Tsang and Pau, Tsang and Pau would have an equitable interest in Flat 21E, although such interest would be subject to the interest of the mortgagee bank. Likewise if there was a trust in favour of Mak and Wong, their equitable interest would be subject to the interest of the mortgagee bank. The Evidence of Mr. Joseph WONG 102.Mr. WONG impressed me as someone who is well versed in the scheme of PTA and its “structural deficiencies.” It was Mr. WONG who suggested changes should be made to PTA and finally a new scheme, ie the Home Financing Scheme was introduced in year 2000. 103.I accept Mr. WONG’s evidence that before the Home Financing Scheme was introduced, cross-leasing between civil servants did exist and in Mr. WONG’s words, the practice “might be very common.” Mr. WONG said as the Civil Service Bureau and the then Civil Service Branch had not conducted any survey on cross-leasing, Mr. WONG could not give a figure to illustrate how common the practice of cross-leasing was. I doubt very much had a survey been conducted, the government could get any meaningful information from those who practised cross-leasing. As Mr. WONG said, cross-leasing was not done openly. 104.While I accept Mr. WONG’s evidence that civil servants did not discuss their cross-leasing openly, I find it difficult to accept his evidence that civil servants did not do so openly because “usually the character of civil servants is one of low profile and a civil servant does not like to speak about his personal matters openly.” While Mr. WONG had been a civil servant for many years, there is no basis for this observation. 105.While Mr. WONG said cross-leasing should not be seen as a practice to get around the restrictions as it sounds like it is something improper, when he was asked whether he would recommend cross-leasing to some junior civil servants who were going to be entitled to PTA, Mr. WONG answered that no one had ever asked him such a question. Had he been asked, he would not give any advice. He also agreed that he had never come across a case where a civil servant declared to the Civil Service Branch that he was practising cross-leasing when he put in his PTA application. 106.I accept Mr. WONG’s evidence that the government’s standard towards compliance with the regulations and conduct of civil servants is much higher today than it was in 1985. I accept also Mr. WONG’s evidence that although CSR 852(5) states that “Failure to comply with this requirement may render him liable to disciplinary proceedings,” the government had in a number of cases gone ahead, sought legal advice and commenced prosecutions for PTA applications that took place many years ago. 107.In my judgment, the abovementioned section in CSR does not have the effect of ruling out the possibility of criminal prosecution where a fraud was practised on the government. The Cautioned Interviews of Mak and Tsang 108.In assessing the explanations given by Mak and Tsang in their respective cautioned interviews, I have borne in mind Mak and Tsang were asked to remember events that took place between 1985 and 1992 and some documents, like bank records, could no longer be found. I am aware that Mak and Tsang each has a positive good character. 109.For the reasons to be given in the later part of this judgment, I reject the explanations given by Mak that:
110.For the reasons to be given in the later part of this judgment, I reject the explanations given by Tsang that:
111.For the reasons to be given in the later part of the judgment, the aforesaid explanations given by Mak and Tsang in their respective cautioned interviews are inherently improbable and hence not credible. They are also unreliable. In my judgment, what Mak and Tsang said is not the truth and cannot be the truth. Whether Mak and Tsang had exchanged Flat 21E and Flat 22E? 112.It is Mak and Tsang’s case that they had swapped the flats in 1990. After the swapping, Tsang became the owner of Flat 21E. He sold it in 1990 under PA/1 and kept the sale proceeds. As for Mak, he became the owner of Flat 22E, he sold Flat 22E in 1992 under PA/3 and kept the proceeds of the sale. 113.Buying and selling of a flat is an important investment decision. One would rarely exchange one’s own flat with another person, albeit that person is a friend. In the present case, the alleged exchange of Flat 21E for 22E is inconsistent with the following facts:
114.On the evidence before me, I am sure there was no swap of flats between Mak and Tsang in 1990. Who were the Owners of Flat 21E and Flat 22E? 115.With the assignment on 18th September 1986, Flat 21E was assigned to Mak and Wong and they became the legal owners of Flat 21E until its sale in 1990 (pg. 551-565). The equitable mortgage that Mak and Wong entered into with Wayfoong conferred upon Wayfoong an equitable interest in Flat 21E (pg. 506-550). 116.With the assignment on 20th September 1986, Flat 22E was assigned to Tsang and Pau and they became the legal owners of Flat 22E until its sale in 1992 (pg. 694-708). The equitable mortgage that Tsang and Pau entered into with Wayfoong conferred upon Wayfoong an equitable interest in Flat 22E (pg. 649-693). Did Mak have any financial interest in Flat 22E and Tsang in Flat 21E when they applied for and obtained PTA? 117.If the Prosecution can prove that Mak had a beneficial interest in Flat 22E and Tsang in Flat 21E when they applied for and obtained PTA, then Mak and Tsang had a financial interest in the respective flats. 118.If the Prosecution can prove that Tsang and Pau were holding Flat 22E on trust for Mak or Mak and Wong, then Mak would have a financial interest in Flat 22E, hence he would have a financial interest in the property. 119.Likewise, if the Prosecution can prove that Mak and Wong were holding Flat 21E on trust for Tsang or Tsang and Pau, then Tsang would have a beneficial interest in Flat 21E, hence he would have a financial interest in the property. 120.If the Prosecution can prove that it was Mak or Mak and Wong who provided the purchase money for Flat 22E, then the only irresistible inference that could be drawn is that Tsang and Pau were holding Flat 22E on trust for Mak or Mak and Wong. 121.If the Prosecution can prove that it was Tsang or Tsang and Pau who provided the purchase money for Flat 21E, then the only irresistible inference that could be drawn is that Mak and Wong were holding Flat 21E on trust for Tsang or Tsang and Pau. 122.There is no direct evidence that it was Mak or Mak and Wong who provided the purchase money for Flat 22E. 123.There is no direct evidence that it was Tsang or Tsang and Pau who provided the purchase money for Flat 21E. 124.But it is clear from the evidence that Tsang kept the net proceeds of sale after he sold Flat 21E in 1990. It is also clear that Mak and Wong kept the net proceeds of sale after Flat 22E was sold in 1992. 125.I find that there was no swap of flats between Mak and Tsang in 1990 or at any other time. It was an excuse that was concocted by Mak and Tsang after the initial draft statement sent to PW16 on 7th July 2012. 126.I am aware that Mak and Tsang’s relationship dated back to 1982 or even earlier, when both were at the Hong Kong University, but there was no reason why Mak and Wong would allow Tsang to sell Flat 21E and keep the proceeds; there was no reason why Tsang and Pau would allow Mak and Wong to sell Flat 22E and keep the proceeds. 127.Added to the retention of the sale proceeds by Tsang in respect of the sale of Flat 21E and Mak and Wong of Flat 22E, there is clear evidence that the sale and purchase agreements and the equitable mortgages for both flats were signed by the two couples on the same day, ie 8th June 1985. The two couples bought the two flats in the same block on the same day, which were very similar in size, view and price. In 1986, Mak and Tsang leased the flats to each other; they applied for and obtained PTA from the government. 128.In the case of Tsang, he retained a very high degree of control over Flat 21E. He attempted to continue his PTA claim during his study leave in the UK. When he failed in his application, he arranged to have her younger sister, PW5, to step in. When Tsang’s family returned to Hong Kong in August 1990, PW5 was able to terminate the tenancy prematurely without a break clause so that Tsang’s family could resume their occupation of Flat 21E. 129.On the other hand, Mak and Wong were acquiescing to the breaking of the lease by Tsang without a break clause, the stepping in by PW5 and her breaking of the lease without a break clause. I agree with the Prosecution’s submissions that “If Mak was really the owner of Flat 21E, then there was no need for a break clause at all.” “It is consistent with Tsang knowing that he could get out of his purported lease anytime as he was really living in his own flat.” (Para. 12 and 13 of the Prosecution’s Closing) 130.The only compelling inference I can draw from the evidence is that it was Mak or Mak and Wong who provided the purchase money for Flat 22E in 1985/1986. It was Tsang or Tsang and Pau who provided for the purchase money for Flat 21E in 1985/1986. Mak and Wong had no reason to make a gift to Tsang and Pau by providing the purchase money for Flat 22E, likewise, Tsang and Pau had no reason to make a gift to Mak and Wong by providing the purchase money for Flat 21E. I am sure the purchase moneys provided by Mak or Mak and Wong for Flat 22E and Tsang or Tsang and Pau were not intended to be advancement of moneys or outright transfers. 131.For the payments of the mortgage loans, there is no bank document available to show who had been making the mortgage payments for Flat 21E and Flat 22E respectively. There was only a difference of $2,200 between the purchase price of Flat 21E and 22E. Both Mak and Tsang took mortgages for 85 per cent of the purchase price of their respective flats. For the first lease, they purported to lease to each other for the same rental of $8,000. In the renewed leases in 1988, Mak’s rental for Flat 22E was $11,000 and Tsang’s rental for Flat 21E was 10,500. I agree with the Prosecution’s closing that neither had paid rent and the sums were just set off against each other. Before the sale of Flat 21E in 1990, it was very easy for Mak and Tsang to sort out between themselves the mortgage payments for the respective flats. (Para. 10 of the Prosecution’s Closing) 132.I further infer from the evidence that since the purchase of Flat 22E, Tsang and Pau were holding the flat on trust for Mak and Wong until it was sold by Mak and Wong under PA/3 in 1992. I infer from the evidence that since the purchase of Flat 21E, Mak and Wong were holding the flat on trust for Tsang and Pau until it was sold by Tsang under PA/1 in 1990. 133.I thus draw the only compelling and irresistible inference that Mak and Wong had a financial interest in Flat 22E when Mak applied for and received PTA in respect of Flat 22E; Tsang and Pau had a financial interest in Flat 21E when Tsang applied for and received PTA in respect of Flat 21E. Did Mak know that he had financial interest in Flat 22E when he applied for and obtained PTA? 134.I have borne in mind what the Court of Appeal said in HKSAR v Sin Law Yuk Lin Agnes & 2 Others, CACC 17 of 2001, Stock JA (as he then was) said at paragraph 129 of the judgment:
135.Given my findings that it was Mak or Mak and Wong who had provided the purchase money for the purchase of Flat 22E and Mak had set off the mortgage payments with Tsang, and given my findings that Tsang and Pau were holding Flat 22E for Mak or Mak and Wong, I find that Mak knew he had a financial interest in Flat 22E when he applied for and obtained PTA in respect of Flat 22E. Did Tsang know that he had financial interest in Flat 21E when he applied for and obtained PTA? 136.Given my findings that it was Tsang or Tsang and Pau who had provided the purchase money for the purchase of Flat 21E and Tsang had set off the mortgage payments with Mak; and given my findings that Mak and Wong were holding Flat 21E for Tsang and Pau; I find that Tsang knew he had a financial interest in Flat 21E when he applied for and obtained PTA in respect of Flat 21E. 137.In my judgment, Mak and Tsang might not be able to understand or they might not be aware of the concept of equitable interest under a trust as opposed to the legal interest under the legal assignments, but they both knew that they had a monetary stake in Flat 21E and Flat 22E respectively. By virtue of their arrangements, when Mak and Tsang applied for and obtained PTA, Mak and Tsang could not have genuinely believed that as a matter of law or right, they had no financial interest in the flats they leased, ie Flat 22E for Mak and Flat 21E for Tsang. False Declarations/Statements by Mak 138.Based on the above, I further find that on 29th August 1986, when Mak made the declaration in his application for PTA and on 9th September 1986, when Mak submitted the application, he knew the declaration that he and his spouse did not have a financial interest in the leased property was false. When Mak submitted a memorandum for renewal of his PTA in August 1988, he made a false statement that (a) he had genuinely renewed the lease of Flat 22E from Pau and (b) concealing and not disclosing that neither he nor his wife had a financial interest in Flat 22E. 139.Obviously in submitting the application and the memorandum which Mak knew contained a false declaration/statement, Mak intended to mislead the Hong Kong Government into thinking that (a) the leases were genuine and (b) Mak and Wong had no financial interest in Flat 22E and Mak was eligible for PTA. False Declarations/Statement by Tsang 140.Based of the above, I find that when Tsang made his PTA application in respect of Flat 21E on 2nd August 1986, 19th May 1988 and 3rd October 1990, he knew each application contained a false statement that he and his wife did not have a financial interest in the leased property, ie Flat 21E. 141.Obviously, in submitting the applications which Tsang knew contained a false statement about the financial interest that Tsang and Pau had in Flat 21E, Tsang intended to mislead the Hong Kong Government into thinking that (a) the leases were genuine and (b) neither Tsang nor Pau had a financial interest in Flat 21E and Tsang was eligible for PTA. Genuine or Bogus Leases 142.On the evidence before me, clearly what Mak and Tsang wanted to achieve was to get the government to pay for their investments, Flat 22E for Mak and Flat 21E for Tsang. 143.The flat that Mak leased was one that he had provided purchase money. The purpose of the scheme was to get the government to pay for the mortgage payments for Flat 22E. The leases between Mak and Pau were not genuine leases, they were bogus. 144.The flat that Tsang leased was one that he had provided purchase money. The purpose of the scheme was to get the government to pay for the mortgage payments for Flat 21E. The leases between Tsang and Wong were not genuine leases, they were bogus. Concealment and Non-disclosure 145.Given the provisions in CSR 852(5), the agent/principal relationship between the defendants and the Hong Kong Government and the way that the PTA Unit processed the PTA applications, I find that Mak and Tsang had a duty to disclose to the PTA Unit their respective financial interest in Flat 22E and 21E. 146.During the period between 8th June 1985 and 31st December 1990, both Mak and Tsang had failed to disclose in their PTA applications that they and their wives had a financial interest in Flat 22E and 21E respectively. 147.In all the leases of Flat 21E, by stating that the landlord was Wong, Mak and Tsang were concealing the true position that Mak and Pau had a financial interest in the flat. In all the leases of Flat 22E, by stating that the landlord was Pau, Mak and Tsang were concealing the true position that Mak and Wong had a financial interest in the flat. Agent/Principal Relationship 148.I am satisfied on the evidence before me that Mak and Tsang were agents of the Hong Kong Government at the material time. The Importance of an Application or a Memorandum for Renewal in a PTA Application 149.It is clear from the evidence of PW1, PW13 and PW14 that the PTA Unit would go through an application form or memorandum for renewal when they processed a PTA application or renewal application. I have no difficulties in concluding that the application forms and memorandum for renewal referred to in Charge 2 to 6 were documents which the Hong Kong Government, as the principal of Mak and Tsang, was interested. Intention to Mislead the Government 150.Given my findings that both Mak and Wong had a financial interest in Flat 22E and Mak knew that he had such interest, I find that Mak knew the false declaration/statement contained in the application or memorandum for renewal was intended to mislead the government into thinking that he and his wife did not have a financial interest in Flat 22E and he was eligible for PTA. 151.In the light of my findings that Tsang and Pau had a financial interest in Flat 21E and Tsang knew that he had such interest, I find that Tsang knew the false declarations/statements in his applications were intended to mislead the government into thinking that he and his wife did not have a financial interest in Flat 21E and he was eligible for PTA. 152.It is true that prior to 13th March 1989, ie before the amended CSR came into force, PW14 (Ms. LUK Ming) would not concern herself with the existence or otherwise of a trust. It is quite clear that all along PW14 was concerned whether an applicant for PTA had a financial interest in the leased property. She would not concern herself with the existence or otherwise of a trust before March 1989 only because she did not appreciate an applicant who leased a property owned by a trust of which he was a beneficiary had a financial interest in the leased property. Had PW14 known that Flat 21E and 22E were each owned under a trust in favour of Tsang and Mak respectively and therefore Mak and Tsang and their wives had a financial interest in the flats they leased, I do not think she would approve the PTA applications by Mak and Tsang. False in any Material Particular? 153.It is clearly stated in the relevant CSR that an officer would not be eligible for PTA if he and his spouse had a financial interest in the property he leased. In my judgment, any declaration/statement to the effect that Mak and Wong did not have a financial interest in Flat 22E or that Tsang and Pau did not have a financial interest in Flat 21E was false in a material particular. Use of Documents 154.It is clear from the evidence that Mak had submitted the application for PTA on 9th September 1986. He had also submitted a memorandum for renewal on 26th August 1988. 155.It is an admitted fact that Tsang submitted three applications for PTA in respect of Flat 21E on 28th August 1986, May/June 1988 and in or around October 1990 respectively. Can an agreement between Mak and Tsang be inferred? 156.I reject the contention that Mak made in his record of interview that he met Tsang by chance when they queued up to buy flats in Block 9 in 1985, that without any prior agreement, Mak and Tsang both picked Flat E of Block 9, one above the other and both flats were of very similar size and view. I find Mak’s account too good to be true. 157.Subsequent to the purchase, Mak and Tsang entered into leases and applied for PTA. In the lease of Flat 21E, only Wong appeared as the landlord and Mak was not mentioned at all. In the lease of Flat 22E, only Pau appeared as the landlord and Tsang was not mentioned. 158.In both leases, misleading addresses were provided. The landlord’s address in the lease of Flat 22E, ie the Maidstone Road address, was obviously not the address of Tsang and Pau when Mak submitted an application for PTA dated 29th August 1986 on 9th September 1986. Tsang admitted that he and Pau began to reside at Flat 21E since 1st August 1986. Before moving into Flat 21E, Tsang and Pau were residing at 305 Prince Edward Road. I agree with the Prosecution’s analysis that the Maidstone Road address could only be supplied to Mak by Tsang. 159.It is also clear that on 28th August 1987, when Tsang submitted his PTA application, the landlord’s address in the lease of Flat 21E, ie Flat H, 23rd Floor, Everwin building, King’s Road, was not the address of Mak and Wong. Mak and Wong were residing at 25th Floor, Block 6, City Garden at that time. The address of Everwin building could only be supplied to Tsang by Mak. 160.Mr. CHENG submits that there was nothing illegal in the use of the Maidstone Road address. In my judgment, the relevant issue is whether the Maidstone Road address was used dishonestly by Mak and Tsang, not whether there was anything illegal per se in the use of that address. 161.I agree with the Prosecution’s submission and I find Mak and Tsang both behaved in a very similar manner in the provision of the addresses of their alleged landlords. The provision of misleading addresses could not be a coincidence and it shows that Mak and Tsang were acting in pursuance to an agreement. 162.The conduct of Mak and Tsang between 1st June 1985, ie the day they signed the sale and purchase agreements for Flat 21E and 22E and 31st December 1990, ie the day that the tenancy agreement for Flat 21E was terminated, in particular the provisions of misleading addresses, the use of their wives as the landlords in the leases and the fact that both Mak and Tsang falsely stated in their PTA applications/memorandum for renewal that they and their wives did not have a financial interest in the property they leased, when considered together, point to the only compelling inference, ie Mak and Tsang had agreed to apply for and obtain PTA from the government by cross-holding and bogus cross-leasing between themselves Flat 21E and Flat 22E. Dishonesty 163.Since the decisions in Welham v DPP [1961] AC 103 and R v Scott [1975] AC 819, it has been settled that:
as summarised by Sir Anthony Mason NPJ in Mo Yuk Ping v HKSAR [2007] 10 HKCFAR 386, at page 405 of the judgment. 164.I apply the two-stage test in Ghosh to the facts in this case. I must first of all decide whether according to the ordinary standards of reasonable and honest people in 1985 what was done was dishonest. I must then decide whether Mak and Tsang in 1985 must have realised that what they were doing was by those standards dishonest. 165.I am aware that the scene of this case was set in the 1980s. I am aware of Mr. Joseph WONG’s evidence that the standard to be expected from civil servants are much higher today than it was in the 80s. I am aware that both Mak and Tsang each has a positive good character and an unblemished service record with the government. 166.Bearing all these in mind, there is no innocent reason for the use of Wong and Pau as the landlords, the omission of Mak and Tsang as the landlords and the use of misleading addresses. Mr. KWOK submits that these acts were consistent with bona fide cross-leasing and Mak and Tsang were doing no more than keeping the cross-leasing at a very low profile, even to the extent of making it difficult for others to find out (Para. E3 of D1’s Closing at pg. 14). While I accept the evidence of Mr. Joseph WONG that cross-leasing by civil servants has never been illegal and civil servants who cross-leased would not discuss it openly, I see no reason why Mak and Tsang should take positive steps to conceal their identities as co-owners and used only their wives as landlords in the leases. I see no reason why misleading addresses should be used as the addresses of the landlords. I agree with the Prosecution’s analysis that the addresses provided would not enable the PTA Unit to connect Wong to Mak, and Pau to Tsang if the PTA applications of Mak and Tsang were compared. 167.Applying the ordinary standards of reasonable and honest people in 1985 to 1990, I find the following conduct dishonest:
168.The means employed by Mak and Tsang were obviously dishonest. It is plainly not right to describe what they did as merely sharp practice. 169.In Mo Yuk Ping, Sir Anthony Mason NPJ pointed out at paragraph 48 of the judgment that:
170.Mak and Tsang were well-educated professionals. In my judgment, Mak and Tsang must have realised that the means they employed were dishonest by those standards. Claim of Right 171.As I have rejected the contention that there was a swap of Flat 21E and 22E in 1990 and in the light of my findings that Mak and Tsang each knew that the means they employed were dishonest, that Mak and Tsang knew that they had a financial interest in the flat each leased and hence they were not entitled to PTA, there is no credible evidence that Mak and Tsang had an honest belief that their scheme of cross-holding and bogus cross-leasing would have circumvented the prohibition in CSR 852(5) or that it had been properly implemented. 172.In my judgment, the scheme devised by Mak and Tsang was a composite one. I do not believe that either Mak or Tsang could have had honestly believed that the scheme as it was in implemented could have been a valid one such as to circumvent the provisions contained in CSR 852(5). Intent to Defraud 173.Viscount Dilhorne said in R v Scott (Ibid at pg. 839C):
“Contrary to public duty” is a special category. 174.The economic loss in the present case is the net value of PTA that Mak and Tsang received from the government for Flat 21E and Flat 22E, ie $209,792.33 for Mak and $363,608 for Tsang. 175.The “contrary to public duty” aspect concerned the processing and granting of PTA to Mak and Tsang by the officers at the PTA Unit, who acted on what Mak and Tsang stated in their applications or memorandum for renewal and believed that Mak and Tsang were entitled to PTA, when in fact they were not. Intent to Inflict Economic Loss on the Government 176.With respect to Mr. KWOK, I do not think the introduction of the Home Financing Scheme in year 2000 is relevant to the issue of whether Mak and Tsang had the intent to inflict economic loss on the government. When Mak and Tsang claimed and obtained PTA in respect of Flat 21E and Flat 22E in the 1980s, they could not have contemplated a new scheme would be introduced in year 2000 to replace the old PTA scheme to cure its structural deficiencies. 177.Mr. KWOK argues that Mak and Tsang could simply use cross-leasing to pay for their investments and they had no motive and no need to do it in the way suggested by the prosecution. Whilst it is true that Mak and Wong could still have obtained PTA to pay for the investments by cross-leasing between themselves, under a cross-leasing arrangement, Mak and Tsang and their families had to live in flats owned not by them. With a scheme of cross-holding and cross-leasing under bogus leases, Mak and Tsang could receive PTA while living in a flat that they had a beneficiary interest. Mak and Wong would be the beneficial owners of Flat 22E; Tsang and Pau would be the beneficial owners of Flat 21E. They could spend money in the flats they resided, decorated it in the way they liked, bearing in mind Flat 21E and 22E were new flats sold off the plan by the developer. Any money that Mak spent in improving Flat 22E was spent for his own flat. During Mak’s occupation of Flat 22E, Mak and his family could feel they were living at a place which was owned, not rented by them. The same can be said for Tsang in relation to Flat 21E. 178.Given my findings that Mak and Tsang knew that given the financial interest they had and their wives had in Flat 22E and Flat 21E respectively, both Mak and Tsang knew that they were not eligible for PTA when they applied and obtained PTA from the government. In my judgment, clearly, Mak and Tsang had the intent to inflict economic loss on the government. Intention to Deceive 179.The House of Lords in Welham v DPP [1961] AC 103 held that the expression “intent to defraud” has a wider meaning than “an intention to deceive.” In the present case, there is clear evidence that what Mak and Tsang stated in their PTA applications that they and their spouses did not have any financial interest in the respective flats was false. Mak and Tsang each knew at the time that what they represented as true was untrue. There is clear evidence that Mak and Tsang intended to deceive the government by deceit. Private/Public Duty 180.It is trite law that the common law of conspiracy to defraud does not extend to private duty situation. 181.Mr. KWOK submits that:
182.In my judgment, government officers like PW13 and PW14 were invested with powers, duties, responsibilities or discretions which they were obliged to exercise or discharge for the benefit of the general public, to use the words of Lord Millet NPJ in HKSAR v Wong Kin Kay FACC No. 3 of 2011. I am aware that the Court of Final Appeal in Wong Kin Kay was concerned with the offence of misconduct in public office, but I agree with Mr Marash that the duties of PW13 and PW14 involved use of public money and how PW13 and PW14 exercised or discharged their duties in processing PTA applications would affect the public interest. Positive Good Character of Mak and Tsang 183.I have reminded myself that Mak and Tsang are men of positive good character; hence, they are less likely to commit the offences under complaint. Conclusions 184.On Charge 1, I am satisfied beyond reasonable doubt that all the elements of the offence of “conspiracy to defraud” are proved against Mak and Tsang. They had conspired to defraud the Hong Kong Government in their PTA applications between 8th June 1985 and 31st December 1990 in the manner as particularised in Charge 1. 185.On Charge 2 and 3, I am satisfied beyond reasonable doubt that all the elements of the offence of “agent using document with intent to deceive his principal” are proved against Mak. 186.On Charges 4, 5 and 6, I am satisfied beyond reasonable doubt that all the elements of the offence of “agent using document with intent to deceive his principal” are proved against Tsang. 187.For the reasons given, I find the 1st defendant, Mr Mak Chai-kwong, and the 2nd defendant, Tsang King-man, guilty of Charge 1. 188.I find the 1st defendant guilty of Charge 2 and 3. 189.I find the 2nd defendant guilty of Charge 4, 5 and 6.
Please refer to CACC309/2013 for the relevant appeal(s) to the Court of Appeal. |
Cases cited in this judgment
Further hearings and rulings under DCCC 956/2012