HKSAR v. Chae Man Tock and Another
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CACC 255 of 2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 255 OF 2012 (ON APPEAL FROM DCCC 973 OF 2011) ____________ BETWEEN
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________________________ J U D G M E N T ________________________ Hon Lunn JA (giving the judgment of the court) : 1.The 1st and 2nd applicants, who are husband and wife and were at all material times, sought the leave of the court to appeal against their convictions after trial by District Court Judge Browne on 6 June 2012 of multiple charges of fraud and other charges arising out of their conduct in the business of Promo International Limited, a company incorporated in the United Kingdom in December 2003, and trading as Olympicpromo, referred to as ‘OIL-UK’ at the trial. 2.In 2003, OIL-UK set up and then operated an office in Shenzhen from which it sourced set up factories to manufacture promotional products for its customers in the United Kingdom and elsewhere in the European Union. The Shenzhen office had 6-8 employees of whom the General Manager was Ms Brenda Chang. In February/March 2007, the Shenzhen office was closed down and an office in Sheung Shui in Hong Kong opened on 2 May 2007. The Hong Kong office, referred to at the trial as ‘OIL-HK’, had no formal legal identity. The 1st applicant was first employed by OIL-UK in April 2006 to work as a merchandiser in the Shenzhen office. The 2nd applicant was recruited by the 1st applicant as a merchandiser and employed by OIL-UK in August 2007 to work for OIL-HK. THE CHARGES 3.The Charges, which stipulated various dates in the overall period of 14 May 2007 to 15 August 2010, reflected the prosecution allegations that both the 1st and 2nd applicants were employees of OIL-UK and that they had misconducted themselves in the discharges of their duties as employees in that, unknown to OIL-UK, secretly they had taken commissions and inflated prices charged to OIL-UK for products that they had arranged to be manufactured on the Mainland. The 1st and 2nd applicants were the beneficiaries of those commissions and inflated prices in that, on receipt of payment for the goods from OIL-UK, the manufacturers paid that element of the total price to the applicants. Charges 1 and 2 (1st and 2nd applicants) 4.Charges 1 and 2 alleged that jointly, on 14 May and 3 July 2007 respectively, without lawful authority or reasonable excuse the applicants, the 1st applicant as an employee and the 2nd applicant as an agent of OIL-UK, had accepted advantages, US$960 and US$2,717 respectively, from Mr Yuan Shenyong in relation to their principal’s affairs, namely awarding purchase orders of OIL-UK to Mega Handbag Manufactory Limited (“Mega Handbag”), contrary to sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201. Charges 17 and 18 (2nd applicant) 5.In the alternative, Charges 17 and 18 alleged, against the 2nd applicant only, that on the dates stipulated in Charges 1 and 2 she had aided, abetted, counselled and procured the 1st applicant, an agent of OIL-UK, without lawful authority or reasonable excuse to accept those advantages, contrary to section 89 of the Criminal Procedure Ordinance, Cap. 221 and sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201. Charges 3, 4 and 5 (2nd applicant) 6.Charges 3, 4 and 5 alleged that without lawful authority or reasonable excuse the 2nd applicant as an agent of OIL-UK had accepted advantages from stipulated persons in relation to his principal’s affairs, namely awarding purchase orders of OIL-UK to named Mainland manufacturers, contrary to sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201. 7.Charges 3 alleged that on and between 1 April and 31 July 2009 the 2nd applicant had received an advantage, namely $32,738 from Man Kim Ming and Chan Wai Chung in respect of purchase orders from OIL-UK to Macro Development Limited (“Macro Development”). Charges 4 and 5 alleged that on or about 6 July 2009 and 30 June 2010 respectively the 2nd applicant had received advantages, namely $2,042 and $31,000 respectively from Chan Wai Chung in respect of purchase orders from OIL-UK to Macro Union Co (“Macro Union”). Charges 6, 9 to 11 (1st and 2nd applicants) 8.Charges 6 and 9 to 11 alleged that the 1st and 2nd applicants jointly committed fraud in respect of representations that they made to Mainland manufacturers that the inflated amounts that were stated on their invoices had been approved by OIL-UK with the intent of defrauding the latter by inducing them to pay those invoices, either to the benefit of the applicants or to the prejudice of OIL-UK, contrary to section 16A of the Theft Ordinance, Cap. 210. 9.Charge 6 alleged fraud in the period between 1 March and 30 November 2007 in respect of dealings between OIL-UK and Mega. Charges 9 alleged fraud in the period between 1 November 2008 and 31 January 2009 in respect of dealings between OIL-UK and MCP Gifts Enterprise Company Limited. Charge 10 alleged fraud in the period between 1 December 2008 and 30 June 2009 in respect of dealings between OIL-UK and Macro Development. Charge 11 alleged fraud in the period between 1 May 2009 and 30 June 2010 in respect of dealings between OIL-UK and Macro Union. Charge 16 (1st and 2nd applicants) 10.Charge 16 alleged that, between 5 September 2007 and 15 August 2010, the applicants conspired together and with Yeung Hoi Fan to defraud OIL-UK in respect of 21 manufacturers who supplied goods to OIL-UK by dishonestly inflating prices stipulated on invoices, which were submitted to OIL-UK, causing the latter to place purchase orders and make payments at those inflated prices, after which the 21 manufacturers made payments to the applicants. Charges 19 to 39 (1st and 2nd applicants) 11.In face of the evidence of Yeung Hoi Fan, in particular his denial that he was a party to such a conspiracy, and given that the applicants were husband and wife, shortly before the close of its case the prosecution applied for, and the judge permitted, the addition of Charges 19 to 39, namely 21 charges of fraud, contrary to section 16A of the Theft Ordinance, Cap. 210. The Particulars of Offence of each of those charges alleged that, on stipulated dates, the applicants caused the submission of invoices of the respective 21 manufacturers to OIL-UK, which invoices reflected inflated prices with the intent of defrauding OIL-UK by inducing it to make payments to the respective manufacturers at those inflated prices, to the benefit of the applicants or prejudice of OIL-UK. 12.Following the closure of the prosecution case, the judge acceded to a submission made on behalf of the applicants that there was ‘no case to answer’ in respect of Charge 16, and the applicants were acquitted of the charge. THE TRIAL 13.There was no dispute that the function of the office opened by OIL-UK in Shenzhen in 2003 was to source the manufacture of goods for OIL-UK. Purchase orders for the supply of goods were issued by OIL-UK to whom invoices were issued and by whom payments, both deposits and the balance of payments due, were made directly to the manufacturers. Further, the employees, including the 1st applicant, were paid their salaries directly into their respective bank accounts from OIL-UK’s bank in the United Kingdom. The expenses of the Shenzhen office were met by payments from OIL-UK into an account created for that purpose in the name of the office manager, Ms Brenda Chang. 14.There was no dispute at trial that the 1st applicant had been an employee of OIL-UK from April 2006 until the end of April 2007. During that period he worked at the OIL-UK office in Shenzhen. However, in the spring of 2007 that office was closed. Ms Brenda Cheng resigned and left the employment of OIL-UK in about March 2007. The prosecution case 15.The prosecution case was that the method of doing business that had obtained when the Shenzhen office was operating was continued once the office of OIL-HK was opened in May 2007. The 1st applicant continued as an employee of OIL-UK. Now, he was the General Manager. OIL-UK continued to issue purchase orders, received invoices and make related payments directly to the manufacturers in the Mainland. The 1st applicant opened a bank account, a ‘petty cash’ account, in his name into which monies were paid on a regular basis from OIL-UK and from which the expenses of OIL-HK, other than the salaries of staff, were met. 16.According to the prosecution case, the only change in respect of the 1st applicant was that his salary was now denominated in Pounds Sterling and OIL-UK no longer made payments on his behalf into his Mandatory Provident Fund (“MPF”). 17.Mr John Palmer, the Operations Manager of OIL-UK, testified that he had interviewed the 1st applicant for the position of Merchandising Manager in the Shenzhen office. Subsequently, he witnessed the 1st applicant signing a contract of employment with OIL-UK dated 6 April 2006. The contract was in standard form, a template of which was stored in a computer from which it had been printed. He produced into evidence a photocopy version of that contract, exhibit P9. The original of the contract had been kept in the Shenzhen office, so that it could be shown to Mainland authorities if necessary. However, it, together with many other documents, could not be found following the closure of that office. Mr Peter Townsend, Managing Director of OIL-UK, confirmed that a photocopy version of the contract had been brought back to OIL-UK’s offices. 18.Mr Peter Townsend said that the 1st applicant had requested a change of the currency in which he was paid from Hong Kong Dollars to Pounds Sterling and that OIL-UK no longer pay a contribution to his MPF. He produced a copy of a letter dated 4 May 2007, exhibit P10, that he had sent to the 1st applicant confirming that arrangement and stipulating that the 1st applicant continued as an employee of the company bound by his existing employment contract. 19.The nub of the prosecution case was that the applicants were both involved in a fraudulent scheme in which, by their arrangement with manufacturers in the Mainland, inflated prices were charged in invoices rendered to OIL-UK on which basis the latter made payments to Mainland factories for their goods. The scheme was simple : the applicants caused an extra payment to be added to the quotation received from the Mainland factory. The pro forma invoice reflected the inflated price and was the basis on which the purchase order was issued by OIL-UK. In due course, the commercial invoice reflected the inflated price on which OIL-UK made payments to the Mainland manufacturers. In addition to inflating prices, sometimes commissions were added. Also, arrangements were made for the ‘tooling’ costs to be inflated. By arrangement with the Mainland factories the applicants received payment of the inflated monies into bank accounts in their name in Hong Kong. Most of those payments were made into a bank account of the 2nd applicant. 20.Although the 2nd applicant did not become an employee of OIL-UK until August 2007, it was the prosecution case that she and the 1st applicant had embarked upon the fraudulent scheme even before the OIL-HK office was opened. They did so by arrangement with Mr Yuan of Mega. The defence case 21.The 1st applicant testified at the trial. Whilst he accepted that he had been an employee of OIL-UK, he said that the arrangement had come to an end when the Shenzhen office was closed and the Hong Kong office opened. Then, he had reached arrangement with Mr Peter Townsend where they would operate in a loose partnership arrangement. He was entitled to inflate invoice prices issued by Mainland manufacturers, which ultimately were sent to and paid by OIL-UK. That was a profit to which he was entitled. In those circumstances, he was entitled to and did authorise payments of commission to the 2nd applicant. She was aware that he was no longer an employee. 22.The 1st applicant testified that he had never seen, let alone signed, the contract of employment (exhibit P9) dated 6 April 2006. There had not been a written contract of employment. Further, he had never received the letter dated 4 May 2007 (exhibit P10). The change of the currency paid into his bank account from Hong Kong dollars to Sterling was made at the direction of Mr Peter Townsend as was the discontinuation of any payment into his MPF by the company. He was told that this was to his advantage for tax purposes. The monies paid monthly into his bank account were not wages, as stated on the documentation of the company and its bank, rather they were payments towards the expenses of the Hong Kong office. 23.Mr Valerie Aginsky, an expert in the examination of documents, testified that the contract of employment, exhibit P9, was not a first-generation photocopy of the original. REASONS FOR VERDICT 24.In his Reasons for Verdict, the judge said that he had[1] “serious reservations about the provenance of the purported contract, P9, and the prosecution evidence concerning the letter P10.” In the result, he stated that he attached no weight to those documents. Furthermore, he said that he treated the evidence of Mr Peter Townsend and Mr Phillip Palmer “with the greatest caution”. 25.In determining that the 1st applicant was an employee of OIL-UK, the judge said that there was[2], “a substantial volume of compelling and persuasive evidence” to that effect. Earlier, in his Reasons for Verdict the judge had examined the contents of a series of e-mails between the 1st applicant, Mr Peter Townsend and Mr Phillip Palmer and concluded[3] :
26.The judge rejected the applicant’s testimony that the staff of OIL-HK worked for him[4] :
27.Given that the 1st applicant accepted in his testimony that the invoices material to the charges which had been presented to OIL-UK were inflated, from the price at which the manufacturer had quoted to OIL-HK, the only controversial issue was whether or not that was known to Mr Peter Townsend and/or Mr Phillip Palmer. Of that, the judge found[5] :
28.Of the 2nd applicant, the judge concluded[6] :
29.In the result, the judge convicted of the 1st applicant of Charges 1, 2 6, 9 to 11 and 19 to 39 and the 2nd applicant of Charges 3 to 5, 6, 9 to 11, 17, 18 and 19 to 39. GROUNDS OF APPEAL AGAINST CONVICTION The 1st applicant 30.By ground 1, of the grounds of appeal against conviction, Mr Grossman SC submitted that the judge had “ignored, discounted or failed to take proper account of” evidence that undermined the prosecution case on the central issue of whether or not the 1st applicant was an employee of OIL-UK at the material time. As a result, it was contended that he erred in determining that the 1st applicant was an employee of OIL-UK at all material times. 31.It was submitted that the evidence of Mr Peter Townsend and, to a lesser extent, Mr Phillip Palmer was important to the resolution of the issue. It was contended that other employees of OIL-HK were either unaware of the 1st applicant’s relationship with OIL-UK or gave evidence which tended to support his evidence, namely that he was in a loose partnership with Mr Peter Townsend. It was contended that the judge’s determination that he had “serious reservations about the provenance of the purported contract, P9, and the prosecution evidence concerning the letter, P10” amounted, in effect, to a determination that Mr Peter Townsend and Mr Phillip Palmer had forged those documents. In those circumstances, having stipulated that he approached their evidence with “the greatest caution”, the judge ought not to have accepted their evidence where it was incriminatory of the 1st applicant. On the contrary, it was asserted that the judge had “accepted PW1’s (Mr Peter Townsend) evidence in its entirety, where it was incriminatory of D1 and D2.” 32.In addition, it was submitted that the judge had failed to have proper regard to the evidence that undermined Mr Peter Townsend’s testimony that the 1st applicant was an employee of OIL-UK. In a letter dated 10 June 2010, signed by Mr Peter Townsend, it was asserted of the 1st applicant that “after several years of employment (he) requested that his status become self-employed”. That contradicted Mr Peter Townsend’s testimony. Also, the 1st applicant was the only employee of OIL-UK who had signed a contract. No explanation was forthcoming from Mr Peter Townsend as to why OIL-UK paid the MPF contributions of other staff of OIL-HK, but not those of the 1st applicant. Ground 3 33.By ground 3, it was submitted that the judge erred in permitting the prosecution to add Charges 19 to 39 immediately before the close of the prosecution case. That was done in the face of a very likely successful submission of ‘no case to answer’ in respect of Charge 16. The substantive charges of fraud were materially different from the charge of conspiracy to the fraud. Had the 1st applicant faced those charges at the outset, the 1st applicant may not have made the admissions in the Admitted Facts. Also, cross-examination of witnesses would have been conducted on a different basis. The addition of those charges caused injustice to the 1st applicant. The 2nd applicant 34.It was accepted on behalf of the 2nd applicant that resolution of the issue of whether or not the 1st applicant was an employee of OIL-UK or in some form of loose partnership with Mr Peter Townsend was crucial to the case of the 2nd applicant at trial. Ground 1 35.By ground 1, it was submitted on behalf the 2nd applicant that the judge had erred in drawing the inference that the 2nd applicant knew that at all times material to the charges the 1st applicant was an employee of OIL-HK. In particular, the judge had relied wrongly on inadmissible hearsay evidence, namely an e-mail, dated 30 June 2010, (exhibit P1392) sent by the 1st applicant to Mr Peter Townsend concerning the issue of non-payment by OIL-UK of a bonus to the 2nd applicant and Mr Daniel Yeung, there being no evidence that the 2nd applicant was even aware of the communications let alone that she had adopted them. Further, the judge had relied wrongly on a draft letter, couched in terms of a request for an increase in salary by an employee of an employer, contained in a notebook bearing the 2nd applicant’s name and found in her desk at the offices of OIL-HK at the time of her arrest on 16 August 2010. First, there was insufficient evidence to determine that the 2nd applicant had written the draft letter. Secondly, it was ambiguous as to its purpose. Thirdly, it was not known when it was written. 36.In the alternative, it was contended that, even if the judge was correct in determining that the 1st applicant was an employee of OIL-HK, nevertheless he was in error to determine that the 2nd applicant was aware of the limitation of authority of the 1st applicant, as an employee, and that she knew that OIL-UK was unaware of the inflated prices described in documentation supplied to the latter in respect of the supply of goods by Mainland manufacturers. Charges 17, 18 and 6 (Mega) 37.It was submitted that, having regard to the fact that he was a witness testifying under immunity from prosecution and to the internal inconsistencies in his testimony and the inconsistencies between that testimony and his out-of-court statements, the judge erred in accepting the evidence of Mr Yuan Shenyong (Mega) (PW7) that the 2nd applicant was involved in discussions with Mr Yuan about inflating prices on documentation to be submitted to OIL-UK without the knowledge of the latter. Charges 17 and 18 (aiding and abetting) 38.In the alternative, it was submitted that even if the judge was correct in accepting the evidence of Mr Yuan Shenyong his evidence was ambiguous as to whether or not the 2nd applicant was present at discussions he had with the 1st applicant about the payment of commission in respect of orders from OIL-UK. The court was asked to note that the 2nd applicant was not an employee of OIL-UK until August 2007, whereas Charges 17 and 18 concerned the period on or about 14 May and 3 July 2007. It was submitted that there was no evidence as to the 2nd applicant’s knowledge of the ambit of the 1st applicant’s position and/or authority in the operation of the Shenzhen office of OIL-UK. Charges 3 to 5 (Macro Development and Macro Union) 39.It was submitted that, in determining that the 2nd applicant knew that the 1st applicant did not have authority to authorise her to receive payments of commission or the balance of the monies made available from inflated invoices, the judge erred in failing to have regard to the evidence that tended to show that he was possessed of that apparent authority. He was the general manager of the office of OIL-HK. The 2nd applicant had reasonable grounds to believe that the 1st applicant had the authority to give her consent to receive such payments and a reasonable excuse to receive such monies. A CONSIDERATION OF THE SUBMISSIONS 40.As the judge noted[7], the main issue of controversy in respect of the 1st applicant was whether or not at the dates stipulated in the Particulars of Offence of the charges the applicant was an employee of OIL-UK. There was no dispute that he had been an employee of OIL-UK from April 2006 in its Shenzhen office. At issue, was whether or not he remained an employee of the company after that office was closed and the Hong Kong office of OIL-UK was opened in May 2007. Resolution of that issue was also highly relevant to the case of the 2nd applicant. 41.In ‘Directions’ that the judge stated in his Reasons for Verdict that he had given himself the judge addressed the fact that a number of witnesses for the prosecution had given evidence under an immunity from prosecution. Of that, he said[8] : “I therefore treated their evidence with the utmost caution”. 42.As the judge noted[9], Mr Peter Townsend was one of the witnesses who gave evidence under an ‘immunity from prosecution’. He observed that the immunity had been provided on the basis that in his testimony he might make admissions of carrying on a business in Hong Kong without having made the requisite registration, thereby attracting liability under sections 5 and 15 of the Business Registration Ordinance, Cap. 310. The penalty provision provides for a maximum sentence on conviction of one year’s imprisonment and a Level 2 fine. The immunity was forthcoming after Mr Egan, counsel for the applicants at trial, had raised the issue immediately in advance of Mr Peter Townsend giving evidence. Clearly, such risk of exposure to criminal liability as Mr Peter Townsend faced in giving his anticipated testimony was of a very minor nature. 43.As the judge stated there was a “clear dispute” between the evidence of Mr Peter Townsend and Mr Phillip Palmer on the one hand and the 1st applicant on the other hand about the alleged written contract of employment (exhibit P9) dated 6 April 2006, said to be between OIL-UK and the 1st applicant, page 13 of which bore the applicant’s name, a signature and a photocopy of a Hong Kong Permanent Identity card in his name. The 1st applicant said that he had never seen the document, let alone signed it. Mr Phillip Palmer testified that he had witnessed the 1st applicant sign the document in the Shenzhen office of OIL-UK after the 1st applicant’s identity card had been photocopied onto the last and signature page. The original copy of the contract had been kept in the Shenzhen office of OIL-UK, but had been lost after that office was closed. Mr Phillip Palmer said that he had taken a photocopy only of the contract back to OIL-UK’s office. That photocopy had been photocopied itself on numerous occasions. Mr Peter Townsend testified that he had seen a photocopy of the contract and recognised the signature of the 1st applicant. 44.On its face the contract adverts at clause 2.1 to an ‘offer of employment’, but none was produced in evidence. The contract did not specify the job title or salary. Moreover, bizarrely it specified Wickford, Essex as the 1st applicant’s normal place of work. Not surprisingly, the judge found[10] : “The contract itself meant little without the offer letter of employment.” 45.Mr Peter Townsend said that following the change of offices of OIL-UK, from Shenzhen to Hong Kong, and the employment of the 1st applicant as General Manager in OIL-HK he agreed to the 1st applicant’s requests that he be paid in Pounds Sterling and make his own MPF contributions. As a result, he had sent the 1st applicant a letter dated 4 May 2007 (exhibit P10) setting out those and other provisions of his continued employment. The letter was sent with other items in the regular courier deliveries to Hong Kong. Again, as the judge noted[11], the 1st applicant disputed having received it. There was no dispute that communication by letter, rather than e-mail, Skype or telephone, from Mr Townsend was unusual. His explanation was that the communication was “official” which was why it was on company letterhead and why he had signed it. 46.As noted earlier, the judge determined to attach no weight to either exhibit P9 or P10[12] :
47.Notwithstanding the judge’s determination to attach no weight to those two documents, he went on to find[13] :
48.Clearly, the judge’s reference to a “substantial volume of compelling and persuasive evidence” of the fact of the 1st applicant’s employment by OIL-HK was, in part, to the undisputed evidence of payments made by OIL-UK to bank accounts in the name of the 1st applicant and to e-mail communications to and from the 1st applicant and Mr Peter Townsend and Mr Phillip Palmer. Bank accounts and bank records OIL-UK’s payment of ‘Wages’ to the ‘payroll account’ of the 1st applicant 49.As the judge noted[14], by an e-mail dated 7 May 2007, three days after the date which exhibit P10 bears, the applicant provided details to the accounts staff of OIL-UK of two bank accounts in his name to receive respectively “payroll” and “petty cash”. Also, he sought confirmation of his salary in Pounds Sterling :
Clearly, the references to Peter and Lynda are to Mr and Mrs Townsend. 50.The National Westminster Bank ‘Payment Debit Advice’ documentation (exhibit P12), confirmed that in late May 2007 the first of the payments of £2,500 per month was made by OIL-UK to the ‘payroll account’ stipulated by the 1st applicant in the e-mail. That payment, and all subsequent monthly payments up to and until July 2010, was described as ‘Wages’. There was no dispute that on dates that coincide with Lunar New Year, namely in January 2009 and January 2010, but not January 2008, the applicant received payments of double the usual monthly amount. In cross-examination, the 1st applicant accepted that he had been sent copies of that bank documentation every month[15]. He agreed that he had never contacted Mr Peter Townsend to correct the mis-description of the nature of those payments, which on his evidence were to defray the expenses of the office of OIL-UK in Hong Kong. 51.Prior to May 2007, payments to the 1st applicant, of what was described in the bank documentation as ‘Salary’, was made to a different account, in Hong Kong dollars, in the name of the applicant with the same bank in Hong Kong. 52.There was no dispute that employees of OIL-UK in Hong Kong, including the 2nd applicant, were paid directly by bank transfer by OIL-UK to stipulated bank accounts in their own names. They too received double month payments at Lunar New Year. However, in their case OIL-UK also paid monies into their respective MPFs. 53.After the resignation of Ms Brenda Chang and the closure of the Shenzhen office in about March 2007 the 1st applicant began to receive transfers of money from OIL-UK to the account in his name that he had stipulated as designated to receive ‘petty cash’. That practice continued until July 2010. 54.Of the 1st applicant’s testimony that the monthly payments described as ‘Wages’ made by OIL-UK in Pounds Sterling to his account in Hong Kong were, “not salary payments, but were made to him for the purpose of running of the Hong Kong office, fixed costs” the judge determined[16] :
55.In the context of those payments of salary in Hong Kong dollars to the other OIL-HK employees, the judge clearly rejected the applicant’s testimony that the change to payment to him from Hong Kong dollars to Pounds Sterling was made because Mr Peter Townsend had said that it was to his tax advantage[17] :
56.For his part, in cross-examination Mr Peter Townsend rejected the suggestion that paying the 1st applicant in Sterling was to his tax advantage : payments to the 1st applicant in Hong Kong dollars had been tax-deductible in any event[18]. 57.In fact, as the judge noted[19] the 1st applicant admitted that he had made no declarations for tax in Hong Kong at all, notwithstanding the substantial sums of money that he had received as a result of OIL-HK’s business activities. 58.Although Mr Peter Townsend testified[20] in cross-examination that he had no idea why the 1st applicant suggested that for his own tax advantage he wished to be paid in Pounds Sterling and take care of his own MPF payments, he said that he was concerned that, since OIL-UK would no longer report those payments to the Hong Kong Revenue authorities, the 1st applicant make his own tax returns in Hong Kong. No doubt, if OIL-UK had continued to make employer’s contributions to the 1st applicant’s MPF that is a matter that would have come to the attention of the Revenue authorities in Hong Kong, in particular if no tax return in respect of salaries or profits tax was made by the 1st applicant. E-mails 59.Having noted that he had dealt with the e-mail correspondence between the 1st applicant and OIL-UK in some detail, the judge found[21] :
60.Earlier in his Reasons for Verdict, the judge set out at length[22] an interchange between the 1st applicant and Mr Peter Townsend arising out of the latter’s wife querying the payment of $162,000 in cash by the 1st applicant to a Mainland supplier. The 1st applicant asserted in an e-mail, dated 25 January 2008, to Mr Peter Townsend that he was “pissed off” with her enquiry as to how the payment was made (exhibit P1393; exhibit bundle 2543-1). The 1st applicant asserted :
61.As counsel for the respondent, Mr David Leung, pointed out in his oral submissions, in an e-mail in reply[23] Mr Peter Townsend pointed out that his wife was the Financial Director of OIL-UK and entitled to ask the question. He went on to state :
Tellingly, the description of the 1st applicant as “an employee” did not produce any protest or refutation from the 1st applicant. References by the 1st applicant to Mr Peter Townsend as “boss” and “employer” 62.As the judge noted[24], contrary to the 1st applicant’s assertion that Mr Peter Townsend was his partner in the Hong Kong office, he had referred to him in other e-mails as his “boss and employer”. In the context of the apparent dispute that ensued after the 1st applicant had stopped payment to a Mainland supplier of a cheque drawn on his personal account on the advice of Mr Peter Townsend, the applicant asserted in an e-mail dated 4 September 2008[25] :
63.In an e-mail dated 20 July 2010[26], the applicant raised an issue as to whether or not he should book an inspection date, of which enquiry he said :
64.In an e-mail dated June 2010[27] the 1st applicant raised with Mr Peter Townsend the question of when the staff in OIL-HK would receive a promised bonus. For his own part, the 1st applicant said :
The 1st applicant concluded the e-mail by stating :
65.Obviously, the judge was entitled to determine, as he did, that the 1st applicant’s tone was[28] :
Letters relevant to the employment status of the 1st applicant 66.Although it was submitted that the judge failed to have proper regard to the evidence of assertions made by or on behalf of Mr Peter Townsend in respect of the status of the 1st applicant vis à vis OIL-UK in letters to the ICAC (exhibit D2) and to CO Chan & Co (exhibit D4), it is clear that the judge considered them carefully before coming to his ultimate conclusion that the 1st applicant was an employee of OIL-UK at all material times. Mr Peter Townsend’s letter to ICAC : 10 June 2010 67.As the judge noted[29], Mr Peter Townsend accepted that an assertion made in a letter signed by him to an officer of ICAC, sent by fax cover sheet dated 10 June 2010, was inaccurate in its description of the 1st applicant. As was stated in the text of the letter, the purpose of the communication was to summarise the situation allegedly uncovered in the OIL-HK office following the supply of information and material from an anonymous source. Under the rubric ‘Implicated HK Employees’ three employees were named, the 1st and 2nd applicants and Mr Daniel Yeung. The 1st applicant was described as the office manager, of whom it was stated[30] :
Having described the 2nd applicant and Mr Daniel Yeung, the letter asserted that, although two other merchandisers were employed by the company, they had started their employment recently and were not implicated in the corruption. 68.However, as the judge went on to note[31], in the context of Mr Peter Townsend’s evidence that he had not drafted the letter, rather it had been drafted by an employee, and that he had not focused on the inaccurate assertion that the 1st applicant had requested to become self-employed, in any event the inaccuracy was immediately contradicted by a subsequent passage in the letter. Under the rubric ‘Allegations’ the letter asserted :
69.In any event, it is to be noted that the letter does not assert that the 1st applicant was self-employed. Rather, it asserts that a request was made in that respect. Moreover, as the judge noted, the suggestion that the letter had acknowledged that the 1st applicant ever enjoyed that status is immediately refuted by the following paragraph. The letter to CO Chan & Co : 5 December 2008 70.The judge noted[32] that Mr Peter Townsend accepted that the letter of 5 December 2008 written by his solicitors in Chelmsford, Nigel Broadhead Maynard, to CO Chan & Co described the 1st applicant inaccurately as OIL-UK’s “agent”. The letter was written in response to their demand of the 1st applicant for payment of monies due to Aesthetics Prototype Limited (“APL”) for goods sold to OIL-UK, in respect of which the 1st applicant’s had stopped his cheque for payment of the monies due. The letter had been written in haste in an attempt to protect the 1st applicant from assault and intimidation in relation to the matter. The judge acknowledged[33] that the defence relied on the description of the 1st applicant as an “agent” as pointing to the fact that was the status, rather than that of employee, that the 1st applicant enjoyed with OIL-UK. Conclusion 71.Clearly, the judge had considered such evidence as there was that contradicted or undermined the crucial evidence of Mr Peter Townsend that the applicant was an employee of OIL-UK. Equally, he had considered the overwhelming amount of evidence pointed to the fact that the applicant was an employee of OIL-UK. His description of that evidence as “compelling and persuasive” was entirely apposite. Ground 2 72.The complaint made on behalf of the 1st applicant, that the judge was in error to describe the personal cheque drawn by the 1st applicant in favour of APL as having been drawn on the “petty cash” account in the name of the 1st applicant was justified. The judge was in error. The cheque was drawn on the 1st applicant’s personal account into which his wages were paid by OIL-UK. Understandably, Mr Grossman stated in his written submissions that no further submission was made on this ground, which stance he took in oral submissions. Whilst it was an error it was of no significance whatsoever. Mr Grossman took a similar stance in respect of the complaint that the judge was wrong to determine[34] that the 1st applicant had kept no proper accounting records. He was right to do so. Such records as the 1st applicant kept were entirely consistent with not making any declaration at all to the Revenue. Ground 3 73.By ground 3, it was submitted that the judge had erred in permitting the prosecution to add 21 substantive charges of fraud immediately before it closed its case. 74.Clearly, the purpose of the prosecution making the application was so that there was an alternative set of charges to reflect the alleged misconduct of the applicants in the event that the judge acceded to the anticipated submission on behalf of the applicants that there was ‘no case to answer’ on Charge 16. That charge alleged a conspiracy to defraud, in which the alleged parties were the 1st and 2nd applicants together with Mr Daniel Yeung. In his testimony, Mr Daniel Yeung denied being a party to such a conspiracy. 75.In his ruling[35] allowing the addition of 21 substantive charges of fraud the judge described the nature and ambit of the conspiracy alleged in Charge 16 ：
76.Having noted that the prosecution submitted that, even if the court ruled that there was no case to answer in respect of Charge 16, there remained prime facie evidence that the applicants were parties to the underlying fraudulent transactions, the judge went on to describe the nature of the objection made on behalf of the applicants :
77.Of the prosecution response to the objection taken by the defence, the judge noted :
78.In the result, the judge ruled :
79.There is no dispute that, after the applicants had been re-arraigned, no application was made on their behalf for an adjournment, the recall of any of the prosecution witnesses for further cross-examination or for a withdrawal of any of the admissions made by the applicants in the Admitted Facts. Counsel for the applicants took the stance in the knowledge that the court had indicated[36] that it would accommodate any such applications. 80.In all the circumstances, we are satisfied that the judge was within his discretion to permit the addition of the 21 substantive charges fraud. No injustice enured to the applicants. Conclusion 81.In the result, we are satisfied that there are no merits in any of the grounds of appeal against conviction advanced on behalf on the 1st applicant. The 2nd applicant 82.In respect of the issues taken with the judge’s findings that the 2nd applicant knew that the 1st applicant was an employee of OIL-UK and that, as such, he did not have the authority to authorise her to receive money by way of commission or otherwise from Mainland suppliers who manufactured goods for OIL-UK, their relationship and working experience was clearly relevant. 83.The 1st applicant testified that he had known the 2nd applicant since 2001, at which time she was working as a merchandiser. They were married in 2004. On 1 August 2007, she began working as a merchandiser in the offices of OIL-HK in Sheung Shui at a salary of $21,000 per month, which was paid directly into her bank account by OIL-UK. Immediately prior to that she had been working for less than a year as a senior merchandiser at RT Sourcing, which the 1st applicant described as, “a quite big European trading company located in Hong Kong.” Then, her salary was $26,000 per month. 84.As the judge noted[37] the 2nd applicant had graduated from Hong Kong Polytechnic with a degree in engineering and had been a merchandiser for over 10 years. 85.No issue was taken with the judge’s finding[38] that the 2nd applicant had an e-mail account at OIL-HK for some months prior to becoming an employee of OIL-UK or that she received payments into her bank account from suppliers of OIL-HK before she became an employee of the company. Some of those payments related to orders placed when the 1st applicant was working in the offices of OIL-UK in Shenzhen. Similarly, no issue was taken with the judge’s findings[39] that throughout the period of the charges the 2nd applicant had received very large sums of money deposited into her bank account on a regular basis by “mainland suppliers of OIL-UK” or that “she knew the source of this money”. 86.As the judge noted[40] the 2nd applicant had negotiated the inflation of prices stipulated in invoices provided by Macro Development and Macro Union and received payments in cash on a number of occasions from Mr Joe Chan Wai Chung, being monies that represented commission and price inflation on goods manufactured for OIL-UK by Macro Development and Macro Union. 87.Obviously, and not surprisingly the 2nd applicant was intimately involved with the business activities of the 1st applicant in particular the negotiation for commissions and price inflated invoices and the receipt of those monies. Having rejected the 1st applicant’s evidence that he enjoyed some form of loose partnership with OIL-UK, rather than being their employee it is hardly surprising that, in all the circumstances, the judge rejected his evidence in so far as it touched on the state of knowledge of the 2nd applicant or that he had authorised her to receive the commissions or monies connected with the inflated invoices. The judge’s reference to the 2nd applicant’s notebook 88.On behalf of the 2nd applicant issue is taken with the judge’s determination of what he described as the “personal notebook”[41] of the 2nd applicant as containing a letter that she had drafted. From that determination, the judge went on to find that the draft letter was :
89.Clearly, the judge was entitled to find that the notebook was the “personal notebook” of the 2nd applicant. It bore her name, ‘BOWIE CHAU’ and had been found in her desk at the offices of OIL-HK on the day of her arrest. No issue was taken with the evidence of Ms Carina Wong, a fellow merchandiser and employee of OIL-UK, of the identification of writing in the book as being that of the 2nd applicant. Moreover, as the text of the draft letter makes clear, the information there described resonates with the circumstances of the 2nd applicant[42] :
90.As the judge noted[43], having been employed by OIL-UK on 1 August 2007, the summer of 2010 represented a period of about three years employment with OIL-UK. Throughout her employment the 2nd applicant had been paid wages of $21,000 per months, so that a salary of $25,000 per month represented a higher salary. 91.Clearly, the judge was entitled to have regard to the draft as being wholly inconsistent with any belief in the 2nd applicant that her husband, the 1st applicant, was her employer and in some form of joint-venture, loose partnership with Mr Peter Townsend. The draft was not a letter between wife and husband, but it was consistent with 2nd applicant writing to her employer, Mr Peter Townsend. Earlier, the judge had rejected the evidence of the 1st applicant that the employees of OIL-HK were his employees as being, “clearly at odds with the evidence”[44]. 92.The judge’s reference to e-mail correspondence in June 2010 between the 1st applicant and Mr Peter Townsend in which the subject of the failure of OIL-UK to pay employees, including 2nd applicant, promised bonuses was no more than a reference to the fact that there was other evidence that was consistent with the issue of employee remuneration being live at that point in time. The judge did not suggest in any way that the 2nd applicant was a party to or aware of that correspondence. Charges 17, 18 (alternative to Charges 1 and 2) and 6 93.In his written submissions Mr Selwyn Yu accepted that the 2nd applicant had allowed her bank account to be used to receive payments of monies from Mr Yuan of Mega Handbag. Banking documentation evidenced receipt into the 2nd applicant’s bank account of monies from Mr Mega Handbag related to Charge 17 and Charge 18 on 14 May and 3 July 2007 respectively. Issue was taken with Mr Yuan’s evidence that the 2nd applicant had participated in discussions he had with 1st applicant in respect of the inflation of invoices provided by Mega Handbag to OIL-UK. 94.The judge made it clear that he was aware that Mr Yuan was a witness testifying under immunity from prosecution[45], a category of witnesses he had indicated he treated with the “utmost caution”[46]. Furthermore, he noted that Mr Yuan accepted in his testimony that his out-of-court statement to the ICAC made no mention of having had such discussions with the 2nd applicant[47]. In his evidence, Mr Yuan explained that omission on the basis that the statement-taker had not asked him[48]. 95.The judge acknowledged that there was a conflict between the testimony of the 1st applicant[49] and that of Mr Yuan[50] in respect of whether or not the 2nd applicant had played any role in relation to orders placed by OIL-UK with Mega Handbag prior to commencing employment with the former in August 2007 and whether the three of them had met in Shenzhen. 96.There is force in Mr Yu’s submission that there was considerable uncertainty in Mr Yuan’s evidence as to where he had met the 2nd applicant for the first time. In evidence in chief, he testified that it was in his own office in Shenzhen, but immediately contradicted that by saying that he supposed it was at the offices of OIL-UK in Shenzhen, but concluded by saying that he did not recall. 97.In cross-examination, he said that the issue of paying commission on the value of orders placed by OIL-UK had been discussed “before doing business”[51]. Similarly, he said that the issue of inflating prices had been discussed “before doing business”[52]. Mr Yuan went on to say that the 2nd applicant provided him with the inflated price on each and every occasion[53]. By contrast, he said that the matter of commission was only discussed on the first occasion[54]. 98.Later in cross-examination, Mr Yuan said that he was sure that the discussion in respect of commission had taken place in Shenzhen before the office of OIL-UK in Shenzhen was closed and before any of the orders were placed with Mega Handbag. Then, he said that he was not sure if the 2nd applicant was present[55]. Finally, he added that before the 2nd applicant had joined OIL-UK he had a meal with the two of them over which they had chatted. 99.Notwithstanding the vacillations in the evidence of Mr Yuan, it is clear, as he was entitled to do, that the judge had regard to the evidence overall in making his determination that the 2nd applicant had been involved from the outset in the arrangement by which Mega Handbag’s invoices were inflated. Of the arrangement with Mr Yuan, the judge found[56] :
100.We are satisfied that there are no merits in any of the grounds of appeal against conviction advanced on behalf of the 2nd applicant. CONCLUSION 101.For the reasons which we have given, we are satisfied that there are no merits in any of the grounds of appeal against conviction advanced on behalf of the 1st and 2nd applicants. Accordingly, the applications for leave to appeal against conviction are refused.
Mr David Leung, DDPP(Ag.) and Mr Ivan Cheung, PP, of the Department of Justice, for the respondent Mr Clive Grossman, SC and Ms Emerald Shek, instructed by Ho & Ip, for the 1st applicant Mr Selwyn Yu, SC and Ms Karen Ma, instructed by Alvin Cheng & Rosaline Choy, for the 2nd applicant [1] Reasons for Verdict, paragraph 183. [2] Reasons for Verdict, paragraph 185. [3] Reasons for Verdict, paragraph 87. [4] Reasons for Verdict, paragraph 197. [5] Reasons for Verdict, paragraph 185. [6] Reasons for Verdict, paragraph 218. [7] Reasons for Verdict, paragraph 38. [8] Reasons for Verdict, paragraph 25. [9] Appendix to the Reasons for Verdict, ‘Summary of the Evidence’, paragraph 1. [10] Reasons for Verdict, paragraph 48. [11] Reasons for Verdict, paragraph 51. [12] Reasons for Verdict, paragraph 183. [13] Reasons for Verdict, paragraph 185. [14] Reasons for Verdict, paragraph 51. [15] Appeal Bundle, page 654-5. [16] Reasons for Verdict, paragraph 52. [17] Reasons for Verdict, paragraph 63. [18] Appeal Bundle, page 480 F-G. [19] Reasons for Verdict, paragraph 177. [20] Transcript page 108. [21] Reasons for Verdict, paragraph 192. [22] Reasons for Verdict, paragraphs 67-72. [23] Exhibit bundle 2543/2. [24] Reasons for Verdict, paragraph 80. [25] Exhibit P1393; Exhibit Bundle 2542. [26] Exhibit P1389; Exhibit Bundle 2538/1. [27] Exhibit P1392; Exhibit Bundle 2541. [28] Reasons for Verdict paragraph 83. [29] Reasons for Verdict-Summary of Evidence, paragraph 28. [30] Exhibit D2. [31] Reasons for Verdict, paragraph 112. [32] Reasons for Verdict-summary of evidence, paragraph 32. [33] Reasons for Verdict, paragraphs 94 and 108. [34] Reasons for Verdict, paragraph 193. [35] Appeal Bundle, pages 559-560. [36] Appeal Bundle, pages 538 and 550. [37] Reasons for Verdict, paragraph 199. [38] Reasons for Verdict, paragraph 201. [39] Reasons for Verdict, paragraph 205. [40] Reasons for Verdict, paragraph 206. [41] Reasons for Verdict, paragraph 210. [42] Reasons for Verdict, paragraph 213. [43] Reasons for Verdict, paragraph 214. [44] Reasons for Verdict, paragraph 197. [45] Reasons for Verdict, paragraph 141. [46] Reasons for Verdict, paragraph 25. [47] Reasons for Verdict, paragraph 144. [48] Appeal Bundle, page 301 R. [49] Reasons for the verdict-summary of evidence, paragraph 192. [50] Reasons for Verdict, paragraph 141. [51] Appeal Bundle, page 300 B. [52] Appeal Bundle, page 300 M. [53] Appeal Bundle, page 300 1J; Page 313 D. [54] Appeal Bundle, page 313B. [55] Appeal Bundle, page 314 H-K. [56] Reasons for Verdict, paragraph 149. |
Cases cited in this judgment