THE QUEEN v. FUNG SHU SING

In the Court of Appeal

1992, No. 80
(Criminal)

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J U D G M E N T

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Sears J.

1. This is the Judgment of the Court.

2. This Applicant (D2) was jointly tried with Lam Ka-lai (D1) before Judge Longley in the District Court, on a charge sheet containing 14 charges of conspiracy.

3. The Applicant faced 4 charges:

11th Charge

Statement of Offence

4. Conspiracy to Defraud, contrary to Common Law.

Particulars of Offence

FUNG Shu-sing, between about June 1987 and April 1988, in Hong Kong, conspired with NG Shek-chung to defraud the Director of the Trade Department of the Hong Kong Government in the allocation of textile quota to Chung Wui Garment Factory by dishonestly:-

(i) Preparing and thereafter submitting and/or causing to be prepared and thereafter submitted, documentation to the Trade Department upon which allocation of textile quota was to be based, and in particular Export Licence Nos. HKDE7-2414238, HKDE7-2336724, S306716, S403033, S403131, HKDE7-2338240, the material particulars of which he knew or believed to be false or misleading.

(ii) Representing to the Director of Trade that the commercial transaction(s) and purported export performance of Chung Wui Garment Factory reflected in the said documentation was genuine when the same were to his knowledge false.

(iii) Causing or permitting the Director of Trade to allocate textile quota to Chung Wui Garment Factory in or about April 1988."

5. The 12th Charge was similar except that the conspirator was Ho Yuk-chan and the documentation was different.

6. The 13th Charge was:-'

Conspiracy to Defeat the Course of Public Justice, contrary to Common Law.

Particulars of Offence

FUNG Shu-sing, in or about December 1987 in Hong Kong, conspired with CHU Siu-wah to defeat the course of public justice by dishonestly:-

(i) Compiling and/or causing to be complied documents, the material content of which he knew or believed to be false or misleading, and which purported to relate to the production, sale and delivery of textiles by Wah Tai Garment Factory; and thereafter submitting or causing the same to be submitted to an officer of the Customs and Excise Department in relation to the investigation of a suspected criminal offence.

(ii) On or about the 28th day of December 1987 making and/or causing to be made, a statement to an officer of the Customs and Excise Department, the material content of which he knew or believed to be false or misleading in relation to the investigation of a suspected criminal offence."

7. The 14th Charge was similar to the 11th except that the conspirator was CHU Siu-wah.

8. D1 faced 6 charges of Conspiracy to defraud and 4 charges of Conspiracy to defeat the course of public justice. All were concerned with the allocation of textile quota and were similar to those against the Applicant.

9. It is of importance to note that in all the 14 charges there was no conspirator common to both defendants, nor were each said to have conspired with the other. The charge sheet was, on any view, grossly overloaded and it was not surprising that an application for separate trials was made. The Judge refused this. The trial lasted 55 days - there was a mass of documentation and evidence, and at the conclusion D1 was convicted of 7 charges of conspiracy and the Applicant of charges 11 and 14. He was acquitted of Charge 12 (on a submission of no case) and Charge 13.

TEXTILE QUOTA

10. In order to implement a number of bilateral agreements, the Trade Department operates a textiles export control system.

11. Underlying this system is the legal requirement embodied in the Import and Export Ordinance and its subsidiary regulations. All textile exports from Hong Kong require valid export licenses issued by the Director General of Trade.

12. Section 36 of Import and Export Ordinance provides that:-

(1) Any person who, in respect of

(a) an application for the issue of a licence;

(b) an application for registration under this Ordinance; or

(c) any declaration, document or article required to be lodged with the Director, an authorized officer or member of the Customs and Excise Service pursuant to the provisions of this Ordinance.

makes or causes to be made any statement or furnishes or causes to be furnished any information orally or in writing which is false or misleading in a material particular or omits any material particular shall be guilty of an offence and shall be liable on conviction to a fine of $500,000 and to imprisonment for 2 years, unless he satisfies the court of magistrate that he did not know and had no reason to believe the statement or information to be false or misleading or the omission to be material.

13. Textile quotas are allocated according to the basic principle of past performance i.e. they go to those companies which have demonstrated their ability to export the particular products to the markets concerned. This means that quotas have to be continually earned, and will be lost unless they are re-earned by proper export performances.

YESSS Scheme

14. The Trade Department normally operates several free quota schemes in each textiles year to dispose of uncommitted quota balances. The Year-end Special Shipment Scheme (YESSS) is the last free quota scheme operated in the last month of each textiles year. In the YESSS, free quotas are allocated in the form of export licenses valid for 28 days or until the end of the textiles year, whichever is the shorter.

15. Free quotas are not transferable.

16. Companies which have utilized 95% or more of the quantities approved on an individual export licence basis under the YESSS will qualify for quota allocation in the subsequent year subject to quota balances being available in the categories concerned following the issue of final allocation to existing quota holders. If quota available is less than the total qualified performance, the allocation will be scaled down proportionately. Allocations are shared on a 50/50 basis between exporters and manufacturers.

17. Exporters allocated with free quotas must perform at least four of the following six functions:

(i) receive order from the overseas buyer;

(ii) receive payment from the overseas buyer;

(iii) purchase or supply the raw materials for the manufacture of the goods;

(iv) contract with the manufacturer for the manufacture of the goods;

(v) make payment to the manufacturer for the goods; and

(vi) arrange the export of the goods.

18. Own quotas held by quota holders can be transferred. This is to provide optimum utilization of quotas by Hong Kong as a whole, by providing flexibility to the trade. Further they can be transferred at a premium. This is not illegal and quota premium does not have to be registered with the Department. Both Charges 11 and 14 allege a conspiracy with a manufacturer related to the allocation of quota to the manufacturer's factory, for example in Charge 11, the Applicant is said to have conspired with Ng Shek Chung, who is a manufacturer, "in the allocation of textile quota to Chung Wui Garment Factory ....." which is Chung's factory.

19. The importance of this is that only the export licences in respect of the YESSS scheme were capable of supporting the conspiracy charges, because it is only under the YESSS scheme that the manufacturer can obtain quota. Further the periods of the conspiracy were respectively between June 1987 and November 1987 to April 1988.

20. The basic case for the Crown was that for a valid application for an export licence, there had to be:

(a) a genuine exporter;

(b) a genuine consignee;

(c) a genuine consignment of goods on a commercial basis.

21. We wish to say at the outset that the Judge approached the many issues before him with care. He was, however, not helped by the way the charge sheet was overloaded with 14 counts of conspiracy. We have said before that charges should be presented on a simple basis so that time, with the resultant public expense, is not wasted. It was unfortunate that the Judge did not grant separate trials, nor force the Crown to limit the scope of the charges.

22. In the result, the Judge's attention may have been diverted, in view of the number of issues he had to unravel, from the nature and extent of the charges the Applicant faced.

23. The Judge found the Applicant to be both dishonest and untruthful. Having examined the evidence given and documents produced, these conclusions appear well founded. Some of the Applicant's actions reek of fraud. We fail to understand why he was not charged with substantive offences under s.36.

Charge 11

24. The Crown sought to allege that Fung conspired with Ng to defraud the Trade Department (TD) in the allocation of textile quota to Chung Wui by dishonestly:

a) submitting 2 applications for quota under the YESSS which were false;

b) by representing that the transactions in the 2 applications were genuine, which was also false; and

c) by causing manifests to be submitted to the TD that goods were shipped. Quota was subsequently allocated in the following trade year to Chung Wui, which in turn was transferred to Fung. The goods relating to the 2 applications were destroyed before the quota was allocated. There is no evidence that Fung notified the TD of the destruction.

25. However, six export licences were issued and from a perusal of the evidence led and the Judge's reasons it is clear that he relied on evidence which was inadmissible. Only 2 licences Ex. 89 and 102 related to the YESSS scheme and Ex. 89 was dated August 12th 1988 - outside the extent of the conspiracy charged of April 1988. The only relevant and admissible evidence therefore related to Ex. 92 a licence issued on December 23rd 1987 which related to an alleged shipment of 34,969 men's 100% cotton wear suits with a declared value of $91,840 - or approximately $2.50 each suit. The exporter was said to be World Enough Trading Co. (W.E.T.C.) - ran by a Kan Lan. This was the 75 year old illiterate mother of the conspirator Ng Shek Chung. Ng gave the Applicant his mother's I.D. card to register two businesses and obtain 2 business registration certificates, a prerequisite for applying for quota. The documents were allegedly signed by Kan Lan. It is clear that these documents were all forged, that Kan Lan had never run a business and that the exporter was in reality the Applicant. The consignee was said to by a Mr. Babel Klar. He gave evidence that he had never had any dealings with W.E.T.C. or Chung Wui.

26. The evidence was overwhelming that the Applicant had either submitted, or caused to be submitted, false documents for the purpose of obtaining a licence and subsequent quota. It would appear that an offence under s.36 had been committed.

27. Unfortunately, the charge was one of conspiracy to defraud and, in our judgment, the Judge was only entitled to have regard to evidence legally admissible to support such a charge.

28. The Judge referred continually to the 6 Export licences and the factual background of each application and grant and the subsequent utilization for the allocation of quota, although he recognized that 4 of them - (those not in the -YESSS scheme) could not have obtained quota for the Chung Wui factory.

Destruction of the Goods

29. The Judge attached great importance to the fact that the goods which were shipped to Hamburg were destroyed there. He recited at length all the factual evidence concerning the destruction. What had happened was that 14 containers with a declared FOB value of $4.8m, on four ships, were landed in Hamburg. The German customs opened 3 of the containers and found what was described as "cotton waste". All the goods were subsequently destroyed. The only relevant goods of the Applicant were the cotton suits in 580 cartons in one container. The remainder of the goods were irrelevant. Further the goods of D1 were mixed in the containers. As we have said earlier, D1 was not a conspirator with the Applicant and any acts or declarations of his could not have been in furtherance of the conspiracy with which Applicant was charged. Further, what D1 said or did was evidence only against him. In view of the joint trial, it is not surprising that the Judge lost track of these principles. There was no clear evidence who ordered the destruction, the Judge said "I accept Mok's evidence that the person from whom he received instructions to display the goods ...... was either D1 or the Applicant". There was no evidence that any of the Applicant's cartons were opened.

30. The Judge attached great weight to the relationship between D1 and the Applicant. Although they had given evidence as to them being partners and that they were both involved in shipping some of the goods in the containers, they were not jointly charged, and as we have said before, if the Crown sought to prove wholly separate conspiracies, what D1 did was not evidence against the Applicant.

31. Every thing, on this aspect of the case, was lumped together. There was a mass of evidence considered by the Judge which could have had no relevance to the Applicant. Although the Judge, in his reasons considered each charge separately, the evidence of the destruction was considered as though there was a charge of conspiracy between D1 and the Applicant.

Conclusion

32. The Applicant, who was found and rightly found by the Judge to be a liar and dishonest, was still entitled only to be convicted on relevant and admissible evidence.

33. We have reluctantly concluded that on this charge the Judge took into account a large body of evidence which was not admissible. We have every sympathy for the Judge who was not helped by the drafting of such an overloaded charge sheet, nor by the Crown producing a volume of evidence which they should have realized was irrelevant. There should have been separate trials and the Crown should have charged the Applicant with substantive offences. The conviction on this charge is both unsafe and unsatisfactory and should be quashed.

Charge 14

34. This, together with Charge 13, alleged a conspiracy between the Applicant and Chu Siu Wah of the Wah Tai Garment Factory.

35. Chu Siu Wah gave evidence and he said that at the end of 1985 he received a telephone call asking if he was interested in applying for European quota and saying that there would be no need for him to manufacture any goods. The caller said that if he was interested in making a joint application with the caller for such quota and they succeeded in obtaining quota without manufacturing goods, he could have a quarter of the quota allocated the following year. He agreed to the suggestion. Following that, a foki brought around blank Export Licences in which Chu's factory address and name had been filled in, and took them away after Chu had signed them. In evidence- in-chief Chu had said that the caller was the Applicant, but in cross- examination he said the caller "should be Mr. Fung". When it was suggested to him that he was not sure, he said, after a pause, "Right".

36. Chu said that later on there was a telephone call in which he was warned that there would shortly be an inspection by the Customs and Excise regarding the Licence. Whereas in chief he had said it was the Applicant who made this call, in cross-examination he agreed that he was not sure if the call was made personally by the Applicant or a foki. In re-examination he said "At that time I might not be the first person to answer the telephone call. Someone could have told me it was Mr. Fung and it was said that according to what Mr. Fung had said the Customs Officer might come on 28th" (December). Later he said that in order to make sure as to the time that the Customs Officer would come he made a call to Ngai Lam Co. (of which the Applicant was the proprietor together with his wife), and asked to speak to the Applicant. He said he had forgotten whether he actually spoke to him but the person he spoke to told him to prepare documents properly. It is not clear whether it was in this return call or in the earlier call when he was warned about the impending visit of Customs Officers or both that he was told to prepare documents in time and that if documents could not be prepared in time the Customs Officer could be told that the fabrics had not arrived in time and the agreement had been cancelled.

37. Following this call documents were sent to Chu which he understood had come from the Applicant. They included a purchase order, fabric delivery note and delivery instructions all in the name of Finkwan. On the basis of these documents Chu and his colleagues fabricated fictitious production and packing documents, which were shown to a Trade Controls Officer of the Customs & Excise Department, Mr. Ho Chin Nang when he was checking the Export Licence HKDE7-2414603 on 28-12-87. Chu also made a statement to the officer verifying a genuine transaction with Finkwan. As a result of purported export performance under this Export Licence Wah Tai Garment Factory was allocated additional quota the following year which they transferred to Ngai Lam Co.

38. Finkwan was the Applicant firm's name and the Judge was satisfied that it was registered in the name of Ng Shek Chung's mother following a personal request by the Applicant to Ng to borrow his mother's identity card, and that her signature was forged on the business registration certificate.

39. It was clear therefore that the name of Kan Lan in the exporter's declaration was forged, that there was no genuine exporter and that Babel Klar - the alleged consignee - was not genuine. Further, no goods were manufactured. All the documentation indicated that the transaction was fraudulent. Quota was allocated to Chu and subsequently transferred to the Applicant's company, Ngai Lam Company.

40. The Judge held that Chu was a conspirator and that it was indeed a fraudulent conspiracy which caused the Trade Department to allocate quota to Chu.

41. Mr. Griffiths Q.C. submits that the evidence was not sufficient to establish an agreement for an unlawful purpose and that the Judge could not be sure, in view of Chu's evidence that it was the Applicant who had made the telephone call. Further, he says as the end result was only a few quotas, it was unlikely that he would enter into such a conspiracy, particularly as he had shipped in 1987 $120 million worth of garments.

42. With respect, we disagree.

43. It is unusual for a conspirator to give direct evidence of the agreement. The Crown normally relies on evidence from which a Court infers such an agreement. The Judge was fully entitled to come to the conclusion from the facts that the Applicant must have made the initial telephone call. The documents indicate that the whole operation was a sham designed to defraud the Trade Department and they were so defrauded. We can find no flaw in the Judge's reasons, nor was the conviction in any way unsafe or unsatisfactory.

44. We give leave to appeal, allow the appeal against Charge 11, but dismiss it against Charge 14.

45. This Applicant seeks leave to appeal against sentence. On the two charges for which he was convicted, he was sentenced to two years' imprisonment on each concurrent. We have allowed the appeal against Charge 11 and the sentence therefore is one of two years' imprisonment on Charge 14. It is clear from the chronology that this matter has been hanging over his head for a long time. He was arrested in July 1988 and not charged for some 2 1/2 years. The trial was heard between September and December 1991 and on January the 24th he was sentenced. He was released on bail pending appeal, and he has served approximately 5 months' imprisonment.

46. On any view, the scheme which the Applicant operated was a carefully thought out deliberate fraud aimed at defrauding the Trade Department which in itself causes loss to Hong Kong generally. This is a serious offence, and it appears that sentences of approximately 18 months to 2 years are passed in the District Court for this type of carefully planned scheme.

47. In our judgment, looking at the two charges together, there is nothing wrong in principle with the sentences which the judge passed. However, we have allowed the appeal against the 11th Charge and it is clear from the Judges' reasons that he attached great importance to the stated value of the goods involved, and the resultant valuable allocation of quota.

48. The Applicant has been on bail for some time. It should not be thought that those who are granted bail pending appeal, even when there is some delay in the hearing of their appeal are entitled to any discount at all. That is a factor which generally speaking should be irrelevant for the purposes of sentence. However, we must have regard to the fact that we have allowed the appeal against the major charge, and therefore, in so far as the factual background is concerned of Charge 14, which involves a small amount of goods and allocation of quota, coupled with the fact that the Applicant had a long trial and was ordered to pay a sum by way of costs of $150,000, we think justice would be served if we passed such sentence of imprisonment as would allow his immediate release.

Representation:

Mr. Joseph Pethes, S.A.C.P. for Respondent.

Mr. John Griffiths, Q.C. and Mr. Leo Remedios (Bernard Wong & Co.) for the Applicant.