Introduction

In HKSAR v Chan Chun Fung Vincent & Others DCCC 545/2012, Vincent Chan (“Vincent”) was convicted of fraud and money laundering in relation to a fictitious petroleum transaction. This article discusses Vincent’s offence of fraud.

Fraud is a statutory offence. Pursuant to s.16A of the Theft Ordinance (Cap. 210), a person (“X”) commits the offence of fraud if:-

1. 1. By any deceit (whether or not the deceit is the sole or main inducement) and with intent to defraud induces another person (“Y”) to commit an act or make an omission; and
   2. Such act or omission results either in benefit to any person other than Y, or in prejudice or a substantial risk to any person other than X.

Background

In 2010 to 2011, Petrocraft S.A. (“Petrocraft”) engaged Marine Logistics as its agent to source for petroleum. Vincent, who was a manager of Marine Logistics at the material time, was assigned to locate petroleum suppliers for Petrocraft.

In February 2011, it was agreed that Marine Logistics would purchase from Petrol China (via Shanghai Lonyer Fuels Company Limited) 40,000 tonnes of petroleum (+/-10% at the purchaser’s option). However, due to some foreign currency restrictions, Vincent procured the agreement to be entered into between Sharp Cheer Group Limited (“Sharp Cheer”) (as seller) and Marine Logistics (as purchaser) (the “Agreement”). Unbeknown to Marine Logistics, Sharp Cheer was in fact a company solely owned by Vincent’s wife.

In March to April 2011, around 34,000 tonnes of petroleum was supplied to Petrocraft. Upon actual measurement of the petroleum supplied to Petrocraft, Marine Logistics had paid a surplus sum of around US$290,000, which was retained by Sharp Cheer as deposit for subsequent transactions. However, due to decreasing demand for petroleum, Petrocraft did not place any further order for petroleum.

In August 2011, Vincent left Marine Logistics. In September to October 2011, Mr. Gotcha, the executive director of Petrocraft, received emails from one “Mark Lim”, whose email address was sharpcheer@gmail.com, informing him that the deposit could not be refunded and requesting Petrocraft to fulfil its obligation to purchase petroleum. Mark Lim subsequently informed Mr. Gotcha via email that Brightoil Petroleum (“Brightoil”) was interested in purchasing 10,000 tonnes of petroleum. In order to expedite the transaction, Mark Lim suggested Mr. Gotcha to make direct payment to Sharp Cheer instead of via Marine Logistics. Mark Lim also sent an email to Mr. Gotcha enclosing a purported message from one Ms. Stephanie Ip of Petrol China demanding payment for the said petroleum transaction.

In accordance with Mark Lim’s instructions, Petrocraft deposited around US$6,600,000 (the “Sum”) into Sharp Cheer’s bank account on 14 November 2011. On the same day, Sharp Cheer transferred the Sum into various bank accounts:-

1. 1. US$5,700,000 to the bank account of Good China Group Limited (“Good China”), a company solely owned by Vincent’s mother;
   2. US$600,000 to the personal bank account of Vincent’s wife; and
   3. US$300,000 to Vincent’s own personal bank account.

On 23 and 26 November 2011, Vincent’s mother transferred US$1,000,000 and US$200,000 from Good China’s bank account to her personal bank account. Further, on 29 November 2011, Vincent’s mother transferred the remaining US$4,500,000 into Vincent’s personal bank account.

Petrocraft never received the petroleum. Vincent was subsequently charged with fraud and money laundering.

Prosecution case

The Prosecution case was that Mark Lim had made the following false statements to induce Petrocraft to deposit the Sum into Sharp Cheer’s bank account:-

1. 1. Brightoil would purchase 10,000 tonnes of petroleum from Petrocraft S.A. (the “1^st Statement”);
   2. Petro China had agreed to sell 10,000 tonnes of petroleum to Petrocraft S.A. at US$6,900,000 (the “2^nd Statement”); and
   3. Stephanie Ip of Petro China had demanded immediate payment for the said transaction (the “3^rd Statement”).

The Prosecution contended that Mark Lim was Vincent. In this regard, the Prosecution relied upon Vincent’s evidence that Mark Lim was a junior employee who was only responsible for clerical and shipping matters. This was inconsistent with the email correspondence between Mark Lim and Mr. Gotcha, which showed that Mark Lim had good knowledge of the terms of the Agreement and the status of the transactions between Sharp Cheer and Marine Logistics under the Agreement (e.g. the amount of surplus kept by Sharp Cheer as deposit). The Prosecution further relied upon the fact that Mark Lim had instructed Mr. Gotcha to deposit the Sum directly into Sharp Cheer’s bank account, which supported the inference that Mark Lim was Vincent.

Vincent’s defence

Vincent denied that he was Mark Lim. He further challenged that the Prosecution had failed to show that the statements made by Mark Lim were false. In relation to the 1^st Statement, Vincent argued that there was evidence which suggested that Sharp Sheer was arranging delivery of petroleum to Brightoil. As for the 2^nd Statement, there was no evidence regarding the operations of Petro China to show that Petro China would not sell 10,000 tonnes of petroleum to Petrocraft at US$6,900,000.  In relation to the 3^rd Statement, while Stephanie Ip of Petro China gave evidence that she had not demanded immediate payment, she could not confirm whether there was another Stephanie Ip in Petro China. As such, Vincent contended that the 3^rd Statement may not be false.

Verdict and sentence

The Court held that to establish fraud, the Prosecution was not required to show that all three statements were false; it was sufficient that one of them was false. Upon considering the evidence, the Court concluded that the 1^st and 3^rd Statements were false.

1. 1. In respect of the 1^st Statement, there were no contemporaneous documents to show that Brightoil would purchase petroleum from Petrocraft.
   2. In relation to the 3^rd Statement, Stephanie Ip was a risk management manager of Petrol China. Her responsibilities did not involve the financial matters of petroleum transactions. As such, the purported request for immediate payment by Stephanie Ip in Mark Lim’s email was undoubtedly false. The Court also rejected Vincent’s suggestion that there could be another Stephanie Ip in Petro China.

The Court accepted that the circumstantial evidence showed that Mark Lim was Vincent. Vincent was the only person who possessed detailed knowledge of the terms of the Agreement and the status of the transactions under the Agreement. Further, the manner in which the Sum had been dealt with clearly showed that Vincent knew that the petroleum transaction was fictitious. By making the false statements, Vincent defrauded Petrocraft to deposit the Sum into Sharp Cheer’s bank account. The Court further held that even if Mark Lim was not Vincent, in light of the fact that there were no documentation to support the existence of petroleum transaction, Vincent ought to have known that the Sum represented proceeds from an indictable offence. Vincent had committed the offence of money laundering by transferring the Sum to various bank accounts. Vincent was therefore convicted of fraud and money laundering and was sentenced to 6 years’ of imprisonment.

Appeal

Vincent subsequently appealed against his conviction on, among others, the grounds that there was insufficient evidence to show that he was Mark Lim and that the statements were false. However, the Court of Appeal agreed with the findings of the District Court and dismissed Vincent’s appeal.