HKSAR v Chu Ka Lok (朱家樂) [2025] HKCA 951; [2025] 5 HKLRD 1054 (Brian Tsui, Agnes Kwok)
Brian Tsui and Agnes Kwok represented the Applicant in HKSAR v Chu Ka Lok (朱家樂) [2025] 5 HKLRD 1054; [2025] HKCA 951.
The complainant ran and owned a company which traded sport shoes. He constantly purchased sport shoes for his business from the defendant, who worked as a salesperson at a sport shoes store. The complainant would place orders with the defendant by depositing payments into the latter’s personal bank accounts. The defendant would then arrange for the shoes to be delivered to the complainant’s company. In the event of non-delivery or non-fulfillment of order(s), the surplus payments would be used to set off the amounts for subsequent purchases. By the time the defendant informed the complainant that he had resigned from the store, there were payments for which no deliveries had been made. The complainant reported the case with the police. Under caution, the defendant said he was greedy and admitted using the money for gambling. The prosecution case for proving that the remaining funds were properties belonging to the company was that the payments made by the company to the defendant were subject to a Quistclose trust which would be caught under s 6(2) of the Theft Ordinance (Cap 219), which provided that the property under a trust (the remaining funds) shall be regarded as belonging to the person having the right to enforce the trust (the company), and an intention to defeat the trust shall be regarded accordingly as an intention to deprive any person having that right of the said property. A District Judge convicted the defendant of theft. The judge considered it unnecessary to apply the Quistclose trust principles while finding that a trust relationship existed by agreement between the defendant and the company. She found that in case of non-delivery, the defendant was obligated to return the remaining funds to the company; and that the defendant was not entitled to use the funds for any purpose other than purchasing sport shoes. She accepted that s 6(2) was applicable in the case. She also relied upon s 6(3) which provided that where a person received property from another and was under an obligation to the other to retain and deal with the property or its proceeds in a particular way, the property or its proceeds shall be regarded as belonging to the other. The defendant applied for leave to appeal against conviction.
Held, unanimously, granting leave to appeal, allowing the appeal, and setting aside the conviction and sentence, that:
(1) The evidence before the court below did not support a finding of trust relationship. Firstly, there was no evidence to support the judge’s finding that in the event of non-delivery, the defendant had to return the relevant funds to the company. The complainant’s evidence was that if orders could not be fulfilled, the remaining funds would be used to pay for the subsequent orders, referred to as the ‘rolling-over’ arrangement. Secondly, despite several months of delay or non-delivery, the complainant did not ask the defendant if the funds were intact or ask about their whereabouts. It appeared that his focus was on the delivery. Given the above and that the complainant never instructed the defendant to put aside the payments solely for the restricted use of purchasing sport shoes, there was no evidential basis for the judge to find that the defendant clearly had an obligation to retain and deal with the property in a specific manner. Thirdly, there was no evidence that the defendant was the complainant’s agent for the purchase of sport shoes from the store. Fourthly, nothing in the complainant’s evidence indicated the company’s intention as to any restricted use of the payments. Nor was there any assertion in respect of an agreement or acquiescence on the defendant’s part as to the existence of such mutual intention. In other words, there was no evidence that the payments were not added to the defendant’s general assets. Accordingly, the increases in the credit balances of the defendant’s accounts belonged to the defendant himself, not to the company. Sections 6(2) and 6(3) of the Theft Ordinance (Cap 219) were not applicable in the present case. R v Preddy [1996] AC 815, [1996] 3 All ER 481, [1996] 2 Cr App R 524 applied; R v Hall [1973] QB 126, [1972] 2 All ER 1009, [1972] 3 WLR 381 and China Life Trustees Ltd v China Energy Reserve and Chemicals Group Overseas Co Ltd [2024] 5 HKC 338, (2024) 27 HKCFAR 359, [2024] HKCFA 15 considered (paras 27-46).
(2) It was not appropriate to substitute the conviction with the statutory alternative of evading liability by deception, as urged by the prosecution. There was certainly no assertion of inducement from the complainant’s evidence. There were also grave doubts whether the evidence could prove the other elements of this offence, not to mention the difficulties concerning when the liability was said to have arisen – the particular point in time and why. Further, this alternative, albeit a statutory one, would be a radical change from the prosecution case, causing unfairness to the defendant (paras 50-51).
[The above is excerpted from the headnote to the report in HKLRD.]
