Article

Note: Defendant was the director of the Hong Kong branch of Yue Fung Development Company Limited (Applicant). Defendant and his brother were the sole stockholders in Applicant.

Defendant caused Applicant to apply for LCs in favor of various beneficiaries, the purpose of which was to pay for goods.Defendant also caused Applicant to issue documentation that said goods were received. However, the transactions in question had never occurred and Defendant had arranged beforehand with the beneficiaries of the LCs to have the beneficiaries return most of the funds to Applicant.

Defendant was charged with and convicted of LC fraud. The District Court for the Hong Kong Special Administrative Region, Dufton, DJ., stated that:

[A] bank engaged upon documentary credit transactions is concerned with security ... . [It] is in that respect that the truth or falsity of representations of fact made by documents may well be highly pertinent. If the bank looks to the goods referred to in the application and in the documentary credit, once issued, as its security, a representation that there are goods, when there are not, or that the goods are available as security locally, is hardly irrelevant. And if invoices and cargo receipts and trust receipts are produced which contain deliberate falsehoods in order to further a deception operative on the mind of the bank, it matters not that in other circumstances, and in another case, and another situation, an issuing bank may be unconcerned that the parties named upon an application and in the documentary credit do not reflect the actual parties to the underlying contract.

Defendant applied for a reversal of his conviction. The Court of Appeal for the Hong Kong Special Administrative Region, Stuart-Moore, VP, and McMahon and Reyes, JJ, dismissed this application, affirming the ruling of the District Court.

[JEB/dgd]

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