THE QUEEN v. TAKESHI MACHIYA

BETWEEN

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JUDGMENT

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Silke, V.-P.:

1. This is the judgment of the Court.

2. Takeshi Machiya - “the applicant” - was tried before His Honour Judge Downey in the District Court on what became a consolidated charge sheet containing four charges.

3. On trial with him were Wong Kai Kong ("D2") and James Wong Loong Cheung ("D3").  The first and second charges concerned the applicant alone and the third and fourth charges were joint in respect of D2 and D3 and were a mirror of the first two.

4. The first charge was one brought under section 9(1) (a) of the Prevention of Bribery Ordinance - “the Ordinance” - and alleged that the applicant, being an agent, namely a director of China Japan (Shenzhen) Leasing Company Limited - “CJL” -, on a date unknown between 1st January 1985 and 31st August 1985 in Hong Kong without lawful authority or reasonable excuse accepted an advantage from Universial Cars Limited - “UCL” - namely a gift, fee, reward or commission in the sum of Japanese currency ¥98,000,000 as a reward for or otherwise on account of doing an act in relation to his principals’ business, namely, the negotiation of a contract for the sale and purchase of 100 dump trucks.

5. The second charge was in similar terms but alleged that the applicant was an agent, as director, of Hua Ding Engineering Equipment Company Limited - “Hua Ding”.

6. At the close of the Crown’s case the trial judge accepted a submission that the applicant had no case to answer in respect of the second, or Hua Ding, charge.  He made a similar ruling in respect of D2 and D3 on the fourth charge.  At the conclusion of the trial he convicted the applicant on the first charge and D2 and D3 on the third charge - the CJL charges.

7. The applicant now seeks leave to appeal against that conviction and, if necessary, the sentence of 18 months’ imprisonment passed upon him.  Neither D2 nor D3 have filed applications and with them we are not concerned.

8. In early 1984 a joint venture business contract was signed between seven Japanese companies, Party B, and the Shenzhen Industrial Development Service Company - “SID” - of China, Party A.  The seven Japanese companies were Nittoh Leasing Company Limited - “Nittoh” - a company registered in Japan and of which the applicant was managing director and president; Showa Leasing Company Limited; C. Itoh Construction and Machine Selling Company Limited; C. Itoh Company; Takenaka Civil Engineering Company Limited; Yamazaki Construction Company Limited and Century Leasing Company Limited.

9. The joint venture capital was ¥200,000,000 divided fifty fifty, the 50% of Party B, being subdivided as to 12.5% to Nittoh, 7.5% to each of Showa, Century Leasing and Takenaka; 5% to C. Itoh Company Construction, C. Itoh Company and Yamazaki.

10. Clause 31 of the agreement set out that which was the major business of CJL as being:

“(1)Leasing business of machinery for civil engineering;

(2)Maintenance business of machinery for civil engineering;

(3)sales of machinery, materials and parts in civil engineering (relating to leasing business);

(4)contractor business for civil engineering;

(5)     leasing business (finance leasing) of other machinery equipment.

The Board of Directors shall decide further development of this service when the property and finance of the joint venture company reached an opportune development.

(6)Other business under (1), (2), (3), (4), and (5) above stated.”

11. The directors of CJL were, on the Chinese side, Mr. Shang Zhi An (PW4) and Mr. Xiao (Siu) Zhi Quen: on the Japanese side, the applicant and Akira Tokumitsu - “Tokumitsu” -, the latter coming from C. Itoh.

12. SID has as directors Mr. Song Yi Ying (PW1) and Mr. Shang (PW4).  UCL had as directors D2 and D3.  Hua Ding had as directors Mr. Zhang Xiao Ling, Mr. Song (PW1), the applicant and Shinichi Uchida - “Uchida” - also of Nittoh.  Another company which will become relevant, China United Ship Building Company Limited - “China United” - had Mr. Sony (PW1) as one of its directors.

13. Before the setting up of the joint venture a Chinese delegation had gone to Japan to discuss its creation.  This included Mr. Song (PW1) and Mr. Shang (PW4).  The subsequent joint venture leasing company contract which is exhibit P15 was signed by Mr. Sang (PW4) and the applicant on behalf of their respective sides.

14. In late 1984 the question of acquiring a fleet of dump trucks for the purpose of carrying out the business of the joint venture was discussed by its directors.  The applicant was the leader of its planning committee.

15. It was the case for the Crown, and Mr. Martin Lee who, with Mr. Warren Chan, appears for the applicant in this Court, takes issue, that the Board of Directors then agreed to increase the investment in order to acquire equipment and to import dump trucks.  This because of the construction boom in Shenzhen.

16. It was decided to obtain banking facilities through the assistance of China United.  A further joint venture company, Hua Ding was set up.  The object was that CJL would import 100 dump trucks into Shenzhen.  Hua Ding was to be formed in Hong Kong to raise the loan to support this deal.  China United would support Hua Ding in obtaining a bank loan from the Sanwa Bank.  The trucks were to be mortgaged to SID so that even if risks emerged the vehicles could be auctioned in Shenzhen.  The applicant and Mr. Shang (PW4) agreed to these proposals.

17. On 24th January 1985 a joint venture business contract was signed by Mr. Song (Pw1), representing China” United and the applicant representing Nittoh.

18. On 21st January 1985 a sales contract - No.85121 - to purchase 100 Mitsubishi dump trucks at a cost of ¥700,000,000 was executed in Shenzhen with the seller stated to be Hua Ding represented by Mr. Song (PW1), the buyer CJL represented by Mr. Nakao Katagiri - “Katagiri” - who was the general manager of CJL, and with China United as the seller’s guarantor represented by a Mr. Chan Loong Fu, director of China United.  This was witnessed by the applicant and reference was made to SID which, however, was not a party.

19. There was a purported resolution of the Board of Directors of CJL endorsing the contract and dated 31st January 1985.

20. The eventual price of ¥700,000,000 had been negotiated down from a listed price of ¥7.062 million for each dump truck to ¥6.020 million and then was added the commission of ¥980,000 per truck thus arriving at the cost price.  The ¥98 million paid eventually into the applicant’s account.  These negotiations had been carried out between UCL and the applicant and became contract No. CT0044 with D2 signing as the seller and the applicant signing as the buyer, the name of which was first stated to be CJL.

21. After the signing of the UCL contract the name of the purchaser of the trucks was altered from CJL to Hua Ding the original name of the buyer being tippexed out.

22. In a letter dated 23rd January UCL treated Nittoh as a “middleman” and offered the commission.

23. A letter of credit was opened by China United with the Sanwa Bank to raise the necessary funds.

24. Queries were raised by the Chinese Government on the contract to buy the dump trucks because SID was not named as a party to the contract.  On 9th May 1985 another contract in terms of No.85121 was signed this time by four parties.  These were: as seller Hua Ding, represented by the applicant, as purchaser CJL, represented by Katagiri, the seller’s guarantor as China United, represented by Mr. Yeung Tsang Hong, and with a purchaser’s guarantor, SID, represented by Mr. Xiao Zhi Quan.

25. The price was queried by SID and the applicant explained the quotation to members of the SID with the suggestion that the unit price was ¥5.565 million per truck after deducting all the operational costs.  The real price remained at ¥6.020 million per truck plus, of course, the commission.

26. The trucks were delivered at the end of July 1985.  On 9th August the applicant asked for the commission to be deposited into his personal account.  This letter was considered by the top management of UCL and they sought and received a board resolution from Nittoh which authorised the applicant to accept the commission.  As a result the money was paid into an account which had been opened in the applicant’s name in the Bank of Tokyo at its Kowloon Branch on 27th August 1985.

27. It will be seen from all of this that the applicant was, throughout all these transactions, wearing a number of different hats - the Nittoh hat, the Hua Ding hat and the CJL hat.  He remained a director of all three.  The ambit of his directorship in CJL was, suggests Mr. Lee, both in doubt and very much in issue.

28. Upon arrest, the applicant made a statement to officers of the Independent Commission Against Corruption and much reliance was placed upon this at trial.

29. The issues at trial were, first, did the applicant receive such commission and, second, was he, at the time of such receipt, acting as an agent for CJL.

30. Mr. Lee’s basic argument before this Court is that there was no evidence of any properly constituted board meeting of CJL entitling the applicant to act for it in these purchases and that the applicant was acting for Hua Ding on a speculative business basis, accepting the commission yes but on behalf of and with the permission of Nittoh.  Essentially that there was no agency as charged.

31. Of the fourteen grounds of appeal originally filed in support of his contentions, the fourteenth being the wrap-up ground of unsafe and unsatisfactory added by leave at the hearing, Mr. Lee now relies on ten, of which he groups grounds 4, 5 and 6 together.

32. Ground 1 relates to a ruling made at the outset of the trial by the trial judge when the issue of absent witnesses was raised and his refusal to stay the proceedings.  We shall come back to that in a moment.

33. Ground 3 alleges the placing of too great a reliance on the contents of the applicant’s statement to the Independent Commission as being probative of guilt and adds to that a factual misdirection in relation to contract CT0044 on the erasing and substitution of Hua Ding for CJL which caused the judge to wrongly find the applicant to have been telling lies.

34. Grounds 4, 5 and 6 are based on a suggested lack of evidence to show that CJL approved the purchase of the dump trucks, authorised the applicant to negotiate their acquisition or that CJL had bought or agreed to buy those dump trucks.  This revolves around whether there were or were not properly constituted Board meetings of CJL.

35. Ground 8 relates to the changes of name again in contract CT0044 and the date of its execution.

36. Ground 10, and in respect of this it must be borne in mind that the applicant gave no evidence at trial, alleges that having acquitted the applicant on the second charge, the Hua Ding charge, the trial judge failed then to consider whether the applicant had considered himself throughout to be in fact acting for Hua Ding and not for CJL.

37. Ground 11 relates to that which Mr. Lee says is a finding of a solicitation not charged.  In this connection he suggests that the Crown’s reply to his submissions effectively erected a new case which was never adumbrated at trial relating to that solicitation.

38. Ground 13 is a matter of the construction of the Ordinance and an alleged failure by the judge to consider whether the applicant could have accepted commission as a principal and not as an agent and, if as the former, could he be convicted under section 9.

39. The essence of the Crown’s case was first of all the directorship of the applicant of CJL,. then the alterations in the UCL sales contract by having CJL deleted and altering the purchaser’s name to Hua Ding, the applicant’s directorships of those two companies, the clear tax dodge associated with second contract No.85121 which was to avoid Chinese Tax on the loan money provided by the Sanwa Bank on the guarantee of China United, the payment of the commission direct to the applicant’s personal account and, finally, the keeping of the true facts from CJL until a very late stage.

40. The evidence at trial and the submissions before us disclose a lamentable lack of proper management of this joint venture with a confusing number of cross directorships.  No one seems to have taken a glance at what CJL was supposed to do and was in fact doing.  But that is by the way.

41. When ground 1 was first presented to us members of this Court were of the view that it might well determine this application.  Indeed, Mr. Lee had urged that on this ground alone we should quash the conviction.  Our view was indicated to counsel and it was suggested to us that, were we to do so and, in consequence to give consideration to a retrial, this would be of benefit to no one and give, in effect, the Crown another bite of the cherry.  Mr. Lee asked us to exercise our own discretion in place of that of the trial judge.

42. In the event we went on to hear the entirety of the submissions on both sides.

43. What led to the first ground was this.  At the outset of the trial three witnesses, whom the Crown wished to call and who were intimately concerned with the matters which they sought to prove, were not available being then out of the jurisdiction and not prepared to come to Hong Kong.  These witnesses were Tokumitsu, Katagiri and Uchida.  Counsel then appearing for the applicant made a submission that the proceedings should be stayed on the basis that it would be unjust to allow the prosecution to proceed in their absence.  The trial judge accepted that he had a discretion to stay the proceedings in those circumstances, basing himself on R. v. Cavanagh and Shaw [1972] 1 WLR 676 where it was held, although the appeals there were dismissed, by the English Court of Appeal that:

“ provided the prosecution had taken all reasonable steps to secure the attendance of witnesses named on the back of the indictment, the Court had a discretion to permit the trial to proceed if there was no injustice to the defendants and, since in the circumstances it had been to the defendants’ advantage that B had not been available to give evidence, the judge had rightly exercised his discretion to allow the trial to proceed.”

44. A discretion to permit to proceed must, and properly, include a discretion to stay.  Let us say at once that, in the course of his submissions, Mr. Lee has conceded that the absence of Katagiri and of Uchida is not now material for he accepts that, if they gave evidence in accordance with their witness statements, they would have provided evidence prejudicial to the applicant.  We are, therefore, on the issue of injustice, concerned primarily with the evidence capable of being given by Mr. Tokumitsu.  The main issue, however, is whether or not, in coming to the decision he did in the absence of all three witnesses, the judge properly exercised his undoubted discretion.  It is accepted that he would, had he thought there to be no injustice to the applicant, have been entitled to allow the trial to proceed.

In part of his ruling, the trial judge said this:

“Having regard to the considerations mentioned in Cavanagh and Shaw [1972] 1 WLR 676 at 679E I took the view that the trial should proceed in the absence of these witnesses, despite the slight risk of prejudice to the defence.  It seemed to me that some of the facts, which the defence might have expected to elicit from absent witnesses, could have been given by other witnesses or be given by the accused.  It was never suggested that the absent witnesses could or would give evidence on crucial issues which was not available from the defendants or other persons, who might be willing and available to testify on their behalf.”

45. Mr. Reading, who appeared for the Crown both here and below, concedes that whether or not the “accused” or the “defendants” could give the evidence was not a factor which the trial judge should properly have taken into account in determining whether or not injustice would be done by reason of the absence of the witnesses and therefore was not a factor he should have considered in the exercise of his discretion.  This concession, fairly made, we accept.  It would clearly be wrong to force a defendant into the witness box.  This of itself might not have been enough but in addition there was a second and, with great respect to the trial judge, fundamental error in the manner in which he did exercise it.

46. There were available to the trial judge the statements made to police officers of the International Investigation Section of the National Police Agency of Japan by the absent witnesses.  The judge did not have any depositions before him as would have been the case had this trial taken place in the High Court thus placing him at a disadvantage in his assessment.  He felt that problem might be overcome by looking at the witness statements, with the consent of the accused and counsel, but that it would be further necessary to weigh them against the evidence of other witnesses in the trial.  He stated it as his opinion that an accused person should not be required to waive objections to the Court’s “being acquainted with inadmissible material, and notwithstanding high authority to the effect that professional judges sitting alone can be relied upon to exclude inadmissible or prejudicial material from their assessment of the evidence, .....”

47. He then went on to express the view that it was difficult to see how the individual accused or the objective observer could really be convinced that justice had been done or had been seen to be done if the Court did examine written statements of absent witnesses that contained material adverse to the defence.  This was despite Mr. Llewellyn’s invitation to the trial judge to look at the statements in order that he might see the injustice in continuing without the witnesses.

48. The trial judge asked counsel to give an undertaking that, if he did look at the statements, there would be no objection to his continuing with the trial were he to so decide.  The Court then adjourned for the purpose of enabling the applicant to be fully advised of the proposal that the judge should read the statements.  Upon resumption, counsel informed the Court that the applicant was satisfied that he should.  There was then a further short adjournment for counsel to discuss between themselves whether the statements would be admissible under the provisions of section 65B of the Criminal Procedure Ordinance, Cap.121.  This unfortunately could not be done for there was no agreement.  After further short submissions the judge ruled as he did having refused to look at the statements.

49. Once it was established that the witnesses would not attend in the circumstances as outlined here then the main issue was whether or not injustice would be done to the applicant by proceeding in their absence.  In order to ascertain whether or not this was so, and so that the exercise of his discretion could be a properly informed one, it was clearly necessary for the trial judge to consider that which they would have said were they to live up to proof.

50. In Attorney General v. Ma Chiu Keung [1988] 2 HKLR 64 at p.70, another Division of this Court considered Cavanagh and Shaw, which in turn had considered and approved R. v. Woodhead [1874] 2 CAR & K 520 175 ER 216.  Geoffrey Lane, J. (as he then was) in delivering the judgment of the Court in Cavanagh and Shaw said at page 679:

“If, however, it proves impossible, despite such steps to have the witnesses present, the Court may in its discretion permit the trial to proceed provided that no injustice will be done thereby.  What considerations affect the exercise of the Court’s discretion will vary infinitely from case to case.  Would the defence wish to call the witnesses if the prosecution did not? What are the chances of securing the witness' attendance within a reasonable time? Are the prosecution prepared to proceed in its absence? If so, to what extent would the evidence of the absent witness have been likely to assist the defendant? If the absent witness can be procured, will other witnesses by then have become unavailable? There will be many other matters which may have to be considered.”

51. In Ma Chiu Keung the Court was concerned with a trial judge not having considered the statements made by an absent witness, the victim of a robbery, before ruling that the proceedings should terminate and it indicated its adoption of the considerations referred to in Cavanagh and Shaw.  It held that what the trial judge should there have done was to hold a form of preliminary inquiry, considered the victim’s statement, the contents of a cautioned statement made by the accused which the prosecution wished to adduce and any other evidence relevant to the issue before coming to a decision.

52. This is similar to the course which should have been adopted here.

53. It is the function of a judge, be he sitting alone in the District Court or in the High Court with a jury, to rule upon the admissibility of evidence.  Judges do it everyday of the week.  Usually it is necessary to Know what the evidence is before the question of its admissibility can be properly considered.  Professional judges are capable, and must be accepted as being capable, of putting out of their minds, should the evidence not eventually come before the Court, anything that they might have learnt from their perusal of it.  With great respect to this experienced judge he should, in the course of an inquiry, have considered the contents of those witness statements, and in particular that of Tokumitsu which we, in fact, have done.  Not to do so, combined with the error as to the applicant’s giving the evidence which those witnesses could have given, amounts to a failure to properly exercise his discretion and vitiates it.  That was a material irregularity.

54. It is Mr. Reading’s submission that, when proper consideration is given to the contents of Tokumitsu’s statement, the irregularity resulted in no injustice to the applicant - this is in effect adapting Mr. Lee’s submission that we should exercise our own discretion.  On the statement Mr. Lee argues the contra and both have drawn our attention to passages in that statement which, it is suggested, support their differing contentions.

55. While it might well have been right, bearing in mind Ma Chiu Keung, to have proceeded with this trial, nevertheless a defendant is entitled to have the issue resolved by a proper exercise of a trial judge’s discretion and not by a substitution by this Court of its discretion for that of the trial judge.  Had the judge here proceeded on the proper basis then it might well have been difficult to fault his exercise of his discretion.  But he did not.  Bearing in mind the contents of Tokumitsu’s statement and the submission of Mr. Reading we find ourselves unable to conclude that the trial judge, had he adopted the correct approach, would inevitably have found that no injustice would have been occasioned to the applicant by proceeding.  The real issue at trial was the agency if any of the applicant, a director as he was of CJL, to which Tokumitsu would have spoken.  We regret that we cannot accept Mr. Reading’s argument that Tokumitsu would have added very little to the evidence called at trial.

56. Because the exercise of the trial judge’s discretion was fatally flawed in the way indicated and because that amounted to a material irregularity which cannot, in our judgment, be rectified by this Court substituting its discretion for his, we are of the opinion that this conviction cannot stand.  It is not therefore necessary, with no disrespect to Mr. Lee, to go on to consider in detail his other grounds.

57. We have not come to this conclusion without hesitation, in the light of the admirably presented submissions of Mr. Lee and bearing in mind the succinct and helpful submissions of Mr. Reading, but we think the interests of justice require that the conviction be quashed, the sentence set aside and that this Court be addressed on the issue of a re-trial.

58. Having heard submissions the Court declined to order a retrial.

59. An application for costs was refused.