HKSAR v. HUI PO YUEN MAKIE

CACC 319/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 319 OF 2000

(ON APPEAL FROM HCCC NO. 264 OF 1998)

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J U D G M E N T

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Hon Stock JA (giving the judgment of the Court):

Introduction

1 The applicant was arraigned before Jackson J and a jury on an indictment containing 32 counts. The first 26 counts charged that he stole choses in action, between 3 September 1993 and 28 March 1995, to a total value of over $101 million. Counts 27 to 30 inclusive charged false accounting, contrary to section 19(1)(a) of the Theft Ordinance, by producing or making invoices in respect of fictitious sales of goods; and the last two counts, Counts 31 and 32, charged offences of publishing a false statement in the annual reports of a public company, namely Yeebo International Holdings Limited ("YIL") with intent to deceive creditors and members of that company. On 2 August 2000, the applicant was convicted on all but three of the counts, namely, Counts 3, 4 and 23, and he was sentenced to a term of seven years' imprisonment. His application for leave to appeal against conviction stipulated that he sought leave to appeal against all the convictions, but we were on the last occasion informed by Mr Lok SC, who has appeared on his behalf on this appeal, that the application relates to the theft convictions alone, that is, Counts 1-26 (Counts 3, 4 and 23 apart).

Adjourning the application

2 The application came before us in October 2001, and we heard argument by Mr Lok. By the outset of argument for the respondent, it became apparent that this court had been provided with insufficient information about the prosecution case but, more particularly, about the defence in relation to each challenged count. The essence of the application for leave attacked the judge's directions to the jury on the issue of dishonesty. It is said that the judge correctly directed the jury that a person was not to be deemed to have acted dishonestly if he appropriated property in the belief that he had in law the right to deprive the other of it, or where he did so in the belief that he would have the consent of the person to whom the property belonged if the other knew of the appropriation and the circumstances of it. But the complaint was that the judge went on to give a direction in terms of what has become known as the Ghosh direction, when to do so was to confuse the jury and to deprive the applicant of the full benefit of the statutory defences available under sections 3(1) and 3(2) of the Theft Ordinance, in that, by doing so, he undermined the subjective intent on which, it is said, section 3 concentrates.

3 Before being drawn into a lengthy analysis as to whether a Ghosh direction did have the effect for which Mr Lok contended, and on the relationship between Ghosh and section 3, we wanted to have the true context in which this argument was raised, for the point might be interesting academically, but this court does not sit to engage in academic exercises divorced from the facts of the case. It therefore seemed to us to be rather important to know how the applicant had run his defence; what he said in relation to the various counts; whether the section 3 defences were put forward in relation to all the theft counts or to some of them; and if in relation to all, whether some were covered by a section 3(1)(a) defence and others by section 3(1)(b); whether in fact he raised defences that required a Ghosh direction, and so on. The summing up in the case was in the region of 150 pages long, which is not a criticism given the fact that the trial lasted over three months; but it was hardly easy for anyone who had not been involved in the trial readily to answer these questions from a reading of the summing up. Counsel were not able to assist us. Mr Lok had not appeared at trial and, in any event, his case was that the point of law was of general application and that it did not turn particularly on the facts. Mr Cahill was also not able to assist us. The exceptionally short statements of the case proved in any event inaccurate in so far as they stated that the sums withdrawn from the company were withdrawn for the applicant, whereas such oral inquiries as we made in the course of argument upon the last occasion soon made clear that that was not so, and therefore we adjourned the application part heard until today.

4 We have now been provided with some assistance as to the defence in relation to each count. The respondent's skeleton submission deals with the points of law raised, but does not deal, as might have been hoped, with the question whether, in this particular case, section 3 defences were raised; whether in this case Ghosh was raised; and whether the issue placed before us as the central issue in this appeal is, in the light of the directions, the verdicts on the false accounting counts, and the jury's evident acceptance of the prosecution evidence, in fact a live issue. In the event, we have had to do a considerable amount of homework ourselves to discover the true evidential basis upon which we are asked to determine the raised issue.

Factual Background

5 The facts of the case, which are complex, are as follows. In the late 1980s a number of men, who included one Marshall, and persons named Suzuki and Wan Wai Tak, established a factory to produce LCDs and the venture was financed wholly or in part by one K K So. Thus did Yeebo Development Limited, the company which is at the heart of this case, come to be incorporated. K K So ran his own company, called Kin Son Electronics (Kin Son), and Kin Son did business with Yeebo although, as the years progressed, that business diminished. In 1989, the applicant became a director of Yeebo. The evidence established that K K So and the applicant were close acquaintances, an acquaintanceship which went back to the days when the applicant was the sales manager for a company called Conic, which was doing business with Kin Son.

6 On 1 September 1993 the shares of YIL were listed on the Stock Exchange. Yeebo Development Limited ("YDL") was a subsidiary of that company, and the applicant was appointed Chairman of YDL. It was a matter of considerable surprise to some of the witnesses that that had happened, given his lack of prior experience at such level. It would appear that he held 44% of the shares in the company. A subsidiary of YDL was called Yeebo Semiconductor Ltd ("YSL"). The applicant was the sole authorised signatory of all cheques drawn in the name of YDL and YSL. The bank credits or facilities which constitute the choses in action in relation to Counts 1 to 21 inclusive were in the name of YDL; and those the subject of Counts 22 to 25 inclusive in the name of YSL.

7 The prosecution case was that between early September 1993 and 28 March 1995 the applicant, without any lawful authority, abused his position as Chairman and sole signatory to divert funds for purposes which, as he well knew, were wholly unauthorised and that, in order to cover up his malfeasances, he caused documentation to be created and falsified. The amounts involved are enormous: in respect of the theft offences of which he was convicted they amount to $74,307,270. All the offences are said to have been committed with one named accomplice and others.

The Indictment

8 The first count on the Indictment states:

Count 1

HUI Po-yuen, Makie, on or about 3rd day of September 1993, in Hong Kong, together with LING Tim-wah and other persons unknown, stole a chose in action, namely a debt in the sum of $2,000,000 Hong Kong currency owed by Standard Chartered Bank to Yeebo Development Limited, the said debt being the property of Yeebo Development Limited.

Counts 2 to 26 inclusive, each alleging theft, are in much the same form, differing as to date, amount of the chose in action, and the person with whom the offence is said to have been committed. So:

Count 2 alleges theft by the applicant, on or about the 11th day of October 1993, with LING Tim-wah and other persons of a chose in action (a debt) in the sum of $5,000,000 owed by ABN Amro Bank to Yeebo Development Limited.

Count 3: On or about the 18th day of October 1993, together with LING Tim-wah and SO Kin-keung and other persons unknown, theft of a chose in action, in the sum of $15,000,000 owed by ABN Amro Bank to YDL.

Count 4: On or about the 18th day of October 1993, together with LING Tim-wah and SO Kin-keung and other persons unknown, a chose in action, in the sum of $5,000,000 owed by Yien Yieh Commercial Bank Limited to YDL.

Count 5: On or about the 2nd day of November 1993, a chose in action, in the sum of $2,000,000 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 6: On or about the 1st day of December 1993, a chose in action in the sum of $500,500 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 7: On or about the 7th day of January 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $1,100,000 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 8: On or about the 29th day of April 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $500,000 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 9: On or about the 29th day of April 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $5,000,000 owed by Bank of East Asia Ltd. to YDL.

Count 10: On or about the 29th day of April 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $4,000,000 owed by Bank of East Asia Ltd. to YDL.

Count 11: On or about the 2nd day of May 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $248,000 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 12: On or about the 4th day of May 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $2,370,000 owed by Bank of East Asia Ltd. to YDL.

Count 13: On or about the 10th day of May 1994, together with SO Kin-keung and other persons unknown, a chose in action in the sum of $1,000,000 owed by Bank of East Asia Ltd. to YDL.

Count 14: On or about the 10th day of May 1994, together with SO Kin-keung and other persons unknown, a chose in action in the sum of $1,000,000 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 15: On or about the 18th day of May 1994, together with SO Kin-keung and other persons unknown, a chose in action in the sum of $2,000,000 owed by National Bank of Canada to YDL.

Count 16: On or about the 23rd day of May 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $700,000 owed by Bank of East Asia Ltd. to YDL.

Count 17: On or about the 7th day of June 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $300,000 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 18: On or about the 7th day of June 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $25,000 owed by Yien Yieh Commercial Bank Ltd. to YDL.

Count 19: On or about the 10th day of June 1994, together with SO Kin-keung and other persons unknown, a chose in action in the sum of $2,000,000 owed by National Bank of Canada to YDL.

Count 20: On or about the 5th day of July 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $100,000 owed by Yien Yieh Commercial Bank Limited to YDL.

Count 21: On or about the 8th day of July 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $200,000 owed by Yien Yieh Commercial Bank Limited to YDL.

Count 22: On or about the 22nd day of December 1994, together with SO Kin-keung and other persons unknown, a chose in action in the sum of $1,300,000 owed by Bank of East Asia Limited to YSL.

Count 23: On or about the 3rd day of March 1995, together with Rue Steel MARSHALL and other persons unknown, a chose in action in the sum of $130,000 US currency owed by Citibank N.A. to YSL.

Count 24: On or about the 23rd day of March 1995, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $10,800,000 owed by Bayerische Vereinsbank AG to YSL.

Count 25: On or about the 28th day of March 1995, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $3,253,770 owed by Belgian Bank to YSL; and

Count 26: On or about the 7th day of September 1994, together with LING Tim-wah and other persons unknown, a chose in action in the sum of $35,000,000 owed by Citibank, N.A. to YSL.

Counts 27 to 30: These were counts alleging false accounting by which it was asserted that the applicant, with a view to gain for himself or another, falsified invoices purporting to show that YSL had sold goods to a company called China Merchandise Company, (Count 27) and a company called Proton (Counts 28 and 29), when in fact no such goods had been sold.

Counts 31 and 32 relate to the annual reports of YIL, for the years 1994 and 1995 respectively; and they alleged that the applicant published, on each occasion, a false statement, namely, the Annual Report of YIL, by overstating the current assets figures for the year in question.

8 Mr Ling named in some of the counts became a director of Yeebo before it went public. At all material times Mr Marshall was the production manager for Yeebo; and Mr Suzuki was the sales and marketing director. Mr K K So, to whom we have already referred, fled Hong Kong in July 1995.

The Evidence

9 The evidence led by the prosecution was that the applicant signed Yeebo cheques and caused cashier orders to be issued in favour of a number of beneficiaries, in particular Kong Chung Trading Company, a company in the hands of Mr Ling and K K So, and also Kin Son Electronic of which former directors of YDL, Mr So and Mr Ling, were directors and each of whom were associates of the applicant. The sole proprietor of Kong Chung was a Mr Chan, an odd jobs man, who gave evidence at the trial, and he was put up as sole proprietor at the behest of So and of Ling. Funds found their way from YDL to K K So, or to his company, or to companies to whom K K So was said to owe money, often through Kong Chung. Not all of the funds went to third parties. Some were for the direct benefit of the applicant for himself: for example, in the case of Count 5, it is accepted by the applicant that the funds were used to pay a deposit for an apartment which he purchased; and in the case of Count 6 for the purchase of shares.

10 That all was not as it should be with these payments was evident to quite a number of officers and employees of Yeebo who testified at the applicant's trial. Some had participated in illegality and gave evidence under immunities which had been granted by the prosecution. Mr Marshall, for example, who was the one who eventually made a report to the police about the affairs of the company, noticed in late 1993 or early 1994 that the company had no money, and he broached the subject with the financial controller, a Mr Wong, who said that the difficulty was a temporary one, and that funds had been removed for non-company purposes. So Mr Marshall spoke to the applicant who in turn said that Yeebo had given certain guarantees for Kin Son, but that these had not been disclosed when Yeebo had been listed. Now Kin Son was in difficulties, and therefore Yeebo had to help Kin Son, lest, if Kin Son became more deeply mired, it might lead to an investigation of Yeebo. This admission, if true, is relevant to the question with which we later deal, namely, whether the issue raised in this appeal is or is not a live issue.

11 Then, according to Marshall's evidence, in February 1994 the applicant proposed a scheme for the distortion of sales figures, to inflate the figures of sales to the Mainland. This, said the applicant, had to be done because otherwise there might be an investigation, for the figures did not match projections made at the time of listing.

12 All these events are to be viewed in light of the evidence of Ms Kitty Ma, who was an accountant employed by the company. Her evidence was central in this case, and it is obvious from the judge's directions, and from the verdict, that Ms Kitty Ma's evidence was believed by the jury, and that where the defendant's evidence conflicted with hers, as it did frequently and materially, he was disbelieved by them. It appears that she is the one who would prepare cheques for signature on the applicant's directions. Her evidence was that in 1993 she became concerned about the large number of cheques issued under the applicant's signature, as well as about the large sums for which they were drawn. Accounting difficulties were posed for her because often the applicant would not tell her what the cheques were for. So in respect of such cheques it was impossible, for example, at the time, to complete bank payment vouchers. But in due course this was remedied although (if her evidence was correct, and it was believed by the jury) in a way or in a manner that reeked of dishonesty. She was asked by Mr Wong to supply a list of all cheques which had been drawn, the purpose of which was unclear; and she provided such a list. In due course she received back from him a list on which, against each unexplained cheque, there was provided an explanation as to payee and purpose. In particular, there were two companies, one called Leinger Enterprises and the other S T Microsystem ("STM") which were, by these vouchers, represented to be the beneficiaries of these payments. In about May or June 1994, when the audit for the financial year ending March 1994 was in progress, the applicant asked her, she said, to create documentation for cheques issued in the year under audit; in other words, to create invoices and quotations and receipts and so on. These were bogus. The documents were fabricated using letterheads or forms which were in the applicant's possession and which he gave her. For example, P 15 was an order confirmation suggestedly issued by Leinger Enterprises which was given to her and she matched it with a payment voucher. P 16 was a quotation by STM for a total of $4.963m.

13 Returning to Mr Marshall, he said that in February 1995 the applicant proposed a scheme to inflate the price of a UV system which Yeebo was to import for its production line and to falsify the number of orders placed. The idea was to cover up for money taken from the company. This was duly done, but there then came the problem of convincing the auditors that the equipment had been ordered. This in turn was overcome with the cooperation of compliant acquaintances of the applicant in the USA and in Taiwan who, for the appropriate bribe, agreed to make equipment available for the inspection of the auditors. The equipment was supposed to have been sold by STM, but the company had in fact no dealings with Yeebo, and so documentation was forged to back up the fraud.

14 The UV system was not the only area for the inflation of prices. It became a feature of life in Yeebo; and a company called Great Pyramid was used by the applicant to purchase goods sold to Yeebo at inflated prices, and the profit accruing to Great Pyramid was channelled to the applicant himself.

15 There was evidence that in August 1994, Mr Wan was sent an envelope containing documents dated September and October 1993 which referred to three companies, of which Wan had never heard, which were, according to these documents, supposed to have supplied YSL or YDL with goods. The fact that Wan had never heard of the companies was significant, because he was the man responsible for ordering goods. Some of the items were clearly surplus to requirements, and none of them was ever delivered to either company. So, too, with Count 26, the count which alleges theft of $35m. This was a payment to Kong Chung, supposedly for the balance of the cost of a UVS system. Wan was shown two documents, exhibits 157 and 158, which purported to support the requirement to pay Kong Chung Trading. But Wan had never ordered the items and, in any event, the prices, he knew, were grossly inflated. In August 1994, that is, one month before the payment of the sum of $35m, he was asked by the applicant for a catalogue of items needed for LCD production. The applicant's own evidence in relation to the payment of this sum was that this was a blank cheque when he signed it. He said that he was told after the event that it was for the purchase of machinery. Yet Ms Ma's evidence was that she prepared a quotation to back up this cheque, and that the quotation was on Kong Chung's notepaper, and that that paper was given to her for this purpose by none other than the applicant himself. Also on his instructions, she prepared a receipt on Kong Chung paper. What is significant is that at the time this cheque was drawn, Kong Chung had almost exhausted its considerable overdraft facility. The deposit of this cheque put Kong Chung back into funds, and one sees the flow of funds shortly thereafter from Kong Chung Trading: between 8 September 1994 to 13 September 1994 a sum of almost $35,420,000 was paid out. Some was drawn in cash by Ling; some went to settle a loan; $2.5m went to Chinacreate, that is the applicant's own company; some went to settle interest on a loan which K K So owed. $4.25m was paid to Kin Son Electronic, which sum then went out of Kin Son. The defence case, however, was that this sum was paid for the purchase of machinery. The prosecution case was that there was no purchase of machinery. What there was was a scheme, later, by which the applicant wanted machinery available for inspection by auditors to match the suggested purchase. This dramatic conflict of evidence, or of cases, is again relevant to the question whether the Ghosh direction issue raised by this application for leave is, in light of the judge's directions and the verdicts, a real issue for us to consider.

16 The evidence of Kitty Ma, once accepted by the jury, as clearly it must have been, was particularly damning of the applicant. Count by count she explained how the applicant had caused her to fabricate documents. For example, in relation to Counts 8 to 12 which involve a sum of $12.118m, she forged a letter, on the applicant's instructions, from ST Microsystems seeking from Yeebo the sum of $12.118m as an additional deposit for equipment, and asking for payment to be made to Kong Chung Trading Company "our liaison office in Hong Kong". It so happens that this sum was the very total of the cheques which are the subject to Counts 8 to 12 inclusive, none of which ever went to ST Microsystems. Indeed, the applicant's own case in relation to Count 11 is that the sum was a loan to him from Yeebo. In support of each payment she prepared a bank payment voucher showing the name STM and a receipt from Kong Chung Trading Company, each handed to her by the applicant, as well as the quotation for machinery on STM letterhead.

17 In May 1994, cheques and a cashier order were issued in favour of a company called Alexandra Stock company, totalling $4m. However, there were created debit notes by Leinger and the bank voucher showed payments to Leinger with matching receipts from that company. The receipts were typed by Ms Ma on pads supplied by the applicant. These cheques and the cashier orders are the subject of Counts 13 to 15.

18 The letter seeking $12.118m as an additional deposit was not the only letter supposedly from ST Microsystems which she was told by the applicant to create. There was another dated 18 May 1994 demanding a sum of $1.325m which happened again to coincide with the total of the cheques signed by the applicant the subject of Counts 16 to 21 (save for Count 19). The applicant's case is that some payments were for the development of an hotel in Vietnam; one a petty cash cheque; and one to Kin Son for some project. None of this tallies with the letter. In relation to Count 19 she prepared, on the applicant's instructions, a bogus confirmation order by Leinger as well as an invoice. In fact the cheque was left blank as to payee, and Kin Son was filled in later as payee, but not by herself. The same happened in relation to the cheque which was the subject of Count 22; yet on the applicant's instructions a voucher and receipt purporting to support a payment to ST Microsystems, and a letter of demand from that company, were also created.

19 Count 25 concerns a cheque, again to Kong Chung, with false documentation suggesting a debt due, and paid in favour of Leinger. Given the evidence of the man who created Leinger that Kong Chung was never an agent for Leinger, the falsity of the scheme is patent. Also prepared and approved by the applicant were two revised purchase orders (P60) and (P61) - one from YDL to STM purporting to confirm orders for machines in the sum of $12.1m, and another from YDL to Leinger in a total of $17.758m.

20 In the event, a glance at a table helpfully prepared by the prosecution for the jury shows clearly what happened. Two purchase orders were purportedly issued, one by STM totalling $48.643m, the other by Leinger Enterprises totalling $17.758m, each for the suggested purchase of machinery. Those two sums however did not buy machinery, nor were the orders genuine. The sums happened to represent the totals of cheques and cashier orders made out either to cash in some instances; in others to Kong Chung which was not associated with STM; on two occasions to Kin Son Electronics; once to Chinacreate, the applicant's own company; once to a firm of stock brokers (Peregrine) to pay for shares purchase by the applicant; once to his solicitors in cash to pay a deposit on a flat; and also to this company called Alexandra Stock Company. These purchase orders were created after the event, in other words to fit the value of the cheques and cashier orders issued, and which are the subject of Counts 1 to 25. Bank vouchers and receipts and invoices were prepared to back up these payments allegedly made to fulfil delivery of goods for the purchases or to make deposits for the purchases, represented by the purchase orders. It was Kitty Ma's evidence that the bulk of this bogus documentation was prepared at the applicant's direct behest.

21 There was other cogent evidence of dishonesty by the applicant, and not all from within the company. For example, in support of Counts 28 and 29, which are not now the subject of appeal, there was evidence from a Ms Leung Hung Kwan, who ran a company called Proton, and her evidence was that the applicant had asked her to use her company's chops to chop two invoices issued by Yeebo, though there was no question of them representing a true order or delivery of goods by Yeebo. She noticed that the address and telephone and fax numbers used on Kong Chung notepaper were in fact the address and numbers of Proton, yet there had been no authority given by Proton for this to be done. She also testified as to the use by the applicant of her private bank accounts for the channelling of monies.

22 There was testimony from a Mr Kuo from Taiwan who had established the company called Leinger which had some business with Kin Son Electronics; but there was never any business with Yeebo nor was Kong Chung ever an agent for Leinger. Documents purportedly issued by Leinger in this case were shown to him, and he said that they were fakes.

23 This then gives the flavour of the evidence and of its strength against the applicant.

The Defence

24 What was his defence? His defence was that he knew nothing of any falsification of documents, and that Ms Ma's account was untrue. The judge summed up the essence of the applicant's dispute with Ms Ma, which was extensive and fundamental:

"He told you how the cheques prepared by YDL. YSL and YPCB were usually presented to him for signature by Kitty Ma. He said that not all of them were accompanied by supporting documents, and if they were not Kitty Ma would explain to him what they were for and he would sign them. She saying that she would file supporting documents later.

As to bank payment vouchers the defendant told you that he would sign all of those given to him by Kitty Ma and if any were not signed by him he had not been given them. He denied that he had ever instructed Kitty Ma to prepare order confirmations and other correspondence for ST Microsystems. He said that he had first heard of that company after listing, when Marshall and Suzuki told him that it was a company associted with Fred Otto. The defendant also denied ever instructing Kitty Ma to prepare documents in the name of Leinger, which company he first heard of when Suzuki gave or sent to him an order confirmation.

He denied having unsigned Kong Chung notepaper in his office, or of giving Kitty Ma any instructions concerning tht company, or of Kitty Ma giving him any unsigned Kong Chung or Leiner receipts.

He told you that he did not have in his possession Leinger or Kong Chung receipt pads, or signed but uncompleted Kong Chung receipts." (Tr. p 153)

25 The applicant's defence advanced at trial was that money was used for a variety of purposes. He said, in some instances, that there was money owed to him by the company which was in a director's account - why the record did not reflect this, he could not say - Kitty Ma made mistakes. Then he said, (Count 7 for example), that he had overpaid the company in repayment of such a loan and, therefore, he drew money for reimbursement - why this gave rise to a receipt from Kong Chung, or to a bank voucher showing a payment to STM, he could not say; there was money paid out for deposits on machinery (Counts 8, 9, 10 and 12); funds drawn to make loans to K K So, which loans, however, we see were not recorded as such in the company records, and in respect of which there were no board resolutions, and in respect of which loans or suggested loans there was never any written agreement, and in respect of which payments there were debit notes from Leinger Electronics; there were loans to himself (Count 11); some monies went out, he said, to pay a deposit on a hotel in Vietnam - here, too, the documentation did not support the suggestion, and the payments were, oddly if this was the true purpose, made in cash, and in one instance, cash was given to Chan Man Yin, the odd jobs man who was the proprietor of Kong Chung (Count 20); there was payment, he said, for a project furnished by Kin Son, though the company documents mentioned no such objective, and the cheque to which this expenditure related was blank when the applicant signed it (Count 19); there was payment for the UV system. All this, he said, was known full well to company staff, and he never sought to cover it up. The suggestion that the monies were merely channelled for the benefit of himself and his friends, and that there was no genuine loan to himself, and no genuine purchase of machinery, was all denied by him, as was the suggestion that the true intent of these payments were disguised by him by the creation of false accounting documents.

The Grounds of Appeal

26 The surviving grounds of appeal all relate to the judge's directions in relation to section 3 of the Theft Ordinance, Cap 210.

27 The section, in so far as is relevant, runs as follows:

"(1) A person's appropriation of property belonging to another is not to be regarded as dishonest-

(a) if he appropriates the property in the belief that he has in law the right to deprive the other of it, on behalf of himself or of a third person; or

(b) if he appropriates the property in the belief that he would have the other's consent if the other knew of the appropriation and the circumstances of it;

...."

28 Grounds 1 and 2 of the amended perfected grounds of appeal, read thus:

"1a. The learned Judge erred in law in that he failed to direct or sufficiently direct the Jury that in relation to s.3(1)(a) and s.3(1)(b) of the Theft Ordinance, Cap. 210, they ought to approach the Applicant's belief in a subjective manner, and in that regard, it was immaterial whether such belief was unreasonable, unfounded in law or in fact, so long as it was genuinely held by the Applicant. [Page 45 line N to page 46 line H of the Bundle]

1b. The learned Judge erred in law in directing the Jury in relation to S.3(1)(b) that the applicant would not have such belief if he didn't intend to enquire of the owners. [Page 46 line G to H of the Bundle]

2. Further or in the alternative, the learned Judge was wrong to direct the Jury on dishonesty in line of Ghosh [1982] Q.B. 1053 immediately after his directions on s.3(1)(a) and s.3(1)(b). [Page 46 line N to page 47 line B] Such direction would in the circumstances import unnecessarily an objective test into s.3(1)(a) and s.3(1)(b) in relation to the Applicant's belief and therefore was wrong in law. Alternatively, such direction had the effect of removing the subjective test which ought to have been applied in relation to s.3(1)(a) and s.3(1)(b), and therefore was likely to confuse the Jury."

Analysis

29 We resumed today the hearing of this application, and Mr Lok advised us that he had nothing further to add to submissions made on the last occasion. We have had the benefit since that occasion of seeing, and considering in depth, the defences put, and the arguments then raised (to which nothing is now added) and the particular grounds of appeal which are advanced, namely, the relationship between section 3 of the Theft Ordinance and the Ghosh direction, and the suggested failure of the judge in this case to address those issues properly, and the suggestion that, by giving a Ghosh direction, the applicant's accounts and his defence were materially undermined.

30 We have concluded that the argument on this appeal is a red herring. It is a red herring for two reasons. First, it is self-evident that the basis of the defences which are suggested to give rise to pure section 3 defences, unadorned by any Ghosh direction, were rejected by the jury. In other words, the jury obviously disbelieved that the monies were channelled from the company for the purposes which the applicant put forward. That being so, the question of his honest belief that he could use funds for those purposes simply did not arise. The jury believed that the monies were channelled for different purposes, entirely to benefit the applicant and his friends, and that he engaged thereafter on a scheme to falsify the documents, the purpose of which could only have been to cover up what he knew to have been dishonest. That being so, the whole premise for the argument before us falls away. Secondly, the entire argument of the applicant is premised on the following assertion to be found in Mr Lok's supplementary submissions: "It is now apparent that the applicant did not raise the defence that he did not know that anybody would think what he had done was dishonest. Therefore the Ghosh direction should not have been given." If that premise is false, as we find it is, then, again, the whole basis for this appeal falls away.

31 As to the first reason, the judge made it clear to the jury that if the applicant's account was true or may be true, he was to be acquitted. At an early stage of the summing up, he reminded the jury, count by count, what the defence was. Then, he said this - and it is difficult to see, once one takes in these passages, what possibly can be the complaint in this case:

"The defence case is, in relation to these counts, [Counts 1 to 26] that the defendant was not acting dishonestly. That so far as he was concerned, or was led to believe by others, each of those transactions was legitimate or proper, and that if any of the documentation was indeed false or falsified, he, the defendant, was not a party to that falsification. That was done by others, who, for reasons of their own, have effectively conspired together to cast the blame on to him and to give false evidence against him.

It is not for the defendant to prove that defence. But if that is right, members of the jury, or if it may be right, the defendant is not guilty of these counts of theft.

In relation to Counts 27 to 30, which allege false accounting, the issues are these. Was the defendant a party to the issuing of these four invoices? Were they false invoices, and if so, did he do what the prosecution tells you he did, dishonestly and with a view to gain for himself or another or to cause loss?

The defence case is that in relation to these counts of false accounting, he was not acting dishonestly when he did what he did. The invoices were genuine invoices for goods delivered. And when the defendant did what he did, it was not with a view to gain for himself or another, or to cause loss. And again, members of the jury, it is not for the defendant to prove that defence. But if it is correct or if it may be correct, you will find him not guilty of the false accounting charges." (Tr. pp 30-31)

32 Obviously, falsification of the accounting documents, if proved, and if proved to have been at the behest of the applicant, was, as common sense and the evidence of Marshall showed, the clearest evidence that the applicant knew full well that the monies had gone out for illegitimate purposes. In this regard we see what the judge, said and here, again, the judge was dealing with only the counts relating to theft, and the question of inferences of dishonesty which might be drawn, and the evidence from which such inferences might be drawn:

"The other direct evidence which the prosecution says must inevitably lead you to draw those inferences is the evidence before you about the defendant's instructions concerning, and indeed, his participation in the altering or creation of receipts and invoices and other documents. Now, members of the jury, so that there is no doubt about it, it is not open to you to draw those inferences about the defendant's intent or dishonesty in relation to the counts of theft on the indictment unless you are sure, firstly, that defendant did, indeed, appropriate or take property belonging to the company. And you are sure, secondly, that after doing so, he then took active steps to cover up what he had done. In other words, he instructed others or participated with others in the preparation or the creation of false receipts and invoices.

The defence case, as the defendant himself told you in evidence, is that he had no part whatsoever in the preparation of any false or bogus receipts, invoices or other documents. And if that is right, or may be right, it is not open to you to draw any adverse inference against him as regards his honesty or his intention, and in that event, the prosecution would have failed to have proved a vital element in the offence of theft and you would find the defendant not guilty. And even if the prosecution has made you sure that the defendant did take active steps in the preparation or creation of false documents, it does not follow that you must then draw the inferences against him which the prosecution invites you to draw. It is for you, members of the jury, as the judges of the facts in this case, to decide what inferences you can properly draw, given my direction to you on this subject." (Tr. pp 38-39)

33 It is quite obvious from the directions which we have cited that this jury concluded that this applicant engaged in falsification of accounts, and that his evidence generally was untrue. Indeed, there is no appeal in relation to those counts in respect of which he was convicted of falsification. In other words, it is obvious that the jury rejected the applicant's account as to why he was causing the funds which were the subject of these counts to be taken out of the company. That being so, it is impossible to see how the issue of claim of right truly arises.

34 As for the second point which we have said constituted the premise of this appeal a red herring, we do not in any event accept that the applicant did not raise an evidential basis for a Ghosh direction. Let us take but a few examples. When speaking of loans to K K So, the applicant was asked why there was no board resolution authorising the loan and he said (tr. page 1492), that he did not know it was necessary to have one. He said that he thought it acceptable to make payments for a hotel in Vietnam with company money, because he intended to pay it back (p 1479); that in relation to Count 1, a payment of a sum of $248,000, a loan to himself, true there was no meeting to authorise that, but "Why bother with such a small amount?"(p 1489); and in relation to another loan, when asked why there was no loan agreement, he said he did not know much about rules in relation to listed companies (p 1494); that, as for Count 21, and payment of sums for a hotel in Vietnam for which there was no company record, and the payment was in cash so that there was no protection for the company, he said: "I would be responsible for it". These, in essence, were protestations by him that, whilst others might be more particular, some might be less, and that he felt that what he was doing was acceptable in the running of a public company; and that what he did was known by his staff and was accepted by them too. In the light of the tenor of these defences, we venture to suggest that had there not been a Ghosh direction, that omission would have been the subject of complaint in this appeal. We note, too, that, in a closing address by counsel for the prosecution, he put to the jury for their suggested consideration the Ghosh test of dishonesty. That met with not a murmur of disapproval from counsel for the applicant who, one might think, was best placed to have the feel of what his client's defence was all about.

35 We do not in the circumstances intend to be drawn into an analysis of Ghosh in relation to section 3 of the Theft Ordinance. We would merely say this, that Mr Lok's reliance on certain authorities in support of his appeal is, with respect, a reliance which, in the context of this case, is misplaced. First, they are primarily concerned with cases in which complaints have been made that the Ghosh direction was not given. Secondly, the only case in which there was a suggestion that a specific section 3 direction ought to have been given, where only a Ghosh direction was given, was a case far removed on its facts from this case. In support of his argument, Mr Lok cited R v Wootton [1990] Crim L R 201, and the passage reported there that the court thought it was undesirable that section 2 of the English Theft Act (our section 3) was not drawn to the jury's attention, even though the Ghosh direction was, the court there adding that in that case "there was a clear claim of right ... which was not necessarily the same thing as saying 'we considered the that the way we acted was in the Ghosh sense.'" The full judgment of that case reveals in detail what the facts were. It was a classic claim of right case. One defendant said he had been told in terms by the wife of the owner of the pottery, which was run by the owner and the wife, that he could take pots because the owner owed him money; and the other defendant said that he too was owed money and what he had done was by arrangement with the owner's wife. One can see that in such a situation a mere direction along the lines of Ghosh, without any assistance as to how that relates to the very specific claim of right in such a case, might not bring home to the jury, as much as it should, that if a person genuinely believes he is owed money, no-one could properly find him to have acted dishonestly. In this case, the judge not only encapsulated section 3 for the jury (tr. p 45), but also told them in terms that the defence was that the applicant honestly believed that he was entitled to do as he did, and if that were right he was to be acquitted. In the circumstances of this case, which we have described, the complaint is not made out.

36 The suggestion by the judge (at page 46 G-H) that if the applicant had not asked the directors and shareholders whether they objected to what he was doing he could not have held the beliefs he said he held, was, perhaps, an odd comment. But in the context of the case, it is obvious that the jury did not believe the defendant's claim of honesty, and that disbelief was quite clearly engendered by completely overwhelming evidence of dishonesty which had little to do with whether the applicant asked shareholders if he could or could not use company money for the purposes for which they were used, which were quite unauthorised. The idea of him asking shareholders was a complete non-starter, as he at all times must have realised. One can hardly ask shareholders if one can take vast sums from a company for purposes quite extraneous to the company's objectives, which is, no doubt, why they were not asked and, which is, perhaps, the point implicit in the judge's comments.

37 Other grounds earlier raised have been abandoned.

Conclusion

38 Accordingly, and for the reasons which we have given, this application for leave to appeal against conviction is dismissed.

Costs

[Submissions as to costs]

39 There will be an order that the applicant shall pay to the respondent its costs of, and in connection with, this appeal, to be taxed if not agreed.