HKSAR v. NANIK DAYARAM AND ANOTHER

CACC 274/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 274 OF 2015

(ON APPEAL FROM HCCC 2 OF 2014)

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REASONS FOR DECISION

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1.  The applicants were charged jointly, with one other, with 9 counts of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200. They were tried before Andrew Chan J (“the judge”) between 18 May and 11 August 2015. On 6 August 2015 the applicants, but not the 3^rd accused, were convicted of all counts. On 11 August 2015, both applicants were sentenced to 10 years’ imprisonment.

2.  The applicants subsequently applied for leave to appeal against both their convictions and their sentences. Pending the hearing of their appeals they applied for bail.  At the hearing of the bail application I granted both applicants bail and said I would hand down my reasons for so doing at a later date.  This I now do.

The application for bail

3.  The bail applications for both applicants are made on the basis of there being merit in their grounds of appeal.  They are not made on the basis of the time ground, that is, that by the time their appeals come on for hearing the applicants will have served a significant part of their sentences.  That being so the applicants bear the burden of showing sufficient merit in their grounds of appeal as to appear to the court that the appeal would be successful.[1]

The background to these offences

4.  The applicants were the owners of a long standing Hong Kong family business which dealt in electronic products.  They operated the business through a number of companies, the key ones of which, for the purpose of the charges, were Days Impex Limited (“Days Impex”) and Days International Limited (“Days Intentional”).  These companies had established credit facilities with various banks in the form of import loan facilities and export loan facilities.  The import loan facilities were the subject of charges 1-6 and involved Hongkong and Shanghai Banking Corporation Limited (counts 1 and 2), Hang Seng Bank Limited (counts 3 and 4) and Bank of Baroda (counts 5 and 6).  These charges concern the use of an import loan facility to purportedly fund the purchase of goods by either Days Impex (counts 1, 3 and 5) or Days International (counts 2, 4 and 6) from Oscoda Electronics Limited (“Oscoda”).

5.  The export loan facilities involved Hongkong and Shanghai Banking Corporation Limited (count 7), Bank of Baroda (count 8) and UCO Bank (count 9).  These charges relate to the use of an export loan facility to purportedly fund the sale of products by Days Impex to Priya International LCC and Sadrudin Sumar.

6.  Essentially the prosecution case was that the applicants conspired together to induce the banks to release to their companies funds under these facilities by false representations that genuine commercial transactions existed to which the facilities were being applied. 

7.  The prosecution sought to prove that no such transactions existed.  In respect of charges 1-6 it alleged that Oscoda was a fictional company controlled by the applicants.  In respect of counts 7-9 it was alleged that the shipping company, Opus Container Lines SA, on which the goods the subject of these purported transactions were supposed to have been shipped, did not in fact exist and that the bills of lading issued in relation to the shipments were false.  

8.  The funds obtained from these facilities flowed back to the applicants or were used by them for other purposes.  At the end of the day when the applicants’ companies were put in liquidation there was a net loss to all the banks of between US$200 - US$ 250 million.

The grounds of appeal

9.  The first ground of appeal complains that the judge misdirected the jury on proof of the element of dishonesty in the offence of conspiracy to defraud.  The test for dishonesty has become known as the Ghosh[2] test which is comprised of two limbs; an objective first limb and a subjective second limb.  The applicants’ complaint is in respect of the judge’s direction to the jury on the evidence they may take into account when applying the second limb of the Ghosh test.  In his direction the judge invited the jury to have regard to evidence of matters that occurred after the conspiracies came to an end and which were not proven to have been attributable to the applicants.

10.  The second ground of appeal asserts that the judge erred in admitting into evidence an HSBC internal note which recorded what transpired at a meeting the applicants attended and admissions said to have been made by the second applicant at that meeting. 

11.  The third ground of appeal complains that the judge misdirected the jury on what they had to find proven in relation to each conspiracy count in the indictment in order to convict the applicants.

12.  The fourth ground of appeal complains of the interventions by the judge in the course of the trial which it is said deprived the applicants of their right to a fair trial.

13.  The fifth ground of appeal relates to the applicants’ appeals against sentence and so is not relevant for the purposes of the bail application. 

Discussion

14.  In respect of the first ground of appeal the applicants relied upon the following direction by the judge on the Ghosh test:

“In respect of the first question it is a question for you. In respect of the second question, you may like to take into account all the circumstances of the case to come to the answer, circumstances such as the missing or death of various important people, for example, the death of Miranda Law. Miranda Law may have passed away, but again, was she being used as a vehicle? namely, that all the handling, all the works was now put on her; the disappearance of Ashok Mhaske; the sudden onset of illness of Mr Mahesh Vangani, Vangani, that’s Priya’s boss; and the missing of computer record and the destruction of all of the relevant physical papers and documentary records. These may assist you -- well, you have to give consideration to the prosecution’s as well as the defence’s argument on these topics. That may assist you in answering the second question.”

15.  The applicants complain that for the offence of conspiracy to defraud the element of dishonesty focuses on the means agreed upon by the conspirators in order to carry out their fraud.  The applicants submit that the judge’s direction invited the jury to take into account matters which were irrelevant to the determination of the dishonesty of the means and of the state of mind of the applicants at the relevant time.  These matters, it is argued, “did not relate to the issue of whether they knew or realised, at the material time when the alleged dishonest means were being carried out (ie at the time they submitted the various loan applications), that the means used were dishonest.”

16.  The dishonest means were particularized in each of the charges. In respect of charges 1-4 they consisted of conduct of:

(i)   falsely representing that Oscoda was a genuine supplier; and

(ii)   submitting false invoices purporting to show the existence of genuine transactions.

17.  In respect of charges 5-6 the dishonest means were particularised differently.  The second particular of submitting false invoices was still relied upon but, in place of the first particular, a particular of “making import loan applications … in favour of Oscoda Electronics Limited” was pleaded.

18.  In respect of charges 7-9 the dishonest means were particularised as:

(i)   falsely representing in the export loan application that Priya was the genuine drawee under the bill of lading;

(ii)   the same particular as (i) above but in respect of Sadrudin Sumar;

(iii)   submitting false bills of lading;

(iv)   submitting false sales invoices between Days Impex and Priya; and

(v)   submitting false sales invoices between the drawer and Sadrudin Sumar.

19.  It may be that the matters to which the judge directed the jury had relevance to the underlying issue of whether the particulars of the charges were established to their satisfaction and not to the application of the second limb of the Ghost test. 

20.  For the real issue in this case was whether, as alleged in the particulars, the applicants made false representations and submitted false documents to the bank.  On this issue, it is not suggested that there was an erroneous direction.  Nor is it suggested that the matters referred to by the judge in the impugned direction could not be taken into the account as circumstantial evidence relevant to the proof of the particulars.

21.  There was never, and, in the circumstances of this case, never could be, an issue of whether the applicants knew they were behaving dishonestly if it was proven that they had knowingly made false representations and submitted false documents to the banks in order to obtain monies which would not otherwise be lent to them.  In earlier directing the jury on dishonesty the judge, in fact, adverted to the lack of dispute on this issue.  The judge said:

“I do not think anyone would dispute in this case that applying for import loan to banks on a false basis that the loans were in respect of true or genuine transactions whereby goods were purchased and submitting false invoices would not constitute to the banks at economic risk by dishonest means.”

22.  I do not see how, once the particulars of the charges were proven, dishonesty could ever be a live issue in this case.

23.  Finally, it must be noted that there are many other passages in the summing-up where the judge directs the jury on the Ghosh test, the elements of the offence of conspiracy to defraud and the particulars of the charges and in respect of these passages no criticism is made.

24.  For all these reasons, even if this particular direction on dishonesty is determined by the Court of Appeal to be erroneous, I am not persuaded that it would result in the appeal being successful.

25.  The second ground of appeal argues that the judge erred in ruling that a record of a meeting held at a bank between the bank and its customer and which record the bank preserved for its internal purposes could be a banker’s record for the purposes of section 20 of the Evidence Ordinance, Cap 8.  The applicants’ counsel, Mr Marash SC conceded that in order to succeed on this ground he would have to persuade the Court of Appeal to depart from or distinguish an earlier decision of the court in R v Law Ka Fu.[3]

26.  However, quite apart from this difficulty there is the added problem that the person who made the record to which objection was taken, Ms Shannon Lau, gave evidence as a prosecution witness and testified as to what was said at this meeting.  Mr Marash accepted that even if Ms Lau’s record of the meeting had not been admitted into evidence pursuant to section 20, she would nevertheless have been entitled to refresh her memory of what was said at the meeting from it.

27.  I am not persuaded that the appeal will be successful on the basis of this ground of appeal.

28.  The third ground of appeal complains of a misdirection by the judge as to what the jury must find proven beyond reasonable doubt in order to convict each applicant of each of the conspiracy to defraud charges.  It is argued that the judge left the jury with the impression that the prosecution was alleging one over-arching conspiracy, and that was all the jury need find proven, as opposed to nine separate and distinct conspiracies to defraud.

29.  In the direction in the summing-up to which objection is taken the judge said:

“ The prosecution did not have to prove that any defendant thought about defrauding any particular bank or that they even knew the names of the bank. What you have to be sure of is that they knew that the agreed course of conduct carried out by themselves or by others involved exposing any banks to the risk of economic loss. That is why you see towards the end of the particulars of the offence the wording ‘inducing the said bank to approve the said import or export loan applications and to release funds’.” (Emphasis added.)

30.  The applicants seize on the italicised sentence of the direction to argue that the judge told the jury that they did not have to examine the prosecution evidence as it pertained to each charge and make a finding as to whether they were satisfied that the prosecution had proven beyond reasonable doubt the elements of each of the nine conspiracies to defraud.

31.  In support of this argument Mr Marash refers to other areas in the summing-up where the judge referred to “a conspiracy” instead “the nine conspiracies”.

32.  There is no doubt that what the judge meant in this paragraph is unclear.  It may be that he was trying to distinguish between an intention to cause actual loss to a victim as opposed to only intending to expose the victim to a risk of economic loss.

33.  Be that as it may, it is not the only occasion that the judge directed the jury on the offence of conspiracy to defraud and the need for separate verdicts on each of the counts.  In my view, the issue on appeal is likely to be whether any confusion or misunderstanding that might otherwise have been generated by this direction was neutralized by correct and adequate directions elsewhere in the summing-up.

34.  Though troubled by this direction it is not enough, on its own, to persuade me the appeal will succeed.

35.  The fourth ground of appeal complains of interventions by the trial judge.  This ground complains that the judge:

(i)   wrongly prevented questioning by the applicants’ counsel of witnesses;

(ii)   improperly entered the arena in asking questions of witnesses and making adverse comments in front of the jury;

(iii)   displayed a hostile attitude to the applicants when they gave evidence;

(iv)   made factual errors in some of his lines of questioning; and

(v)   refused to hear the applicants’ counsel when he wished to address the judge on his interventions.

36.  In arguing this ground I was taken to different parts of the transcript and it is clear that some of the complaints are justified.  Whether the effect of the judge’s interventions deprived the applicant of a fair trial is for the Court of Appeal to say.  However, after considering the submission of Mr Marash and Miss Ko for the respondent I was satisfied that, on the basis of this ground of appeal, I should grant bail to the applicants.  Having reached that view I do not think it is appropriate for me to say anything further in respect of the fourth ground of appeal.

Conclusion

37.  For these reasons I granted bail to both applicants.