THE QUEEN v. YEUNG YEE HING

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 1097 OF 1995

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J U D G M E N T

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1. This was an appeal against a conviction for selling securities through the Unified Exchange without a presently exercisable and unconditional right to vest the securities in the purchaser of them, contrary to s.80(1) & (2) of the Securities Ordinance, Cap.333. The facts really were not in dispute.

2. The Appellant is a registered securities dealer's representative trading under the name of Ga Lung Securities Company. Ga Lung is a registered securities dealer and a member of the Stock Exchange of Hong Kong.

3. On 20th May 1994 at 12:13 p.m. the Appellant, through the Stock Exchange of Hong Kong, sold 100,000 units of Swiss Bank Corporation - Hong Kong Telecommunications Limited Warrant 1995. At 10:23 a.m. on 23rd May 1994, the Appellant through the Stock Exchange of Hong Kong sold 100,000 units of Swiss Bank Corporation - Hong Kong Telecommunications Limited Warrant 1995. The Appellant confirmed in a statement made to staff of the Securities Futures Commission that at the time of the sales mentioned above, he did not have any presently exercisable and unconditional right to vest the securities in the purchaser of them. In a cautioned statement taking from the Appellant, he claimed in regard to the transactions that he thought he had the securities to sell when he sold them.

4. The learned Magistrate this :

"Having so reviewed the evidence offered by both parties I then considered the matter in the light of the decision of Duffy J. in R.v. LAM Nai Sum Rohin and another Magistracy Appeal No.817 of 1991. In accord with that decision I directed myself that it was for the Crown to satisfy me beyond reasonable doubt that the defendant's short selling was deliberately dishonest in the sense that when he entered into the sale transactions in question he knew that he did not hold warrants to cover same.

Having so directed myself I reasoned that the defendant was a young man apparently of sufficient intelligence and ability to hold down the position of registered securities dealer.

In such a position he was required to buy and sell on behalf of his companies clients in accord with the laws of Hong Kong. As such it would be necessary for him to conduct himself in such a way as to ensure that shares he sold on behalf of clients were indeed available for sale prior to transaction. Further as a matter of judicial notice I was satisfied that such an agent will not (normally) agree to sell shares unless a seller can prove ownership and that these issues are addressed in regard to every such transaction.

Further the evidence before the Court suggested that the defendant traded regularly in the warrants in question. He bought and sold the shares within a short period of time. From this I inferred that during these periods he watched the market carefully and kept up a constant scrutiny, while he held an open position.... (Many of these buy and sell trades were made in such short periods that settlement by him of the cost of purchase, would not have to be made.)

In these circumstances I was left in no doubt that at all relevant times the defendant was well aware of the quantity of stock he held. He was necessarily vigilant about all aspects of such transactions and by selling without stock available he had acted dishonesty."

5. Mr Haldane who appeared on the appeal complained that in fact rather than following the judgment in R.v. Lam Nai Sum Rohin and another, the Magistrate was, in effect, trying to find ways round it. He submitted that the learned Magistrate in failing to properly take account of the explanation put forward by the Appellant in his cautioned statement, also erred in the inferences he drew about the Appellant's intelligence and ability. I did not find any merit in these submissions. It seemed to me that the learned Magistrate properly went about the task of deciding whether or not to accept the Appellant's explanation for the short selling because, in the absence of such explanation, a conviction was inevitable. The explanation given by the Appellant was most improbable.

6. It was my view that the learned Magistrate was perfectly entitled to draw the inferences which he did, having regard to the fact that the Appellant was a securities dealer's representative. I could find no fault with his reasoning and could not therefore interfere with his conclusion. This appeal was dismissed.